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R5: Costs appeals
Whether party behaved unreasonably is a value judgment
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“… because the decision involves the application of a not altogether precise legal standard to a combination of features of varying importance, I think that this falls within the class of case in which an appellate court should not reverse a judge’s decision unless he has erred in principle …” (Designer Guild v Russell Williams (Textiles) Ltd [2000] 1 WLR 2416 at 2423 per Lord Hoffmann).
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“Where the application of a legal standard such as negligence or obviousness involves no question of principle but is simply a matter of degree, an appellate court should be very cautious in differing from the judge’s evaluation.” (Biogen v Medeva [1997] RPC 1 at 45, Lord Hoffmann)
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“A determination of the question whether a party has, or has not, acted unreasonably is, accordingly, not the exercise of a discretion, but a matter of value judgment…” (HMRC v. Jackson Grundy Limited [2017] UKUT 180 (TCC), §47(1) Judges Bishopp and Herrington).
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“A determination of the question whether a party has, or has not, acted unreasonably is, accordingly, not the exercise of a discretion, but a matter of value judgment. An appeal against such a judgment, on a question of law, needs to be approached with appropriate caution. As Jacob LJ observed in Proctor & Gamble UK v Revenue and Customs Commissioners [2009] STC 1990, at [7], it is the FTT which is the primary maker of a value judgment based on primary facts. Unless the FTT has made a legal error, for example by reaching a perverse finding or failing to make a relevant finding or misconstruing the statutory test) it is not for the appeal court or tribunal to interfere.” (Market & Opinion Research International Limited v. HMRC [2015] UKUT 12 (TCC), §16, Judges Berner and Powell).
General principles same as for case management appeals
"[46] The parties were rightly agreed that this Tribunal should be slow to interfere with the exercise of a case-management discretion, particularly where that discretion related to the award of costs. In Atlasjet Havacilik Anonim Sirketi v Ozlem Kupeli and others [2018] EWCA Civ 1264, Hickinbottom LJ set out the applicable principle as follows:
5. In relation to that rule, several points are worthy of note.
i) In considering orders for costs, the court is of course bound to pursue the overriding objective as set out in CPR rule 1.1, i.e. it must make an order that deals justly with the issue of costs as between the parties. Therefore, when considering whether to make a costs order – and, if so, the order it makes – the court has to make an evaluative judgment as to where justice lies, on the facts and circumstances as it has found them to be.
ii) Before an appeal court will interfere with the exercise of that discretion, as with any appeal, it must be satisfied that the decision of the lower court was wrong or unjust because of a serious irregularity in the proceedings below (CPR rule 52.21(3)). No one suggests that there was a serious irregularity in this case.
iii) Before an appeal court concludes that the costs decision below was "wrong", it must be persuaded that the judge erred in principle, or left out of account a material factor that he should have taken into account, or took into account an immaterial factor, or that the exercise of his discretion was "wholly wrong" (see, e.g., Adamson v Halifax Plc [2002] EWCA Civ 1134; [2003] 1 WLR 60 at [16] per Sir Murray Stuart-Smith, adopting (post-CPR) the conventional (pre-CPR) approach he described in Roache v News Group Newspapers Limited [1998] EMLR 161 at page 172).
iv) An appeal court will only rarely find that the exercise of discretion below is "wholly wrong", because not only is that discretion particularly wide but the judge below is usually uniquely well-placed to make the required assessment, having heard the relevant evidence." (Worldpay UK Limited v. HMRC [2020] UKUT 290 (TCC), Judge Richards and Judge Cannan - relating to a decision to defer determining the costs consequences of HMRC being permitted to amend their statement of case at a very late stage)
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Decision must be an unreasonable exercise of discretion
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“[HMRC] reminded me that under s. 11(1) TCEA 2007 an appeal to the UT from a decision of the FTT only lies on a point of law, and that where what is in issue is the exercise of a discretion, an appellate court or tribunal can only interfere where the lower court or tribunal has “exceeded the generous ambit within which reasonable disagreement is possible” (G v G (Minors) [1985] 1 WLR 647 at 652 per Lord Fraser); or where “the judge has either erred in principle in his approach, or has left out of account, or taken into account, some feature that he should, or should not, have considered, or that [the exercise of] his discretion is wholly wrong because the court is forced to the conclusion that he has not balanced the various factors fairly in the scale” (Roache v News Group Newspapers Ltd (1992) [1998] EMLR 161 at 172 per Stuart Smith LJ (“Roache”)); both these passages were cited by Maurice Kay LJ and applied to a trial judge’s exercise of his discretion on costs in Painting v University of Oxford [2005] EWCA Civ 161 (“Painting”) at [12]… These are very familiar principles.” (Bastionspark LLP v. HMRC [2016] UKUT 425 (TC), §21, Nugee J – on question of who was the successful party).
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“In the context of a decision in relation to costs, for an appeal to succeed it must be shown that the judge exercised his discretion in an unreasonable manner, by failing to apply the correct law, by taking into account something that was not relevant, by failing to take into account a relevant consideration or by reaching a conclusion which no judge, properly exercising his discretion, could reasonably have reached.” (Tarafdar v. HMRC [2014] UKUT 0362 (TCC), §24, Judges Berner and Powell; see also to the same effect Cantana v. HMRC [2012] UKUT 172 (TCC), §16; Marshall v. HMRC [2016] UKUT 116 (TCC), §24 and HMRC v. Jackson Grundy Limited [2017] UKUT 180 (TCC), §47(2)).
Appeal court must exercise self-restraint
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“It must recognise the advantage which the trial judge enjoys as a result of his ‘feel’ for the case which he has tried…[I]t is not for an appellate court even to consider whether it would have exercised the discretion differently unless it has first reached the conclusion that the judge’s exercise of his discretion is flawed. That is to say, that he has erred in principle, taken into account matters which should have been left out of account, left out of account matters which should have been taken into account, or reached a conclusion which is so plainly wrong that it can be described as perverse.” (Johnsey Estates (1990) Ltd v. Secretary of State for the Environment [2001] EWCA Civ 535, §22)
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Alltrans Express Ltd v. CVA Holdings Ltd [1984] 1 WLR 394
Cannot ask the Tribunal to apply different principles to assess behaviour at the cost stage to those it applied in making its decision​
"[56] No particular difficulty would arise if Worldpay was challenging both the FTT’s decision to permit the amendment and its decision on costs. In that case, Worldpay could argue that the FTT had been wrong, as a matter of law or principle, to permit the amendment. If that argument succeeded before the Upper Tribunal, the Upper Tribunal could have remade the decision to allow the amendment and having done so could, in exercise of its powers under s12(4) of the Tribunals, Courts and Enforcement Act 2007, have made a direction to the effect that HMRC should pay Worldpay its costs thrown away by the postponement of the hearing. However, in circumstances where Worldpay is not appealing against the decision to allow the amendment, Worldpay’s collateral attack on that decision introduces a degree of unreality into proceedings. Worldpay is effectively saying that the FTT should, applying correct principles at the costs stage of its decision, have concluded that HMRC had no good reason to amend their pleadings so late even though the FTT had already decided that there were good reasons when permitting the amendment." (Worldpay UK Limited v. HMRC [2020] UKUT 290 (TCC), Judge Richards and Judge Cannan - relating to a decision to defer determining the costs consequences of HMRC being permitted to amend their statement of case at a very late stage)
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