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N11: Estoppels and abuse of process
GENERAL
Estoppel prevents a person relying on a fact or argument
"[100] In ordinary language, an "estoppel" means that a person is prevented ("estopped") from relying on a particular fact or argument. In Tinkler, Lord Burrows, giving the leading judgment with which the rest of the Supreme Court agreed, said at [28]:
"There are several types of estoppel recognised in English law. These include
estoppel by representation, promissory estoppel, proprietary estoppel, estoppel by convention and, most recently, so-called contractual estoppel... Attempts have been made over the years to try to unify the various estoppels but such unification has proved elusive and the different types of estoppel continue to be seen as having their own particular requirements and effects."" (MWL International Ltd v. HMRC [2024] UKFTT 402 (TC), Judge Redston)
- Query whether there can be estoppel on a view of the law
"[53] In Telent Technology Services Limited v The Commissioners for Her Majesty's Revenue and Customs [2022] UKFTT 147 (TC) ("Telent"), Judge Redston referred to the above passage, and a passage to similar effect from the Upper Tribunal decision in Ritchie v The Commissioners for Her Majesty's Revenue and Customs [2019] UKUT 71 (TCC) at paragraph [36], in reaching her conclusion that the Respondents were not estopped from changing their arguments in the circumstances of that case. In Judge Redston's view, "a party can change its view of the law at any time subject to the other party having a fair opportunity to respond" (see Telent at paragraph [99]).
[54] Although the claimant in Telent was seeking to rely on the doctrine of estoppel by convention whereas the Appellant in this case is seeking to rely on the doctrine of promissory estoppel, we can see no reason why the principle that a party to a dispute cannot be precluded from changing its arguments in relation to the law at any time subject to the guiding principles of fairness in the circumstances of the case and proper case management should not apply equally in the latter case. We would add that, in our view, the facts in this case are, if anything, more favourable to the Respondents than the facts in Telent. In Telent, the Respondents were allowed to change their position more than three years after the Appellant had lodged its notice of appeal and the Respondents had issued their statement of case whereas, in this case, the Appellant was made aware during the course of the enquiry and long before the assessment was issued and he appealed that the Respondents proposed to assess him to capital gains tax in reliance on Section 66 of the TCGA regardless of whether or not he had lost beneficial ownership of the Property upon his bankruptcy. The point was first mentioned by the Respondents in Officer Cussons's letter of 14 October 2019 and the assessment was not issued until over a year later." (Newfield v. HMRC [2024] UKFTT 116 (TC), Judge Beare)
Statutory requirements and estoppel
- Whether estoppel can be relied on in relation to a statutory requirement depends on nature of legislative condition
"[20] Clarke LJ stated, at p 182, that where a particular estoppel relied upon would offend the public policy behind a statute it is necessary to consider the mischief at which the statute is directed. Where a statute had been enacted as the result of the recommendations of the Law Commission it is appropriate to consider those recommendations. He stated that in his opinion "The contents of that Report ["Formalities for Contracts of Sales etc of Land", Law Com No 164, June 1987] will be of the greatest assistance in deciding whether or not the principles of particular types of estoppel should be held to be contrary to the public policy underlying the Act. In this regard it seems to me that the answer is likely to depend on the facts of the particular case". Beldam LJ stated, at p 191, that "The general principle that a party cannot rely on an estoppel in the face of a statute depends on the nature of the enactment, the purpose of the provision and the social policy behind it".
[21] In my judgment, that statement of Beldam LJ, reflecting as it does the judgment of the Privy Council in Kok Hoong is, with respect, an accurate statement of the law of England and Wales. The Court is entitled to consider the particular statutory provision, its purpose and the social policy behind it when deciding whether an estoppel is to be allowed. Upon such an analysis of Section 2 of the 1989 Act, requiring contracts for sale of land to be made by signed writing I do not, with respect, question the conclusion of Simon Brown LJ in Godden that the section should not on the facts of that case be "outflanked" by an estoppel. I cannot however accept that the principle stated in Halsbury is of absolute or universal application and agree with the comment of Robert Walker LJ in Yaxley (at p 174G and in the context of section 2) that a general assertion of a "no go area" for estoppel would be unmaintainable." (Shah v. Shah [2001] EWCA Civ 527)
See further N11a. Estoppel by convention
Summary
"[27] For present purposes, I derive the following from the authorities:
i) Where a civil claim has been the subject of an adjudication, issue estoppel will generally bar a party from re-opening in a second claim an issue determined against him in the first one if the issue was essential to that decision;
ii) Where a civil claim has been struck out as an abuse of process on account of intentional and contumelious conduct, want of prosecution or wholesale disregard of rules of Court or, perhaps, struck out by reason of other "inexcusable" procedural failure on the part of the claimant, a second claim covering the same subject matter will be struck out unless there is special reason not to do so;
iii) Where a civil claim has been discontinued, the claimant will need to obtain the Court's permission to bring a second one arising out of facts which are at least substantially the same if the defendant had filed a defence in the first claim;
iv) Where a point was not raised in a set of proceedings but could have been, it may be an abuse of process for the party to raise it in later proceedings. When deciding whether that is the case, the Court takes a "broad, merits-based" approach in accordance with Johnson v Gore Wood & Co;
v) While the point was left open in Shiner, the weight of authority suggests that issue estoppel has, at most, a much smaller part to play in the context of tax appeals. However, it may be abusive for a party to contest a point which has been decided against him in such an appeal in later proceedings and, in that context, the Court will again make a "broad, merits-based" evaluation." (HMRC v. Kishore [2021] EWCA Civ 1565, Newey LJ)
ESTOPPEL BY ACQUIESCENCE
- Silence can only amount to acquiescence where there is a duty to speak
"[40] [HMRC] rightly acknowledged that estoppel by acquiescence is a recognised form of estoppel. He referred to a decision of Blair J in Starbev GP Ltd v Interbrew Central European Holdings BV [2014] EWHC 1311 (Comm) which treated it as a sub-set of estoppel by convention. The case was determined on different grounds, but Blair J noted at [127] that in a contractual context, silence on the part of a party can only amount to acquiescence where there is a duty to speak. Mr Elliott submitted that in the present context there was no duty to speak and there could be no estoppel by acquiescence. Mr Jones KC disagreed and submitted that there was a duty to speak, in the sense that HMRC were obliged to state their case in full." (Telent Technology Services Limited v. HMRC [2024] UKUT 183 (TCC), Green J and Judge Cannan)
- Detriment essential
"[41] In the event, it is not necessary for us to resolve that issue or to determine whether HMRC can be said to have acquiesced in TTSL pursuing the Claim Appeal by failing to make their strike out application until July 2021. That is because we are satisfied that it is a necessary ingredient of estoppel by acquiescence, as for any estoppel by representation, that the party claiming the benefit of the estoppel has suffered detriment. The FTT made a clear finding that TTSL had not suffered any detriment and it has not appealed that finding." (Telent Technology Services Limited v. HMRC [2024] UKUT 183 (TCC), Green J and Judge Cannan - on the facts no detriment because FTT found that most likely T would have pursued the appeal anyway)
- Estoppel by acquiescence and estoppel by convention are types of estoppel by representation
"[45] In the light of Tinkler at [64] and ING at [64(v)], we do not accept that submission. We are satisfied that detrimental reliance is a requirement of both estoppel by convention and estoppel by acquiescence, both being different forms of estoppels by representation." (Telent Technology Services Limited v. HMRC [2024] UKUT 183 (TCC), Green J and Judge Cannan)
ESTOPPEL BY REPRESENTATION
Distinguishing estoppel by representation and estoppel by convention
[101] HMRC considered that if any estoppel was in point, it would be estoppel by representation. In Steria v Hutchison [2006] EWCA Civ 1551 at [93], Lord Neuberger said that for such an estoppel to arise, the following elements needed to be present:
"(a) a clear representation or promise made by the defendant upon which it is reasonably foreseeable that the claimant will act;
(b) an act on the part of the claimant which was reasonably taken in reliance upon the representation or promise, and
(c) after the act has been taken, the claimant being able to show that he will suffer detriment if the defendant is not held to the representation or promise."
[102] Lord Neuberger continued by endorsing the following passage from the Privy Council judgment in Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank [1986] AC 80 at p 110:
"[T]he essence of estoppel is a representation (express or implied) intended to induce the person to whom it is made to adopt a course of conduct which results in detriment or loss..."
[103] We acknowledge that what had happened at the Meeting could be analysed as follows:
(1) the Inspector made a representation as to what was required for the pool car exemption to be met;
(2) the Appellants relied on that representation when filing subsequent tax and NICs returns; and
(3) the Appellants will suffer detriment if HMRC are not held to that representation.
[104] However, in our judgment the better view is that at the Meeting the Inspector and Mr Walpole shared the common factual assumption that Maywal was following the requirements set out at §40, and also shared the common legal assumption that in consequence the cars were pool cars, and went on to agree that Maywal could rely on the pool car exemption as long as the facts remained the same. In other words, the parties' common understanding as to the facts about the Cars and the law on pool cars together formed the basis of their future mutual dealings. As explained below, it is the law on estoppel by convention which is potentially engaged, rather than estoppel by representation." (MWL International Ltd v. HMRC [2024] UKFTT 402 (TC), Judge Redston)
Possibly where the parties have agreed to treat company income as personal income
“ Bearing in mind that the facts are that it was agreed that he would return this income instead of it being returned by the company, it may be that under equity he would have been estopped from making any such amendment even if it had been made in time (unless of course at the same time he corrected the company’s tax position). But we do not need to decide this because he did not attempt to make such an amendment.” (Byrne v. HMRC [2017] UKFTT 144 (TC), §§38…39, Judge Mosedale)
CONCESSIONS
- FTT entitled to make inference on similar matter from concession
"[190] Ms Nathan accepted, in answer to questions from the court, that the logic of HMRC's case on duality of purpose was that the payments of salary were "tainted" in the same way as the payments into the EBTs. But if HMRC had wished to run that case before the FTT, they should have articulated the point in their statement of case, and explained, if they could, why the payments of salary could legitimately be treated differently from the payments into the EBTs in computing the employer's trading profits. In the absence of such an explanation, it was in our view clearly open to the FTT to infer, as it did, that both elements of Mr Hoey's remuneration should be treated in the same way for the purposes of the wholly and exclusively rule." (Hoey v. HMRC [2022] EWCA Civ 656, Henderson LJ)
No withdrawal of concession where it would be unfair
"[12] In general, the rule is that parties should not be taken by surprise by submissions made by the other side. It is clear to me that, up until Miss Simler’s mention of s334 when she opened HMRC’s case on 8 November, the Appellant, with good reason, believed HMRC had conceded the point. I find the submission on s334 put the Appellant at a disadvantage: Mr Grace had already given his evidence on 2 November and left the country. He was not present in the hearing on 8 & 9 November during the legal submissions. His counsel could not ask him about the nature of his residence in South Africa, as, at the time Mr Grace gave evidence, it was not known HMRC wished to resile on its concession on s334.
[13] In any event, I do not consider that Mr Grace’s evidence did materially change before me: it is implicit in the findings of fact made by Dr Brice in 2007 that Mr Grace knew each time he left the UK to go to his home in South Africa that he would later be returning to the UK. So I conclude that Miss Simler is bound by her concession that s334 does not apply to Mr Grace: failing to give earlier warning of the new submission put the Appellant at a disadvantage and there was no reason (such as a change in evidence) for such a late warning." (Grace v. HMRC [2011] UKFTT 36 (TC), Judge Mosedale)
OTHER
Promissory estoppel does not apply to statutory discretions
“value added tax is to a large extent a self assessing tax. It is often of great importance that a taxpayer should be able to seek guidance on his position vis-a-vis the Commissioners, so as to be able to comply with the many provisions of the statutes and regulations relating thereto. In our judgment, however, having regard to the authorities to which we have referred, and to the mandatory nature of sections 1 and 2, an estoppel cannot lie against their provisions. Moreover, having regard to the passage from the judgment of Lord Parker CJ quoted above, we have reached the conclusion that an estoppel cannot lie so as to hinder the exercise of a statutory discretion. In our judgment, therefore, no estoppel can lie under the fourth ground of appeal.” (GUS Merchandise Corporation Ltd [1978] VATTR 28)
- Probably no pre-existing legal relationship with HMRC
"[51] First, promissory estoppel normally requires the existence of a pre-existing legal relationship (such as a contract) between A and B in the context of which the relevant promise or representation by A is made - see Lord Henderson in Harvey at paragraphs [60] to [63] and Lord Walker in Thorner v Major [2009] UKHL 18 at paragraph [5]. In Harvey, although he preferred to express no concluded view on the question because it was unnecessary in the context of that case for him to do so, Lord Henderson said that "it seems clear to me that the weight of existing authority supports the view that a promissory estoppel can only arise in the context of an existing legal relationship" (see paragraph Harvey at [62]). The alleged promise or assurance on the part of the Respondents in this case was not made in the context of an existing legal relationship between the parties but was instead made in the context of a dispute between the parties over the Appellant's tax affairs. There was no pre-existing legal relationship between the Respondents and the Appellant to which the alleged promise or assurance on the part of the Respondents can be related." (Newfield v. HMRC [2024] UKFTT 116 (TC), Judge Beare)
General principle: a party may not approbate and reprobate
“There is a principle of law of general application that it is not possible to approbate and reprobate. That means you are not entitled to blow hot and cold in the attitude that you adopt. A man cannot adopt two inconsistent attitude towards another: he must elect between them and, having elected to adopt one stance, cannot thereafter be permitted to go back and adopt an inconsistent stance.” (Express Newspapers plc v. News (UK) Ltd [1990] 1 WLR 1320 at 1329).
“I agree that those words can be made to apply in the present case. The way in which it works is obvious. Having relied on the availability of the recovery of CFA additional liabilities in this class of litigation, the defendant now seeks to rely on the absence of that recovery in the present application. That is a classic approbation and reprobation. It is an inconsistency which should not be allowed. An alternative way of looking at it would be to view it as an abuse of process, which in my view it is. But whichever label one chooses to give it, the present stance is one which MGN should not be allowed to adopt.” (8 Representative Claimants v. MGN Ltd [2016] EWHC 855 (Ch), §34)
Statutory estoppels
- Income tax assessments/decisions conclusive for CGT purposes
“Any assessment to income tax or decision on a claim under the Income Tax Acts, and any decision on an appeal under the Income Tax Acts against such an assessment or decision, shall be conclusive so far as, under any provision of this Act, liability to tax depends on the provisions of the Income Tax Acts.” (TCGA 1992, s.284)
Does not allow the Tribunal upon determining an income tax appeal to adjust the taxpayer’s CGT liability
“We do not think that s 284 TCGA has effect to enable us or anyone else to amend the self-assessment. It is, we think, merely establishing what the correct amount of any chargeable gain is. It means for example that a person cannot say that an amount falls to be excluded under s 37 TCGA which is greater than the amount 42 that ends up ,the conclusiveness of the income tax decision is given effect to.” (Norman v. HMRC [2015] UKFTT 303 (TC), Annex 2, §21).
- Conclusive effect of amount stated in company tax return that cannot be altered
See B7: Calculation of Tax
Confiscation orders do not give rise to any form of estoppel
“The first reason is that the Confiscation Order is not itself necessarily final. Under section 171 POCA, the amount of a confiscation order can be revisited if there is evidence which was not available to the prosecutor. It seems to me, therefore, that the decision of the Crown Court would not give rise to res judicata or an issue estoppel so as to bind HMRC. The decision would not have the necessary element of finality to do so.” (Martin v. HMRC [2015] UKUT 161, §56).
Arbitration decisions
- Only binding on the parties
"[18] Any arbitral award will not bind HMRC as it was not a party to the arbitration." (Scrimshaw Wealth Management Limited v. HMRC [2024] UKFTT 637 (TC), Judge Baldwin)