[2012] UKFTT 443 (TC)
TC02124
Appeal number:
LON/2008/349
PROCEDURE – application for
named judge – refused – application to set aside earlier direction of Tribunal
– occasions when Tribunal could make such a direction – application refused but
permission to appeal earlier direction granted
FIRST-TIER TRIBUNAL
TAX CHAMBER
DECISION
ON APPLICATIONS
IN THE CASE OF
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DDR
DISTRIBUTIONS LIMITED
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE BARBARA MOSEDALE
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© CROWN COPYRIGHT
2012
DECISION
Background
1.
This appeal was lodged in 2008 and was for some time stayed behind
another appeal (Blue Sphere Global Ltd). That appeal has now been
resolved but it is apparent that HMRC at least do not consider that the appeal
in Blue Sphere resolved all the issues at large in this appeal: this
appeal is therefore now progressing to hearing.
2.
On 12 August 2011 Judge M Cornwall-Kelly made a number of directions,
the only two of which are relevant to this application were:
3. No evidence may be served in relation to dealings
with or at the First Curacao International Bank.
6. The appellant’s application of 5 May 2011 in
relation to costs resulting from the late service of evidence by the
Respondents is reserved for later decision by the Tribunal in the light of the
evidence yet to be served and after full submissions by the parties.
3.
On 10 May 2012 Judge D Demack made a number of directions. The three
relevant to this application were:
3 Paragraph
3 of the Direction of Judge Cornwall-Kelly be set aside;
4 The
Respondents be allowed to serve and adduce in evidence the witness statements
of Peter Richard Birchfield and its exhibits and be allowed to rely on the
contents of that statement at the substantive hearing of the appeal;
5 The
appellant’s application of 5 May 2011 in relation to costs resulting from the
late service of evidence by the Respondents is reserved for later decision by
the Tribunal in the light of the evidence yet to be served and after full
submissions by the parties.
4.
By letter of 26 June 2012 the appellant made three applications which
were, in summary:
·
To have its two applications (set out below) heard by Judge M
Cornwall-Kelly;
·
To have Judge Demack’s directions 3 & 4 made on 10 May 2012
set aside and Judge M Cornwall-Kelly’s direction 3 made on 12 August 2011
reinstated;
·
To have Judge Demack’s direction 5 and Judge M Cornwall-Kelly’s
direction 6, both of which reserved until the substantive hearing the question
of costs in respect of HMRC’s applications to admit late evidence, set aside,
and the application of costs dealt with immediately.
Decision without hearing
5.
I have decided to determine these applications without a hearing which I
have the power to do under Rule 29 (Tribunal Procedure (First Tier Tribunal)
(Tax Chamber) Rules 2009) (“the Rules”) because, being interim applications, my
decision does not dispose of the proceedings or any part of them. I have
decided it is appropriate to determine these applications without a hearing as
it is apparent to me from the appellant’s representations that each should be
decided against the appellant and I would not be assisted by any
representations by HMRC.
Preliminary application: for hearing to be before named judge
6.
This is an independent tribunal. It is axiomatic that neither party can
choose the judge or, as the case may be, the panel of judge and member, which
hears their case or any interim application made in respect of it.
7.
It is also axiomatic that where a hearing of a substantive or interim
matter has been commenced before a judge or panel, that judge or panel is
seized of the matter and no other judge or panel could continue it part-heard.
But in this case, there is no part-heard matter. Interim hearings have been held
and the judges have respectively given their directions and reasons for them.
The appellant has now made new application. It cannot choose the judge to hear
it.
8.
The allocation of a judge to a hearing is solely within the discretion
of the President of the Tribunal (paragraph 14 of Schedule 4 to the Tribunals,
Courts and Enforcement Act 2007) although this may be delegated to the Chamber
President. Although the President might in his discretion choose to allocate
the same judge to case manage any particular file for reasons of consistency
and/or familiarity with the issues, that is a matter for the President’s sole
discretion and not something in respect of which it is proper for a party to
make an application.
9.
Nor is it within the power of any tribunal judge to allow such an
application. The power of a tribunal judge to make a direction is as set out
in Rule 5(2) of the Rules. That only permits a direction in relation to the
“conduct or disposal of proceedings”. It is implicit that this refers to the
conduct of proceedings by the parties as the directions are given to the
parties. A judge is not by Rule 5(2) given power to make directions to the Tribunal
itself. The power of a judge to make directions cannot not therefore
include a direction determining the panel to hear the proceedings. In any
event, as I have said, by law that is a decision which is reserved to the
President and not something in respect of which an application should be made.
10.
As the Tribunal has no power to make such a direction, there is no point
in considering the merits of the application. However, I note that even had I
the power to order the composition of the Tribunal (which I do not) I would not
accede to the application on its merits. On the face of its application, it is
apparent that the appellant wishes Judge Cornwell-Kelly to hear its application
because the appellant prefers the direction in respect of FCIB evidence given
by that Judge to the direction given some months later by Judge Demack on the
same issue. This is apparent because the appellant is asking for Judge
Demack’s direction to be set aside and Judge Cornwall-Kelly’s direction
reinstated and because the appellant states that it prefers Judge
Cornwall-Kelly’s reasoning to Judge Demack’s. It says:
“We can see nothing within the reasoning of Judge
Demack to rebut or answer the clear and more cogent reasons which were advanced
by Judge Cornwall-Kelly…”
11.
A Tribunal must be fair and must appear to be fair. If I had the power
to accede to the appellant’s application, and did so, it would have the
appearance of manifest unfairness to HMRC, as the appellant would have been
allowed to choose as the judge hearing its application that judge whose reasons
the appellant preferred on the very issue that would be at stake in the third
applications hearing.
12.
On the contrary, the only fair thing to do for both parties, and the
only way to guarantee the appearance of fairness, is for the appellant’s
applications to be determined by a third judge. And therefore I am determining
the applications.
13.
The appellant’s application for Judge M Cornwall-Kelly to hear its
applications is denied.
Application 1 – reinstatement of bar on new evidence
The Rules
14.
This application, although not expressly, is made under Rule 6(5) as
that is the only Rule under which it could be made. It provides:
“If a party or other person sent notice of the
direction under paragraph (4) wishes to challenge a direction which the
Tribunal has given, they may do so by applying for another direction which
amends, suspends or sets aside the first direction.”
15.
At first glance, it appears, therefore, that the appellant has followed
the proper course of action. It wishes to challenge various Directions Judge
Demack has made and it has done so by applying for a direction which sets them
aside.
16.
But legislation, including secondary legislation, such as our Rules,
must be interpreted in such a way to avoid anomalous or absurd results as such
results would not have been intended by Parliament. If any and every direction
could be challenged merely by an application for that direction to be
set-aside, the Tribunal and parties in any appeal could quickly become ensnared
in an endless game of ping-pong. One party would challenge a direction it did
not like unless and until it was set aside; the other party would then
challenge the setting aside of that direction, ad infinitum.
17.
That would be an absurd and anomalous result and Parliament could not
have intended that. It used the word “may” in Rule 6(5). This should be
interpreted, firstly, as leaving it open for a party to challenge a direction
by another means (by appealing it), and, secondly, that it is not a liberty
which can be exercised in every case of challenge.
18.
With regards substantive decisions, they may be set aside in certain
cases. It seems likely that Parliament intended that directions could be set
aside in similar situations. Those situations are, subject to the overriding
requirement of the set-aside being in the interests of justice (rule 38(1)(a)):
·
Procedural irregularity (rule 38(2)(a)-(c));
·
Non-attendance (rule 38(2)(d));
·
Following a review undertaken on the basis of an obvious error of
law (rule 41(1)(b) coupled with Tribunals, Courts and Enforcement Act 2007 s
9(4)(c)).
19.
It seems likely Parliament intended Rule 6(5) to be used in similar
situations and therefore it may be appropriate to make an application for a
direction to be set aside where a party did not attend, there was procedural
irregularity or there was an obvious error of law in the direction. Whether
the judge would order the set aside would of course depend on whether he
considered it to be in the interests of justice to so do.
20.
It also seems to me, although not by any parallel with hearings of
substantive matters, that Parliament must also have intended Rule 6(5) to be
used in one other circumstance, and that is where there has been a change in
circumstances. Indeed, it is commonplace for earlier directions to be set
aside and displaced by later directions where the situation has changed, such
as where parties have proved unable to keep to the directed timetable. After
all, the objective of directions is to get the appeal on for hearing in the
shortest possible time commensurate with fairness and ensuring in so far as
possible that both parties are fully prepared. Failing to take account of
changing circumstances would not achieve such an objective.
21.
I note that the White Book (Civil Procedure in the High Court) states,
in respect of the High Court’s power to “vary or revoke” any earlier order, that
this does not include a power to reverse itself simply because it had changed
its mind. On the contrary, either an erroneous basis would have to be shown
for the original order or a change in circumstances. See Section A 3.1.9. The
court cannot act as an appellate court from its own orders. I consider that a
similar state of affairs exists in this Tribunal.
22.
In conclusion, in my view, Parliament only intended Rule 6(5) to be used
in limited circumstances, and in particular where:
·
Circumstances have changed;
·
Obvious error of law in direction;
·
Procedural irregularity in relation to the hearing at which
direction made; or
·
A party did not appear and was not represented at the directions
hearing.
A judge would of course only grant the set-aside where it
was in the interests of justice to so do.
23.
The above may not be an exclusive list of all the circumstances in which
Rule 6(5) may be used: there may be some additional circumstances in which
Rule 6(5) would be appropriate, but such circumstances would be exceptional and
would not include an application on the grounds simply that a party considers
the original direction was wrong. To avoid an anomalous and absurd result
Parliament cannot have intended Rule 6(5) to apply simply where a party
considers that a direction is wrong: the only proper course of action in such a
case would be for the party to apply to appeal it.
Application of Rule 6(5) to this case
24.
The appellant does not suggest that circumstances have changed or that
there was a procedural irregularity or that it did not appear or was not
represented at the hearing in front of Judge Demack.
25.
As is apparent from its application, it applies for the set-aside of
Judge Demack’s directions 3 & 4 on the grounds that it considers them to be
wrong. In particular, its ground for saying they were wrong was that Judge
Demack’s direction was procedurally unfair to the appellant. This was because
the appellant consented to the stay behind Blue Sphere in the belief
that it was only to save costs of hearing both appeals simultaneously and not
to allow in new evidence. It also criticises Judge Demack, amongst other
things, for taking into account that the appellant had not attempted to have
the appeal set down for hearing without (they say) taking into account the
large quantity of new evidence served on them (including evidence from
replacement officers). But the basis of their application is that it was
procedurally unfair for entirely new evidence to be admitted at this stage in
the appeal.
26.
However, from what I have said above, it would only be proper for me to
consider setting aside Judge Demack’s decision if I were satisfied that it
contained an error of law. In my view, the principles to be applied here are
those set out in R v First Tier Tribunal (Review) [2010] 160 (AAC) (28
May 2010). In other words, to be satisfied there was an error of law it
must be a clear, unarguable error of law such that an appeal is bound to
succeed. Such an error is likely to be one that can be explained in a sentence
or no more than a few paragraphs; and is likely to be something like an
overlooked case authority or statutory provision (or, I would suggest,
overlooked evidence).
27.
Am I satisfied Judge Demack fell into such error?
28.
Firstly, looking at the decision itself, this was to admit FCIB
evidence. There is no obvious error of law in Judge Demack’s decision on
this. As is apparent from his paragraph 11 he took into account potential
unfairness to the appellant as well as other matters such as delay. All that
the appellant can say is that the weighing exercise Judge Demack performed in
respect of the rival merits of excluding or allowing in the evidence did not
lead to the result the appellant desired. But there is no obvious error in
Judge Demack’s decision: he considered the factors which ought to have been
considered.
29.
Further, Judge Demack set-aside Judge Cornwall-Kelly’s earlier
direction. From what I have said, a Tribunal should only do this where:
·
Circumstances have changed;
·
There is an obvious error of law in direction;
·
There was a procedural irregularity in relation to the hearing at
which direction made; or
·
A party did not appear and was not represented at the directions
hearing.
It should not do so merely because it considered that the
earlier direction was not one that it would have reached.
30.
However, although Judge Demack did not consider the matter in these
terms as expressed by me, it is clear to me that two of the above criteria were
or may have been met and therefore for this reason too I do not perceive any obvious
error in law in Judge Demack’s decision to set aside Judge Cornwall-Kelly’s
direction.
31.
Firstly, circumstances had changed. At the time of Judge Cornwall-Kelly’s
evidence HMRC did not then have the FCIB evidence: they merely had an
expectation that they would acquire such evidence in relation to the
appellant’s case. The hearing in front of Judge Demack was occasioned because
HMRC acquired and then applied to admit the evidence of Peter Richard
Birchfield, which was evidence in respect of FCIB in relation to the
transactions at issue in this appeal.
32.
This was a clear change in circumstances, as in excluding it in August
2011 Judge Cornwall-Kelly could not have weighed the relevance of the
FCIB evidence to this particular appeal, as such evidence was not in front of
him at the time. Once the evidence existed (in the sense of a witness
statement being compiled in respect of it), a later Tribunal could weight
whether it was of such relevance it should be admitted despite any procedural
unfairness to the appellant.
33.
Secondly, Judge Demack may have considered that Judge Cornwall-Kelly’s
direction contained an obvious error of law. While it is normal to set a cut
off date for evidence, after which no new evidence should be served, this
always has to be tempered with the possibility that new evidence might emerge
that is of such relevance to the appeal that it should be heard. For this
reason it is normal to direct after close of evidence that no new evidence may
be admitted save with leave of the Tribunal. Saving words such as these
were not used by Judge Cornwall-Kelly which meant that he was excluding any
future evidence without assessing its relevance: yet Mr Justice Lightman’s
decision in Mobile Export 365 Limited [2007] EWHC 1737 (Ch),
which is binding on this Tribunal, is that:
“The presumption must be that all relevant evidence
should be admitted unless there is a compelling reason to the contrary”
(paragraph 20).
34.
So for both these reasons, it is not apparent to me that Judge Demack’s
decision contained an obvious error of law. I am not satisfied it contains an
error of law at all. It is therefore not appropriate for it to be set aside.
35.
That does not leave the appellant without a remedy. The proper remedy
is for the appellant to seek permission to appeal Judge Demack’s direction.
Rather than require the appellant to make such an application now, I will rely
on Rule 42 (reading “decision” to refer also to reasons for a direction and not
just a decision disposing of an appeal) and treat its application to set-aside
Judge Demack’s direction as an application to appeal it.
36.
Permission to appeal is granted where a party shows a reasonable
prospect of success on appeal. While I am not satisfied that Judge Demack’s
decision contains an error of law, I am satisfied that there is an arguable
error and that the appellant ought to be able to put its case on this to the
Upper Tribunal. I give permission to appeal Directions 3 & 4 of Judge
Demack’s directions of 10 May 2012 and the reasons for those directions as
explained in his written decision dated the same date on the grounds as set out
in the appellant’s representative’s letter of 26 June 2012 under the heading
“first application”.
Application 2: for costs to be determined immediately
37.
Both Judge Demack and Judge Cornwall-Kelly gave the identical direction
that costs in respect of late evidence be reserved until later. It appears
both judges considered that all the new evidence should be considered before a
decision was made on where a costs award would lie.
38.
The appellant does not agree. It considers that all new evidence has
been served now and that the matter should be resolved now.
39.
I do not consider that Judge Demack’s direction (reiterating Judge
Cornwall-Kelly’s) should be set aside. Circumstances have not changed nor is
it obviously wrong in law.
40.
I do not consider that leave to appeal it should be given: I can see no
arguable case that it was wrong for Judge Demack to reiterate Judge
Cornwall-Kelly’s direction.
41.
All that remains now is for the costs application to be heard in
accordance with the terms of both Judges’ directions: however, unless and
until the outcome of the appellant’s appeal (if it chooses to make it) to the
Upper Tribunal is known, any Tribunal hearing it will not be best placed to make
the decision on, for instance, the extent to which the appellant has had to
incur costs on evidence which is not admitted.
42.
I therefore direct that the hearing of the costs application should not
take place until the earlier of (a) the appellant notifying HMRC and this
Tribunal that it does not intend to avail itself of the permission to appeal
granted by me in this decision; or (b) the Upper Tribunal determining the
appeal against the direction (or both parties agreeing the matter before
determination).
BARBARA
MOSEDALE
TRIBUNAL JUDGE
RELEASE DATE: 8 July 2012
