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M32: Imposing and relieving sanctions
Application to extend time limit before expiry
Retrospectively no breach if application granted
"[24] This principle is derived from the decision of Alexander Nissen QC (sitting as a deputy High Court judge) in Everwarm Ltd v BN Rendering Ltd [2019] 4 WLR 107 (“Everwarm”). That case concerned an application for extension of time for compliance with an unless order, where the application was made before the deadline for compliance, but was not heard until after that deadline. In that case, the deputy judge drew a distinction between the applicable tests for determining in-time and out-of-time applications for an extension of time for compliance with an unless order. In short, in-time applications did not engage the principles concerning relief from sanctions (because if granted there had been no breach), whereas out-of-time applications did. The deputy judge decided that the application in question should be treated as an in-time application even though it was not heard until after the unless order would have taken effect. In doing so, the deputy judge confirmed that, if the extension of time was granted, the claim would be treated in retrospect as if it had never been struck out (Everwarm [15]).
[25] Everwarm was a decision on the application of the Civil Procedure Rules. It was common ground between the parties that the principle should apply equally in this case. Both parties also proceeded on the basis that the variation application could only have this retrospective effect if it was made in-time. In other words, the variation application had to have been made before the deadline by which the appeal was automatically struck-out by the Unless Order. But it did not matter if the FTT did not determine that in-time variation application until after that deadline." (Lingajothy v. HMRC [2023] UKUT 63 (TCC), Judge Raghavan and Judge Greenbank)
Burden on applicant to prove application was in time
"[27] [The taxpayer] accepts that the appellant bears the burden of proof of showing the application was in-time[1]. He submits that it was an error for the FTT not to make a clear finding on the time at which the variation application was made." (Lingajothy v. HMRC [2023] UKUT 63 (TCC), Judge Raghavan and Judge Greenbank)
See also M18: Extending and shortening time limits
FTT’s power to impose sanctions
“(2) If a party has failed to comply with a requirement in these Rules, a practice direction or a direction, the Tribunal may take such action as it considers just, which may include--
(a) waiving the requirement;
(b) requiring the failure to be remedied;
(c) exercising its power under rule 8 (striking out a party's case);
(d) restricting a party's participation in proceedings; or
(e) exercising its power under paragraph (3).” (FTT Rules, r.7(2)).
Strike out/debarring
See M29: Striking out proceedings
Excluding evidence
See below.
Restricting participation
“Taking all the circumstances into account we are satisfied that it would be just and fair to refuse the Respondents’ application to amend their case and to rely on the Supplementary Report. Further we are satisfied that the Respondents should be barred from cross examining the Appellant’s expert witness and from making submissions on the Appellant’s case in relation to the Nano Products. We would have been minded to summarily allow the appeal in relation to the Nano Products but it is not clear to us that we have such jurisdiction.” (Moreton Alarm Services (MAS) Ltd v. HMRC [2016] UKFTT 192 (TC), §70 – HMRC attempted to contest a part of the Appellant’s case that it not indicated it contested in its SoC).
“Rule 7(2)(d) may be directed at some more limited form of restriction on participation in the proceedings falling short of striking out. Alternatively, at some exceptional circumstances which do not for some reason fall within the ambit of Rule 8.” (Elder v. HMRC [2014] UKFTT 729 (TC), §83).
Unless orders
No express right to be heard before unless direction issued
“[44] Nor, as noted above, do the parties have any express right to be heard before the tribunal either makes the direction or exercises its power to strike out for non-compliance pursuant to rule 8(1) (a mandatory power) or rule 8(3)(a) (a discretionary power). This is in contrast to the position where a barring order is made under rules 8(2), (3)(b) or (3)(c), where the tribunal is obliged to give the parties an opportunity to be heard prior to making an order striking out or barring: rule 8(4).
...
[103] It is, moreover, always open to any party who feels that further consideration is required to apply under rule 6(5) for a direction to be varied or suspended. 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.
[104] We do not overlook the observation of Moore-Blick LJ in Marcan Shipping that he would “find it difficult to imagine circumstances in which [an ‘unless’] order could properly be made for what were described in Keen Phillips v Field as ‘good housekeeping purposes’ ”. The position at which this appeal had arrived by the making of the first direction on 18 March 2013 was significantly out of order and the tribunal was fully entitled, in the circumstances of more than two years of extensions of time having been allowed, to exercise its powers under rule 5 to ensure that the delay in proceeding with the appeal did not continue. Nor can it be argued that the time then allowed for the directions to be complied with was too short, and indeed no submission to that effect has been made.
[105] We do not see that the contested directions could fairly be characterised merely as ‘good housekeeping’: there is a public interest in the efficient and timeous resolution of disputes and it is proper for the tribunal by its case management decisions to have regard to that. The delay in this case had become unacceptable and, in the absence of an application to vary the directions, any objection to their being made without notice cannot be sustained.” (Compass Contract Services UK Ltd v. HMRC [2014] UKFTT 403 (TC), Judge Cornwell-Kelly).
Unless orders operate automatically
“[34] In my view it should now be clearly recognised that the sanction embodied in an “unless” order in traditional form takes effect without the need for any further order if the party to whom it is addressed fails to comply with it in any material respect. This has a number of consequences, to three of which I think it is worth drawing particular attention. The first is that it is unnecessary, and indeed inappropriate, for a party who seeks to rely on non-compliance with an order of that kind to make an application to the court for the sanction to be imposed or, as the judge put it, “activated”. The sanction prescribed by the order takes effect automatically as a result of the failure to comply with its terms.” (Marcan Shipping (London) Ltd v. Kefalas [2007] EWCA Civ 463)
Party in default must apply for relief
“The second consequence [of an unless order], which follows from the first [see above], is that the party in default must apply for relief from the sanction under rule 3.8 if he wishes to escape its consequences.” (Marcan Shipping (London) Ltd v. Kefalas [2007] EWCA Civ 463, §35).
- Tribunal should carefully consider appropriateness of sanction before imposing unless order
“[36]…before making conditional orders, particularly orders for the striking out of statements of case or the dismissal of claims or counterclaims, the judge should consider carefully whether the sanction being imposed is appropriate in all the circumstances of the case. Of course, it is impossible to foresee the nature and effect of every possible breach and the party in default can always apply for relief, but a conditional order striking out a statement of case or dismissing the claim or counterclaim is one of the most powerful weapons in the court's case management armoury and should not be deployed unless its consequences can be justified. I find it difficult to imagine circumstances in which such an order could properly be made for what were described in Keen Phillips v Field as “good housekeeping purposes”.” (Marcan Shipping (London) Ltd v. Kefalas [2007] EWCA Civ 463)
"[31]...As the courts have emphasised, the court's power to strike out a statement of case is one of the most powerful weapons in the court's case management armoury, and should only be deployed as a sanction of last resort. It is likely only to be imposed for a serious and deliberate breach, and the court must consider very carefully whether it is appropriate, proportionate and justified in all the circumstances of the case: Marcan Shipping v Kefalas [2007] EWCA Civ 463, [2007] 1 WLR 1864, §36; Walsham Chalet Park v Tallington Lakes [2014] EWCA Civ 1607, §44; Michael Wilson v Sinclair [2015] EWCA Civ 774, §34; Byers v Samba [2020] EWHC 853 (Ch), §120.
[32] When assessing the overall proportionality and justification for a debarring order, the court will have regard to all of the circumstances of the case. Particular factors to consider will include the seriousness of the breach, the extent to which it is excusable and the consequences of the breach: Byers v Samba, §123." (WWRT Limited v. Tyshchenko [2023] EWHC 907 (Ch), Bacon J)
[47] Two other things trouble me. The first is a point which I have made on a number of occasions, namely Marcan Shipping and the fact that the sanction would follow automatically, which is uncomfortable when one has in mind that potential for difficulties. The second is the fact that what is being sought - and I pressed Mr McCombe on this last time -is only the "nuclear option" of striking out the claim. No lesser sanction is sought. So it is not a case where what is being sought is a condition which leads to, for example, debarring the Second Claimant from relying on any disclosure or so forth. This is the nuclear option in terms of conditions.
[48] In those circumstances, while it is a situation where it is quite close to being one where I would grant an unless order, as a matter of the exercise of my direction I do consider that doing so in these circumstances against this background would be disproportionate and inappropriate. I hear what Mr McCombe says about the benefits of putting the onus on the Second Claimant, and I certainly have sympathy with his point; but for all that in my estimation where there is no longer an unrepentant breach (unlike Global Torch) and where there are these very particular circumstances offering obvious potential for difficulties not of the Second Claimant's making, the balance tilts away from an unless order.
[49] So in those circumstances I am not going to make the order on an unless basis. I do not accept Mr McCombe's submission that Global Toch binds me to imposing a sanction. What was said there was that a sanction is almost inevitable and that "if persistence in the disobedience would lead to an unfair trial, it seems, at least in the absence of special circumstances, hard to quarrel with a sanction which prevents the party in breach from presenting … the claim". It does not suggest that, even then, failure to impose the sanction would be wrong; and it explicitly contemplates (i) persistent disobedience and (ii) no special circumstances." (Al-Subaihi v. Al-Sanea [2020] EWHC 3206 (Comm), Cockerill J)
"[49] The Court of Appeal has repeatedly emphasised the very great care that needs to be taken by a court before it decides to impose an ‘unless’ order for the striking out of a party’s case, having regard to the grave consequences of non-compliance. An ‘unless order’ or ‘conditional order’ striking out a statement of case was described by Ward LJ as an “atomic weapon in judicial armoury”: Hytec Information Ltd v Coventry City Council [1997] WLR 1666 at 1676D." (Compass Contract Services UK Ltd v. HMRC [2014] UKFTT 403 (TC))
- Persistent disobedience justifying unless order
"[23] ...The importance of litigants obeying orders of court is self-evident. Once a court order is disobeyed, the imposition of a sanction is almost always inevitable if court orders are to continue to enjoy the respect which they ought to have. And, if persistence in the disobedience would lead to an unfair trial, it seems, at least in the absence of special circumstances, hard to quarrel with a sanction which prevents the party in breach from presenting (in the case of a claimant) or resisting (in the case of a defendant) the claim. And, if the disobedience continues notwithstanding the imposition of a sanction, the enforcement of the sanction is almost inevitable, essentially for the same reasons. Of course, in a particular case, the court may be persuaded by special factors to reconsider the original order, or the imposition or enforcement of the sanction.
[24] In the present case, essentially for the reasons given by the three judges in their respective judgments, there do not appear to be any special factors (subject to what I say in the next two sections of this judgment). Further, it is difficult to have much sympathy with a litigant who has failed to comply with an unless order, when the original order was in standard terms, the litigant has been given every opportunity to comply with it, he has failed to come up with a convincing explanation as to why he has not done so, and it was he, albeit through a company of which he is a major shareholder, who invoked the jurisdiction of the court in the first place." (Al Saud v. Apex Global Management Ltd [2014] UKSC 64)
"[66] In this case the Unless Order was made in the context of HMRC being in repeated breach of the Agreed Directions." (Ebuyer (UK) Limited v. HMRC [2023] UKFTT 611 (TC), Judge Bowler)
- Usually only made against a party already in breach
"[37] In my view the reference in the first sentence of that paragraph to "unrelated failures" is a reference to earlier breaches of rules or orders which the applicant has committed during the course of the litigation. At stage 1 it is not legitimate to say "this breach is trivial but, set against X's history of failures and delays, this breach is the last straw. It becomes a serious matter." At stage 1 the court must ignore X's historic breaches and assess the breach in respect of which X is seeking relief.
[38] An "unless" order, however, does not stand on its own. The court usually only makes an unless order against a party which is already in breach. The unless order gives that party additional time for compliance with the original obligation and specifies an automatic sanction in default of compliance. It is not possible to look at an unless order in isolation. A party who fails to comply with an unless order is normally in breach of an original order or rule as well as the unless order.
[39] In order to assess the seriousness and significance of a breach of an unless order, it is necessary also to look at the underlying breach. The court must look at what X failed to do in the first place, when assessing X's failure to take advantage of the second chance which he was given.
[40] In my view the phrase "the very breach" in paragraph 27 of Denton, when applied to an unless order, means this: the failure to carry out the obligation which was (a) imposed by the original order or rule and (b) extended by the unless order.
[41] The very fact that X has failed to comply with an unless order (as opposed to an 'ordinary' order) is undoubtedly a pointer towards seriousness and significance. This is for two reasons. First, X is in breach of two successive obligations to do the same thing. Secondly, the court has underlined the importance of doing that thing by specifying an automatic sanction in default (in this case the Draconian sanction of strike out)." (Oak Cash & Carry Limited v. British Gas Trading Limited [2016] EWCA Civ 153, Jackson, King, Lindblom LJ)
FTT’s power to refer to the UT
“(3) The Tribunal may refer to the Upper Tribunal, and ask the Upper Tribunal to exercise its power under section 25 of the 2007 Act (Upper Tribunal to have powers of High Court or Court of Session) in relation to, any failure by a person to comply with a requirement imposed by the Tribunal--
(a) to attend at any place for the purpose of giving evidence;
(b) otherwise to make themselves available to give evidence;
(c) to swear an oath in connection with the giving of evidence;
(d) to give evidence as a witness;
(e) to produce a document; or
(f) to facilitate the inspection of a document or any other thing (including any premises).” (FTT Rules, r.7(3)).
Power only arises if there has been a failure to comply with a direction
“Rule 7 only gives the Tribunal power to refer persons who have failed to comply with a direction or summons.” (Clavis Liberty Fund 1 LP [2014] UKFTT 1077 (TC), §42).
Direction must have been validly issued
“If the Tribunal had no jurisdiction to issue the summons or direction then it is ineffective and there is no failure to comply with it; in any event Rule 7 was clearly only intended to apply to directions and summons which the FTT had power to issue.” (Clavis Liberty Fund 1 LP [2014] UKFTT 1077 (TC), §42).
Implied sanctions
Generally slow to imply a sanction even in respect of directions that do not expressly impose a sanction
"[54] In his submissions, Mr Limb referred to the wording of 16 PD.4 and the use of the word "must" indicating that it is a mandatory provision. Whilst this is true, I would observe that this is a characteristic of the drafting of the CPR and the word "must" is used liberally. However, to imply the need to apply for relief from sanction in all cases where a rule or practice direction contains such wording would, as Mr Walker submitted, result in the courts being inundated with applications quite unnecessarily." (Mark v. Universal Coatings & Services Limited [2018] EWHC 3206 (QB), Martin Spencer J)
"[32] I respectfully agree with that analysis [in Mark v. Universal Coatings]. In my judgment, it would be wrong for the court to search out reasons for imposing sanctions that do not obviously arise out of the terms of the CPR or an order made by the court. As to orders made the court, it is always open to the court to impose a sanction and it should be clear on the face of the order so that the parties know of the consequences of a failure to comply with it.
[34]...With reference to the second category, loosely 'implied sanctions', in some cases it will be obvious that the court intended there to be a sanction for a failure to comply with the order and it is also obvious that what that unexpressed sanction should be. This is matter of the court construing the earlier order. But as I have observed already, since it is open to the court to impose an express sanction in an order, it will be rare of the court to be able to reach the threshold for implication. After all, if it is so obvious that the court intended there to be a sanction, why was it not expressed. But I distinguish here a failure to draw up the order to as to reflect the intention of the court as it was expressed at the hearing, from seeking to construe the order to establish the court's unexpressed intention." (DJurberg v. London Borough of Richmond [2019] EWHC 3342 (Ch), Chief Master Marsh)
Sanction may be implied based on the significance of the rule or direction
"[52] There are, however, some rules or practice directions which, without themselves expressly laying down a sanction for non-compliance, carry with them an implied sanction by reference to the consequences of the rule not having been observed. Two examples are those referred to in paragraph 45 above: the failure of a respondent who wishes to resist an appeal on grounds other than those relied on in the court below to serve a Respondent's Notice (Altomart); and a litigant who wishes to appeal from a court order or judgment but fails to serve and file a notice of appeal in time (Sayers v Clarke Walker).
In my judgment, the principle behind the reason why those rules carry with them an implied need to apply for relief from sanction when breached can be discerned by reference to the default position if the application is refused. In the case of a litigant who fails to serve and file a notice of appeal in time, without an extension of time the litigant is unable to appeal as any notice of appeal would be invalid as having been served out of time and the judgment in the court below will stand. This is so significant for the purposes of the litigation that the need to apply for relief from sanction is implied. Similarly, as explained by Moore-Bick LJ in Altomart, the failure to serve a respondent's notice means that, without permission to do so, the respondent is fixed with relying on the grounds relied on below and may not argue that the judgment below should be upheld for different reasons. This may so significantly confine the scope of the appeal as to be highly significant for the purposes of the litigation and has therefore also been held to require relief from sanction although, as it seems to me, this is much closer to the line than the failure to serve a notice of appeal in time considered in the Sayers' case." (Mark v. Universal Coatings & Services Limited [2018] EWHC 3206 (QB), Martin Spencer J)
Examples
Failure to file a notice of appeal in time: implied sanction
"[36]...As the authorities demonstrate, for the past twelve years it has been consistently understood that in Sayers v Clarke Walker this court deliberately equated applications for extensions of time for filing a notice of appeal with applications for relief from sanctions because in its view the implied sanction of the loss of the right to pursue an appeal meant that the two were analogous. Following the decision in Mitchell the courts have continued to proceed on the basis that applications for extensions of time for filing a notice of appeal should be approached in the same way as applications for relief from sanctions under CPR 3.9 and should attract the same rigorous approach. It might even be said that the decision in Mitchell has provided an independent basis for a similar approach to applications of that kind. The clearest example is perhaps to be found in Baho v Meerza, to which I have already referred. Whatever one may think of the doctrine of implied sanctions, therefore, particularly in the light of the views expressed by the Privy Council in Matthews, I think that the approach to be taken to applications of the kind now under consideration is now too well established to be overturned. It follows that in my view the principles to be derived from Mitchell and Denton do apply to these applications." (R (Hysaj) v Secretary of State for the Home Department [2014] EWCA Civ 1633)
“It is agreed before me that the requirement to transmit the case stated to the High Court within 30 days of receiving it is a jurisdictional requirement.” (Woodpecker Ltd v. HMRC [2009] EWHC 3443 (Ch), §24 – relating to the former procedure of asking the General Commissioners to state a case for the opinion of the High Court).
Failure to serve an expert report that brought proceedings to a halt: implied sanction
"[43] In my judgment Judge Platts was correct to treat this as a case in which the order of Judge Pelling by implication imposed a sanction for non-compliance, here the inability to proceed with the claim for compensation under the cross-undertaking. That was the approach taken by this court in Altomart Limited v Salford Estates (No 2) Limited [2015] CP Rep 8, [2014] EWCA Civ 1408 which concerned an application for an extension of time in which to file a Respondent's Notice, and Hysaj, above, which concerned an application for an extension of time within which to file a Notice of Appeal. The tide is flowing strongly in that direction, and towards a less indulgent approach to non-compliance." (Elliott v. Stobart Group Limited [2015] EWCA Civ 449, Tomlinson LJ)
Failure to make strike out application by specified time: no implied sanction
"[28]...Having considered his submissions I am satisfied that the order did not contain an implied sanction and there is no requirement to consider the first defendant's application to extend time for issuing and serving the application with their evidence against the backdrop of the relief from sanctions regime as is required in some circumstances. It seems to me that the order amounted to no more than routine case management. It would have been open to the court to have imposed an express sanction but in the absence of the order there is no basis for importing a sanction that does not arise by way of necessary implication or because it is obvious. Indeed, the court should not be over-inclined to import that sanctions regime unless it is clear that this is what was intended." (DJurberg v. London Borough of Richmond [2019] EWHC 3342 (Ch), Chief Master Marsh)
Failure to serve medical report and schedule of loss with particulars of claim: no implied sanction
[53] However, in my judgment the failure to serve a medical report and/or a schedule of loss with the Particulars of Claim is not in the same category [as failure to file a notice of appeal on time], for the reasons which I have endeavoured to set out in paragraph 49 above. Often, within the context of the particular litigation, this will be a trivial breach because compliance can be achieved with the service of documents which, in the end, are relatively uninformative and do not take the matter any further." (Mark v. Universal Coatings & Services Limited [2018] EWHC 3206 (QB), Martin Spencer J)
Relief from sanctions: general approach
"[55] The three stages of the analysis laid down by the Court of Appeal in the Denton case are very well known: (i) examine the seriousness of the breach or failure to comply with the order; (ii) consider why it occurred and, in particular, whether there was good reason for the breach or failure to comply; and (iii) consider whether in all the relevant circumstances relief should be granted. The critical advance made in the Denton case was to make it plainer than had appeared to the profession after the earlier leading case of Mitchell v News Group Newspapers Ltd (Practice Note) [2013] EWCA Civ 1537; [2014] 1 WLR 795 that relief might nonetheless be granted at stage (iii) even if there had been a serious breach or failure to comply for which no good reason had been shown." (AIC Ltd v. Federal Airports Authority of Nigeria [2022] UKSC 16)
Similar to the CPR approach to relief from sanctions
"[25] Such guidance to tribunals on tax cases was given by Judge Sinfield in the UT in McCarthy & Stone. In para 43, after referring to differences and similarities between the CPR and the tribunal rules, in that case the Tribunals Procedure (Upper Tribunal) Rules 2008 (SI 2008/2698), he accepted that “the CPR do not apply to tribunals” but added that he did not “accept that the UT should adopt a different, ie more relaxed, approach to compliance with rules, directions and orders than the courts that are subject to the CPR”. The same view was expressed by Ryder LJ in paras 37 and 38 in the Court of Appeal in this case, including this: “I can detect no justification for a more relaxed approach to compliance with rules and directions in the tribunals”, and added that “[i]t should not need to be said that a tribunal’s orders, rules and practice directions are to be complied with in like manner to a court’s”.
[26] It is not for this Court to interfere with the guidance given by the UT and the Court of Appeal as to the proper approach to be adopted by the Ft-T in relation to the lifting or imposing of sanctions for failure to comply with time limits (save in the very unlikely event of such guidance being wrong in law)... In a nutshell, the cases on time-limits and sanctions in the CPR do not apply directly, but the Tribunals should generally follow a similar approach." (HMRC v. BPP Holdings Ltd [2017] UKSC 55, Lord Neuberger)
“[37] There is nothing in the wording of the relevant rules that justifies either a different or particular approach in the tax tribunals of FtT and the UT to compliance or the efficient conduct of litigation at a proportionate cost. To put it plainly, there is nothing in the wording of the overriding objective of the tax tribunal rules that is inconsistent with the general legal policy described in Mitchell and Denton. As to that policy, I can detect no justification for a more relaxed approach to compliance with rules and directions in the tribunals and while I might commend the Civil Procedure Rules Committee for setting out the policy in such clear terms, it need hardly be said that the terms of the overriding objective in the tribunal rules likewise incorporate proportionality, cost and timeliness. It should not need to be said that a tribunal's orders, rules and practice directions are to be complied with in like manner to a court's. If it needs to be said, I have now said it.
[38] A more relaxed approach to compliance in tribunals would run the risk that non-compliance with all orders including final orders would have to be tolerated on some rational basis. That is the wrong starting point. The correct starting point is compliance unless there is good reason to the contrary which should, where possible, be put in advance to the tribunal. The interests of justice are not just in terms of the effect on the parties in a particular case but also the impact of the non-compliance on the wider system including the time expended by the tribunal in getting HMRC to comply with a procedural obligation. Flexibility of process does not mean a shoddy attitude to delay or compliance by any party.” (BPP Holdings Ltd v. HMRC [2016] EWCA Civ 121).
This overruled a developing line of authority that the Tribunals did not apply the CPR approach: Romasave (Property Services) Ltd v. HMRC [2015] UKUT 254 (TCC), §89; Leeds City Council v. HMRC [2014] UKUT 350 (TCC), §18; Technetix Ltd v. HMRC [2015] UKFTT 369 (TC), §32; Citipost Mail Ltd v. HMRC [2015] UKFTT 252 (TC), §64).
“Thus the Tribunal needs to take a strict approach when considering non-compliance with directions.” (Reed v. HMRC [2016] UKFTT 653 (TC), §47).
Particular importance of efficiency conduct of litigation and enforcing compliance with rules
“The new approach requires the Tribunal to give significant (but not paramount) weight to the need for litigants to respect the Tribunal’s rules and directions. If the litigants do not respect the need for compliance, the Tribunal will be unable to meet is overriding objective of dealing cases fairly and justly, as it would be building into the litigation process procrastination and delay. Where a Tribunal excuses a delay which has occurred for no good reason, the result is not only that the litigants concerned are encouraged to think non-compliance will not receive a sanction but that litigants in other cases also get the message that procrastination is permitted.” (Clarke v. HMRC [2018] UKFTT 123 (TC), Judge Mosedale).
“It is important to note that the application of this test does not require the matters set out in sub-paragraphs (a) and (b) of CPR r 3. 9 (1) to be given “paramount importance”, as was stated in Mitchell, over other relevant factors. In clarifying the position at [32] of its judgment in Denton, the Court of Appeal said that although these matters may not be of paramount importance, they were of particular importance and should be given particular weight at the third stage when all the circumstances of the case are considered. Whilst I must take a stricter approach than might have been the case before the new rule was implemented, it is still the case that a consideration of all of the circumstances may lead to the conclusion that relief should be granted. As the Court of Appeal said at [35] of Denton, the more serious or significant the breach (as assessed at stage one) the less likely it is that relief will be granted unless there is a good reason for it (as ascertained at stage two). Nevertheless, the Court also said at [31] that even if there is a serious or significant breach and no good reason for it, the application for relief from sanctions will not automatically fail, but in those circumstances, when considering all the circumstances at stage three particular weight must be given to the matters specifically referred to in CPR r 3. 9 (1).” (Hattons (Southport) Ltd v. HMRC [2016] UKFTT 710 (TC), §25, Judge Herrington).
Attribute liquidator’s actions to company
“Mrs Brittain was not a third party, such as an adviser, for the purpose of considering the reasons for the delay. She was the liquidator of Abbey. As such, she took over the (vast majority of) the powers of the directors, and became the organ of the company. In the tax context, section 108(3)(a) of the Taxes Management Act 1970 makes it clear that a liquidator is the “proper officer” of the company, with (broadly) power to do anything to be done by the company under the Taxes Acts (section 108(1)). This means that Mrs Brittain’s failure to appeal the assessments for some three and a half years was Abbey’s failure.” (Abbey Forwarding Ltd v. HMRC [2017] UKFTT 228 (TC), §193, Judge Thomas Scott).
No special treatment for HMRC as a public authority
"[30] Fourthly, Ms Simor argued that the Judge should have accepted the relevance of, and taken into account, the fact that the debarring order in this case prevents HMRC from discharging its public duty and could lead to the public interest being harmed in that VAT which should be paid may not be recovered. I consider that it would set a dangerous precedent if that point were accepted, as it would discourage public bodies from living up to the standards expected of individuals and private bodies in the conduct of litigation. It seems to me that there is at least as strong an argument for saying that the courts should expect higher standards from public bodies than from private bodies or individuals. In fairness, it should be said that this point was more attractively developed by Ms Simor when she said that it justified a more relaxed approach to all parties by tribunals than that adopted by the courts. Nonetheless, I find that unconvincing: there is no good reason to have different rules for public law cases. I consider that Moore-Bick V-P in R (Hysaj) v Secretary of State for the Home Department (Practice Note) [2015] 1 WLR 2472, paras 41 to 42 was right to reject a similar point in relation to public law cases in the courts." (HMRC v. BPP Holdings Ltd [2017] UKSC 55, Lord Neuberger)
Application for relief from the consequences of a simple mistake should usually be granted readily
“In an ordinary case one would expect an application for relief from the consequences of a simple mistake, made as promptly as was this application, to be unopposed and even if opposed to be granted quite readily. As the Court of Appeal made clear in Denton and others v TH White Ltd (and related cases) [2014] EWCA Civ 906, [2014] 1 WLR 3926, the stricter regime to be applied with regard to applications for relief from sanctions which was discussed in Mitchell v News Group, to which Proudman J referred, was not intended to lead to a culture of non-cooperation between litigants and their lawyers and to a proliferation of satellite litigation; that must be all the more the case when a party is not seeking relief from a sanction but to undo a mistake.” (SRN Horizon Limited v. HMRC [2017] UKUT 246 (TCC), §30, Asplin J and Judge Bishopp).
Litigant in person
Does not usually justify a lower standard of compliance with rules or orders of the court (unless particularly inaccessible or obscure)
"[18] Turning to the reasons for Mr Barton’s failure to serve in accordance with the rules, I start with Mr Barton’s status as a litigant in person. In current circumstances any court will appreciate that litigating in person is not always a matter of choice. At a time when the availability of legal aid and conditional fee agreements have been restricted, some litigants may have little option but to represent themselves. Their lack of representation will often justify making allowances in making case management decisions and in conducting hearings. But it will not usually justify applying to litigants in person a lower standard of compliance with rules or orders of the court. The overriding objective requires the courts so far as practicable to enforce compliance with the rules: CPR rule 1.1(1)(f). The rules do not in any relevant respect distinguish between represented and unrepresented parties. In applications under CPR 3.9 for relief from sanctions, it is now well established that the fact that the applicant was unrepresented at the relevant time is not in itself a reason not to enforce rules of court against him: R (Hysaj) v Secretary of State for the Home Department [2015] 1 WLR 2472, para 44 (Moore-Bick LJ); Nata Lee Ltd v Abid [2015] 2 P & CR 3, [2014] EWCA Civ 1652. At best, it may affect the issue “at the margin”, as Briggs LJ observed (para 53) in the latter case, which I take to mean that it may increase the weight to be given to some other, more directly relevant factor. It is fair to say that in applications for relief from sanctions, this is mainly because of what I have called the disciplinary factor, which is less significant in the case of applications to validate defective service of a claim form. There are, however, good reasons for applying the same policy to applications under CPR rule 6.15(2) simply as a matter of basic fairness. The rules provide a framework within which to balance the interest of both sides. That balance is inevitably disturbed if an unrepresented litigant is entitled to greater indulgence in complying with them than his represented opponent. Any advantage enjoyed by a litigant in person imposes a corresponding disadvantage on the other side, which may be significant if it affects the latter’s legal rights, under the Limitation Acts for example. Unless the rules and practice directions are particularly inaccessible or obscure, it is reasonable to expect a litigant in person to familiarise himself with the rules which apply to any step which he is about to take." (Barton v. Wright Hassall LLP [2018] UKSC 12, Lord Sumption, see also §42)
“[39] 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 Ltd v. HMRC [2016] EWCA Civ 121).
“[44] The fact that a party is unrepresented is of no significance at the first stage of the enquiry when the court is assessing the seriousness and significance of the failure to comply with the rules. The more important question is whether it amounts to a good reason for the failure that has occurred. Whether there is a good reason for the failure will depend on the particular circumstances of the case, but I do not think that the court can or should accept that the mere fact of being unrepresented provides a good reason for not adhering to the rules. That was the view expressed by the majority in Denton at paragraph 40 and, with respect, I entirely agree with it. Litigation is inevitably a complex process and it is understandable that those who have no previous experience of it should have difficulty in finding and understanding the rules by which it is governed. The problems facing ordinary litigants are substantial and have been exacerbated by reductions in legal aid. Nonetheless, if proceedings are not to become a free-for-all, the court must insist on litigants of all kinds following the rules. In my view, therefore, being a litigant in person with no previous experience of legal proceedings is not a good reason for failing to comply with the rules.” (R (Hysaj) v Secretary of State for the Home Department [2014] EWCA Civ 1633)
“Shortage of funds (and consequent inability to instruct a professional adviser) should not, of itself, generally carry any weight in the FTT’s consideration of the reasonableness of the applicant’s explanation of the delay: see the comments of MooreBick LJ in Hysaj referred to at [15(2)] above. Nor should the fact that the applicant is self-represented – Moore-Bick LJ went on to say (at [44]) that “being a litigant in person with no previous experience of legal proceedings is not a good reason for failing to comply with the rules”; HMRC’s appealable decisions generally include a statement of the relevant appeal rights in reasonably plain English and it is not a complicated process to notify an appeal to the FTT, even for a litigant in person.” (Martland v. HMRC [2018] UKUT 178 (TCC), §47, Judges Berner and Poole).
“The gist of [Barton v Wright Hassall LLP [2018] UKSC 12] is that, while the Tribunal will do what it can to assist litigants in person, by and large litigants in person have no extra leniency in respect of compliance with the rules and directions of the Tribunal, although their status as litigants in person might have relevance in marginal cases where it is an explanation for the default.” (Clarke v. HMRC [2018] UKFTT 123 (TC), Judge Mosedale).
Rules readily accessible on internet are not inaccessible
"[19] Mr Barton contends that CPR rule 6.3 and Practice Direction 6A are inaccessible and obscure. I do not accept this. They are accessible on the internet. Part 6 is clearly headed “Service of Documents”. Electronic service under rule 6.3 is expressly required to be in accordance with Practice Direction 6A, which is prominently flagged in the table of contents. Furthermore, when the claim form was issued, the Courts Service sent Mr Barton in the usual way on 26 February 2013 a blank certificate of service for him to complete when he had served it. This included the statement: “Rules relating to the service of documents are contained in Part 6 of the Civil Procedure Rules (www.justice.gov.uk) and you should refer to the rules for information.” Since he did not in fact refer to them, their alleged obscurity is perhaps immaterial. But they are not in my view obscure. They do not justify Mr Barton’s assumption that Berrymans would accept service in that way unless they said otherwise. On the contrary, the paragraph 4.1(2)(b) of the Practice Direction clearly states that even where a solicitor’s writing paper includes an email address, service by that means was permissible “only where it is stated that the email address may be used for service.” It is fair to say that others have made the same mistake as Mr Barton, including the authors of A Handbook for Litigants in Person, ed HHJ Edward Bailey (2013), at p 157. But this is not for want of clarity in the rules." (Barton v. Wright Hassall LLP [2018] UKSC 12, Lord Sumption)
Cases giving litigant in person a degree of latitude
“Finally, following conclusion of the hearing, the appellant sent two sets of further written submissions to the Tribunal. HMRC objected to the Tribunal considering these submissions since they argued that the appellant had adequate opportunity to present his case during the hearing. However, in case the Tribunal decided to hear the appellant’s submissions, HMRC made their own submissions in response. Since the appellant was representing himself, we have given him some latitude in matters of procedure and have decided to consider the written submissions that both he and HMRC made following the hearing.” (Adelekun v. HMRC [2016] UKFTT 107 (TC), §10).
“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 [2015] UKFTT 0064 (TC), §50).
Examples not relating to extending time limits
- Multiple failures without any excuse and delay before rectification justified debarring HMRC
"[34]...There must be a limit to the permissible harshness (or indeed the permissible generosity) of a decision relating to the imposition or confirmation (or discharge) of a debarring order. It may well be that this case is not far from that limit (a view which obviously draws support from Judge Bishopp’s careful judgment in the UT). However, I do not consider that it was on the wrong side of the line, given the combination of the nature and extent of HMRC’s failure to reply to BPP’s request, the length of the delay in rectifying the failure and the length of the consequential delay to the proceedings, the absence of any remedy to compensate BPP for the delay, and the absence of any explanation or excuse for the failure, coupled with the existence of other failures by HMRC to comply with directions." (HMRC v. BPP Holdings Ltd [2017] UKSC 55, Lord Neuberger)
Extending time limits: general
Purpose of time limit is legal certainty
“An inability to enforce a debt, it seems to us, is no more than an incident of the finality of litigation, and as such adds nothing further to the prejudice argument. But the prejudice to the finality of litigation is itself a material factor in our determination.” (Romasave (Property Services) Ltd v. HMRC [2015] UKUT 254 (TCC), §98, Judges Berner and Falk).
“The aim of the rule, like any other imposing a time limit, is to require a party asserting a right to do so promptly, and to afford to his opponent the assurance that, after the limit has expired, no claim will be made.” (Leeds City Council v. HMRC [2014] UKUT 350 (TCC), §24).
Same test where no history of non-compliance (but that is relevant factor)
“The Court of Appeal specifically declined to analyse the decision in Data Select, which in BPP the Upper Tribunal had relied on in making its decision. The Court did, however, observe that the question in Data Select was the principle to be applied to an application to extend time when there had been no history of non-compliance, that also being the situation in this case. The Court also observed that the approach of Morgan J in Data Select had been to apply the provisions of CPR r 3. 9 as then in force by analogy, which is the approach that the Court of Appeal in BPP found to be appropriate.” (Hattons (Southport) Ltd v. HMRC [2016] UKFTT 710 (TC), §20, Judge Herrington).
Opposition to short extensions following a mistake where no prejudice suffered should be the exception
“It should be very much the exceptional case where a contested application for relief from sanctions is necessary. This is for two reasons: first because compliance should become the norm, rather than the exception as it was in the past, and secondly, because the parties should work together to make sure that, in all but the most serious cases, satellite litigation is avoided even where a breach has occurred.” (Denton v. TH White Ltd [2014] EWCA Civ 906, §42).
“I am satisfied, following Denton, that opposition to short extensions when a mistake has been made and there is no real prejudice beyond the loss of a windfall gain is not within the spirit of the overriding objective of r 2 of the Upper Tribunal rules, and should be the exception rather than the norm. Time limits are there to be complied with, and for the reason I have given; but mistakes do occur and if they are not egregious—for example when there is a failure to comply without good reason with an “unless” direction—or are not remedied promptly when discovered, they should not, in my view, lead to satellite litigation which takes up the resources of the parties and the tribunal. What was said in Denton at [42] on that topic is of equal application to the tribunals.” (Leeds City Council v. HMRC [2015] UKUT 350 (TCC), §27).
Extending the time limit for appealing
Burden on taxpayer to show appeal validly notified in time
“In any event, I do not consider that the Appellant has discharged the burden of satisfying me that the original notice of appeal was validly submitted and that the Tribunal acted in error when it rejected the notice. The Appellant has provided only the first page of the relevant notice and not the complete notice with the relevant attachments. In addition, from the page which has been provided to me, there is a credible interpretation of the attachments which suggests that the Tribunal was right to reject the notice as incomplete. There is also the fact that, as is apparent from the facts described above, Mr Ukachukwu has not been consistent in his explanation of the events relating to this appeal and the general level of disorganisation in the Appellant’s affairs tends to support the proposition that the original notice of appeal was deficient and therefore that the Tribunal was justified in rejecting the original notice.” (Fameface Import Ltd v. HMRC [2018] UKFTT 565 (TC), §10, Judge Beare).
Date of the document is date of despatch
“We do not accept that this interpretation can be correct, even if it is literally the case that the documents bear the original issue date. The “date of” the document, the statutory term, is not necessarily the same as the date on the document. In our view the date of the documents is the date they were despatched, ie 2 November 2016.” (Sharya UK Ltd v. HMRC [2018] UKFTT 72 (TC), §85, Judge Richard Thomas).
Exceptional for extension to be granted but exceptional circumstances not required
“We are also mindful of the comments of Sir Stephen Oliver, sitting in the First-tier Tribunal, in Ogedegbe v Revenue and Customs Commissioners [2009] UKFTT 364 (TC) (discussed in Markland v Revenue and Customs Commissioners [2011] UKFTT 559 20 (TC) and by this tribunal in O’Flaherty v Revenue and Customs Commissioners [2013] UKUT 0161 (TCC)) that permission to appeal out of time should only be granted exceptionally, meaning that it should be the exception rather than the rule and not granted routinely.” (Romasave (Property Services) Ltd v. HMRC [2015] UKUT 254 (TCC), §96, Judges Berner and Falk).
“These references to permission being granted exceptionally should not be elevated into a requirement that exceptional circumstances are needed before permission to appeal out of time may be granted. That is not what was said in Ogedegbe, nor in Aston Markland, and it is not the case. The matter is entirely in the discretion of the FTT, which must take account of all relevant circumstances. There is no requirement that the circumstances must be exceptional.” (O’Flaherty v Revenue and Customs Commissioners [2013] UKUT 0161 (TCC), §38).
Stricter approach where taxpayer relying on tax avoidance scheme
“In a “normal” appeal, such conduct would display an unacceptably lax approach to the statutory time limits. In an appeal such as this, I cannot see how a delay of this nature and magnitude can possibly be “excused” by permitting the late appeal to proceed. Where taxpayers embark on a course of action which involves careful reliance on detailed technical provisions to avoid tax, they cannot reasonably expect an indulgent attitude to be shown to them when they fail so spectacularly to observe basic time limits in seeking to exercise their rights of appeal when HMRC challenge the effectiveness of the scheme.” (De Jesus & nor v. HMRC [2017] UKFTT 786 (TC), §31, Judge Poole).
Three stage approach
“When the FTT is considering applications for permission to appeal out of time, therefore, it must be remembered that the starting point is that permission should not be granted unless the FTT is satisfied on balance that it should be. In considering that question, we consider the FTT can usefully follow the three-stage process set out in Denton:
(1) Establish the length of the delay. If it was very short (which would, in the absence of unusual circumstances, equate to the breach being “neither serious nor significant”), then the FTT “is unlikely to need to spend much time on the second and third stages” – though this should not be taken to mean that applications can be granted for very short delays without even moving on to a consideration of those stages.
(2) The reason (or reasons) why the default occurred should be established.
(3) The FTT can then move onto its evaluation of “all the circumstances of the case”. This will involve a balancing exercise which will essentially assess the merits of the reason(s) given for the delay and the prejudice which would be caused to both parties by granting or refusing permission.
That balancing exercise should take into account the particular importance of the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected. By approaching matters in this way, it can readily be seen that, to the extent they are relevant in the circumstances of the particular case, all the factors raised in Aberdeen and Data Select will be covered, without the need to refer back explicitly to those cases and attempt to structure the FTT’s deliberations artificially by reference to those factors. The FTT’s role is to exercise judicial discretion taking account of all relevant factors, not to follow a checklist.” (Martland v. HMRC [2018] UKUT 178 (TCC), §§44 – 45, Judges Berner and Poole, applied in Bell v. HMRC [2018] UKUT 254 (TCC), §25, Judge Berner).
“For all these reasons, I am not persuaded that there should be any difference, however nuanced, in the approach when considering whether a sanction should be imposed due to a breach, or whether permission should be granted for a late appeal. The authority of BPP Holdings is therefore applicable to this application.” (Mackin v. HMRC [2018] UKFTT 110 (TC), §63, Judge Poon).
“We take from the above case law, that in deciding whether to extend the time limit for an appeal, the tribunal must have in mind the general guidance set out in Denton, namely, that all circumstances must be considered but that particular weight should be given to the two factors set out in CPR 3.9. In looking at all the circumstances, approaching the matter by looking at the questions posed in Data Select remains a useful way of assessing this. I have considered, therefore, each of the questions posed in the Data Select case.” (Khan v. HMRC [2017] UKFTT 731 (TC), §53, Judge Morgan).
“[30] Most recently, important guidance has been provided by the Supreme Court in BPP Holdings Limited and others v HMRC [2017] UKSC 55. It is clear from the Supreme Court decision that we must take all relevant factors into account, but that close regard should also be paid to the approach now taken by the courts, under which importance must be attached to observing rules. The approach taken in the CPR (the Civil Procedure Rules) should generally be followed. Lord Neuberger referred in particular to the guidance given by Judge Sinfield in McCarthy & Stone (Developments) Ltd v HMRC [2014] UKUT 196 (TCC), [2015] STC 973 as being appropriate. Addressing the question of whether to permit an extension of time under the Upper Tribunal rules, Judge Sinfield referred to the Court of Appeal decision in Andrew Mitchell MP v News Group Newspapers Ltd [2013] EWCA Civ 1537 as providing useful guidance. Mitchell made it clear that, whilst all the circumstances should be taken into account, particular weight should be given to the references in the CPR to the need for litigation to be conducted efficiently and at proportionate cost, and the need to enforce compliance with rules, practice directions and orders.
[31] The guidance in Data Select suggests that the Tribunal should ask itself the following questions: what is the purpose of the time limit, how long was the delay, was there a good explanation for it, and what are the consequences for the parties of an extension or a refusal. The guidance in Denton, discussed and applied in Romasave, refers to a three-stage process, the first being to identify and assess the seriousness and significance of the failure, the second to consider why it occurred and the third to evaluate all the circumstances of the case, including those emphasised by the CPR rules.” (Waheed v. HMRC [2017] UKFTT 668 (TC), Judge Falk).
Error of law not to consider importance of complying with rules
“We have, however, concluded that the FTT did make an error of law in failing to acknowledge or give proper force to the position that, as a matter of principle, the need for statutory time limits to be respected was a matter of particular importance to the exercise of its discretion.” (HMRC v. Katib [2019] UKUT 189 (TCC), §17, Mann J and Judge Jonathan Richards)
Scotland
“HMRC referred us to Data Select, which is of course an English Authority and we are in Scotland, but it explicitly endorses Aberdeen at paragraph 36 indicating that both Authorities are broadly in line…We have considered, and weighed in the balance, all of the relevant circumstances including, but not restricted to, the circumstances identified in Aberdeen and Data Select. In so doing, we have concurrently applied the three stage process set out by the Court of Appeal in Denton & Others v T H Whyte & Another; Decadent Vapours Ltd v Bevan & Others and Utilise TDS Ltd v Davies & Others (“Denton”). The first of those is to identify the seriousness and significance of the failure to lodge an appeal in relation to which the relief sought. The second is to consider why the default occurred and the third is to evaluate all the circumstances of the case so as to deal justly with the application of the factors.” (Gullane Golf Club v. HMRC [2017] UKFTT 179 (TC), §§39…43, Judge Anne Scott – but note the synthesis of the case law in Martland).
No implicit permission from FTT correspondence
“[The taxpayer] argued that the effect of the Tribunal's letter of 15 April 2016 cancelling the hearing which had been listed for 19 April 2016 "to allow [the] parties time to explore resolving their dispute by ADR" effectively amounted to a decision by the Tribunal to allow the late notification of the appeals. This was on the basis that any Tribunal judge must have been aware that ADR could only be considered if there was an open appeal and so it would be impossible to explore ADR unless permission to appeal out of time had been granted…There is no suggestion in the letter of 15 April 2016 that it was implicitly granting permission to appeal out of time and it is inconceivable that the Tribunal intended to do so without using clear words.” (Rees v. HMRC [2016] UKFTT 784 (TC), §§45…51 Judge Vos).
Or allocation to case category
“[The taxpayer] argued that the Tribunal’s allocation of the appeal to the standard category and the making of what he referred to as “detailed directions for a stay” should also be taken into account, presumably on the basis that this further activity clearly implied that a considered decision had been taken to give permission for late notification of the appeal. Again, this fails to take into account the fact that no judicial consideration whatever had been given to the late appeal application, on the basis that the Tribunal’s administrative procedures do not require it unless and until it becomes apparent as a point of dispute between the parties.” (Ancell v. HMRC [2017] UKFTT 177 (TC), §30, Judge Poole).
Stage 1: Seriousness of breach/length of the delay
“The delay in this case, some 9 months, is much longer than that in the previous case and in general the longer the delay the less willing the court will be to extend time. Of course, the applicant may in some cases be able to satisfy the court that the delay, although substantial, has not had any practical effect on the course of the proceedings, but the longer the delay, the less likely it is that he will be able to do so.” (R (oao Dinjan Hysaj) v. Secretary of State for the Home Department [2014] EWCA Civ 1633, §54).
“The seriousness and significance of the relevant failure has always been one of the factors relevant to the tribunal’s determination. That is encompassed in the reference in Data Select, at [34], to the purpose of the time limit and the length of the delay.” (Romasave (Property Services) Ltd v. HMRC [2015] UKUT 254 (TCC), §94, Judges Berner and Falk).
Judge relative to original time limit
“In the context of the short period of nine days allowed for lodging the request for reconsideration a delay of thirteen days cannot be regarded as trivial or insignificant.” (R (oao Kigen) v. Secretary of State for the Home Department [2015] EWCA Civ 1286, §25)
Failure that prevents other party understanding case not trivial
“This was not a trivial breach…Fairness in litigation makes it essential that each party makes it clear what their case is long before it reaches the day of the hearing because otherwise the other party is deprived of the ability to properly prepare its own case.” (Greenish Ltd v. HMRC [2017] UKFTT 727 (TC), §25, Judge Mosedale – failure to provide witness statement for person listed as a witness following FTT request)
- Unless order is pointer towards serious breach but not determinative
"[36] Both parties’ positions acknowledge the fact the order breached was an unless order, pointed on its face to the breach being serious and significant. That conclusion was in line with the observations of the Court of Appeal in British Gas Trading Ltd v Oak Cash & Carry Ltd [2016] EWCA Civ 153 (“British Gas”) (at [41]) where Jackson LJ explained:
“The very fact that X has failed to comply with an unless order (as opposed to an 'ordinary' order) is undoubtedly a pointer towards seriousness and significance. This is for two reasons. First, X is in breach of two successive obligations to do the same thing. Secondly, the court has underlined the importance of doing that thing by specifying an automatic sanction in default (in this case the Draconian sanction of strike out).”
[37] Both parties recognised however that the “unless” nature of the order was not determinative. Again, that conclusion was consistent with Jackson LJ’s observation in the paragraph following that above, that not every breach of an unless order is serious or significant. It is also helpful to note that the Court of Appeal’s preceding discussion on the assessment of seriousness and significance in relation to unless orders was the source for the proposition the FTT in the current case noted from Dominic Chappell (see [14] above), that in order to assess the seriousness and significance of breach of an unless order, it is necessary to look at the underlying breach. Jackson LJ explained:
“39…The court must look at what X failed to do in the first place, when assessing X's failure to take advantage of the second chance which [X] was given.
40. In my view the phrase "the very breach" in paragraph 27 of Denton, when applied to an unless order, means this: the failure to carry out the obligation which was (a) imposed by the original order or rule and (b) extended by the unless order.”
[38] With the above in mind, we do not think the consideration under Stage 1 should be as narrowly focussed solely on the breach of the Unless Order as HMRC’s position suggests. At the level of principle, the appellant’s case, correctly in our view, suggests the taking of a broader perspective of looking not just at the breach of the Unless Order but the underlying breach." (Lingajothy v. HMRC [2023] UKUT 63 (TCC), Judge Raghavan and Judge Greenbank)
- Must take into account partial compliance
"[39] The ground of appeal is that the FTT did not take into account the provision of an unsigned statement on 8 October 2019 in the Stage 1 test. Taking the provision of that statement into account would, we note, be consistent with the need to analyse the underlying breach, namely the failure to comply with the tribunal’s directions, standard in this type of case, to serve witness statements on the other party before the hearing is listed. We therefore agree with Mr Windle that the provision of the unsigned witness statement would, in principle, be of potential relevance. The FTT did not however take the unsigned witness statement into account at Stage 1. It wrongly focused on the breach of the unless order (to the exclusion of the underlying breach). That, in our judgment, represented an error of law." (Lingajothy v. HMRC [2023] UKUT 63 (TCC), Judge Raghavan and Judge Greenbank)
- Delay aggravated if only corrected following prompt
"[27] The context in Romasave is distinctly different to the circumstances of this appeal. HMRC's position is further aggravated by the fact that a prompt was necessary from the FtT before HMRC sought to rectify the default." (Guerlain-Desai v. HMRC [2024] UKFTT 117 (TC), Judge Manyarara)
- Delay may be aggravated if follows resistance to extension for other side
"[28] The direction of the FtT was clear in terms of when the Statement of Case was required. Furthermore, I find considerable force in Mr Cannon's submission that having forcefully opposed the Appellant's own application for an extension of time to appeal, it is reasonable to expect that HMRC would have proceeded to act in a timely manner in preparation for a substantive hearing." (Guerlain-Desai v. HMRC [2024] UKFTT 117 (TC), Judge Manyarara)
- Failing to disclose significant documents in breach of unless order
"[68] HMRC seek to maintain that the breach was only in relation to seven out of 161 documents. However, the number of the documents is not the determining factor. The nature and relevance of the missing documents must be the relevant feature and not the number of documents. The seven documents were progress logs. Ebuyer had asked for them since 2015. They are potentially at the heart of Ebuyer’s case about due diligence and knowledge as well as the time bar issue. [69] HMRC have submitted that Ebuyer should have identified that the seven documents were missing and brought this to HMRC’s attention so that the omission could have been rectified quicker. I see no basis to conclude that there was any such obligation on Ebuyer; but more importantly, the fact that Ebuyer did not do so does not detract from the significance and seriousness of HMRC’s breach of the Unless Order.
[70] Given my conclusions so far, I have no hesitation in concluding that the breach in relation to the seven documents was serious and significant." (Ebuyer (UK) Limited v. HMRC [2023] UKFTT 611 (TC), Judge Bowler)
Examples of characterisation of length of delay
- 13 day late appeal not serious or significant
“[13] Turning first to the length of the delay of what the parties agree is 13 days, whilst I do not consider that it is “very short” (in the language of the first stage of Martland,) which would mean that I might need to spend little time on the second and third stages of the process, I do not consider it to be either serious or significant. I appreciate that a period of 13 days relative to a period of 30 days to bring an appeal might be seen to be relatively significant, but in absolute terms 13 days is not serious and in the context of this case, certainly not significant.” (Choudhrie v. HMRC [2021] UKFTT 152 (TC), Judge Popplewell)
- 20 days late during covid not significant
"[11] Given that Veho have made an explicit statement that their application for a review was late, it is not open to me to decide that the application was not late, but equally I do not have unequivocal evidence that it was 20 days late.
[12] In SC Duvenbeck Logistik, Judge Popplewell decided that a delay of 28 days during the COVID pandemic was neither significant or serious.
[13] In light of the lack of evidence of the actual lateness and the short period of time, I find that the delay was not serious or significant." (Veho Limited v. Director of Border Revenue [2022] UKFTT 472 (TC), Judge McGregor)
- 24 days late “significant”, three months late “serious” in context of 30 day appeal deadline
“Time limits imposed by law should generally be respected. In the context of an appeal right which must be exercised within 30 days from the date of the document notifying the decision, a delay of more than three months cannot be described as anything but serious and significant. We note, although judgment was given only after we had heard this appeal, that in Secretary of State for the Home Department v SS (Congo) and others [2015] EWCA Civ 387 the Court of Appeal, at [105], has similarly described exceeding a time limit of 28 days for applying to that court for permission to appeal by 24 days as significant, and a delay of more than three months as serious. Although each case must be considered in its own context, we can find nothing in this case which would alter our finding in this respect.” (Romasave (Property Services) Ltd v. HMRC [2015] UKUT 254 (TCC), §96, Judges Berner and Falk).
- Six weeks not so egregious that it should determine application
“However, the time period in question of six weeks is not so long or so egregious that Tribunal considers it should be determinative of the application given that 30 days from notification is stipulated as the statutory deadline for lodging appeals.” (Hussain v. HMRC [2017] UKFTT 77 (TC), §83, Judge Rupert Jones)
- 64 day delay in providing statement of case serious and significant
"[26] In respect of the first stage, there can, in my view, be no argument but that the delay in delivering the Statement of Case by HMRC was both serious and significant. Whilst Miss Saeed submitted that the delay was not significant in light of the fact that it was under 90 days, that is not the benchmark by which a significant delay must be considered. The length of the delay is to be considered by reference to the time-limit. This was confirmed in Romasave (Property Services) Ltd v Revenue & Customs Comrs [2015] UKUT 254 (TCC) ('Romasave'), at [96], in the context of the time-limit for submitting an appeal.
[27] ... In Secretary of State for the Home Department v SS (Congo) & Ors [2015] EWCA Civ 387, the Court of Appeal, at [105], has described exceeding a time-limit of 28 days for applying to that court for permission to appeal by 24 days as significant and a delay of more than three months as serious. It is, therefore, plain from the relevant authorities that a delay of this nature can be both serious and significant, in the context of a 60-day time-limit. The time for filing the Statement of Case was no later than 15 June 2023, following a direction of the FtT on 17 April 2023. The Statement of Case was, in fact, only filed on 18 August 2023 following further correspondence from the FtT on 17 August 2023." (Guerlain-Desai v. HMRC [2024] UKFTT 117 (TC), Judge Manyarara)
- Delay of 7 months “serious breach”
“The period of delay in the present case is from 6 May 2016 to 16 December 2016 when the appeal was notified to the tribunal. That is a period of some 7 months. It is plainly a significant period and amounts to a ‘serious breach’ in the language of the Court of Appeal in Denton. Indeed, the Upper Tribunal in Romasave referred to a delay of 3 months as serious and significant.” (Currie v. HMRC [2017] UKFTT 539 (TC), §44, Judge Cannan)
Stage 2: Reasons for the breach
- Consider the seriousness of the slip not just its consequences
"[47] 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 [2021] UKUT 91 (TCC), Judge Richards and Judge Cannan)
- HMRC contributing to delay
“In our view the delay of just over a year is serious, but not significant. We also find that there is a good explanation for the delay of just over a year. Mr Massey could not be expected to realise the error made by Mr Fisher in referring to the VAT and Duties Tribunal. He could though have expected to get a response from HMRC in answer to his reasonable questions about a number of the entries he needed to put on the Notice of Appeal to the Tribunal. And he was not told that he had 30 days to appeal after the review conclusions letter.” (Massey v. HMRC [2016] UKFTT 616 (TC), §74)
- HMRC providing inadequate notice of appeal/review rights
"[65] The Tribunal is influenced by the final sentence of paragraph 37 of the Upper Tribunal’s decision in NT ADA already quoted at paragraph 27 above:
“As already indicated, a failure by HMRC to provide adequate notification of appeal or review rights in the decision letter could also influence the exercise of the FTT’s discretion to admit a late appeal.”
[66] We consider the advice given by HMRC in their decision letters was confusing. The encouragement to lodge appeals given by HMRC officers during the meetings and telephone calls led the Company to believe that its agents had lodged appeals. This is supported by the fact that HMRC’s Debt Department did not write to the Company until 13 September 2019. HMRC had advised the Company that it would not take any action to collect the disputed tax while the reviews of the decisions were being carried out. In the absence of any demands from HMRC the Company was entitled to believe the decisions were under appeal.
[67] The amount of VAT at stake is considerable (£631,548.43). We consider the prejudice to the Company if the appeals are not allowed to proceed outweighs any prejudice to HMRC.
[68] The application to allow the two appeals dated 24 September 2019 is successful." (Transwaste Recycling and Aggregates Limited v. HMRC [2022] UKFTT 4 (TC), Judge Rankin)
- Reliance on HMRC advice/assistance understandable but rarely reasonable
“We have some sympathy for Mr Rampat’s predicament. Nonetheless, it must be appreciated that the appellant was properly informed of its options and the timescales as early as the decision letter of 20 November 2013. While it is understandable, particularly where one has no legal or other professional representation, to rely on advice and assistance from HMRC and the tribunal it would rarely be reasonable solely to do so. Ultimately, Mr Rampat accepted that the conduct of the appeal was the appellant’s responsibility alone. To the extent that he was unclear as to information provided or options available it was his duty to inform himself on behalf of the company.” (SNAR Associates v. HMRC [2016] UKFTT 763 (TC), §21, Judge Rupert Jones)
- HMRC corresponding on the matter after the deadline may imply acceptance to extend deadline but T still holds responsibility
“Correspondence from HMRC after the expiry of a deadline which fails explicitly to point out that a deadline has expired and that immediate action should be taken to rectify deficiencies, always carries the risk that it is misunderstood. It may be taken by taxpayers to be a tacit acceptance by HMRC that the deadline is agreed to be extended, even though HMRC has no such power. It may also be taken by taxpayers to be a tacit acceptance that further action is required on HMRC’s part before the appeal can be filed when it is not. However, it must be repeated that the appellant holds the responsibility to properly inform itself of the deadlines and options available and it is likely to be a rare case where this reason alone could found a successful application for permission to appeal out of time.” (SNAR Associates v. HMRC [2016] UKFTT 763 (TC), §22, Judge Rupert Jones)
- Intentional failure
“No reason has been put forward for the delay in appealing Decision 9. The failure to do so must be regarded as intentional on the part of Romasave; there was no suggestion that Romasave had been misled in any way as to whether an appealable decision in that respect had been made or believed that it had lodged an appeal.” (Romasave (Property Services) Ltd v. HMRC [2015] UKUT 254 (TCC), §97, Judges Berner and Falk)
- Being busy is not a reasonable excuse
“Being busy is not an excuse for not doing what needs to be done: if it were such an excuse, extensions of time would become the rule and not an exception. In any event, completing a notice of appeal form is not a time consuming task and would-be appellants need to make time to complete the form if they wish to lodge an appeal.” (Danger Money Records Ltd v. HMRC [2016] UKFTT 741 (TC), §23, Judge Mosedale)
- Filling in appeal form is simple/does not require much time
“…completing a notice of appeal form is a relatively short and straightforward matter and one of some importance: it is a somewhat incredible claim that the appellant could not find time to do it, however busy he was.” (Danger Money Records Ltd v. HMRC [2016] UKFTT 741 (TC), §22).
- Medical reason must be supported by strong evidence
“It seems to me that, while there is a plausible reason for the delay in in the form of Mr Jones’s depression and the failure of his agents to take appropriate action, and the potential consequences for Mr Jones are very significant, the evidence of the effect of Mr Jones’s condition on his ability to deal with his affairs is not strong. In the final analysis, those factors are insufficient to outweigh the seriousness of the delay, and the need to ensure that litigation is pursued efficiently and that time limits are adhered to.” (Peters v. HMRC [2018] UKFTT 187 (TC), §75, Judge Greenbank)
- Difficulties understanding letter
“Secondly, Border Force could reasonably have anticipated that the Appellant would require time to translate and then understand the review decision letter. It is a long letter dealing with a complex matter and citing legislation which is specialist and technical in its nature… For the Appellant, matters were confused by two further features of the review decision letter, both of which contributed to his delay in making his appeal…The first is the clear statement in the conclusion section of the letter that the vehicle should be restored. Understandably the Appellant felt the need to have the matter settled beyond doubt. He told us that the lawyer in Poland who translated the letter could not advise him for certain of the consequence of the letter given the express contradiction within the letter.” (Szczepanski v. Home Office [2014] UKFTT 162 (TC), §§42…44…45, Judge Sadler).
- Reduced time for consideration due to letter being sent by post
“First it is clear that the actions of Border Force had the effect of curtailing the 30 day period: they chose to send the review decision letter by post to the Appellant when they could, concurrently, have emailed it to the Appellant. They were in email contact with him at that time. The result was that the effective appeal period for the Appellant was reduced to 16 days.” (Szczepanski v. Home Office [2014] UKFTT 162 (TC), §41, Judge Sadler).
- Simply disagreeing with FTT's interpretation of direction not a good reason
"[80] In relation to the default regarding the additional documents, HMRC’s reason is no more than that they disagree with the conclusion I have reached that disclosure was required by the Unless Order. Given my conclusions about those documents made so far there is clearly no good reason therefore for the failure to comply with the Unless Order in this respect." (Ebuyer (UK) Limited v. HMRC [2023] UKFTT 611 (TC), Judge Bowler)
- Leaving things until the last minute not a good reason
"[77] HMRC say that in relation to the seven conceded documents the reason for their omission was Mr Collins testing positive for Covid and an oversight resulting from him being unwell. However, this ignores the fact that Mr Collins tested positive for covid on 26 January 2022, just a few days before the first deadline under the Unless Order. By that time HMRC had had ten months to carry out the disclosure exercise as a result of various extensions. Despite the clear warning from Judge Redston in the Unless Order when she commented on the inadequacy of reason for delay provided by HMRC relying on the illness of one person, HMRC had left the exercise to the last moment. Furthermore, as Judge Redston previously commented, HMRC is a large government organisation and one person’s illness should not equate to HMRC being unable to comply with Tribunal directions." (Ebuyer (UK) Limited v. HMRC [2023] UKFTT 611 (TC), Judge Bowler)
- Absence of legal advice not a good reason because taxpayers are expected to obtain legal advice within time limit
“[Counsel for the taxpayer] submits that [the taxpayer] appealed, once it received legal advice. In common with other taxpayers, [the taxpayer] had thirty days to obtain advice. Its failure to act within that time limit is not a “good reason” for the failure. It follows, too, that the failure was not caused by [the taxpayer’s] legal adviser, but by the company itself.” (Citipost Mail Ltd v. HMRC [2015] UKFTT 252 (TC), §74).
- Failing to understand the significance of a strike out until new advisers appointed
“We have concluded that, on balance, all three late applications should be admitted. Although the delays were not “trivial” (over two months for Vaultdawn, over three months for Cookes, and over four months for Allsigns) we are satisfied that each appellant did apply to the Tribunal promptly once, following appointment of new professional advisers, it became aware of the situation it was in. We feel it would be disproportionately harsh to refuse even to hear the arguments put forward by those appellants in support of their respective applications, especially as (as pointed out by Mr Burgess) those arguments would anyway have to be addressed by HMRC in relation to the other appellants.” (Vaultdawn Ltd v. HMRC [2015] UKFTT 383 (TC), §45)
- HMRC relying on explanations that they routinely reject as good reasons
“The reasons given by HMRC were, in the Tribunal’s view simply astonishing. The Tribunal reflects on the position HMRC take against taxpayers who seek to bring appeals which are out of time and the consternation with which they approach any taxpayers’ failure to have proper systems to ensure compliance with statutory deadlines. Any attempt by a taxpayer to assert that they should be permitted to bring an appeal 100 days out of time because the person dealing with the matter was suffering from a stress related illness, there were frequent management changes and no system to ensure compliance would be met with derision. As is clear from the BPP judgment, whilst no higher expectation should be set of a government department certainly no lower standard should be expected of them.” (Dangov v. HMRC [2017] UKFTT 734 (TC), §31, Judge Amanda Brown).
- HMRC misleading the Tribunal about reason for delay
“In a written response to the appellant’s present application the respondents relied on the following matters to explain, if not justify, their failure to serve a statement of case on or before 4 February 2013: (1) It appeared from the correspondence referred to above that the tribunal was proposing a directions hearing prior to the service of the statement of case. The respondents delayed producing the statement of case until after the directions hearing which, in the circumstances was a reasonable decision…Mr Hone said and I accept that it took him time to get up to speed in relation to the appeals. I can well understand that would be the case. He frankly stated in his oral submissions that that was the real reason why he left matters to the directions hearing. Pressure of work meant that he could not properly consider the appeals until the directions hearing…I respect Mr Hone’s candour, but it does mean that what was previously said in writing purporting to explain why there had been no engagement by the respondents prior to the directions hearing was, at best, misleading.” (Elder v. HMRC [2014] UKFTT 728 (TC), §§75…77…78)
- New authority not a good reason for lateness (but possibly relevant at stage 3)
"[88] We have already discussed those cases but there is also the issue as to whether it could ever be a reasonable excuse for a delay in appealing because a decision in another case some time later might mean that a successful appeal would be possible. HMRC cited a number of cases in support of a refutation of that concept but by far the most persuasive was the decision of Judge Cannan in Moore v HMRC [2022] UKFTT 411 (TC) where he said at paragraph 95 that:
"In my view, the publication of a new authority which prompts an appeal out of time might have some weight in the balancing exercise at stage three. However, it is not in itself a good reason for not appealing in time. If it was, then it would nullify to a large extent the benefit of finality recognised in Data Select and Aberdeen City. It seems to me that the longer the delay, the less weight that should be attached to the fact that the law was in effect misunderstood or misconstrued."
In that case the delay was four years which is not dissimilar to the delay here but in that case the issues in the appeal upon which reliance was placed were already being litigated and it was the outcome of the appeals, including to the CJEU, which was awaited." (Wardrop v. HMRC [2024] UKFTT 178 (TC), Judge Anne Scott)
Failure due to litigant’s advisors
- The accountant is the advisor (where relevant)
“In the present circumstances although CPR 3.9 refers to "legal representatives" I think Woodpecker's accountants may be taken as its professional advisors holding themselves out as competent to conduct an appeal on its behalf.” (Woodpecker Ltd v. HMRC [2009] EWHC 3442 (Ch), §52).
- Advisors expected to be familiar with key practitioner texts
“What is more in September 2008 the clear advice given in paragraph A5-203 and 206 of Simon's Taxes was that a notice of appeal was necessary. Any competent practitioner should have been aware of that work and of the view which it expressed.” (Woodpecker Ltd v. HMRC [2009] EWHC 3442 (Ch), §48)
- Failure due to adviser/representative as a factor in favour of relief
“In favour of setting aside the November Decision there are in my judgment the following considerations:…(iii) The preponderance of blame for the circumstances which led to the dismissal of the appeals, and to the February Decision, lies fairly and squarely with Mr Ross [the taxpayer’s accountant and representative], who (whether dishonestly or not does not matter) concealed the company’s extreme predicament from its directors.” (ATEC v. HMRC [2010] UKUT 176 (TCC), §51)
“She could reasonably have expected that a professional accountancy firm would be able to follow the simple instruction set out in the notice of assessment and make the appeal within the 30-day time limit. Although it is not expressly stated in Section 118(2) of the TMA 1970 itself, other reasonable excuse provisions in the tax legislation provide that, where a taxpayer has relied on any other person to do anything, that is not a reasonable excuse unless the relevant taxpayer took reasonable care to avoid the failure. I believe that, in this case, the Appellant has taken that reasonable care. She has not simply relied on SFL to sort out her problem but has maintained a keen interest in the proceedings and has tried to avoid the current situation. But she did not herself have the necessary expertise to know what steps needed to be taken to resolve the problem and was entitled to expect that SFL would know what it was doing.” (Miron v. HMRC [2018] UKFTT 118 (TC), §12, Judge Beare).
“I was not referred to any authority bearing on the significance of a party relying on professional advice in withdrawing an appeal or discontinuing proceedings and subsequently forming a different view as to the merits. I am not aware of any general principle to be applied, but it does seem to me that where a party applies to reinstate in such circumstances it will be relevant to consider whether the advice was such that no reasonably competent professional adviser could have given it. I would emphasise that I view that simply as one relevant factor and not as a test to be applied as such.” (Rolls Group v. HMRC [2015] UKFTT 404 (TC), §18).
- Only if reasonable reliance established
“The failures of its representative should not necessarily be visited on the appellant; nevertheless, it seems to me that where a person chooses to be represented by another, that person is to a large extent adopting its representative’s acts as its own. In general, it would be unfair to the defendant if, while the appellant’s representative’s compliant actions are attributed to the appellant, the representative’s defaults are not. And in this case, the appellant’s director did not attend the hearing nor given any reason for his non-attendance, and therefore was not in a position to explain to what extent (if any) he was aware of his representative’s defaults and to what extent (if any) he had done anything to correct the situation. In these circumstances, I consider that it is only fair to HMRC to treat FTI Fox Consultants’ defaults as defaults of the appellant.” (Greenish Ltd v. HMRC [2017] UKFTT 727 (TC), §33, Judge Mosedale)
- Only a factor in favour in limited circumstances
“We do not consider that, given the particular importance of respecting statutory time limits, Mr Katib’s complaints against Mr Bridger or his own lack of experience in tax matters are sufficient to displace the general rule that Mr Katib should bear the consequences of Mr Bridger’s failings and, if he wishes, pursue a claim in damages against him or Sovereign Associates for any loss he suffers as a result. This conclusion is fortified by the fact that the FTT’s findings demonstrate that there were some warning signs that should have alerted Mr Katib to the fact that Mr Bridger was not equal to the task. Despite Mr Bridger assuring Mr Katib that his appeals were in hand, he was still receiving threats of enforcement action ([9]). Mr Bridger’s advice to “cease to be a man by making a declaration to this effect” should have alerted Mr Katib to the warning signs. Mr Katib is not without responsibility in this story.” (HMRC v. Katib [2019] UKUT 189 (TCC), §59, Mann J and Judge Jonathan Richards)
"First, while the fault for failing to bring an appeal in time may in many cases lie at the door of an appellant’s professional advisers, that does not justify or excuse any delay. The general rule (to which, of course, there may be exceptions) is that the failings of an adviser are laid at the door of their client. This was made clear by the Upper Tribunal in Katib and underlined by the (very recent) Upper Tribunal decision in Shafique Uddin and Kzitula Limited (in liquidation) v HMRC, [2023] UKUT 99 (TCC)." (City Plant Ltd v. HMRC [2023] UKFTT 414 (TC), Judge Baldwin)
"[46] We are bound by the decision in Katib and, as a result, we must find that the fact that the appellant was let down by his accountant(s) does not constitute a good reason for the failure to appeal." (James v. HMRC [2023] UKFTT 661 (TC))
"[12] As can be seen from the extract from Katib above, reliance on agent is not a good reason for bringing an appeal out of time. I am bound by Katib. The appellant has provided no documentary evidence of the basis on which he appointed his accountants, and so I am not able to review the detailed terms of such appointments and whether, as alleged by the appellant, they included bringing an appeal against the VAT and penalty assessments. But even if I accept the appellant’s evidence at face value, and it is clear from the contact notes mentioned above that the appellant had raised concerns about his accountants with HMRC in January 2014, failures by an appellant’s advisers should generally be treated as a failure by the appellant. I accept that this is a generality, and that there may be circumstances in which that generality is displaced by evidence showing that even though an appellant has relied on an agent, that can still comprise a good reason for failure to submit a timely appeal. But unfortunately for this appellant, I have seen no evidence which might displace that general “principle” and allow me to find that the reliance on his accountants in his situation can comprise a good reason for failing to submit a timely appeal." (Fitzpatrick v. HMRC [2022] UKFTT 87 (TC), Judge Nigel Popplewell)
“The circumstances in which reliance upon an agent can of itself constitute an adequate reason for failure to meet a relevant time limit may be limited. However, the obligation of the Tribunal is to deal with cases fairly and justly having taken into account all of the facts and circumstances of the case. In particular, while I would agree that in many cases reliance upon an agent will not be an adequate reason, when coupled with other factors such as evidence of mental illness or evidence that the taxpayer has taken all reasonable steps to ensure that the time limits were met, there may be circumstances in which it can form part of an adequate reason for a delay.” (Peters v. HMRC [2018] UKFTT 187 (TC), §58, Judge Greenbank).
“While an appellant does nothing wrong in seeking to appoint a representative, the appellant has chosen to bring legal proceedings, and must accept the responsibility to pursue them as directed by the Tribunal. The appointment of a representative does not absolve the appellant from such a duty: that would be unfair on the other litigant, who has no choice over whether the appellant appoints a representative or as to who that representative is. It is the litigant who appoints a representative who must (in general at least) take the burden as well as the benefit of what his representative does (or fails to do) in his appeal. The risk of a poorly performing representative must (in general) fall on the litigant appointing that representative and not on the other party to the appeal. To rule otherwise is manifestly unfair to HMRC, who had no choice or control of Mr Clarke’s decision to appoint a representative, and to whom the appellant’s representative owes no duty of care.” (Clarke v. HMRC [2018] UKFTT 123 (TC), Judge Mosedale).
- May have to waive privilege
“We accept HMRC’s general point that, in most cases, when the FTT is considering an application for permission to make a late appeal, failings by a litigant’s advisers should be regarded as failings of the litigant and we will return to this issue in the “Disposition” section that follows. Therefore, in most cases, a litigant seeking permission to make a late appeal on the grounds that previous advisers were deficient will face an uphill task and should expect to provide a full account of exchanges and communications with those advisers. It will often be impossible to give the requisite full account without waiving privilege. In this case Mr Katib did provide a reasonably full account of his dealings with Mr Bridger. He put correspondence with him into evidence and, in doing so, waived any privilege that he had in relation to that correspondence. We reject HMRC’s submission that, in the absence of a signed, formal waiver of privilege, this was necessarily insufficient for his application to succeed. If HMRC felt that they needed full access to Sovereign Associates and Mr Bridger to meet the case that Mr Katib was making, they could have persisted with their application to the FTT referred to at [43]. Once they had not done so, it was a matter for the FTT to decide on the basis of the evidence it had whether Mr Katib’s complaints about his former advisers were justified and, if they were, whether he should be granted permission to make a late appeal.” (HMRC v. Katib [2019] UKUT 189 (TCC), §49, Mann J and Judge Jonathan Richards)
Stage 3: All the circumstances of the case
- HMRC not objecting is an important factor if present
“However, in not opposing the Appellant’s application for an extension of time, the Respondents had indicated that no or very little prejudice would be caused to them. After weighing these factors, in particular the very limited prejudice felt by the Respondents, we considered it appropriate to grant an extension of time to the Appellant.” (M Najib and Sons Ltd v. HMRC [2017] UKFTT 147 (TC), §5, Judge Bailey).
“Taking all these factors together, but in particular relying on the lack of objection by the Respondents, we consider that it is appropriate to grant the Appellant permission to make a late appeal, and we grant such permission.” (Hamma v. HMRC [2016] UKFTT 817 (TC), §8, Judge Bailey).
“We place significant weight on HMRC’s lack of opposition to the application for permission and fair concession that it had at times been slow to respond to the appellant and provide information requested or at least to clarify that nothing was outstanding. We also note that HMRC fairly conceded it had delayed substantially in replying to the appellant in a previous period of 2009 to 2012 before the decision was promulgated.” (SNAR Associates v. HMRC [2016] UKFTT 763 (TC), §25, Judge Rupert Jones)
- Prompt application for relief
“The failure to issue an appellant's notice at all until January 2009 and the failure to include within it an application to extend time are to my mind a failure to act promptly.” (Woodpecker Ltd v. HMRC [2009] EWHC 3442 (Ch), §48).
“[A relevant consideration is whether] once the excuse has ceased to operate, for example because the appellant became aware of the possibility of an appeal, have matters proceeded with reasonable expedition?” (AG for Scotland v. General Commissioners for Aberdeen City [2005] CSOH 135, §23 and see Patrick v. HMRC [2015] UKFTT 508 (TC), §46).
“In this case the appellant says the first he knew of the penalty was in a letter of 28 July 2014 from HMRC putting him on notice that he had been charged a penalty of £100. Between then and 4 August the appellant engaged an agent to help him, and the agent contacted HMRC on 4 August to appeal. That is reasonable expedition by any standards. (And his very promptness in doing this reinforces my view that the 28 July approach by HMRC was the first he knew of the penalty).” (Patrick v. HMRC [2015] UKFTT 508 (TC), §69)
- Interests of the administration of justice (finality and compliance with the rules)
“The time limit concerned must be given great respect and there must be strong factors in favour of departing from it. Time limits should be respecte unless there are good reasons not to and time limits are there for a reason: generally speaking, the parties are entitled to finality (see [40] of the Decision).” (Hill v. Pensions Regulator [2016] UKUT 480 (TCC), §21(3)).
“[The taxpayer] has been dilatory in the prosecution of its appeal and that the period of delay is so serious that…the interests of justice in achieving finality and in securing observance of the time limits laid down in the rules are weighty factors which come down in favour of refusing permission to extend time.” (Woodpecker Ltd v. HMRC [2009] EWHC 3442, §46)
- Similar appeal already before FTT does not remove prejudice to administration of justice
“The submission underlying this argument appears to be that if there is genuine uncertainty about the interpretation of the law which is being (or might be) settled in some test case, then appellants in similar circumstances should be allowed to delay making their appeals until that test case has been decided and the law clarified, seemingly on the basis that HMRC cannot possibly be prejudiced by the lateness of an appeal where they are involved in test litigation to clarify the whole issue. Once this is explicitly stated, it becomes clear how unsustainable it is as an argument.” (Martland v. HMRC [2018] UKUT 178 (TCC), §53, Judges Berner and Poole).
“if permission is granted for a late appeal there would be some prejudice to the administration of justice. The 30 day time limit has been enacted by Parliament, and it should be respected in any decision as to whether an appeal should be allowed to proceed late. The period of delay here is very long, and HMRC should be able to regard decisions which were not appealed as final. Overriding that principle of finality, essentially because there are two other similar appeals, risks undermining the fairness of the system. In other words, is it equitable for Citipost to be granted permission, essentially because it has two other similar appeals before the Tribunal, when an application from a taxpayer with otherwise identical facts would be refused?” (Citipost Mail Ltd v. HMRC [2015] UKFTT 252 (TC), §76).
But may be a relevant factor
“The Appellant contends that HMRC suffer no prejudice in this case because even if he had appealed in time his appeal would have been stayed behind the lead appeals. Whilst I do not accept that HMRC suffer no prejudice, I do consider that this is a relevant factor in favour of extending time to notify the appeal.” (Currie v. HMRC [2017] UKFTT 539 (TC), §44, Judge Cannan).
See further below in Late appeal examples
- Whether direction specified the sanction
“Where case management directions provide for a sanction for failure to serve witness statements on time, as was the case in Durrant, then I would expect that sanction to apply if there is a default that is not trivial and there is no good explanation for it…As the directions in this case did not specify any sanction for failing to serve witness statements by the due date and as the specified date for service in the case of HMRC was repeatedly extended without sanction or condition being imposed, I consider that it would be neither just nor fair to refuse LCC’s application to serve and rely on the further evidence.” (London Cellular Communications Ltd v. HMRC [2014] UKFTT 272 (TC), §25 – query whether there was even an implied sanction in this case - see above)
- HMRC knew their decision was being challenged
“The appeal against the assessment raised the question of the availability of the losses for payment arising from commissions paid in the year of account, and in consequence, the Inspector knew within time that his decision about the non-availability of those losses was being put in issue by the taxpayer…Those losses and whether or not they are allowable would be in issue in exactly the same way in any appeal from the loss determination. The Revenue can point to no relevant prejudice to the public finances if this appeal is allowed to be lodged out of time…By contrast, the taxpayer's case as to whether or not he has to pay tax for that year of account will be irremediably prejudiced if, simply by having failed for what appears to be explainable reasons to lodge the appeal in time, those losses are disallowed without any enquiry as to whether they were in fact properly allowable…For these reasons it seems to me that this is the paradigm example of circumstances where the General Commissioners should have used what I have found to be their more extensive discretion than that of the Inspector, conferred by section 49 subsection 1 of the Taxes Management Act, to extend time for the taxpayer to lodge an appeal against the loss determination.” (R (oao Browallia Cal Ltd v. General Commissioners of Income Tax [2003] EWHC 2779 (Admin), §§16 – 19).
"[62] I accept [the taxpayer's] submission that the prejudice is one way, against the appellant. The delay was not significant so far as relating to prejudice to HMRC: (i) because HMRC were still for much of the delay considering whether the assessments were correct, that is to say, putting their resources into the case by considering the evidence, inviting further evidence and suggesting that the appellant appeal; and (ii) because HMRC were being told, right up until just six days prior to the 29 October 2019 appeal being filed, that the appellant intended to pursue an appeal. I take each in turn.
...
[99] Given the lack of significant prejudice to HMRC, the significant financial prejudice to the appellant, Mr Boland having to defend himself against dishonesty allegations, and all of his personal health and circumstances, I am not willing to add to all of that by not permitting these appeals to be made late. I say that especially given that HMRC must already have all the evidence they consider they need to allege fraud, since it would be improper of them to have alleged it otherwise..." (PRB Trading Limited v. HMRC [2023] UKFTT 421 (TC), Judge Perez)
“It seems to us that no prejudice arises to HMRC by permitting Mr Frydrysiak to make an appeal out of time against the penalty assessment and dealing with that appeal as part of the appeal against the assessment. HMRC must have known in good time that it was Mr Frydrysiak’s’s intention to appeal against the penalty, they knew from his Notice of Appeal and letters what the grounds of such an appeal were, and they knew that his command of the detail of legal procedure or understanding of legal documents was not likely to be good. In contrast if the tribunal enforce the formalities Mr Frydrysiak would face a substantial penalty without a chance to make his case against it.” (Frydrysiak v. HMRC [2017] UKFTT 561 (TC), §96, Judge Hellier)
- Effect of delay on evidence
“[A relevant consideration is] has the delay affected the quality of the evidence that is available? In this connection, documents may have been lost, or witnesses may have forgotten the details of what happened many years before. If there is a serious deterioration in the availability of evidence, that has a significant impact on the quality of justice that is possible, and may of itself provide a reason for refusing leave to appeal late.” (AG for Scotland v. General Commissioners for Aberdeen City [2005] CSOH 135, §23 and see Patrick v. HMRC [2015] UKFTT 508 (TC), §46).
- Refusing extension would have a disproportionate effect on one party
“[26] ... It is now well recognised that there is a wider public interest in ensuring that litigants comply with the time limits laid down in the rules, but the court must also consider whether to grant or refuse relief would have a disproportionate effect on one or other party. This is not a case in which the Secretary of State can point to any particular prejudice she will suffer as a result of a period of nine days' delay, whereas the appellants will suffer a degree of prejudice if they are prevented from having their application for permission to apply for judicial review reconsidered at an oral hearing.” (R (oao Kigen) v. Secretary of State for the Home Department [2015] EWCA Civ 1286, Moore-Bick LJ)
- Compliance with other rules
Failure to apply for an extension of time is a failure to comply with other rules:
“when the matter was brought to the attention of Woodpecker's advisors they did not address the matter and only made an application for an extension of time when directed to do so by the court. They wholly failed to comply with CPR 52.6 relating to the application for an extension. This therefore is a consideration which counts against the appellants.” (Woodpecker Ltd v. HMRC [2009] EWHC 3442 (Ch), §51 – this appears to somewhat duplicate the “prompt application for relief” factor).
Previous defaults
“I consider it is also appropriate to take account of the conduct of the appeals up to July 2014 in reaching a decision on this application. The default in this case was not an isolated error by appellants who have otherwise conducted the appeals in a reasonably diligent manner; it is the continuation of a pattern which has been firmly established since the assessments and closure notices were first issued.” (Hayat v. HMRC [2015] UKFTT 471 (TC), §40)
- Non-compliance by other party
"[82] When I move on from considering the fact that Ebuyer itself has previously failed to comply with Tribunal directions, I do not agree with HMRC’s submission that the omission of the seven documents is equivalent to the clerical error given relief in the case of BMW Shipping Agents. HMRC’s error was a repeated error to give the Tribunal’s directions due time and attention..." (Ebuyer (UK) Limited v. HMRC [2023] UKFTT 611 (TC), Judge Bowler)
- Merits (only relevant if very strong or very weak)
“…it would be thoroughly undesirable if, every time the court was considering the imposition or enforcement of a sanction, it could be faced with the exercise of assessing the strength of the parties' respective cases: it would lead to such applications costing much more and taking up much more court time than they already do. It would thus be inherently undesirable and contrary to the aim of the Woolf and Jackson reforms.” (HRH Prince Abdulaziz Bin Mishal Bin Abdulaziz Al Saud v. Apex Global Management Ltd [2014] UKSC 64, §47).
“If applications for extensions of time are allowed to develop into disputes about the merits of the substantive appeal, they will occupy a great deal of time and lead to the parties' incurring substantial costs. In most cases the merits of the appeal will have little to do with whether it is appropriate to grant an extension of time. Only in those cases where the court can see without much investigation that the grounds of appeal are either very strong or very weak will the merits have a significant part to play when it comes to balancing the various factors that have to be considered at stage three of the process. In most cases the court should decline to embark on an investigation of the merits and firmly discourage argument directed to them. Here too a robust exercise of the jurisdiction in relation to costs is appropriate in order to discourage those who would otherwise seek to impress the court with the strength of their cases.” (R (oao Hysaj) v. Secretary of State for the Home Department [2014] EWCA Civ 1633, §46).
“This is a case where the court can see without much investigation that the proposed grounds of appeal are indeed "very strong" and, as Moore-Bick LJ states, "the merits have a significant part to play when it comes to balancing the various factors that have to be considered". On that ground alone, I would, therefore allow the appeal.” (Re H (Children) [2015] EWCA Civ 583, §44).
“In the context of considering only the late appeal application, it is clear from Martland (at [46]) that the FTT should, as part of its balancing exercise, have regard to any obvious strength or weakness in the underlying case; it should not, however, carry out a “detailed evaluation of the case”, it should simply “form a general impression of its strength or weakness to weigh in the balance”. The FTT, therefore, considered the merits of the Company’s appeals only briefly (see [114] of the Decision) but concluded that there was at least an “arguable, rather than fanciful” case that the Company could make. The FTT therefore treated the merits as broadly neutral…We can discern no error of law in this approach. The FTT approached this aspect of the question before it correctly and it is not appropriate for us, as HMRC request, to embark on a far more detailed assessment of the merits of the appeal than was carried out by the FTT or is called for by the criteria set out in Martland.” (HMRC v. Sharya UK Ltd [2019] UKUT 143 (TCC), §§110…111, Judge Jonathan Richards and Judge Poole).
“the depriving of a party of the opportunity of putting forward an arguably meritorious appeal is itself an obvious prejudice, and so the reference to lack of prejudice in paragraph 12 of the judgment of Evans-Lombe J [in R (Brownallia Cal Ltd v. General Commissioners of Income Tax [2004] STC 296] must carry with it the question of whether the basic appeal was arguable…Although the Commissioners' letter in the protocol correspondence asserted consideration of the merits, it is quite plain that they did not in the end so consider them.” (R (oao Cook) v. HMRC [2007] EWHC 167 (Admin), §27).
"[22] In the circumstance I do not consider that the appellant has a good explanation for his delay which is of some significant length. However, in balancing the prejudice caused to both parties, I conclude that it is appropriate to extend the time limit for appeal. The personal circumstances of the Appellant, and the fact that he was unexpectedly brought within the self-assessment regime through no fault of his own are significant circumstances. Although there is a clear need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected, I do consider that the merits of the Appellant’s case, particularly in relation to the late payment penalties, to be strong." (Jama v. HMRC [2020] UKFTT 336 (TC), Judge Hudson)
“However, while not permitting or engaging in what has been termed a “mini-trial” of the merits, I have considered whether a refusal to extend time would be likely to cause what Judge Berner in O’Flaherty called “demonstrable injustice”.” (Rowledge v. HMRC [2016] UKFTT 556 (TC), §35).
“Thus without conducting a mini-trial we have considered whether a refusal would cause demonstrable injustice.” (Massey v. HMRC [2016] UKFTT 616 (TC), §57).
“I find that this is not a case in which the Tribunal “can see without much investigation that the grounds of appeal are either very strong or very weak”. I therefore decline to embark on any investigation of the merits of Mr Harvey’s case.” (Harvey v. HMRC [2016] UKFTT 597 (TC), §66).
“So far as I can tell from the papers provided, this is not a hopeless case, where the absence of merits would weigh against the appellant being granted permission; but neither is it one where the appellant will obviously succeed. Instead, like many of the cases which come to the Tribunal, the outcome is uncertain. I find that the merits are neutral.” (Citipost Mail Ltd v. HMRC [2015] UKFTT 252 (TC), §78).
FTT should consider outline arguments
“More often, the appeal will have some merit. Where that is the case, it is important that the FTT at least considers in outline the arguments which the applicant wishes to put forward and the respondents’ reply to them. This is not so that it can carry out a detailed evaluation of the case, but so that it can form a general impression of its strength or weakness to weigh in the balance. To that limited extent, an applicant should be afforded the opportunity to persuade the FTT that the merits of the appeal are on the face of it overwhelmingly in his/her favour and the respondents the corresponding opportunity to point out the weakness of the applicant’s case.” (Martland v. HMRC [2018] UKUT 178 (TCC), §46, Judges Berner and Poole).
FTT should be wary of taking into account disputed evidence
“In considering this point, the FTT should be very wary of taking into account evidence which is in dispute and should not do so unless there are exceptional circumstances.” (Martland v. HMRC [2018] UKUT 178 (TCC), §46, Judges Berner and Poole).
- HMRC nowhere near establishing allegation of deliberateness
"[26] Clearly litigation must be conducted efficiently and at proportionate cost, but these important principles are far outweighed by the prejudice which would be caused to the appellant by denying his application. And this is exacerbated by the fact that even on a cursory examination of the merits of the penalty appeal, it seems to us that HMRC have got nowhere near establishing deliberate behaviour. And given that we have considered the position in detail, as is necessary to decide the penalty appeal, we are reinforced in that conclusion." (Thompson v. HMRC [2024] UKFTT 138 (TC), Judge Popplewell)
- Strong merits do not lead to presumption permission will be granted
"[70] We should also deal with Mr Young’s argument that, because the FTT found that it was “very likely” that Mr Horder would succeed in his substantive appeal, the interests of justice and the overriding objective of dealing with cases fairly and justly required the FTT to grant Mr Horder’s application for permission to appeal out of time.
[71] We reject that submission. Certainly, an applicant’s prospects of success in its substantive appeal constitute a relevant factor. We do not, however, accept the proposition that because an applicant has a strong or even a very strong case, permission to appeal late should always or usually be given. The strength of an applicant’s substantive case is a matter to be taken into account in the balancing exercise which forms the third stage of the Martland analysis. It is necessary then, as the FTT did in this case, to consider whether there are countervailing considerations which would require that permission to appeal late should be refused. In this case, the FTT considered that there were such countervailing considerations and refused the application. We see no reason to interfere with that conclusion." (Horder v. HMRC [2023] UKUT 106 (TCC), Miles J and Judge Brannan)
- Possibility of criminal sanction if appeal not permitted only a factor
"[76] In our view, it is not necessary to determine under which provision of the Convention the proceedings before the FTT fell. Even accepting Mr Young’s argument that the NOR did not involve the assessment of tax but was, instead, a security arrangement and involved a criminal charge, we fail to see how the FTT erred in law in its decision to refuse the application. It cannot be correct that the possibility of a criminal conviction flowing from a decision to refuse permission to appeal out of time must always result in permission being granted - a proposition from which we did not understand Mr Young to demur. Indeed Mr Young accepted that the FTT was correct to apply the structured approach in Martland. As Mr Young also accepted, his argument in relation to the Convention was effectively one of the weight that should have been attached to the likelihood of Mr Horder facing criminal sanctions when the FTT carried out its balancing exercise as a third stage of the Martland analysis. We see no error in the way that the FTT carried out that exercise. It clearly had the likelihood of potential criminal sanctions being suffered by Mr Horder firmly in mind and had also concluded that Mr Horder was likely to succeed in relation to the substantive appeal. As explained above, the FTT gave careful consideration to these issues. The FTT decided, however, that there were countervailing factors (explained at [112]-[118]) which outweighed the importance of the likelihood of criminal sanctions when considering the question whether permission for a late appeal should be granted. We see no error of approach in or reason to disturb the FTT’s analysis. We therefore dismiss this appeal on Ground 4." (Horder v. HMRC [2023] UKUT 106 (TCC), Miles J and Judge Brannan)
- 64 day late statement of case for no good reason admitted
"[36] Having considered all of the evidence, I am satisfied that the balance between the prejudice to the Appellant, the prejudice to HMRC and the administration of justice through the finality of litigation falls firmly on the side of an extension of time being granted. In that regard, I accept that if HMRC are unable to rely on their Statement of Case, they will not have an opportunity to defend the decision on the basis of all of the arguments presented in the Statement of Case, which have already been canvassed with the Appellant in correspondence between the parties and are not new arguments, but more detailed arguments. That the Appellant's application to make a late appeal was admitted is not determinative of the outcome of the substantive appeal. Both parties have now delivered detailed written submissions in their respective cases. The strengths and weaknesses of both parties' cases are finely balanced. The case requires consideration of the basis upon which the property was sold and the terms on which the Durford Wood estate is managed, and used. I hold that:
(1) the delay was 64 days;
(2) whilst the explanation for the delay did not represent a good reason for the delay, the default is against a background of compliance in other respects and the oversight was immediately rectified;
(3) no individual litigator, or system, is infallible and draconian measures are disproportionate;
(4) the amount of tax at stake is not insignificant and the issues are important - with case law falling either side of the dividing line; and
(5) HMRC have the duty to ensure that the correct amount of tax is collected (no more or no less).
[37] This is, unfortunately, a case where both parties have defaulted in the past. I am satisfied that the outcome of this appeal will inevitably require detailed consideration of the written cases presented by both parties, which are in turn highly are relevant to the determination of the important issues identified therein. I, therefore, exercise my discretion to permit HMRC to file their Statement of Case and to rely on it at a substantive hearing." (Guerlain-Desai v. HMRC [2024] UKFTT 117 (TC), Judge Manyarara)
No general principle that well-intentioned incompetence should not lead to relief
"[51] Thus, the point being made by the Court of Appeal was that since particular weight has to be given to compliance with rules, practice directions and orders, it will not usually be good enough for a litigant to say, on an application for relief from sanctions, that a genuine attempt was made to comply, or that the litigant honestly thought the rules were complied with. Moreover, at paragraph 31 of Denton, the Court of Appeal confirmed that there are situations in which “serious and significant” breaches of direction for which there is no good reason can still in appropriate cases benefit from relief from sanctions at the third stage of examination. Therefore, we do not consider that any principle emerging from Mitchell precludes the Company from obtaining relief from sanctions simply because a serious and significant breach of directions arose because of failures on Mr Gibbon’s part." (HMRC v. BMW Shipping Agents Limited [2021] UKUT 91 (TCC), Judge Richards and Judge Cannan)
Late statement of case
Permitted where burden on taxpayer
“It is the Tribunal’s view that in light of the analysis above refusing the extension and excluding the statement of case would not take the parties anywhere. The Tribunal is acutely aware of the Appellant’s stated concerns that failure by a taxpayer to comply with time limits carry penalties which feel, to small taxpayers, very draconian whereas HMRC appear to be able, without significant consequence, ignore time limits. The Appellant is unrepresented and, in those circumstances, convention requires that HMRC provide him with all reasonable assistance at the hearing, they are obliged to identify weaknesses in their own case. But as stated above this is a case which it is for the Appellant to prove. Applying the overriding objective to act fairly and justly it is the Tribunal’s view that there is no basis to exclude HMRC and it is fairer (despite his view to the contrary) that HMRC’s statement of case be accepted as it will assist the Tribunal in fairly hearing the Appellant’s appeal. Had that not been the case the Tribunal would have refused the extension as the length of the delay and the inadequacy of the reason for it would not have justified any prejudice to the Appellant however small. HMRC’s actions were inexcusable.” (Dangov v. HMRC [2017] UKFTT 734 (TC), §34 Judge Amanda Brown).
Late skeleton
Essential Telecom Ltd v. HMRC [2016] UKFTT 475 (TC) – application to admit skeleton served one day late granted. Delay not serious and application for an extension made before the deadline passed. FTT noted that skeletons are primarily for the convenience of the Tribunal unless there is a new point.
Late request for reasons for a summary decision
Same approach as to late appeals
“Bearing in mind that a decision on whether or not to extend time for requesting full findings of fact and reasons is, in the present circumstances, analogous to a decision on extending the time for bringing an appeal in the first place, I propose to follow the above approach.” (Hayat v. HMRC [2015] UKFTT 471 (TC), §40).
Purpose of short time limit is finality and judicial memory
“The purpose of the time limit in rule 35(5) is twofold.
(1) It enables the parties and the Tribunal to know, a comparatively short time after the issue of a summary decision, whether it is likely to be appealed. Thus it provides some assurance as to the finality of a summary decision after the 28 day period, enabling the parties to move on to other matters. If the Tribunal receives a request for full findings and reasons, it routinely informs the other party of that request, so they are aware of the possibility of an appeal.
(2) It also ensures that the Judge who issued the decision is made aware quickly that he will be required to provide full findings of fact and reasons – judicial memory can fade and it is generally important for a judge to know at an early stage that full findings and reasons will be required.” (Hayat v. HMRC [2015] UKFTT 471 (TC), §41).
Examples
Hayat v. HMRC [2015] UKFTT 471 (TC) – extension refused due to length of delay (three months), absence of any good reason, lack of proposed grounds of appeal (a bit unfair since the taxpayer had not seen the reasons) and previous defaults.
Singh v. HMRC [2016] UKFTT 184 (TC) – extension refused due to length of delay (years), the fact that advice received was “so clearly wrong that he should not have accepted it” and the staleness of the evidence.
Late application to reinstate
No power to reinstate if deemed to be determined
"[42] In OWD v HMRC [2018] 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 [2023] UKFTT 40 (TC), Judge Redston)
See further M30: Withdrawal and M31: Reinstatement
Apply relief from sanctions case law
"[33]...First it seeks relief from the sanction imposed by Rule 8(6) of the FTT Rules to the effect that no application for reinstatement can be made later than 28 days after the date the FTT sent notice that the appeal was struck out. That aspect of the request for relief from sanctions involved a request for an extension of the relevant time limit pursuant to Rule 5(3)(a) of the FTT Rules." (HMRC v. BMW Shipping Agents Limited [2021] UKUT 91 (TCC), Judge Richards and Judge Cannan)
Focus on reasons why application is late rather than broader conduct
"[38] Yet the FTT Rules afford any person whose appeal is struck out a right to apply for reinstatement, within the 28-day time limit. Accordingly, historic failures, no matter how serious, are not a bar to an application for reinstatement if made in time. It follows, in our judgment, that where an application for reinstatement is made out of time, the focus should be on the proximate cause of why the 28-day time limit was missed, and not a wider examination of the litigant’s conduct leading up to the strike out which will be relevant in considering the underlying application for reinstatement." (HMRC v. BMW Shipping Agents Limited [2021] UKUT 91 (TCC), Judge Richards and Judge Cannan)
Twenty eight day time limit to promote finality
“The purpose of a 28 day time limit to make an application for reinstatement is clearly intended to promote finality. The time limit within which an application is to be made is short. The time limit is similar to the 30 day time limit for appealing a decision of HMRC. That time limit is also intended to promote finality. Subject to the facts of any particular case, in the ordinary course the longer an application is delayed the less likely it is that time will be extended.” (Rolls Group v. HMRC [2015] UKFTT 404 (TC), §53).
Understandable not apply for reinstatement whilst unaware of strike out
"[39]...We consider that Mr Gibbon had an understandable reason for missing the deadline specified in Rule 8(6): it was simply not possible for him to apply for reinstatement before the point at which he knew the appeal was struck out. In saying this, we are not losing sight of the deficiencies in the conduct of the litigation, summarised at paragraph 37 to which HMRC referred and which Mr Gibbon largely accepted. However, we consider those deficiencies are more appropriately addressed in the section that follows, in which we consider the application for reinstatement itself.
...
[42]...When balancing the quality of the reasons against other considerations at the third Martland stage, we will give particular weight to the importance of litigation being conducted efficiently and at proportionate cost and to time limits imposed by the FTT Rules being met. But, even giving that consideration particular weight, the Company could not comply with the deadline in Rule 8(6) because it did not know that its appeal had been struck out. If we decline to extend time for the reinstatement application, then the Company loses all prospect of defending the C-18 demand that HMRC has imposed. But if we grant the extension of time, then it remains possible that the conduct of the litigation that caused the Company to miss the time limit for serving a list of documents, including its protracted failure to follow up on the progress of its appeal, could count against it when the reinstatement application is considered. In short, granting the extension of time would not deprive HMRC of the ability to argue that, because of deficiencies in the conduct of the litigation, the appeal should not be reinstated." (HMRC v. BMW Shipping Agents Limited [2021] UKUT 91 (TCC), Judge Richards and Judge Cannan)
“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 [2016] UKFTT 710 (TC), §29, Judge Herrington – reinstatement after 6 years, during which time T thought the appeal was stayed behind lead cases).
Clarifying whether there had actually been a breach of the unless order before applying to reinstate is a good reason
"[33] However, the second reason, namely the confusion about the status of the striking out given the sending of the first email, the automated receipt from the tribunal timed at 4.48, and yet the fact that the tribunal file had no record of the first email, does seem to us to be a good reason. This is a complicated technical point. It has been argued before us that there was no technical breach of the Unless Order in that the first email complied with it. It is our view that it did not so comply given that the information was required to be sent to HMRC rather than the tribunal. But this is not straightforward, and we can see why the appellant and ACG wanted to clarify the situation with the tribunal before making a formal application for reinstatement which, to their minds, might be unnecessary given that there was no breach of the original order. Having raised this in their email on 20 June 2021 ACG then chased for a response on 13 September 2021. Although the tribunal had written to the appellant on 25 August 2021 telling the appellant that it needed to make a formal application for reinstatement, ACG’s email of 13 September 2021 is consistent with the appellant’s contention that neither it nor ACG received the tribunal’s email of 25 August 2021. And so it was not until the tribunal’s email on 5 November 2021 that they realised that a formal application for reinstatement was required. The application was then made about a fortnight later on 18 November 2021. So, the delay between clarification of the need to make a formal application and the making of that application itself, was short. And reflects the appellant’s contention that it was conscious of and intended to comply with its obligations to the tribunal. The same can be said of the appellant’s decision to appoint ACG very shortly after it learned, in March 2021, of the strike out. This reflects a desire to engage with the tribunal process." (McFarland v. HMRC [2022] UKFTT 355 (TC), Judge Popplewell)
Appellant not expected to apply to reinstate until he could have discovered withdrawal was based on wrong advice
“The appellants must be taken to have been aware of the 28 day time limit for reinstatement. Having said that, it seems to me that in the context of an application to extend time based on wrong advice from Deloitte, the appellants could not be expected to make such an application until they appreciated that the advice was wrong.” (Rolls Group v. HMRC [2015] UKFTT 404 (TC), §55).
Once Appellant becomes aware of wrong advice he should apply to reinstate (or at least put HMRC on notice)
“In the context of a 28 day time limit I would have expected the appellants to act promptly once they had decided to pursue the Appeals and the applications to reinstate in March 2014. I take into account that the overriding objective includes avoiding unnecessary formality and dealing with cases in a proportionate way. However the appellants should at least have put HMRC on notice as to the situation and indicated that such applications were likely to be forthcoming. As far as I am aware no indication whatsoever was given to HMRC prior to November 2014 and February 2015 that these appellants wished to reinstate their appeals.” (Rolls Group v. HMRC [2015] UKFTT 404 (TC), §58).
Loss of opportunity to reinstate a reasonably arguable appeal is significant prejudice
“[The taxpayer] restricted his submissions on prejudice to loss of the opportunity to put forward a reasonably arguable appeal and submitted that in itself is a significant prejudice. I accept that the appellants would lose that opportunity and that it does amount to significant prejudice…Strictly, the relevant prejudice to the appellants is losing the opportunity to pursue the application to reinstate.” (Rolls Group v. HMRC [2015] UKFTT 404 (TC), §§62…67).
Inability to make reinstatement application that the FTT would grant combined with some justification for delay leads to late application being permitted
"When considering the balance of prejudice, we can have regard to any obvious strength or weakness of the appellant’s case. As case law shows, there is obviously much greater prejudice for an appellant to lose the opportunity of putting forward a really strong case than a very weak one. We have decided that the appellant, in the absence of the out of time application, should succeed with the reinstatement application. If, therefore, we do not give it permission to bring that application out of time, we will have deprived it of the opportunity of bringing a cast-iron application. On the other side of the coin, we do not see how HMRC will be prejudiced by granting permission for the appellant to bring the reinstatement application out of time. As mentioned earlier in this decision, they have proceeded on the basis that the hardship information had been provided on a timely basis and have gone on to comply with their obligations under the Rules. By granting the out of time application, HMRC will simply be obliged to continue with the appeal. By not granting it, the appellant will be deprived of the right to bring a successful reinstatement application. Notwithstanding, therefore, the serious and significant length of the delay, and the fact that the reasons for that delay are not all good ones, it is our view that the final evaluation justifies a decision that the out of time application should succeed. We are comfortable that this is consistent with our responsibility to deal with cases fairly and justly."(McFarland v. HMRC [2022] UKFTT 355 (TC), Judge Popplewell)
Expectation of finality is significant prejudice to HMRC
“I accept that HMRC has suffered prejudice. They were entitled to consider that the Appeals had been finalised and that the time for an application for reinstatement had long since passed.” (Rolls Group v. HMRC [2015] UKFTT 404 (TC), §65).
But carries less weight where the same issue is raised in a number of other appeals
“There is a public interest in the finality of litigation. The strength of that argument, which was explicitly recognised by Morgan J in Data Select, is to some extent diminished in the context of litigation where a significant number of other traders are raising the same issue in separate appeals which have been stood over.” (Rolls Group v. HMRC [2015] UKFTT 404 (TC), §66).
Extension of time where withdrawal based on a mistake
“At the hearing, I suggested to Mr Frenzel that if the withdrawal had been made because of a mistake then he might like to consider whether to apply for the appeal to be reinstated. An application under Rule 17(3) must be made within 28 days of the date the Tribunal received the notice, ie by 19 July 2011 in this case, and so Orchid would also have to apply for an extension of time under rule 5(3)(a) of the Rules. I said that I would be prepared to consider granting an extension of time in order to enable him to do so and Ms Sukul said that HMRC would not oppose such an application. Mr Frenzel declined to make any application.” (Orchid Properties v. HMRC [2012] UKFTT 651 (TC), §21).
Late application based on new evidence – exceptional
“It is clear to see the potential to undermine the important principle of finality of litigation were we to set aside a decision of the FTT in circumstances such as those in this case. On the basis of Miss Sloane submissions, it could be many years after a decision had been taken to strike out appeals that the appellant comes along with evidence of how material in relation to those appeals was being used in a different context in a manner which was unfair to him. It can only be in exceptional circumstances, such as those identified in Aslam, that the important principle of finality can be outweighed a long time after an appeal has been determined and for the reasons set out above we see no evidence of exceptional circumstances in this case.” (Clear plc v. HMRC [2016] UKUT 347 (TCC), §57, Judges Herrington and Aleksander).
Voluntary withdrawal but notice of withdrawal not received
“So far as Mr Hadland is concerned, he had never received the notice. The significance we draw is that the assertion of non-receipt by Mr Hadland, arguably, was the reason why the application was made out of time. We therefore give an extension of time and admit his late application.” (Hadland v. HMRC [2018] UKFTT 195 (TC), §63, Judge Poon).
- 6 day late application admitted
"[41] Whilst finely balanced, I have decided in the light of the above that the late Reinstatement Application should be admitted, placing particular weight on the delay being of six days rather than a matter of weeks, and that some explanation has been provided for the delay. This then leads to my needing to consider the substance of the Reinstatement Application." (99P Recycling Ltd v. HMRC [2024] UKFTT 13 (TC), Judge Zaman)
Late costs applications
Length of delay of limited significance
“A delay of over five months in making an application that should have been made within 28 days from the date of the decision cannot be described as anything but serious. The Appellant accepts that to be the case. However, in my view the delay was of limited significance, as that term was used in Denton, in that it is of limited significance in the context of the efficient conduct of the appeal in this case. I take that view because it seems to me that a delay in making an application for a costs order is quite different to a delay, for example, in filing a notice of appeal or an application for permission to appeal where granting the application to extend time will confer upon the tribunal a substantive jurisdiction it would not otherwise have, leaving the respondent substantial work to be done, a prospect it might otherwise have thought it would not have to face. In this case, the parties were still in discussion on the question of costs in the context of the High Court Proceedings only a short time before the costs application to this Tribunal was finally made and in the light of that, the extra work required on the part of the Respondents to deal with the application was of no great significance. Bearing in mind the allocation of this appeal to the complex category the Respondents must also have anticipated that it would be faced with an application for costs as a result of the Appellant being successful in his appeal, as it was in relation to the High Court Proceedings.” (Cozens v. HMRC [2016] UKFTT 390 (TC), §30 although in the event the FTT did consider it a relevant factor in refusing an extension).
Prejudice to late applicant reduced if unlikely to be liable for costs due to representative’s error in submitting application late
“He is now in a position where he may, under the terms of his contingency fee arrangements (which I have not seen) be liable to meet his solicitors' costs. However, the solicitors have admitted that they were in error in not making an application to have costs awarded against the Respondents in time. In those circumstances it seems unlikely that they could legitimately ask the Appellant to pay the costs concerned.” (Cozens v. HMRC [2016] UKFTT 390 (TC), §36).
HMRC engage in the merits of the application weight in favour of extension
“As far as the finality point is concerned, despite the delay, in my view there is no risk of the claim being stale or of the Tribunal not being familiar with the facts given the passage of time. Neither is there a risk of the ability of witnesses to recall the events concerned relevant as there is no witness evidence to be heard. On the other hand, as MSL submits, its claim for costs would be dismissed without consideration of its merits if an extension were refused. As far as the point HMRC make about its need to devote resources to the application, HMRC did in fact engage with the merits of the application in full detail in the response it made to the application so that it is done all the necessary work in respect and the Tribunal is in a position to decide the matter without troubling the parties further…Therefore, despite there being a lack of a good explanation for the delay and the delay not being insignificant, the factors mentioned at [15] above in my view way heavily in favour of granting the extension of time and I conclude that it is in the interests of justice to do so. Accordingly, I extend time and admit the application.” (Merlin Scientific LLP v. HMRC [2016] UKFTT 81 (TC), §§15…16).
3 month extension granted to HMRC where HMRC recipient did not pass on notice of withdrawal to relevant team
"[34] However, the default arose because the individual and team whose knowledge and understanding of the significance of the application were not aware that the time limit for brining the claim was running. Notification by the Appellant that the appeal had been withdrawn does not set the time limit for a claim for costs running only the formal notification of withdrawal by the Tribunal.
[35] This Tribunal is concerned that having been told verbally on 9 October 2019 that time had started running on 26 July 2019 HMRC was prepared to wait 16 days for an email from the Tribunal and that an application was not made within 28 days of the call on 9 October 2019. However, having regard to all the circumstances and on balance, the Tribunal has decided, pursuant to its wide and general power provided for in rule 5(3) FTT Rules to extend the time limit for application of the claim for costs to 21 November 2019." (Golden Harvest Wholesale Ltd v. HMRC [2020] UKFTT 369 (TC), Judge Amanda Brown)
Examples
Cozens v. HMRC [2016] UKFTT 390 (TC) – late application refused where long delay due to solicitor error and persisted even after they became aware of the time limit. It was also relevant that the solicitors would unlikely to be able to ask the taxpayer to pay their costs because it was their error that stopped him recovering them.
Non-compliance with unless order
- Repeated failures with little excuse in already old case - relief not granted
"[88] However, I also take into account the significant public interest in HMRC being able to pursue an appeal in which some £7m of VAT is at stake. At the same time, I must also recognise that there is a public interest in court time being used efficiently and effectively; and court orders being respected and applied with care and timeously. This is a case where disclosure issues have already been litigated to the Court of Appeal in the context of the parties disputing Ebuyer’s knowledge and due diligence and yet HMRC have adopted an approach to disclosure which appears to have excluded consideration of that element of the dispute with very little reason for doing so. It is not an answer to the repeated failures to comply with the Tribunal’s directions to say that there was no intention to withhold documents.
[89] Therefore, considering all of the circumstances in this case, HMRC’s application for relief from sanctions is denied. The terms of the Unless Order should apply such that HMRC is barred from further participation in these proceedings." (Ebuyer (UK) Limited v. HMRC [2023] UKFTT 611 (TC), Judge Bowler)
Evidence in support of application for relief
Impromptu evidence in support
“Neither HMRC nor the appellant produced witness statements as evidence. Both Mr Cock and Miss Reeves based their submissions on a bundle of documentary evidence and a bundle of authorities. Miss Reeves objected to passages of Mr Cock’s submissions dealing with the reasons why the appellant had made its application for costs out of time. She said that these were mere assertions, unsupported by any evidence from the appellant itself. She submitted that Mr Cock should not be permitted to give oral evidence on this issue since the appellant had not disclosed witness statements in advance of the hearing…Mr Cock explained that he had advised the appellant on all aspects of its dispute with HMRC and had direct knowledge of the relevant background to the costs application. I decided that there was little prejudice to HMRC in permitting Mr Cock to give oral evidence as to why the application had been made late and I heard that evidence. I gave Miss Reeves the opportunity to cross-examine Mr Cock, but she declined to do so. Therefore, Mr Cock’s evidence stood unchallenged, although Miss Reeves did submit that I should give it no weight on the basis that it was hearsay. I summarise my conclusions on Mr Cock’s evidence at [37].” (Technetix Ltd v. HMRC [2015] UKFTT 369 (TC), §§21 – 22).
Unreasonable objection to relief application penalised with "heavy costs sanction"
"[41] We think we should make it plain that it is wholly inappropriate for litigants or their lawyers to take advantage of mistakes made by opposing parties in the hope that relief from sanctions will be denied and that they will obtain a windfall strike out or other litigation advantage. In a case where (a) the failure can be seen to be neither serious nor significant, (b) where a good reason is demonstrated, or (c) where it is otherwise obvious that relief from sanctions is appropriate, parties should agree that relief from sanctions be granted without the need for further costs to be expended in satellite litigation. The parties should in any event be ready to agree limited but reasonable extensions of time up to 28 days as envisaged by the new rule 3.8(4).
[42] It should be very much the exceptional case where a contested application for relief from sanctions is necessary. This is for two reasons: first because compliance should become the norm, rather than the exception as it was in the past, and secondly, because the parties should work together to make sure that, in all but the most serious cases, satellite litigation is avoided even where a breach has occurred.
[43] The court will be more ready in the future to penalise opportunism. The duty of care owed by a legal representative to his client takes account of the fact that litigants are required to help the court to further the overriding objective. Representatives should bear this important obligation to the court in mind when considering whether to advise their clients to adopt an uncooperative attitude in unreasonably refusing to agree extensions of time and in unreasonably opposing applications for relief from sanctions. It is as unacceptable for a party to try to take advantage of a minor inadvertent error, as it is for rules, orders and practice directions to be breached in the first place. Heavy costs sanctions should, therefore, be imposed on parties who behave unreasonably in refusing to agree extensions of time or unreasonably oppose applications for relief from sanctions. An order to pay the costs of the application under rule 3.9 may not always be sufficient. The court can, in an appropriate case, also record in its order that the opposition to the relief application was unreasonable conduct to be taken into account under CPR rule 44.11 when costs are dealt with at the end of the case. If the offending party ultimately wins, the court may make a substantial reduction in its costs recovery on grounds of conduct under rule 44.11. If the offending party ultimately loses, then its conduct may be a good reason to order it to pay indemnity costs. Such an order would free the winning party from the operation of CPR rule 3.18 in relation to its costs budget." (Denton v. TH White Limited [2014] EWCA Civ 906)