Davies & Anor v Revenue and Customs

This is a renewed application for permission to appeal. Mr David Goldberg QC appears for the applicants, Mr Robert Davies and Mr Michael James. The order which they wish to have permission to appeal against is that made by Stanley Burnton J on 27 November 2007 when he adjourned the applicants’ application for leave for judicial review to be heard after their appeal to the Special Commissioners.

The matter comes before me today following the decision which I made on the papers on 30 January 2008 when I refused permission on the ground that I was not satisfied that the proposed appeal had a real prospect of success. The difficulty, in my view, was that the adjournment of the proceedings by the judge was in exercise of his discretion and an appeal could only succeed if it was shown that the judge had proceeded to exercise his discretion on wrong legal principles or that, for some other reason, it could be said that his decision to adjourn was plainly wrong.

The background to the case can be stated very briefly. The applicants are faced with a claim by Her Majesty’s Revenue and Customs that they were ordinarily resident in the United Kingdom in the tax year ended 5 April 2002 and are therefore liable for capital gains tax. The applicants say, first, that they were not resident in the United Kingdom during that tax year, and that is the subject of their appeal to the Special Commissioners against the decision of the Revenue. What they wish to say in the judicial review proceedings is that it is unlawful for the Revenue to treat them as resident in the United Kingdom during that period because that would be contrary to the promises that were made by the Revenue in their own guidance, IR20. It would therefore be an abuse of power or maladministration on the part of the Revenue to treat the applicants as resident in the United Kingdom during that period. The position before Stanley Burnton J was that there are two sets of proceedings by the applicants -- their appeal to the Special Commissioners and their application for permission for judicial review. The real issue facing the judge was whether they should both go on in parallel with one another, or whether one should go before the other. The applicants’ position was that the judicial review proceedings should go first; the Revenue’s position was that the appeal of the Special Commissioners should go first. The judge decided that the Special Commissioners’ appeal should go first. He gave reasons for that decision. He said that it is the Special Commissioners who decide the facts about whether the applicants were or were not resident ordinarily during the relevant tax year. They have the expertise that is required to make that sort of decision. If the applicants were held by the Special Commissioners not to be ordinarily resident in the United Kingdom during the relevant year then the judicial review proceedings would not be necessary. It was only necessary for the applicants to fall back on the judicial review proceedings if they lost before the Special Commissioners, and then wished to argue that the Revenue were not entitled to treat them as resident in the United Kingdom by reason of the promises in IR20.

Mr Goldberg on this renewed application has made a number of points which have persuaded me that it would be desirable to have the Revenue present before any decision is made about the future of this proposed appeal. What Mr Goldberg says is that there has not been any genuine attempt by the Revenue to apply IR20. He described what they were doing as serial attempt not to apply it. He said there was no problem in the judicial review proceedings going ahead. As far as evidence was concerned, it was all on the correspondence, which was before the court. This meant that it would be cheaper for the judicial review proceedings to be determined them the Special Commissioners’ appeal. The appeal might take two to three weeks; the judicial review might be over in a day, so it would be shorter and it would be less of a drain on judicial and court resources. He said there were obvious advantages all round in having the judicial review proceedings decided first. The judge had wrongly exercised a discretion in adjourning them.

He made a particular point, which has persuaded me that it would be a good idea to have the Revenue here to answer this application. His argument was that, if the judicial review proceedings do not go forward now and the appeal goes forward and he loses the appeal, then he may be faced with an argument by the Inland Revenue that would prejudice him in the conduct of the proposed judicial review proceedings. He might have to bring different judicial review proceedings. He is apprehensive that the Revenue may argue that, if the Special Commissioners decide that his clients are resident in the United Kingdom, they will seek to argue that it is not open to the court to treat the applicants as other than has been decided by the Special Commissioners. As I understood the point, this would either make the present judicial review proceedings impossible and force the applicants to abandon them or to amend them, or to bring some other set of proceedings. Now this is a point which I think the court needs some assistance on. It is not a matter that seems to have been considered by the judge, and I would be concerned if the adjournment did have the effect of prejudicing the applicants in their pursuit of the judicial review proceedings. That is a matter which should be considered and does not appear to me to have been taken into account so far.

What I propose to do (I have mentioned this to Mr Goldberg) is this: first, I am not prepared to grant permission because I am not satisfied that the appeal has a real prospect of success, but I, on the other hand, do not feel so confident about this that I should simply refuse permission. It seems to me that this is one of these unusual cases where there is a point of some potential general application which needs to be dealt with by the full court with both parties present. So what I propose to do is to adjourn this application to the full court, which will decide whether or not to grant permission. If they refuse permission, that is the end; if they grant permission, then I direct that they proceed immediately to deal with the substantive appeal, so there will be no need for two separate hearings if they decide that it is a case for permission.