Neutral Citation Number: [2009] EWHC 3126 (Admin)

CO/8019/2008 
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION 
THE ADMINISTRATIVE COURT 
Royal Courts of Justice 
Strand
London WC2A 2LL 

Thursday, 16 July 2009
 
B e f o r e: 

MR JUSTICE STADLEN
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Between: 
THE QUEEN ON THE APPLICATION OF INDIGO GLOBAL TRADING LIMITED 
Claimant

v 

HER MAJESTY'S REVENUE AND CUSTOMS 
Defendant 
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MR A YOUNG appeared on behalf of the Claimant
MR J KNIBBE appeared on behalf of the Defendant
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J U D G M E N T
1.	MR JUSTICE STADLEN:  There are before the court two alternative applications: the first is for permission to amend the grounds of claim for judicial review and adjourn the hearing of the claimant's claim for judicial review which was scheduled to be heard by me on 13 July.  The second is for an order standing over the hearing of the claim for judicial review until after judgment by the Court of Appeal in two separate appeals in other cases, emanating from what used to be called the VAT and Duties Tribunal.  I deal first with the application to amend the grounds of claim and adjourn the hearing scheduled for 13 July 2009.  
Introduction and summary of the factual background 
2.	The subject matter of this claim for judicial review is the refusal of the defendants ("HMRC") to pay the claimant ("Indigo") some £2.2 million, this being the amount claimed by Indigo as Input VAT credits ("VAT Credits") in its VAT Returns for its VAT accounting periods ending 30 November 2005 ("Period 11/05") and 28 February 2006 ("Period 02/06"). 
3.	HMRC's reason for that refusal is that it is not satisfied that the amounts claimed by Indigo represent its genuine entitlements to VAT Credits.  HMRC asserts that it has a right to carry out reasonable investigations before paying a VAT Credit claim, and is under no obligation to make payments which it is not satisfied represent genuine entitlements: see R v CCE, ex parte Strangewood [1987] STC 502; and R (UK Tradecrop Ltd) v CCE [2004] EWHC 2525 (Admin), [2005] STC 138.  Thus, in circumstances where HMRC acquires knowledge of facts and circumstances that lead HMRC to suspect or conclude that a VAT Credit claim (and a fortiori a claim for over £2 million) does not represent genuine entitlement, HMRC is entitled to withhold payment of the claimed amount. 
4.	Indigo does not dispute these principles.  Indigo submits, however, that its situation is not that of a trader who is seeking payment of a claimed VAT Credit, but rather that of a trader who has already received payment of its claims.  In that regard, Indigo relies on attempts made by HMRC in April and May 2006 to make payments in respect of the claims by way of electronic funds transfers to Indigo's bank accounts.  Those attempted payments failed, in that they were returned by Indigo's banks before the end of the banking day.  Thereafter, there was a long delay in Indigo providing new bank account details so that the payments could be re‑attempted. 
5.	As explained in HMRC's Detailed Grounds of Resistance at paragraphs 25‑27, HMRC's case is that during that period of delay, HMRC had been carrying out investigations into Indigo's VAT Credit claims for certain accounting periods other than periods 11/05 and 02/06.  Those investigation had already revealed apparent connections between Indigo's transactions and Missing Trader Intra‑Community frauds ("MTIC fraud").  HMRC therefore considered it appropriate to extend its investigations to Indigo's transactions in Periods 11/05 and 02/06 to see if they too were connected with MTIC fraud. 
6.	As held by the European Court of Justice in the cases of Optigen/Bond House (decided in January 2006) and Kittel (decided in July 2006) [Optigen Ltd v Customs and Excise Commissioners (C354/03); Bond House Systems Ltd v Customs and Excise Commissioners (C484/03); Fulcrum Electronics Ltd v Customs and Excise Commissioners], traders are not entitled to reclaim Input VAT on transactions which they knew or should have known were connected with fraud.  Accordingly, HMRC's investigation was as to: (i) the extent to which Indigo's transactions in Periods 11/05 and 02/06 were connected with fraud, and (ii) whether there was evidence that Indigo knew or should have known that its transactions were so connected.  That investigation went to the heart of Indigo's claim entitlement to the £2.2 million VAT Credit.  Pending completion of that investigation, HMRC made no further attempts to pay that sum to Indigo. 
7.	It was against that factual background that Indigo issued the present judicial review claim on 22 August 2008, claiming that HMRC's refusal to re‑attempt the payments was unlawful.  In that regard, Indigo's central contention was, and remains, that the legal effect of the previous attempts at payment was that Indigo ceased to be a trader seeking a payment, and became that of a trader who had already received payment.  It follows Indigo argues, that HMRC no longer has any lawful basis for refusing to make payment of the claimed VAT Credits unless and until satisfied of Indigo's entitlement to those Credits, and that the claimed amounts have become "simply money" to which Indigo is entitled. 
8.	On 8 September 2008 HMRC Officer Gail Goddard wrote to Indigo setting out the outcome of the investigation.  HMRC's decision was to deny Indigo's claimed entitlements to VAT Credits both for periods 11/05 and 02/06, and also for two subsequent VAT periods that are outside the scope of the present proceedings.  The decision to deny entitlement to the VAT Credit claims in respect of those four periods is said to have been taken because of evidence revealed by the investigation that led HMRC to conclude that:
a. all four VAT Credit claims related to transactions (all of Indigo's deals in the four periods) that had been found to be connected with MTIC fraud; and 
b. Indigo either knew or should have known that its transactions were so connected.
9.	As the 8 September letter informed Indigo, the decisions set out therein were appealable to the VAT and Duties Tribunal ("the Tribunal").  Pursuant to section 83(1)(c) of the Value Added Tax Act 1994 ("VATA"), a decision as to "the amount of any input which may be credited to a person" is appealable to the Tribunal. 
10.	Indigo promptly lodged an appeal to the Tribunal against the decision set out in the 8 September letter to the extent that the decision concerned the two accounting periods other than periods 11/05 and 02/06.  In relation to those latter two periods, Indigo chose to instead continue to pursue the present proceedings, continuing to argue that the previous attempts to make payments by electronic transfer meant that it had acquired a right to receive those amounts, irrespective of whether they were ever properly due to Indigo in respect of its VAT Credit claims.
Procedural history 
11.	On 28 October 2008 Slade J refused permission to apply for judicial review on the ground that the claim had no prospect of success.  Slade J also noted that Indigo had an alternative remedy, in that refusals of claims for VAT Credits can be appealed to the VAT Tribunal.  Indigo was ordered to pay HMRC's costs, summarily assessed at £940. 
12.	Indigo renewed its application for permission at an oral hearing on 17 February 2009 before HHJ Pearl.  In seeking permission, Indigo submitted that it wished to pursue a complaint of discrimination contrary to EC law.  Specifically, Indigo alleged that HMRC was, in its MTIC fraud prevention activities, pursuing a policy of unfairly targeting intra‑community traders so that such traders received less favourable treatment than traders whose trades were all domestic (i.e within the UK), and that such a difference in treatment was unlawful.  Indigo argued that this complaint concerned the alleged unlawfulness of HMRC's enforcement policies, rather than any question of Indigo's entitlement to a VAT Credit, and that accordingly the VAT Tribunal did not have jurisdiction to deal with that complaint. 
13.	HHJ Pearl granted permission to apply for judicial review, and also for Indigo to amend its grounds of claim.  Permission was expressly confined to two grounds of challenge (which are grounds that are before this court at the substantive hearing):
a.  'the payment ground':  Indigo contends that, by reason of the attempted payments in April and May 2006, the amounts that HMRC attempted to pay ceased to be claimed repayments of VAT, and became simply money to which Indigo is entitled, and which HMRC is therefore now obliged to pay over to Indigo (see claimant's Amended Detailed Statement of Grounds, paragraphs 72‑74), irrespective of whether the relevant claimed VAT Credits were ever properly due.
b.  'The EC Discrimination Ground':  This ground is pursued with reference to the free movement articles of the EC Treaty.  Indigo claims that HMRC is impeding intra‑community trade by denying VAT Credits to traders who sell goods into other member states, but not making assessments to recover self‑reclaimed input tax from traders engaged in intra‑UK trading (this latter group of traders typically account to HMRC for amounts of VAT, and therefore recover the amounts they claim as Input VAT by deducting those amounts from the Output VAT for which they account to HMRC).
14.	Indigo provided HMRC with an Amended Claim Form and an Amended Detailed Statement of Grounds on 3 March 2009.  HMRC filed its detailed Grounds of Resistance on 7 April 2009, and has also filed substantial evidence (including 7 witness statements), all of which are directed at answering Indigo's case on the two grounds of which permission was sought and granted.  The substantive hearing was listed to take place on 11 June 2009. 
15.	On or shortly after 20 May 2009, however, Indigo made an undated application for these proceedings to be "stood over" pending the final determination of an appeal which Indigo lodged, on that same date, with the Tribunal in respect of Periods 11/05 and 02/06.  Having previously decided not to appeal to the Tribunal in respect of those periods, but to continue to pursue the present proceedings instead, Indigo had changed its mind and decided to appeal to the Tribunal after all.  Indigo explained its change of mind as a response to the inclusion in the evidence filed by HMRC as a copy of a VAT 655 Notice of Assessment document in respect of the two periods (though, as noted above, the 8 September latter was also an appealable decision).  Indigo claimed: (i) that it was not previously aware that an assessment had been made; (ii) that there were reasons for doubting the accuracy of the statements mad by HMRC's witnesses that an assessment had in fact been made; and (iii) that the question whether there had been an assessment was an issue of fact that needed to be determined before the Administrative Court could properly deal with the issues in the present proceedings.  Indigo submitted that the Tribunal proceedings were the proper forum for determining inter alia whether an assessment had been made, and that the present judicial review proceedings should therefore be "stood over" behind the Tribunal proceedings (though not only for the Tribunal to determine whether there had been an assessment, but also for the determination of the other issues before it). 
16.	Indigo's "stand over" application was heard by Mr Ockelton (sitting as a Deputy HCJ) on 8 June 2009, three days before the scheduled hearing of the claim for judicial review.  The judge dismissed the application, stating that any dispute as to whether there had been an assessment was an issue in the present proceedings, and could and should be determined as part of those proceedings.  In particular it arose as part of Ground 1: if Indigo were right on the payment point, the right of HMRC to retain the money depended on whether a valid assessment had been made pursuant to section 73(2)(6) of the Value Added Tax Act 1994.  This was a straightforward question of fact that this court could decide for itself on the basis of the evidence before it, insofar as it was necessary to do so.  In all the circumstances, there was no good reason why the Administrative Court should delay its own proceedings, potentially for several years, pending the Tribunal's determination of the appeal that Indigo had now decided to bring concerning its entitlement to the claimed VAT Credits. 
17.	At the same hearing, counsel for Indigo (Mr Young) requested that the substantive hearing be postponed in any event, as he needed to attend a funeral on 11 June.  HMRC consented to the requested adjournment on compassionate grounds, and the Deputy High Court Judge agreed to re‑list the hearing.  That is why the substantive hearing was listed for 13 July 2009. 
18.	On 26 June 2009 Indigo (after a reminder from HMRC) provided a copy of its Counsel's skeleton argument for the substantive hearing.  That skeleton argument expressly maintained the arguments previously advanced in the Claimant's Amended Statement of Grounds, and for which permission was given, but otherwise made no mention of those arguments.  Instead, the skeleton argument set out an entirely new case that bore practically no relation to any argument that Indigo had previously advanced in these proceedings, and was certainly well outside the parameters of the two specific grounds on which permission had been given by HHJ Pearl. 
19.	On 30 June 2009 HMRC therefore applied to the court for an order requiring Indigo to confine its arguments at the substantive hearing to the grounds on which permission was sought and given, rather than, as HMRC put it, seeking effectively to ambush HMRC with completely new arguments to which HMRC had not had an opportunity to respond, either in its Detailed Grounds of Resistance or in its officer's witness statements.  HMRC's application was heard by Foskett J on 7 July 2009, with Indigo opposing the application.  Foskett J made the order sought by HMRC, also ordering:
a. that Indigo inform the court and HMRC forthwith as to which (if any) of the grounds of claim for which permission was granted continue to be pursued; and 
b. that insofar as Indigo wishes to pursue any of those grounds, Indigo file and serve a new skeleton argument within 3 days.
20.	In fact, the skeleton argument was, at my request, sent to my clerk by email on Saturday 11 July 2009, but was not served on HMRC until the morning of the hearing on 13 July 2009.  In that skeleton argument Mr Young, who appeared on behalf of Indigo, revealed that should both applications to amend and alternatively stand over fail, Indigo will withdraw its claim for judicial review in the Administrative Court.  

The application to amend the grounds of claim and adjourn the hearing scheduled for 13 July 2009.  
21.	The new ground for which permission to amend was sought was referred to at the hearing as the Kittel point.  It was not explicitly articulated in the application to amend dated 8 July, but in summary I understood it to run broadly as follows: if Indigo is right that there was an effective payment by HMRC, HMRC's entitlement to refuse to repay the returned funds turns inter alia on the validity of its purported assessment under section 73(2)(b) of the VAT Act 1994, which provides as material: 
"In any case, where for any prescribed accounting period there has been paid or credited to any person ... b) as being due to him as a VAT credit, an amount which ought not to have been so paid or credited or which would not have been so paid or credited had the facts been, or been, as they later turn out to be, the Commissioners may assess that amount as being VAT due from and for that period, and notify it to them accordingly."
22.	HMRC relied, in support of its assertion that the alleged assessments were valid, on the entitlement to withhold tax credits otherwise due pursuant to the principles enunciated by the ECJ in Kittel.  While Indigo accepts that, in a case to which those principles apply, HMRC is entitled to withhold tax credit where the tax payer has actual knowledge that by his purchase he was participating in transactions connected with the fraudulent evasion of VAT, Indigo wishes to argue that, on its true interpretation, the decision of the ECJ limited those principles to a case where the fraudulent evader of VAT was the immediate supplier to the taxpayer in question, as distinct from a more remote supplier in the chain.  In addition, Indigo seeks to argue that even if it is wrong on the interpretation point, the Kittel decision is of no legal effect in the absence of domestic enabling legislation of which there is none.  It is a measure of the importance of the Kittel point, as seen by Indigo, that Indigo, in its substantive skeleton argument dated 23 June, intended for the 13 July hearing, indicated that it would support a reference to the ECJ on this point should the court be minded to order a reference.  
Discretion.  
23.	It was common ground by the end of the hearing that the First Tier Tax Chamber, as the VAT and Duties Tribunal is now called, does have jurisdiction and would have jurisdiction to entertain the Kittel point in the outstanding appeals brought by Indigo against the two assessments covered by this case pursuant to section 83(1)(p) of the Act.  That section provides as material, subject to sections 83(g) and 84: 
"An appeal shall lie to the tribal with respect to any of the following matters ... (p) (an assessment) ..."
24.	Mr Young argued that he could not, in front of the Tax Chamber, run an interpretation argument based on an alleged inconsistency between a wide interpretation of the Kittel Ruling and Article 22(8) of the EC directive, but in my judgment that is misconceived.  The reason the Tax Chamber does not have jurisdiction to entertain Indigo's existing second ground for judicial review is that that ground constitutes an allegation that HMRC is pursuing an enforcement policy which is discriminatory and illegal as being prohibited by Article 22(8) of the directive.  That challenge is not a challenge to the validity of HMRC's assessment which the Tax Chamber would have jurisdiction to entertain by way of appeal under section 83(1)(p).  By contrast, the new Article 22(8) argument sought to be deployed by Indigo in support of its own interpretation of the Kittel decision is, in my judgment, on analysis, not a challenge to HMRC's enforcement policy, but rather, merely a forensic or legal argument as to the correct interpretation of the decision of the ECJ, on which the validity of HMRC's assessment and alleged right to refuse to repay the tax credits depends.  That is a matter that falls within the jurisdiction conferred on the Tax Chamber by virtue of section 83(1)(p) of the Act.  
25.	For her part, Ms Hall on behalf of HMRC opposed the application.  In relation to the argument that in the absence of domestic enabling legislation the decision of the ECJ, if Indigo is wrong on the interpretation point, is in any event unenforceable, she submitted that as a matter of law that has no realistic prospect of success.  In relation to the interpretation of Kittel, while not accepting that Indigo's argument does have a realistic prospect of success, she did not base her opposition to permission to amend being given on such an argument, but rather on the argument that as a matter of discretion it would be unfairly prejudicial to HMRC, and in any event premature, to allow such an amendment and to adjourn the hearing of the claim for judicial review, not least in circumstances where there is an adequate alternative remedy in the First Tier Tax Chamber.  She also opposed the lack of legislation argument being allowed in by way of amendment on the basis of discretion and alternative remedy.  In my judgment, although I entertain scepticism as to Mr Young's proposition as to the effect of there being no complicity enabling domestic legislation, it is not necessary for me to decide Ms Hall's first ground of objection on which, not surprisingly given the absence of any advance warning, I was referred to no authority, since the application must in my view clearly fail on the other grounds.  
26.	In my view, it is impossible when considering the exercise of discretion to ignore the unusual context in which this application came to be made and heard.  The starting point is that there was nothing to stop Indigo seeking permission to rely on the Kittel point at a very much earlier stage, if not at the outset, then at any rate certainly since they learned of the alleged assessments from HMRC's detailed grounds of resistance in April 2009.  No attempt to argue the point was made at the oral permission hearing in front of His Honour Judge Pearl in February of this year.  The order at that hearing, made by His Honour Judge Pearl confined the permission granted to Indigo to two grounds: first, the payment argument which is described in Indigo's application to amend as the 'power argument', and secondly, the discrimination argument.  Indigo tried to adjourn the hearing of the claim for judicial review until after the Tax Chamber appeal which it had meanwhile initiated in May 2009, at a hearing on 8 June 2009 in front of Mr Ockelton, which was heard three days before the substantive claim for judicial review was due to be heard, and it failed.  It renews that application before me in the alternative to the amendment and adjournment applications, to which I shall return, and in my view this shows that, at least on the assessment point, it would prefer to litigate the point in the Tax Chamber, apparently because of the better opportunities for testing the witnesses of HMRC in cross‑examination.  At that hearing, it did not seek permission to argue the Kittel point.  At that hearing Mr Ockelton ruled that it could argue the challenge to the assessment in this claim for judicial review, on the basis that it was not actually made on the evidence, in the context of ground one of the existing grounds.  If, in that context, Indigo was right that a payment had been made, HMRC's alternative argument for justifying its entitlement to withhold the tax credit was the alleged assessment, and that argument allowed Indigo to challenge whether the assessment was validly made.  
27.	That followed the service, on 7 April 2009, of what was described in effect as belt and braces evidence from HMRC as to the mechanics of the alleged making of assessments.  It did not accept that it was necessary to justify the withholding of the tax credits, therefore it did not have to rely on an assessment having been made, but as an alternative argument it asserted that such assessments had been made and adduced evidence to support that factual assertion.  Neither in its evidence nor in its skeleton argument for the substantive July 3 hearing of the claimant's judicial review claim, did HMRC deal with the Kittel point, because it was not live.  
28.	Amended grounds of claim following the permission granted by His Honour Judge Pearl did not raise the Kittel argument, nor was leave sought to amend the grounds for judicial review to include it.  Indigo must be taken to have believed that it had good grounds on the limited basis allowed by His Honour Judge Pearl.  HMRC served the amended grounds of resistance in response which naturally did not deal with the Kittel point.  The first time the Kittel point was raised was in the skeleton argument for the substantive judicial review hearing served by Indigo on 23 June.  In response to HMRC's application, having received that skeleton argument, to confine Indigo to the grounds which had been ordered by His Honour Judge Pearl, Indigo at the hearing in front of Mr Justice Foskett last week, on 7 July 2009, did not apply for permission to amend, but rather argued that they had not realised that the order made by His Honour Judge Pearl shut them out from arguing the Kittel point.  Foskett J ruled against Indigo and ordered that the substantive hearing of its claim for judicial review, which was due to take place on 13 July, was to be confined to adjudication on the grounds of claim for which permission was granted by His Honour Judge Pearl and which are set out in Indigo's amended detailed statement of grounds dated 2 March 2009.  
29.	The application to amend and adjourn the hearing for the judicial review scheduled for 13 July was not made until 8 July 2009, and the skeleton argument in support of the application was not served on HMRC until the morning of 13 July, that is to say the morning of the date on which the substantive hearing for judicial review was scheduled to be heard.  Pursuant to a request made by my clerk late in the afternoon of Friday 10 July, a copy of the skeleton argument was emailed to my clerk on Saturday 11 July.  This timetable was in breach of paragraph 11.1 of the Practice Direction which requires 7 days' clear notice before the hearing.  Thus the effect was, for the second time, to waste the defendant's costs of preparing for the substantive hearing of Indigo's claim for judicial review, which Indigo recognised in its application for permission to amend would have to be adjourned if the amendment were allowed to enable the defendants to respond with any grounds of resistance and, if so advised, further evidence.  In the event the whole day set aside for the substantive hearing of the claim for judicial review on 13 July, was taken up with the applications to adjourn, amend, and in the alternative, stand over.
30.	In its skeleton argument served in support of its applications to amend, and alternatively stand over, Indigo announced for the first time that if permission to amend is refused, and the application to stand over until after the Tax Chamber hearing is also refused, it would withdraw its claim for judicial review in the Administrative Court.  At the hearing in front of me on 13 July, Mr Young, who appears for Indigo, confirmed that the reason was, at least in part, that Indigo recognised that the claim as it stands, based on the permission granted by His Honour Judge Pearl, is unlikely to succeed, that is to say on the payment point, or what Indigo calls the power point in its application to amend, which since the ruling of Mr Ockelton also includes the challenge to the assessment, and also on the discrimination point.  That was, in my view, a striking development, for two reasons: first, it is an acknowledgement that the maintenance of the claim for judicial review, hitherto, certainly following the decision of His Honour Judge Pearl, was a waste of time and money; and second, it means that the realistic choice facing this court is not between on the one hand a claim for judicial review proceeding in this court on the two existing grounds for which permission was given by HHJ Pearl with the Kittel point being run in a parallel appeal in the Tax Chamber, and on the other hand all three grounds being heard in the same Administrative Court claim for judicial review.  Rather, it is between on the one hand the Kittel point being the sole point to proceed in this court, and on the other hand the Kittel point being heard in the Tax Chamber as part of the appeal against the assessments which are proceeding in any event.  That seems to me to follow from the concession that the existing two grounds on their own are unlikely to succeed.  Thus, the choice is between the Administrative Court judicial review claim disappearing altogether and it, effectively, starting again on a completely new point.  
31.	In my view, that would be unfairly prejudicial and disadvantageous to HMRC.  It has wasted substantial costs and time defending a claim for judicial review for which permission was refused on the papers and which it is now conceded, in its current form, has no real prospect of success.  This has, among other things, involved HMRC in preparing for and attending three interlocatory hearings; in front of His Honour Judge Pearl for oral permission to apply for judicial review, in front of Mr Ockelton for a standing over of the judicial review claim until after the appeals in the Tax Chamber which had subsequently diminished, and latterly in front of Foskett J, brought by HMRC to confine Indigo to its grounds given by HHJ Pearl, preparing extensive evidence to prove the validity of its assessments and the absence of an allegedly unlawful discrimination policy, of which it stands accused.  It has also prepared to defend a substantive claim for judicial review at two hearings on 11 June and 13 July, neither of which has been effective through no fault of its own.  If permission to amend were granted it would now be faced with starting, in effect, from scratch, having to defend a completely new claim based on a new argument, with Indigo benefiting from its own failure to articulate its true claim by being able to bypass the normal procedures for seeking permission to apply for judicial review.  In principle, if Indigo wants to go down that route, it should start again and apply for permission to apply for judicial review in the normal way.  In my view there is no reason why it should get a leg up on the back of proceedings which it now concedes in fact were misconceived.  This is all the more so when taking into account the possibility foreshadowed by Indigo in its skeleton argument of the point, should it be allowed to proceed in the Administrative Court, being one that might be the subject of an application for a reference to the ECJ with all the delay that such a reference would involve.  The reality, as implicitly recognised in Indigo's alternative application to stand over the judicial review claim until after the determination of the appeals in the Tax Chamber, is that it has an alternative remedy and an alternative forum in which to run the argument it now seeks to run by way of an 11th hour application to amend.  
32.	It would, in my view, be one thing if there was no alternative remedy, but it is accepted by Mr Young that the Tribunal has jurisdiction to entertain the Kittel argument.  In my view, it is clear that it also has, in that context, jurisdiction to entertain the argument based on the alleged inconsistency between the wider interpretation of the decision of Kittel contended for by the Revenue, and Article 22(8) of the EC Directive.  That is a quite different matter from ground 2 of the existing grounds for judicial review, which does not constitute a challenge to the validity of assessment, but rather an attack on the enforcement policy of the Revenue.  In principle, since the Kittel argument is part of the challenge to the validity of the assessment, prima facie, the Tribunal is the natural Tribunal to hear that argument.  Indeed, Indigo has twice tried to have the assessment point litigated in the Tribunal before this court can deal with it, and it feels so strongly on the point that it is now apparently prepared to abandon the claim for judicial review altogether, including, I note, the discrimination point which could not on its submission be heard by the Tribunal, rather than have a judgment on it before the hearing of its appeal before the Tax Chamber.  Its application to amend proceeds on a premise as to the more suitable Tribunal, which, on its face, is at odds with the premise on which its alternative application to stand over is based.  
33.	Indigo says that it could not appeal to the Tax Chamber against the failure of HMRC to make the payment prior to the decision of 8 September not to pay, and/or the assessment, and for that reason the Tribunal route does not provide an adequate remedy.  To that Ms Hall says first, that Indigo could have invited HMRC to make a formal decision not to pay, thus triggering the right of appeal, but second, and in any event, that precisely the same arguments would be available to Indigo on appeal to the Tax Chamber against the decision of 8 September not to pay, and against the two assessments, in particular, the right to deploy the Kittel argument, and that if Indigo succeeds on that argument in the context of the appeals against the assessments, it would, among other things, be entitled to interest from the end of the relevant assessment periods, and thus, in practice, would suffer no material prejudice even if not allowed to run the argument in respect of the non‑payment prior to 8 September and/or prior to the assessments.  
34.	In my view, irrespective of the first of those submissions, as to which Mr Young did not accept that HMRC would have responded favourably to a request from Indigo to make a formal decision, there is considerable force in the second submission.  In terms of the substance of Indigo's complaint on the material before me, there is no reason to conclude that it would be unduly disadvantaged, if at all, by being confined to appeals against the 8 September decision and the assessments as distinct from HMRC's failure prior to make payments to it.  In my view, looked at in the round, and as a matter of substance rather than form, it cannot realistically be said that the Tribunal route would not constitute an adequate remedy, or even if it would not, that that is a factor to which the court should attribute significant weight in the exercise of its discretion.  The court will not normally grant permission to apply for judicial review where there exists an alternative remedy which the claimant could use or could have used, unless there are exceptional circumstances or some other reason which makes judicial review particularly appropriate.  
35.	Are there any arguments that outweigh these strong indicators in favour of the Tax Chamber as being the natural and obvious forum?  Mr Young relies on a number of matters: first, interim relief.  He says there is no power in the Tax Chamber to grant interim relief as distinct from the powers available to this court on an application for judicial review.  There is, however, no evidence or material before me to justify a conclusion that the inability of Indigo to apply for interim relief in the Tax Chamber would in practice be likely to render the Tax Chamber an inadequate alternative Tribunal.  
36.	Mr Young pointed out that, in this court, in theory Indigo could apply for damages against HMRC for failing properly to apply the Kittel judgment.  Ms Hall, relying on well‑known cases to which she did not take me, submitted that there is no real prospect of an award of damages in this case, even if the Kittel point were decided in favour of Indigo, since it would have to be a very serious breach of Community law to result in damages, and proceeding on the basis of the wider interpretation, cannot be said to be a very serious breach.  Although there is a theoretical disadvantage to Indigo in the context of damages to being confined to the Tax Chamber as distinct from the Administrative Court, in practice I was shown nothing to persuade me, in the particular circumstances of this case, that this is a factor to which much weight should be given.  Mr Young said it would be advantageous for there to be guidance on the Kittel point from the High Court.  However, if this matter were to be adjudicated upon in the context of the current appeals before the First Tier Tax Chamber, it would be open to Indigo to apply to have the interpretation point dealt with as a preliminary point, with an appeal if necessary or appropriate to the High Court or to the Upper Tier Tax and Chancery Chamber, on which a High Court Chancery Judge would sit.  Indeed, the Chancellor, I was told, has indicated the desirability of all such appeals being heard by the same Chancery Judge or Judges sitting either in the Chancery division or in the Upper Tier Tax Chancery Chamber, with a view to promoting the consistent development of the law in this area.  So far from arguing in favour of granting permission to argue this point in the Administrative Court, this, in my view, points very strongly to the desirability of it being argued in the First Tier Tax Chamber, and then on appeal to the Chancery Division or the Upper Chamber where in either case it would be heard by one of the judges who have been hearing, and will continue to hear, appeals raising such issues. 
37.	Further, Ms Hall says that HMRC would wish to have the opportunity to consider whether it wished to argue in the Tax Chamber that it has in fact complied with the narrower test, that is to say the test contended for by Indigo, by showing constructive or actual knowledge of fraud on the part of the immediate supplier as well as ultimate suppliers if the narrow construction turns out to be the right one.  Thus, she said, it may be premature to have the Kittel point determined as a matter of law if on the facts HMRC have a defence on the narrower interpretation as well as on the wider one.  Any such factual dispute is one which would typically be very time‑consuming and just the kind of matter often raised in the Tax Tier Chamber, but may be inappropriate to determination in the Administrative Court.  If it turns out that HMRC does not wish run an alternative factual defence on the narrower basis, the Tax Chamber could still order a preliminary issue on the interpretation of Kittel which could be appealed to a Chancery judge decided by the Chancellor.  
38.	Further, Ms Hall submitted that judicial review is only suitable if there is evidence that HMRC has abused its power and acted unlawfully by adopting the narrower test, and any such application, she submits, is premature to be addressed, because the point was only flagged for the first time in the skeleton argument of Indigo dated 23 June 2009.
  
Conclusion 
39.	In my view, if the existing grounds are not effective, HMRC are entitled to have a hearing dismissing them, or, as now promised by Indigo, to the claim for judicial review being abandoned.  Without the current last minute applications for an imminent adjournment, that is probably would what would have happened as it now turns out.  In my view, it would be unfair to HMRC to put them in a worse position by allowing this last minute amendment together with the inevitable adjournment and the risk foreshadowed by Indigo in its skeleton that of a reference to the ECJ, in circumstances where even if this point had been run at the outset, or at any rate at some point after service of the evidence by HMRC in April, there would be a strong case that the proper forum for litigating and adjudicating on the Kittel point would be the First Tier Tax Chamber as it is now called, from where it could be heard on appeal by a Chancery judge.  I do not consider that it has been demonstrated that Indigo would be unfairly prejudiced or disadvantaged by such a consequence, still less to such an extent as outweighs the clear and obvious unfair prejudice to HMRC if the amendment and adjournment were allowed, not least given that the current position is the result of its own conduct in these proceedings.  
40.	Accordingly, I do not accept, and refuse the first application for permission to amend the grounds of claim and to adjourn the substantive hearing for judicial review to enable the defendant to respond.

The application to stand over  
41.	In the application dated 8 July 2009, Indigo applied in the alternative to stand over its application for judicial review until judgment in the appeals in two cases called Blue Sphere [2009] EWHC 1150, and Mobilx for which I was given no citation.  At the hearing before me, this application was withdrawn by Mr Young in reply on the basis that Indigo's understanding, based on things said at the hearing in front of Foskett J on 7 July by Ms Hall, which then led him to understand that those appeals would deal with the same point as is sought to be argued on this claim for judicial review, namely whether Kittel is confined to transactions with the immediate supplier of the tax payer or extends to all the base suppliers in the chain, turned out, on the basis of what Ms Hall said at this hearing to be incorrect.  Surprisingly, the skeleton argument in support of that application to stand over, which was dated 10 July 2005, was said to be in support of an application to stand over the hearing of the claim for judicial review, not until the hearing of the appeals in the two cases just mentioned in the Court of Appeal, but rather until the First Tier Tax Chamber has determined the appeals which Indigo initiated against the two assessments brought by HMRC against it, which are also the subject of this application for judicial review.  This was, in other words, as advanced in the skeleton argument, a wholly different basis for applying for the claim for judicial review to be stood over from that sought in the application form itself.  It was advanced orally in front of me on the basis that if this court adjudicates on the assessment issues, which Mr Ockleton held were covered by and could be argued in the context of ground one of the existing ground for which HHJ Pearl gave permission, the Tax Chamber would be bound by its findings of fact.  In dealing with the issue, the Administrative Court would be unlikely to entertain oral evidence or cross‑examination.  The Tax Chamber by contrast would entertain oral evidence and cross‑examination of the officer whose witness statement details the mechanics of the alleged assessments.  The Tribunal has, in previous decisions, not believed officers that assessments have been made in time, and such a finding, if appropriate, would become closed.  
42.	In my view, this is a clear attempt to re‑litigate an issue that was, in effect, decided against Indigo once on 8 June by Mr Ockelton, when he refused an application by Indigo to stand over the claim for judicial review until after the hearing of Indigo's appeal against the assessments by the Tax Chamber.  He dismissed that application, stating that any dispute as to whether there had been an assessment could and should be determined as part of these proceedings.  This was a straightforward question of fact that this court could decide for itself on the basis of the evidence before it, in so far as it was necessary to do so.  There was thus no good reason why this court should delay its own proceedings, potentially for several years, pending the Tribunal's determination of the appeal Indigo had now decided to bring concerning its entitlement to the claim of VAT credits.  
43.	Before me, Mr Young in his reply belatedly sought to argue that the position had changed since Mr Ockelton refused a similar application on 8 June 2009 by reason of additional evidence of the assessment issue served by HMRC last Friday 10 July.  However, I was not taken to that evidence and he was unable to identify anything in that new evidence which was qualitatively different from the mass of evidence which had been served on Indigo in April of this year, and which was before Mr Ockelton on 8 June.  The latter included a factual account of the making of the alleged assessment by officers of HMRC drawn, I was told, from exhibited extracts from HMRC's electronic folder, which provide a narrative record of relevant events in the making of the alleged assessment.  Any arguments based on the advantage of cross‑examination in the Tax Chamber were as applicable to the initial evidence as to the new evidence.  
44.	In my view, this is merely the latest in a series of steps taken by Indigo to postpone the hearing of this claim for judicial review.  It is, moreover, entirely at odds with Indigo's other application for leave to amend in relation to the Kittel point, which is sought to be justified on the basis that the Administrative Court is the more appropriate court than the Tax Chamber to determine it.  
45.	On the footing that I refuse Indigo's primary application to amend to include the Kittel point, the choice is thus either to allow the claim for judicial review on the existing grounds to proceed, or to stay it for an indeterminate but probably very long time, until the conclusion of the appeal before the tribunal.  Such an adjournment would, in my judgment, be unfairly prejudicial to HMRC which has spent a lot of time and money and resources in defending these proceedings, not least in twice preparing for important hearings for the substantive claim.  In addition, HMRC has had hanging over it, and still has hanging over it, the serious allegation in ground two that it has pursued an unlawful policy of discrimination in breach of Article 22(8).  Moreover it is impossible to ignore the concession by Mr Young that, on their own, the two existing grounds are unlikely to succeed and will be abandoned if both applications are refused.  In my view, that adds further weight against the exercise of discretion in favour of reversing Mr Ockelton's decision to refuse to stand over the hearing of this judicial review claim.  
46.	In my view, there is no merit in Indigo's alternative application and I refuse it.
47.	Right, where do we go from here?
48.	MR KNIBBE:  My Lord I am grateful.  I should say that my name is Mr Knibbe and I appear on behalf of the defendant Commissioners.  We are somewhat hampered today by the absence of Ms Hall who could not make it.  My Lord, there are matters to address, principally timetable and costs.  With your permission I would ask for a brief adjournment so that I make take instructions.  I am also informed that Ms Hall may be available on the telephone if need be.  In the light of that I would ask for 10 or 15 minutes so that I can take instructions and we can determine what it is that those instructing me would like to ask for.
49.	MR JUSTICE STADLEN:  Mr Young, paragraph 4 of your skeleton argument said that if both applications were refused the claimant will abandon its claim for judicial review.
50.	MR YOUNG:  My Lord, yes.
51.	MR JUSTICE STADLEN:  Does that remain the position? 
52.	MR YOUNG:  They were my instructions as of Friday.  The lay client gave me those instructions directly and the reason that I inserted them into the skeleton argument, that point, was because I had been told that, and I did not in any way wish to conceal from the court the extent of my instructions.  That was simply to be clear, perhaps an unusual concession, but I wished to make sure ‑‑ 
53.	MR JUSTICE STADLEN:  No, it was quite properly made, and indeed it complied with Foskett J's order that forthwith you should make clear to HMRC which of the grounds you proposed to pursue. 
54.	MR YOUNG:  My Lord, yes.  So my instructions, and these were clear and direct instructions from my lay client, were that the lay client wished to abandon proceedings as of that time.  I have not spoken directly to the lay client subsequently but, as I understand it, I look at my instructing solicitor, I do not think anything has changed.
55.	MR JUSTICE STADLEN:  What steps are necessary in order to enable the claim to be abandoned?  Is it a step you can take unilaterally or do you require the consent of the court? 
56.	MR YOUNG:  I would have thought that, since it is the claimant's claim, the claimant would be in a position to simply withdraw.
57.	MR JUSTICE STADLEN:  Well, I am not sure that that is right.  There are, certainly there were under the old rules, certain circumstances in which either discontinuance or abandonment required permission either of the court or maybe consent of the other party, but plainly, if they are going to abandon the claim, that affects any directions that this court makes as to further progress of the judicial review claim.  
58.	Well, you have not looked at this point, and obviously you need to look at this point and Mr Knibbe wants an opportunity to speak to Miss Hall, but I imagine in any event he would like to speak to her having heard from you on the abandonment point.
59.	MR KNIBBE:  My Lord, that would be helpful.
60.	MR JUSTICE STADLEN:  Well, I am very happy to adjourn and let you consider the point, and you to speak to Miss Hall, but you may require more than 10 minutes.  How long do you think you are going to need? 
61.	MR YOUNG:  Well, if your Lordship is available in the next 20 to 25 minutes? 
62.	MR JUSTICE STADLEN:  Yes, certainly.  Well, let me know when you are ready.
63.	MR YOUNG:  I am grateful my Lord.

(Court rises at 2.44pm and sits again at 3.15pm) 

64.	MR YOUNG:  My Lord, we are grateful for the short adjournment in order that firstly, I could take instructions, and secondly, we could seek to reach an agreement.  We have reached an agreement in principle as to the appropriate way forward.  Put simply, as was indicated in the skeleton argument, the claimant wishes to withdraw its claim.  The mechanics of it appear to be that the claimant can file a notice to that effect.  Having spoken to my learned friend, it is not something that the Commissioners would object to, so we agree that the claimant ought to be allowed to withdraw its claim.  And if I can also say that we have discussed the issue of costs which are going to be prominent in a case such as this, and of course the claimant accepts that it ought properly to pay the Commissioner's costs.  It accepts that.
65.	MR JUSTICE STADLEN:  Of? 
66.	MR YOUNG:  The Commissioner's costs of the judicial review. 
67.	MR JUSTICE STADLEN:  For the whole of the claim? 
68.	MR YOUNG:  Well, I think in the circumstances that has to be correct.
69.	MR JUSTICE STADLEN:  Are there any other orders that have already been made against the Commissioner's on costs? 
70.	MR YOUNG:  My Lord, no.  I think the only order in respect of costs were this: that initially on paper, the Commissioners succeeded when the first paper application was made for permission, and I think the court ordered something along the lines of £940 costs in the Commissioner's favour, but plainly when the matter went before HHJ Pearl, permission was actually granted.  At that stage I do not think any order as to costs were sought.  At the application hearing in order to adjourn matters behind the Tribunal, the learned judge made no order, I think costs reserved.  Costs were reserved my Lord.  So in effect I think we are in a situation where it is ‑‑ 
71.	MR JUSTICE STADLEN:  There is no ‑‑ apart from the order in front of ‑‑ which was the one that the order was made?  HHJ Pearl? 
72.	MR KNIBBE:  Mr Justice Foskett my Lord.  That was on our part 23 application.
73.	MR JUSTICE STADLEN:  That is the only order that has been made?
74.	MR KNIBBE:  That was an order in favour of the Commissioners. 
75.	MR JUSTICE STADLEN:  So the order would then be that the defendant's costs of the judicial review claim, to be paid by the claimant, save in as far as already ordered by Mr Justice Foskett? 
76.	MR YOUNG:  My Lord, yes.
77.	MR KNIBBE:  My Lord, yes.  There is a question as to whether there are any applications where costs were reserved, which might not, on the strict language, be covered by that order.  I will just take instructions on that.  My Lord there is ‑‑ 
78.	MR JUSTICE STADLEN:  Mr Ockelton's order reserved costs?
79.	MR KNIBBE:  Yes. 
80.	MR JUSTICE STADLEN:  Yes.  Well the order would be the claimant to pay the defendant's costs of and flowing from defending the judicial review claim, to include, for the avoidance of doubt, the costs ordered to be reserved by Mr Ockelton.
81.	MR KNIBBE:  My Lord, I am grateful.  
82.	MR JUSTICE STADLEN:  Do you want me to make that order? 
83.	MR KNIBBE:  My Lord, there is one other matter which we would wish to raise.  We would wish to apply that costs be assessed on the indemnity basis my Lord, arising out of the way in which these proceedings have been conducted to date.  As your Lordship pointed out in your Lordship's judgment, there have been repeated delays.  The commissioners are in a position where they have prepared substantive grounds of resistance and evidence, they have then prepared on two occasions for the substantive hearing in this matter, on both occasions that substantive hearing was put back.
84.	MR JUSTICE STADLEN:  Well, on the first occasion it was only put back for compassionate reasons because Mr Young had to attend a funeral.
85.	MR KNIBBE:  I am instructed that is correct, my Lord.
86.	MR YOUNG:  And that was actually by consent.
87.	MR KNIBBE:  My Lord, we would focus in particular on the preparations which were done for the hearing on this Monday, on 13 July, where the commissioners, on Monday morning, were in a position to go on the substantive hearing and were told at ‑‑ the 11th hour hardly even covers it ‑‑ that there was to be no substantive hearing.  Your Lordship has also referred to certain litigation tactics which have appeared to be designed to cause delay ‑‑ 
88.	MR JUSTICE STADLEN:  No, I did not say they were designed to cause delay.
89.	MR KNIBBE:  Which caused delay.  My Lord, on those grounds we would ask that costs be assessed on the indemnity basis.
90.	MR YOUNG:  Well my Lord I am grateful for clarification that you have not ruled that the litigation tactics were set out to cause delay.  Indeed, my Lord, all I can do is apologise for the situation, as soon as I discovered from the lay client that the lay client, as it were, was not up to fighting on in respect of the grounds that had been filed, then I made sure that that was notified as quickly as possible.  Of course, it is unacceptable that it came so late in the day, but that was not a deliberate ploy, we had some difficulty in contacting and taking instructions from our lay client.  So I apologise for that.
91.	MR JUSTICE STADLEN:  Sorry, what is unfortunate it came so late in the day? 
92.	MR YOUNG:  The notification in the skeleton argument.  I put that in simply because I wanted to be absolutely clear as to the position.  It would have been easy to have, as it were, kept that card until later on, but I did not want to do anything such as that because I do not think it would have been a proper way to conduct oneself.  So one has tried to be as straight as one can with this case.  But, that being said, I must say I am driven to conclude that this case has not proceeded in the way that it ought properly to have been taken forward and I can see that the Commissioners, understandably, wish to seek costs on indemnity.  I am not going to resist that, my Lord.
93.	MR JUSTICE STADLEN:  Well, this is an application that the costs should be awarded on an indemnity basis.  The award of such costs is not on authority designed to punish the paying party, but rather to reflect circumstances which are out of the ordinary.  There are, in this case, in my judgment, circumstances which are out of the ordinary.  It is by no means all the features of the case but it is the case that, as part of the last‑minute application to adjourn, which was itself made on 8 July but was supported by a skeleton argument only served on the defendant on the Monday morning on which this substantive hearing was due to take place, there was revealed for the first time an intention on the part of the claimant to abandon its claim if permission to amend to rely on the new ground and/or to stand over the claim after the Tax Chamber hearing was refused.  As I say in my judgment, it seems to me implicit in that, that the claimant recognised that in the form in which it stood and for which alone it had been granted permission to apply for judicial review by HHJ Pearl as long ago as February this year, the claim was unlikely to succeed, and indeed, had no realistic prospect of success.  When one focuses on that aspect of the history of this litigation, it is apparent that there has, at any rate since February, been alive in this court a claim for judicial review which the claimant accepts has no real prospect of success, and the fact that that was only openly acknowledged in the context of a late, and, in my judgment, hopeless application to amend and adjourn, does not alter the fact that it is a matter that was there on the documents for all to see.  I do not have evidence to find, and I do not find, that there was a manipulative or cynical ploy on the part of the claimant.  It may well be this has arisen as a result of an evolving understanding on the part of Indigo's legal advisers as to what was and was not allowed to be argued as a result of HHJ Pearl's order.  Nonetheless, the applications before me, both to adjourn and to amend, were, in my judgment, both unacceptably late, and hopeless on the merits.  The defendant was avoidably exposed to the incurring of substantial costs and wasted time of hard‑working and hard‑pressed officials in resisting an argument that they adopt a discriminatory policy, and in all those circumstances, in my view, this is a case which falls out of the ordinary such as to justify an order for indemnity costs, a conclusion in which I am fortified by the fact that, in the open and proper way in which he has conducted this hearing before me throughout, Mr Young himself acknowledged that he could see no proper basis upon which he could resist such an order.  Accordingly, I make it.  
94.	Thank you very much; is there anything else?
95.	MR KNIBBE:  I would request, in terms that the claimant be required to file its notice of discontinuance within, say 7 days.
96.	MR JUSTICE STADLEN:  Do I have power to give that direction?
97.	MR KNIBBE:  This is something that we have discussed amongst ourselves, myself and my learned friend.  My Lord, where my learned friend has indicated that it is his intention, it may be that your Lordship does have that power.
98.	MR JUSTICE STADLEN:  Well, can you show me.  I do not think I have got power to order that. 
99.	MR KNIBBE:  If not, if your Lordship is content to make an order as to costs of the main proceedings without the notice of discontinuance having actually been put in yet, then the defendants are perfectly content with that.
100.	MR JUSTICE STADLEN:  Are you prepared to give an undertaking to issue the notice of discontinuance within 7 days? 
101.	MR YOUNG:  Well, my solicitor can give the necessary undertaking, my Lord.  
102.	MR JUSTICE STADLEN:  Why can you not give the undertaking? 
103.	MR YOUNG:  Simply because I am not going to be on the mainland later tonight, I am away tonight.
104.	MR JUSTICE STADLEN:  The undertaking is not that you would personally apply for discontinuance, it is the claimant has to apply for discontinuance, but the undertaking ‑‑ your client, through you, would be making an undertaking to the court.
105.	MR YOUNG:  Well, I can give ‑‑ I will just take instructions.  I am instructed that that is the case, my Lord.
106.	MR JUSTICE STADLEN:  Well, upon the claimant, through Mr Young, undertaking to issue a notice of discontinuance within 7 days, I order that the costs of the claim for judicial review, including, for the avoidance of doubt, those ordered by Mr Justice Foskett who reserved on 7 July 2009, be paid by the claimant on the indemnity basis, and I have already ordered that both applications should be refused.  Perhaps you would be so good as to draw up an order and let my clerk have it?  
107.	Good.  Anything else? 
108.	MR KNIBBE:  My Lord, I am grateful.