European Food Brokers Limited Whittalls Wines Ltd v Commissioners for Her Majesty's Revenue and Customs

This was an application by HMRC for an extension of time for the service of the final two of its 19 witness statements (made by 15 witnesses), all of which had been directed by the Tribunal to be served on 13 January 2017. The appellants objected to the application which therefore came on for hearing. At the hearing, having heard the parties’ submissions, I granted HMRC’s application with reasons to follow and made consequential case management directions to progress these appeals to a hearing.

These are my reasons for granting the application.

There are appeals against five decisions of HMRC:

The appellants have applied to the High Court for, and have been refused, an injunction to restrain the effect of the registration of the various WOWGR approvals. They do, however, have the benefit of an interim injunction pending the determination of an appeal to the Court of Appeal, the hearing of which is listed in July 2017.

In their appeals lodged on 15 July 2016, the appellants sought expedition. Regrettably, due to delays in the tribunal’s processes, that application was not considered by a judge before 4 October 2016 when I made directions which sought to recognise the urgency of the matter, having regard to the Court of Appeal timetable, but at the same time acknowledging the need properly to marshall the substantial evidential material, and the importance of the directions not constraining the parties in that regard.

Those directions were released on 14 October 2016. In the meantime, on 10 October 2016, HMRC had served their statement of case. The directions provided a comprehensive timetable designed to achieve a hearing of the appeals in the period May – July 2017. With regard to the appellants’ list of documents and witness statements, the date for compliance was 21 October 2016, and the list of documents and witness statements of HMRC were directed to be served not later than 18 November 2016.

On 21 and 24 October 2016 the appellants served their list of documents and witness statements with exhibits for six witnesses. On 15 November 2016 HMRC applied for an extension of time (until 13 February 2017) to provide its witness statements and serve its list of documents. The appellants objected to that extension. HMRC did in fact serve an initial list of documents and witness statements from four witnesses, accompanied by five files of exhibits.

On 25 November 2016, by a direction released on the same day, I provided a for an extension of time for compliance by HMRC with the direction to provide a list of documents and the remaining witness statements, but to 13 January 2017. I also extended the time for the appellants to serve any witness evidence in reply and for the parties to provide listing particulars for the hearing, which remained scheduled to take place between May and July 2017. I emphasised, in giving reasons for my direction, the need to progress with as little delay as possible, and said:

“The revised timetable, I consider, is the most leeway that can be afforded, if the interests of justice are to be served in this case. It is up to the parties to organise their resources efficiently in order to meet this timetable.”

On 11 January 2017, HMRC sought the appellants’ agreement to later service of two of the witness statements that were due on 13 January 2017, one (that of Officer Pitt) until 20 January 2017 and the other (that of Officer Lewis) until 13 February 2017. The appellants did not consent, and on 12 January 2017 HMRC applied to the Tribunal for an extension of time. The appellants have filed a notice of objection.

On 13 January 2017, in accordance with the November 2016 direction, HMRC served on the appellants nine further witness statements and exhibits contained in 59 lever arch files.

I had before me a witness statement of Ms Helen Barnard, a barrister employed by the Solicitor’s Office of HMRC, which set out some helpful background to the facts surrounding the making of the application in respect of the evidence of officer Pitt and Officer Lewis.

Subject to this application and the appellants’ objection to it, the witness statement of Officer Pitt, with exhibits, was served on 19 January 2017. Officer Pitt’s statement is directed towards the investigation into the appellant’s chains of trade between 2011 and 2014, during which it is said that considerable tax losses and other irregularities were discovered. Officer Pitt was one of the officers who provided the appellants with warnings about the tax losses. I was told that the statement, which is lengthy and includes a further 12 lever arch files of exhibits, had been substantially prepared by 13 January 2017, but could not be finalised before Officer Pitt began a period of leave. He returned to work on 16 January 2017 and the witness statement had been served as soon as possible after that.

Officer Lewis is the decision-making officer in the case. I am told that his evidence requires him to consider and speak to evidence from across this “large and complicated” case, including material obtained from other jurisdictions and collated over several years. At the time of the hearing I was informed that the current draft of his statement is well advanced and stood at around 120 pages; his exhibits were expected to comprise around 12 further lever arch files.

The reason for the extension applied for in the case of Officer Lewis is the officer was expected to be leaving imminently on a period of paternity leave. In fact, at the date of the hearing Officer Lewis had indeed embarked on his leave on 26 January 2017. He was due to return to work and to finalise and sign his witness statement on 10 or 13 February 2017. With his assistance, work on his statement and his exhibits had continued whilst he was on leave.

It ought to be axiomatic that the Tribunal Rules and directions of the Tribunal are to be complied with. The flexibility of process which is a hallmark of the Tribunal system is not code for a relaxed approach to compliance. That has been made clear – to the extent it was necessary to have done so – by the Court of Appeal in BPP Holdings v Revenue and Customs Commissioners [2016] EWCA Civ 121, per the Senior President of Tribunals (Ryder LJ) at [37]-[38]:

“…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.”

The context for BPP was the stricter approach to compliance with rules and directions as applied to the courts, following changes to CPR 3.9, in Mitchell v News Group Newspapers Ltd [2014] 1 WLR 795 and Denton v T H White Ltd [2014] 1 WLR 3296. The Court in BPP took the view that the stricter approach was applicable as well in the tribunals.

Mitchell and Denton were cases on relief from sanctions, to which in the courts CPR 3.9 applies. This, by contrast, is not such a case. HMRC have made an in-time application to extend time under rule 5(3)(a) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. Such a straightforward application, which was preceded by a request to the appellants to consent to it, falls outside the class of case to which the principles enunciated in Mitchell and further explained in Denton apply. That is clear from the judgment of the Court of Appeal in Hallam Estates and another v Baker [2014] EWCA Civ 661, per Jackson LJ at [27], adverted to by Vos LJ in Denton, at [20].

I was referred to a case in this Tribunal, Hill v The Pensions Regulator [2016] UKUT 0480 (TCC), in which the Tribunal (Judge Herrington) had reviewed the law in the context of an application to extend time to permit a late reference to the Tribunal of a determination notice issued by the regulator. Judge Herrington decided, in that case, that having regard to BPP he should accord significant weight 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.

There was no question in Hill of an in-time application having been made to extend time for the late reference. The reference was late, and the Tribunal was accordingly being asked to relieve the application from the consequences of that lateness, namely that no such reference was capable of being made to the Tribunal. In that context Mitchell and Denton are clearly applicable. That is not, however, for the reasons given above, the case for an in-time application of this nature.

Although itself concerned with an application to permit the late making of a tax appeal to the tribunal, the principles set out by Morgan J in this Tribunal in Data Select Ltd v Revenue and Customs Commissioners [2012] UKUT 187 (TCC) have been consistently applied in applications for extensions of time in a number of different circumstances. In Data Select, at [34], Morgan J set out what he described as the well-established approach to the commonplace applications of various kinds, namely:

In addition, Data Select also referred to the helpful guidance of the Court of Appeal, as for example in Sayers v Clarke Walker (a firm) [2002] EWCA Civ 645, to take into account the checklist of factors formerly (before its amendment) set out in CPR 3.9.

That checklist, which no longer appears in CPR 3.9, is, however, equally inapplicable, as a matter of principle, to cases of in-time applications for extensions of time. That follows from the judgment of the Court of Appeal in Robert v Momentum Services Ltd [2003] 1 WLR 1577, in the context, once again, of the court finding that an in-time application for an extension of time was not, and should not be treated as, an application for relief from sanctions (see also In re Guidezone Ltd, Kaneira v Kaneira and others [2014] 1 WLR 3728, per Nugee J at [32]).

In my judgment, therefore, in determining in-time applications of this nature, the Tribunal must have regard to the overriding objective (Rule 2) and the need to deal with cases fairly and justly. That includes dealing with the case proportionately, including with regard to its complexity, and avoiding delay, so far as that is compatible with proper consideration of the issues. A balancing exercise is required, having regard to the respective prejudices to the parties from granting and refusing the application, and having due regard to the need for compliance with the Tribunal’s directions.

The approach indicated by Data Select is helpful in suggesting signposts for the consideration by the Tribunal of all the circumstances of the case. It is, however, no more than guidance and should not be elevated into some sort of quasi-statutory code. Thus, it is not arguable, as Mr Nathan suggested, that the second question in Data Select is somehow inapt because an in-time application involves no delay. That appears to me to be suggesting that the principles set out by Morgan J should somehow be construed as if they were a statute. That is not the case; they are merely principles to be applied flexibly to the particular circumstances. In this case, the reference to delay can readily be applied to the period of the extension that has been sought.

The purpose of the timetable set by the Tribunal was to provide a realistic means to progress to a hearing in the identified hearing window whilst at the same time not constraining the parties in their marshalling of the relevant evidence. I accept therefore that the application introduces delay. It is not an insignificant delay, having regard to the objective, which has been present from the first directions that were made in October 2016, and in the particular circumstances, to bring these appeals on to a hearing between May and July 2017. That said, it must be recognised that the timetable set by the Tribunal in respect of HMRC’s witness evidence has, following the November 2016 directions, been complied with in large part, and it is only in respect of two outstanding statements, albeit particularly significant ones, that the extension of time was sought.

I am also of the view that there is a good reason for the delay that is sought in this case. It must be acknowledged that, even if the Tribunal sets what it considers to be a realistic and achievable timetable for the service of all witness statements, there may be individual cases where circumstances or exigencies militate against the timely preparation or completion of a particular statement. It is not necessary that such circumstances should arise outside the control of a party. Although HMRC has considerable resources, witness evidence inevitably depends on the availability of a particular individual; there is a limit on what can be achieved in the absence of that individual. In this case both officers have been absent on leave at a material time. Although I accept that this was something that, to a greater or lesser extent in the two cases, could have been predicted and planned-for, it must equally be appreciated that such planning cannot be guaranteed to result in timely compliance in all cases. Some measure of flexibility may appropriate in such cases, to be weighed against any prejudice to the other party.

Mr Coppel submitted that HMRC’s conduct in this case smacked of complacency, and that the Tribunal should not endorse such an approach. I do not accept that characterisation. It is apparent that HMRC have, despite not having been granted as much time as they would have wished in my November 2016 directions, made strenuous efforts to meet that timetable, achieving it with respect to the majority of their witness evidence. Nor do I regard my conclusion in this case as somehow giving a green light to any such complacency, or to a relaxed attitude to tribunal directions as deprecated by the Court of Appeal in BPP.

I accept that, with respect to the evidence of Officer Lewis in particular, that the late service of this evidence will impact upon the ability of the appellants to prepare and serve witness evidence in reply. Although they have had much of the evidence in due time, and have been able to consider that evidence such that they would be in a position, were I to refuse HMRC’s application, to serve all their evidence in reply, I accept that because the evidence of Officer Lewis, as the decision-making officer, will draw together many of the threads that are addressed in the other statements, it would not be appropriate to expect the appellants to serve reply evidence in respect of those earlier statements piecemeal, and without having had a proper opportunity to consider the witness statement of Officer Lewis when it is served.

When weighing the respective prejudices to the parties, I have regard to the truncated time between the service of the last part of HMRC’s evidence and the anticipated hearing date. I accept that, where efforts are being made to accommodate a particular hearing timetable, any indulgence granted to one party will necessarily have a knock-on effect on the time available to the other party. However, the question is not what the respective slices are of the particular time cake, but whether there is prejudice to the other party. In this case I am satisfied that, with further case management (and I have made appropriate consequential directions), the prejudice to the appellants can be limited to within reasonable bounds.

On the other hand, the effect of refusing this application would be to deny HMRC the benefit of material witness evidence, in particular that of Officer Lewis who clearly has played a pivotal role in HMRC’s decision-making in this case. It would also deprive the Tribunal of a material part of the evidence. That, in my judgment, cannot be in the interests of justice. Absent material prejudice to the appellants, which would affect their entitlement to a fair hearing, it is in my view clearly in the interests of justice to permit HMRC the extension of time they seek to complete the service of their witness evidence. It is not for nothing that the avoidance of delay in the Tribunal’s overriding objective is tempered by the need to ensure that the issues in the case are properly considered, and in this case it is apparent that many of the material issues will be addressed by Officer Lewis’ statement and his evidence to the Tribunal.

Mr Coppel placed considerable emphasis on the fact that this was not the first extension of time sought by HMRC in respect of their witness evidence. He is right to point out that HMRC had sought an extension for their evidence generally to 13 February 2017, and that I had considered that application and decided to impose a more rigorous timetable. That must, I accept, weigh in the balance. But this is not a case where a further extension has been sought in respect of the whole of HMRC’s evidence; HMRC have substantially complied with the earlier direction. Furthermore, as I have found, there are good reasons that have been put forward for the specific cases where an extension is now sought. I do not accept that there is any relevant finality to the November 2016 directions which should result in a refusal to extend time further in the specific cases at hand. Subject to the question of prejudice, and particular cases where the tribunal has expressed finality by way of an “unless” direction, case management directions must be capable of adaptation to meet the evolving circumstances of the case.

An overly-indulgent attitude to compliance with rules, practice statements and directions has been firmly consigned to the past. The landscape of case management has been coloured by recent judicial authority, but it is important in my view not to allow the big picture, which remains the interests of fairness and justice, to become obscured. Due regard must in all cases be had to the need for Tribunal rules and directions to be complied with, with special significance attaching to that factor in considering relief from sanctions, but that is only one factor, albeit an important one, in the overall assessment of fairness and justice in all the circumstances of the case. This case is one of an in-time application for an extension of time, with good reasons for the delay inherent in such an extension, and where the balance of prejudice clearly favours granting the application. It is accordingly, in my judgment, in the interests of fairness and justice to allow HMRC’s application.

The cases have been equally clear in emphasising the advantages to the judicial system as a whole of a cooperative approach as opposed to satellite litigation. That is so for cases of relief from sanctions (see Denton, at [40] – [42]), and it is equally, if not more, apt to the case of in-time applications (see Hallam, at [12], [30]). Although I can understand why, in the circumstances of this case, and having regard to the earlier directions, a dispute has arisen as to the propriety of an extension of time, it is incumbent upon the parties in all cases to take all reasonable steps to agree reasonable extensions of time which neither imperil a future hearing date or otherwise disrupt the conduct of the proceedings, and to agree appropriate directions to ensure the proper participation of both parties in the proceedings. That entails a spirit of cooperation, both in identifying at the earliest possible stage likely factors which could introduce pressure on timely compliance, and in taking a collaborative approach to agreeing an alternative workable timetable where such circumstances arise. That is the way in which the parties should approach their own obligations, pursuant to the Tribunal’s overriding objective, to cooperate both with each other and with the Tribunal.

I allow the application of HMRC for an extension of time in which to serve:

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.