Deluni Mobile Ltd, R (on the application of) v Customs and Excise

MR JUSTICE MOSES: This is an application for permission brought by Deluni Mobile Limited against the Commissioners for Customs and Excise in respect of their failure to reach a decision in relation to VAT returns for the period from September 2003 to October 2003. The application for permission has been withdrawn, after an application for interim relief was refused by Pitchford J on 13 February 2004.

The claimant deals in mobile telephones. The transactions form part of a chain involving not only domestic supplies and sales, but, in particular, supplies and sales within the whole of the European Union. Deluni Mobile depend upon being able to deduct input tax to make any profit. They are, as is commonly known in the argot of the business, repayment traders. Their accounting periods are monthly, as is common. Speed is of the essence, and if there is a delay in obtaining repayments in respect of deductions of input tax, then those who finance them will cease to do so and the company, as with many companies in similar positions will go under. It is therefore vital that their claims to be able to deduct input tax in their returns are dealt with speedily.

It was in those circumstances that they brought proceedings alleging unreasonable delay and disproportionate enquiries in respect of their accounting periods of September and October 2003. By the time of this hearing they have been allowed some input tax credits and not others, but at least decisions have been made allowing them to appeal.

The position in which they found themselves is explained in an affidavit from Mr Owen, who is the Finance Director of Deluni mobile. He explains that, whilst he does not dispute that enquiries should be made, there were unreasonable delays in this particular case. There were no repayments since the end of October 2003. There have been delays ever since then whilst he was being reassured that decisions would be made very shortly, which, in fact, were not made. He asserts, and this is not disputed, that the company has always maintained exemplary business protocols. There have been no allegations of impropriety or complicity in relation to any missing traders or carousel frauds, and the delay and procrastination has been so severe that the company has been unable to trade since 12 December 2003. He explains that the company has been wholly open in relation to both its suppliers and those to whom it supplies, making it completely incomprehensible as to why there should have been the delays which have taken place in this case.

The position is therefore that, although decisions have now been made in relation to the accounting periods in question in September and October 2003, Deluni Mobile contend that at least some contribution towards their costs should be made. They point out that it was only since launching these proceedings that decisions were made and that they have been able then to appeal. They assert that, having complained and sought details of the enquiries, it is for the Commissioners to satisfy Deluni and the court that the investigations were relevant, reasonable and proportionate and were pursued without unreasonable delay.

To my mind, these proceedings are wholly misconceived. There is absolutely no evidence and no basis upon which it could be said that the Commissioners' enquiries were unreasonable, or that they have occasioned Deluni Mobile unreasonable and disproportionate delay. The position is that this company was engaged in trade which, as Customs and Excise point out and as the court is well aware, is open to fraud both by reason of carousel fraud (commodities going round and round crossing frontiers within the European Union) and missing traders (traders purporting to make supplies in respect of which they have to account for output tax, and when the time for accounting comes, have disappeared).

It should be emphasised, as I have already emphasised, that it is not contended that Deluni Mobile had anything to do with any fraud, but in that context it is inevitable that from time to time investigations will take time and that those who depend upon speedy resolution of their claims for repayment in respect of input tax will from time to time be disappointed.

It is wholly clear to me from the correspondence I have seen that Customs and Excise have accepted that their obligation is to conduct reasonable and proportionate investigation, and indeed, as they have accepted, to notify Deluni of the stage at which those investigations have reached. But I wholly reject the submission, as a matter of principle, that Customs and Excise are under any obligation to explain the detailed nature of those investigations: when they started, when they finished, or what the content of those investigations were. It seems to me that, if that was the obligation, it would be true not only of this tax payer (Deluni Mobile) but everybody in the chain. It needs only to mention that to appreciate that, one of those people in respect of whom that asserted obligation would be owed, if it existed, might be a fraudulent trader themselves, quite apart from the maladministration that would take place in respect of expense and time while the Customs accounted in detail for their activities, no doubt daily. If, of course, there was evidence that a particular office was merely sitting on correspondence and adopting a je m'en fiche attitude then that would be a matter of concern, but such evidence is wholly absent in this case. On the contrary, the correspondence I have seen shows Customs were going into come considerable detail in relation to the stage at which these investigations had reached, well aware of the impact that delay might have on Deluni Mobile Limited. I will not read into this judgment in full the letter of 23 December 2003, but this made it clear, in my judgment, what stage the investigations had reached and why they had not been completed. I repeat, there was no obligation to go into any further detail. Similar correspondence was sent both on 27 November 2003 and after the letter of 23 December 2003 on 23 January 2004. In my judgment, it was quite impossible for Customs and Excise to go into any greater detail without in fact defeating the very object of these investigations.

It is inevitable that they will not be able to say precisely when they are going to end, but it is apparent to me that the Customs adopted a rational and responsible attitude in telling this particular tax payer as much as it could and in going into the detail which was consistent with its obligations, both in respect of time and money to pursue the investigations sensibly.

In those circumstances, had these proceedings not been withdrawn, I would have refused permission. It seems to me quite wrong that tax payers should be able to come to court merely because they seek to have greater detail than it is practical, possible or sensible for Customs and Excise to give. In those circumstances, I reject the application by the claimant for any of its costs.

The next question is as to whether the Customs and Excise should have any of their costs. The attitude of Customs and Excise, responsibly, was to consent to withdrawal of these proceedings and that each side should pay their own costs. They have been dragged to court and required to resist a claim for costs. In my judgment, having regard to the merits of this matter, and bearing in mind the principles as explained by the Court of Appeal in Mount Court Limited, particularly in the judgment of Auld LJ at paragraph 76, the Customs should have the costs of the acknowledgment of service.

The next question is whether I should regard these as exceptional circumstances for making the claimant pay the costs of Customs and Excise. In my view, this was a hopeless claim which should not have been brought. The correspondence reveals to my mind a responsible attitude and it should not have been pursued. On the other hand, Deluni Mobile Limited have now recognised that there is no point in pursuing these proceedings and that their sensible attitude should, to some extent, be reflected in the order that I make. In those circumstances, although I think the claim was hopeless, I shall only order that they pay half of the Customs and Excise's costs.

Do you want to say anything about quantum? I think in the light of your claim for costs, there may not be much to be said. What do you say, Mr Patchett-Joyce, if there is anything?

MR PATCHETT-JOYCE: My Lord, I take the view, rightly or wrongly in relation to statements of costs, that they have to be dealt with on a very broad basis. I also, because I have on occasion worked for the other side if I can say that, acknowledge that the Commissioners of Customs and Excise do keep their fees broadly within modest bands.

MR JUSTICE MOSES: Jolly mean, I always used to think. They are better than they used to be though.

MR PATCHETT-JOYCE: My Lord, in those circumstances I do also say that tax costs are usually somewhat less than is claimed, and, therefore, whilst it is very --

MR JUSTICE MOSES: Shall I call it £5,000 and order you to pay half of that?

MR PATCHETT-JOYCE: My Lord, I think I would be pushing very much uphill if I asked for anything more.

MR JUSTICE MOSES: I propose to knock them down. It was an outrageously high brief fee for you, and therefore I shall knock it down further. So half of whatever £5,000 is plus the costs of the acknowledgment of service. Thank you both very much.