B e f o r e :
LORD JUSTICE HENRY
and
LORD JUSTICE MILLETT
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GURNEY (H.M.I.T.) |
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v |
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RAYMOND JOHN PETCH |
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(Computer Aided Transcript of the Stenograph Notes of
John Larking, Chancery House, Chancery Lane, London WC2
Telephone No: 071 404 7464
Official Shorthand Writers to the Court)
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The Appellant appeared in person
MR L.HENDERSON (instructed by The Solicitor of Inland Revenue, Somerset Hse, Strand London WC2 1LB) appeared on behalf of the Respondent
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HTML VERSION OF JUDGMENT
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Friday 27th May 1994
LORD JUSTICE MILLETT: This is an appeal by the taxpayer Mr. Raymond John Petch brought with the leave of the Judge from two Orders of Harman J. dated 5th. November 1992. By one Order made in case Ch. 1991 P. No. 472 the
Judge struck out a Case Stated which had been lodged by the taxpayer because of his failure to comply with the time limit imposed by Section 56(4) of the Taxes Management Act 1970 ("the 1970 Act"). By the other Order made in case Ch. 1990 P. No. 13358 the Judge refused the taxpayer's application to strike out a Case Stated which had been lodged by the Inland Revenue. The Judge made no Order on the taxpayer's application.
The facts are as follows. In February 1980 a single Special Commissioner heard appeals by the taxpayer against two assessments to income tax for the year 1985-6. The two assessments in question were (i) an assessment of income chargeable under Schedule E in the sum of £24,158 (including a sum of £22,047 in respect of income from the taxpayer's employment by the DHSS) raised on 1st. May 1987; and (ii) a further assessment raised on 23rd. January 1989 which assessed a sum of £2,777 under the beneficial loan provisions then contained in Section 66 of the Finance Act 1976 in respect of a loan of £53,000 made to the taxpayer by the DHSS.
On 1st. March 1990 the Special Commissioner gave a written decision in principle. He found that the taxpayer's employment as a senior civil servant with the DHSS had ended on 2nd. August 1985 but that the monthly payments which he received thereafter until 31st. January 1986 from the DHSS were nevertheless emoluments of that employment within Section 181 of the Income and Corporation Taxes Act 1970. He also held that Section 66 of the Finance Act 1976 did not apply to the loan of £53,000 made to the taxpayer by the DHSS on or about 10th. August 1985, because by then he was no longer employed by the DHSS.
At an adjourned hearing on 13th. August 1990 the taxpayer raised further arguments, including the question whether there should be an apportionment of the sums paid to him between August 1985 and January 1986. The Special Commissioner rejected these arguments, and in accordance with his written decision affirmed the main assessment but discharged the further assessment.
Both parties expressed dissatisfaction with the Special Commissioner's determination as being erroneous in point of law, and within the thirty day time limit laid down by Section 56(2) of the 1970 Act required the Special Commissioner to state and sign a Case for the opinion of the High Court.
On 6th. December 1990 the Special Commissioner stated and signed two Cases in identical form and sent one copy to each of the parties. The questions of law which the Special Commissioner stated for the opinion of the Court were whether, on the facts found, he had erred in holding that:-
(i)the taxpayer's employment as a civil servant ended on 2nd. August 1985; and
(ii)the monthly payments which he received thereafter until January 19th. were emoluments of his employment; and
(iii)there should be no apportionment of the sums of money so paid to the taxpayer; and
(iv)the loan or advance of £53,000 made to the taxpayer on 10th. August 1985 was outside the terms of Section 66 of the Finance Act 1976.
The taxpayer's copy of the Case Stated was sent to him under cover of a letter from the Clerk to the Special Commissioners which expressly informed him that if he wished to appeal against the determination "the Case is required to be transmitted to the High Court within thirty days after its receipt". Enclosed with the letter were verbatim extracts from Section 56 of the 1970 Act, including Section 56(4) with the relevant passage underlined.
The Case Stated was received by the taxpayer on 8th. December 1990. Accordingly the thirty day period for its transmission to the High Court expired on 7th. January 1991. The taxpayer sent it to the High Court on 14th. January 1991 and it was received there on the following day. In the meantime the Inland Revenue had transmitted its Case to the High Court on the 17th. December 1990.
By Notice of Motion dated 2nd. September 1992 the Inland Revenue sought an order striking out the taxpayer's appeal in action CH 1991 P. 472 on the ground that he had not transmitted his copy of the Case Stated to the High Court within the thirty day period specified in Section 56(4) of the 1970 Act, and accordingly the High Court had no jurisdiction to entertain his appeal.
The taxpayer responded by serving a Notice of Motion seeking (inter alia) an Order striking out the Inland Revenue's appeal in case Ch. 1990 P. 13358 on the ground that it disclosed no reasonable cause of action and was frivolous and vexatious. The two motions were heard by Harman J. on 5th. November 1992. He acceded to the Inland Revenue's application and struck out the taxpayer's appeal. He made no Order on the taxpayer's motion to strike out the Inland Revenue's appeal.
1. The taxpayer's appeal to the High Court.
The procedure for appealing a determination of the Special Commissioners to the High Court is laid down by Section 56 of the 1970 Act. That Section provides:-
56. Statement of the case for opinion of the High Court
(1) Immediately after the determination of an appeal by the Commissioners, the appellant or the inspector or other officer of the Board, if dissatisfied with the determination as being erroneous in point of law, may declare his dissatisfaction to the Commissioners who heard the appeal.
(2) The appellant or the inspector or other officer of the Board, as the case may be, having declared his dissatisfaction, may, within thirty days after the determination, by notice in writing addressed to the clerk to the Commissioners, require the Commissioners to state and sign a case for the opinion of the High Court thereon.....
(4) The case shall set forth the facts and the determination of the Commissioners, and the party requiring it shall transmit the case, when stated and signed, to the High Court within thirty days after receiving the same.
(5) At or before the time when he transmits the case to the high Court, the party requiring it shall send notice in writing of the fact that the case has been stated on his application, together with a copy of the case, to the other party.
(6) The High Court shall hear and determine any question or questions of law arising on the case ......
No power is conferred on the Court to extend the time limits laid down by the Section. The taxpayer sought to invoke the inherent jurisdiction of the Court, or alternatively the power contained in RSC Order 3 Rule 5(1). Neither can avail him. The first is defeated by a logical difficulty: the Court cannot assume a jurisdiction to waive or vary a statutory requirement upon which the very existence of its jurisdiction depends. The second is defeated by the terms of Order 3 Rule 5(1) which is expressly confined to time limits contained in the Rules themselves or in any judgment, order or direction (meaning any judgment, order or direction of the Court). The taxpayer invoked RSC Order 91 Rule 5; but that Rule applies only to a very limited category of Revenue proceedings, mainly appeals in penalty cases. It has no application in the present case.
The taxpayer sought to overcome this difficulty by relying on the decision of the House of Lords in Pepper v Hart, (1993) AC 593. He put before us an extract from the Report in Hansard of the proceedings of the House of Commons on 18th. June 1958 when the Finance Bill was in Committee and an amendment to substitute a time limit of 42 days for the 30 days in the Bill was proposed. In recommending the Committee to reject the amendment the Financial Secretary to the Treasury Mr. Simon stated:
"In fact, there is power in the Appeal Commissioners to extend the time where the taxpayer is prevented from appealing within that period by absence, sickness or any reasonable cause".
In my judgment this is not a case in which it would be appropriate to invoke the principle in Pepper v Hart, for the absence of any power to extend the time laid down by what is now Section 56(4) of the 1970 Act is too plain for argument. But as it happens examination of the extract from Hansard confirms the impression which is conveyed by the words I have quoted that what was under consideration was the power of the Commissioners to extend the time for the taxpayer to appeal to them against an assessment - a statutory power which is now contained in Section 49 of the 1970 Act - and not any power of the Court (or the Commissioners) to extend the time for appealing from them by lodging a Case Stated with the High Court.
The question, therefore, is whether strict compliance with the requirements of Section 56(4) by a party who wishes to exercise his statutory right of appeal to the High Court from a determination by the Special Commissioners with which he is dissatisfied is an essential prerequisite for the exercise by the Court of its statutory jurisdiction to hear and determine the appeal.
The question whether strict compliance with a statutory requirement is necessary has arisen again and again in the cases. The question is not whether the requirement should be complied with; of course it should: the question is what consequences should attend a failure to comply. The difficulty arises from the common practice of the legislature of stating that something "shall" be done (which means that it "must" be done) without stating what are to be the consequences if it is not done. The Court has dealt with the problem by devising a distinction between those requirements which are said to be "mandatory" (or "imperative" or "obligatory") and those which are said to be merely "directory" (a curious use of the word which in this context is taken as equivalent to "permissive"). Where the requirement is mandatory, it must be strictly complied with; failure to comply invalidates everything that follows. Where it is merely directory, it should still be complied with, and there may be sanctions for disobedience; but failure to comply does not invalidate what follows.
The principles upon which this question should be decided are well established. The Court must attempt to discern the legislative intention. In Liverpool Borough Bank v Turner (1861), 30 L.J. Ch. 379 at p. 380 Lord Campbell C.J. said:
"No universal rule can be laid down for the construction of statutes, as to whether mandatory enactments shall be considered directory only or obligatory, with an implied nullification for disobedience. It is the duty of courts of justice to try to get at the real intention of the legislature by carefully attending to the whole scope of the statute to be construed".
In a well known passage of his judgment in Howard v Bodington (1877), 2 P.D. 203 at p. 211 Lord Penzance said:
"I believe, as far as any rule is concerned, you cannot safely go further than that in each case you must look at the subject-matter; consider the importance of the provision that has been disregarded; and the relation of that provision to the general object intended to be secured by the Act; and upon a review of the case in that aspect decide whether the matter is what is called imperative or only directory".
The various time limits laid down by Section 56 have been considered by the Courts on a number of occasions. In R v General Commissioners of Income Tax for Freshwell ex parte Clark 47 T.C. 691 C.A. this Court had to consider the requirement in subsection (1). It was contended for the taxpayers that the Revenue had failed, immediately after the relevant determination, to declare to the Commissioners their dissatisfaction with the Commissioners' determination. It was argued that, although the Revenue had subsequently complied with subsection (2) (by giving notice in writing to the clerk to the Commissioners within thirty days of the determination requiring them to state a case for the opinion of the High Court), their failure to comply with subsection (1) deprived the Court of jurisdiction to entertain the appeal. The Court of Appeal found that on the facts subsection (1) had been complied with; but it considered what the position would have been if it had not. It held that subsection (1) was merely directory; failure to comply with it would not have entitled the Commissioners to decline to state a case or have deprived the Court of jurisdiction to hear the appeal. The reason for the Court's conclusion was that "the requirement of immediacy was of no discernible material importance to the subject-matter" with which the Section was concerned. Indeed, as Salmon L.J. pointed out, it was difficult to think why it should be necessary to express dissatisfaction at all before giving notice requiring a case to be stated; such dissatisfaction is implicit in the request itself. Salmon L.J., however, made it clear that he did not intend to cast any doubt on the requirement in subsection (2) that the dissatisfied party should give a notice in writing and give it within thirty days after the determination requiring the Commissioners to state and sign a Case for the opinion of the High Court. That, he thought, was a mandatory requirement.
Subsection (4) or its statutory predecessors have also been considered by the Court on a number of occasions. In Grainger v Singer, (1927) 2 K.B. 505 (when the time limit was only seven days), it was the Crown which was out of time. It was not disputed by the Attorney-General on behalf of the Crown that the requirement of the section was peremptory and that if the time limit was not observed the appeal could not be heard. Rowlatt J. referred to the Crown's concession with apparent approval.
The question first came for actual decision in Valleybright Ltd. v Richardson (1987) 58 T.C. 290. Scott J. held that the requirements of subsection (4) were mandatory; and that failure to transmit the Case Stated to the High Court and to do so within thirty days of its receipt by the proposed appellant deprived the Court of jurisdiction to entertain the appeal. He considered the nature of the requirement in subsection (4) and the consequence of not treating it as mandatory. Unlike subsection (1), he pointed out, subsection (4) was of real significance; transmission of the Case Stated to the High Court was the event which gave the High Court jurisdiction. This suggested that it was mandatory. The consequences of not so treating it suggested the same: it would be open to an appellant to keep his appeal in abeyance indefinitely by delaying the transmission of the Case Stated to the High Court. Scott J. pointed out that there would be nothing that the other party could do about it, for the Court's powers to bring a case on for hearing or dismiss it for delay do not arise until there is a case to bring on or dismiss. To the reasons given by Scott J. I would add only that the provisions of Section 56(4) apply impartially to the Inland Revenue as they do to the taxpayer. It would be extravagant to ascribe to Parliament an intention to allow the Inland Revenue to delay the transmission of its Case Stated as long as it liked and thereby keep the taxpayer's affairs indefinitely in a state of uncertainty.
Valleybright Ltd. v Richardson was followed and applied by Hoffmann J. in Brassington v Guthrie (1992) S.T.C. 47. In my judgment those cases were rightly decided. The transmission of the Case Stated to the High Court is an essential step in the proceedings; it is the means by which the appellant invokes the jurisdiction of the High Court. It plainly cannot be dispensed with. The taxpayer's argument, therefore, comes to this: that the requirement that the Case Stated be transmitted to the High Court is mandatory; but the requirement that this be done within thirty days is not.
This is not an easy proposition to accept. Where statute requires an act to be done in a particular manner, it may be possible to regard the requirement that the act be done as mandatory but the requirement that it be done in a particular manner as merely directory. In such a case the statutory requirement can be treated as substantially complied with if the act is done in a manner which is not less satisfactory having regard to the purpose of the legislature in imposing the requirement. But that is not the case with a stipulation as to time. If the only time limit which is prescribed is not obligatory, there is no time limit at all. Doing an act late is not the equivalent of doing it in time. That is why Grove J. said in Barker v Palmer (1881), 8 Q.B.D. 9 at p. 10:
"Provisions with regard to time are always obligatory, unless a power of extending the time is given to the Court."
This probably cannot be laid down as a universal rule, but in my judgment it must be the normal one. Unless the Court is given a power to extend the time, or some other and final mandatory time limit can be spelled out of the statute, a time limit cannot be relaxed without being dispensed with altogether; and it cannot be dispensed with altogether unless the substantive requirement itself can be dispensed with.
As I have already pointed out, it is obviously impossible to dispense with the requirement that the Case Stated be transmitted to the High Court. Once this conclusion is reached, however, then in my judgment in the absence of any power to extend the time limit laid down by the statute or of any other final time limit which can be spelled out of the Section and substituted,compliance with the requirement that the Case Stated be transmitted to the High Court within thirty days of its receipt cannot be dispensed with either.
It is necessary to notice two points made by the taxpayer in the present case. First, he argued that his Case Stated was by way of cross-appeal, and that the normal rule should not apply to it. There is no substance in this point; but it reflects an unusual factual situation. As I have mentioned, both parties expressed their dissatisfaction with the determination of the Special Commissioner and required him to state a Case for the opinion of the High Court. He did so by preparing and signing two identical Cases and sending one to each of the parties. The Inland Revenue transmitted its Case to the High Court within the time limited. So, argues the taxpayer, the High Court has received a copy of the document which also contains his Case Stated; why should it matter that it has not received two copies of the same document?
The answer is to be found in the Section itself. The Case Stated must be transmitted to the Court by or on behalf of the party who required the Commissioners to state it; and it must set forth the facts found and the determination of the Commissioners upon which he seeks the opinion of the Court. In the present case both parties expressed their dissatisfaction, but with different determinations of the Commissioner. The taxpayer was dissatisfied with his determination of the assessment in respect of post-termination receipts; the Inland Revenue with his determination of the assessment in respect of the loan. Each of them called upon the Commissioner to state a Case for the opinion of the Court in respect of the determination with which he was dissatisfied. The Commissioner complied as he was bound to do; but for administrative convenience he produced a single composite Case Stated, setting forth the facts found in relation to each of the two assessments and his determinations in respect of each of them. In so far as the composite document contained the findings of the Commissioner in relation to the post-termination receipts and the Commissioner's determination in respect thereof, they were included at the request of the taxpayer, not the Inland Revenue; but they were not transmitted to the High Court by the taxpayer or on his behalf within the time limited. It would have been different if the Inland Revenue had agreed to transmit its copy of the Case Stated on the taxpayer's behalf as well as its own, but it was not asked to do so.
The second point taken by the taxpayer is that there has been substantial and unjustifiable delay on the part of the Inland Revenue in taking the point. Regrettably that is the case, but it cannot avail the taxpayer. The Court cannot exercise a jurisdiction it does not possess merely because there has been unjustifiable delay in bringing the want of jurisdiction to its attention.
In my judgment the Judge was right to strike out the Case Stated which was lodged out of time by the taxpayer and I would dismiss the appeal.
By a Supplemental Skeleton Argument lodged by the Inland Revenue our attention was drawn to a very recent decision of the Court of Appeal in Northern Ireland, for which reasons have not yet been given, where the Court has held that it has no jurisdiction to extend the time for the transmission of a Case Stated by the taxpayer to the Court under corresponding provisions in force in Northern Ireland which do not appear to be materially distinguishable from those in the 1970 Act, and accordingly could not entertain the taxpayer's appeal against the decision of a single Special Commissioner in relation to one year of assessment notwithstanding that the Revenue's appeal against his decision in relation to a different year of assessment had been transmitted in time. Had we been minded to reach a different conclusion on the present appeal, we would have delayed giving judgment until after the Court of Appeal in Northern Ireland had given its reasons; but since we have reached the same conclusion there is no reason to do so.
2. The Inland Revenue's appeal to the High Court
The taxpayer's application to strike out the Case Stated lodged by the Inland Revenue was made under RSC Order 18 rule 19 and the inherent jurisdiction of the Court. The attempt to invoke Order 18 rule 19 was plainly misconceived; the Case Stated is a creature of statute and is not a pleading or an indorsement on a Writ. I do not doubt, however, that the Court has an inherent jurisdiction to strike out a Case Stated which does not comply with the statutory requirements which govern its preparation or which is otherwise an abuse of the process of the Court, though such a course must be exceptional. The researches of the Inland Revenue have unearthed only one case in which this course has ever been taken; and there the taxpayer had somehow succeeded in obtaining and lodging a Case Stated on a determination by the Commissioners which was in his favour.
The taxpayer alleges that the Case Stated discloses no reasonable cause of action, and is scandalous, vexatious, and calculated to delay the fair trial of the proceedings. The language is slavishly taken from Order 18 rule 19 and is wholly inappropriate for a Case Stated. A Case Stated is not intended to disclose a cause of action. It is required only to set forth the facts found by the Commissioner and his determination. That is all that it is strictly required to do, though in the present case the Commissioner followed the usual practice and in addition set out the questions on which the opinion of the High Court was sought. There is nothing scandalous or vexatious in the Case Stated, nor anything calculated to delay the fair trial of the proceedings. On the contrary, it initiated them.
The taxpayer's real complaint is that the Inland Revenue's conduct of the proceedings has been oppressive. He complains of two matters. First, there is the long delay before the Inland Revenue applied to strike out the Case Stated which he had lodged. I have already dealt with that; it arises on the taxpayer's appeal, not the Inland Revenue's. It cannot possibly be an appropriate response to delay in one appeal to strike out another and different appeal. The taxpayer's second complaint is even more curious. He complains that the Inland Revenue has offered to withdraw its own appeal if the taxpayer would abandon his or allow it to remain struck out. That is still the Revenue's position. The taxpayer considers this to be oppressive. I do not understand why. On the contrary, it might be thought oppressive if the Inland Revenue had determined to proceed with its own appeal in respect of a relatively small sum of tax after the taxpayer's appeal in respect of a much greater amount of tax had been struck out on what many people may regard as a technicality. Be that as it may, I cannot grasp the logic of the argument that an oppressive offer to withdraw proceedings should be met by striking them out.
The Judge was plainly right to refuse to strike out the Inland Revenue's appeal. He was merciful in making no Order on the taxpayer's Notice of Motion rather than dismissing it. I would dismiss the taxpayer's appeal against this Order also.
LORD JUSTICE HENRY: I agree with my Lord's judgment, the orders he proposes, and the reasons he has given.
On the main point, namely that Mr. Petch's appeal against the Special Commissioners has to be struck out simply because he did not transmit his case stated to the High Court within 30 days as required by Sec.56(4) of the Taxes Management Act, 1970 even though there was in fact no conceivable prejudice to the Inland Revenue, I regret the result. I would add my voice to those to have pointed out that wherever, as here, the statute provides a hard and fast time limit with no discretionary jurisdiction in the court to extend it under any circumstances, there you have a potential source of injustice. I appreciate the need in tax affairs for expedition (though in practice that would appear to be largely theoretical) and finality, but those goals would, in my judgment, be in no way compromised by giving the court a discretion (however limited) to extend the time in hard cases such as this.
ORDER: Appeal dismissed with costs.
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