10/06/2004 draft  MAN/03/150
	SECURITY  — appeal against requirement for security — whether leave to be given for appeal out of time — VATA 1994 Schedule 11 paragraph 4(2) — VAT Tribunal Rules 1986 Rules 4 and 19.

MANCHESTER TRIBUNAL CENTRE

 
 	THE MASON ORGANISATION LIMITED
	N.B. MASON AMUSEMENTS LIMITED
	N.B. MASON ENTERTAINMENTS LIMITED
	JACK CONABOY
	NORMAN BERESFORD MASON	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	Mr J H Fryer-Spedding OBE (Chairman)

Sitting in public in Manchester on 21 November 2003

Mr C G Knowles of counsel for the Appellant
 
Mr J Puzey of counsel instructed by the Solicitor for H.M. Customs and Excise for the Respondents

	© CROWN COPYRIGHT 2003

DECISION

1.	 Before the tribunal are five appeals relating to certain notices of requirement to give VAT security under paragraph 4(2) of Schedule 11 to the Value Added Tax Act 1994.  Three of these appeals are made by limited companies, two are made by individual directors of the companies.

2.	A document headed “Application” dated 10 December 2002 shows all five parties as joint Appellants.  As a result, it appears that the tribunal office allocated one number, MAN/03/150, only, to the appeal.  Subsequently, however, five separate Notices of Appeal were, apparently, lodged at the tribunal centre.  However, no  order appears to have made for the consolidation of the five appeals however, counsel were content for them to be heard concurrently.

3.	The Notices of Appeal served on behalf of Mr Conaboy and Mr Mason do not identify any disputed decision against which those two appeals are made.  Section 83 of the value Added Tax Act 1994 sets out the matters in respect of which appeals can be made to the tribunal.  Mr Knowles for the Appellants argued that Mr Conaboy and Mr Mason should have status before the tribunal because they had both received Sunderland Magistrate Court summons because the companies had been trading in contravention of paragraph 4(2) of Schedule 11 of the 1994 Act without the required security having been given by the companies.  As a result, Mr Knowles argued, their financial position and their human rights could be adversely effected.  In this context, Mr Knowles relied upon the provisions of Articles 6(1), 8 and 14 of the European Convention of Human Rights.  I consider, without making any determination upon the merits, that these may be points which could be raised before the Magistrates Court.  However, I do not consider that they have any place before a tribunal.  Here, Mr Conaboy and Mr Mason have no status.  Accordingly, their applications to seek an extension of time in which to make their appeals are dismissed.

4.	I come,  then, to the appeals of the three companies.  By letters dated 1 November 2001, the Respondents, for the protection of the revenue, gave notice of requirement to give security.  In each case, the letter of the Respondents included the following paragraph;
“If you have information which you think is relevant, and you wish me to reconsider my decision, please contact me urgently.  Any reconsideration does not effect your right to appeal to an Independent Value Added Tax Tribunal Centre within 30 days of the date of this letter.  The procedure for making an appeal is set out in the attached leaflet.”
By three letters dated 5 December 2001 the Respondents amended the amount of security required, in the case of The Mason Organisation Limited £44,273, of N B Mason Amusements Limited £103,800 and of N B Mason Entertainments Limited £30,400.

5.	At some stage the Appellants served upon the Respondents and the Tribunal Centre the document headed “Application”.  By this document the Appellants sought a hearing of an appeal against the notices of requirement to give security and leave to appeal out of time.  The stated grounds of appeal were in these terms:
“(1) 	The decision of the Respondents to seek Security is unfair and unreasonable in all of the circumstances.
 (2)	The action of the Respondents is contrary to the provisions of Article 6, 8 and 14 of the ECHR as incorporated into United Kingdom legislation by the Human Rights Act 1998.”
The document is dated 10 December 2003.  A fax from the Respondents indicates that they had received it by 16 December 2002.  A copy from the Tribunal Centre file indicates that the document was served upon the Tribunal Centre on 18 February 2003.

6.	The Forms Trib 1 dated 3 January 2003 were submitted to the Tribunal Centre.  They bear the Tribunal Centre stamp dated 13 February 2003.  The grounds of appeal are stated to be “SEE ATTACHED SCHEDULE”.  In each case the Appellant applies for an extension of time on the grounds stated “Customs grounds are unjust in equity and contrary to domestic law.”  The Trib 1s are signed by Mr Knowles, counsel for the Appellant.

7.	Unfortunately, despite a direction which I gave on 28 October 2003 for the preparation of an agreed bundle for this hearing, the Appellants’ documents did not become available to the Tribunal and to the Respondents until the day of the hearing.  I should say that Mr Knowles said that he had sent them earlier.  For this reason it was on the day of the hearing that the Tribunal and the Respondents saw for the first time an undated document purporting to be a note of a meeting held on 6 March 2002 between Mrs Ingle and Mrs Stanley who are officers of the Respondents, and Mr Conaboy.  The document appears to be written by Mr Conaboy.  The first paragraph begins:
“It was explained to me that, because we have not paid the security deposit and have not registered an appeal*, and have continued trading after 30 days of receiving the “Requirement for Security Notice” we have committed an offence…”
At the foot of the page is written:
	“* we have no ground to register an appeal.”
I should say that it is not clear to me having regard to the document as a whole whose is the opinion shown against the ‘asterisk’.  When this document was produced to the Tribunal the respondents obtained a copy of Mrs Stanley’s note of the meeting.  This is comparatively full and careful.  It makes no reference to anybody having expressed a view that the Appellants had not grounds for an appeal.

8.	On 22 October 2002, 10 December 2002, 21 January 2003 and 18 February 2003 there were hearing in Sunderland Magistrates Court relating to alleged offences under paragraph 4(2) of Schedule 11 to the 1994 Act.

9.	On 16 June 2003 the Tribunal (Mr M S Johnson, Chairman) gave directions. Paragraph 3 of the directions provided:
“… the appeals are to be listed for hearing of applications for leave to appeal out of time, on the footing that the applications will be opposed by the Respondents.  The applications are each to specify the respective grounds advanced for leave to appeal out of time.”
I should say that the Appellants have not complied with the above direction.  It does appear that the Tribunal Centre may have mislaid the Trib 1s originally lodged with it.  Be that as it may, the only grounds specified by the Appellants for their being given leave to appeal out of time are those stated on the original Trib 1s.

10.	On 28 October 2003 I heard the applications for leave to appeal out of time.  Mr Knowles indicted that he wished to rely upon Human Rights points of which he had not given notice to the Respondents.  He also said that the Appellants had been misled by the Respondents but at that stage did not give detail.  There was no prepared chronology and no agreed bundle of documents.  Mr Owen, the  solicitor of the Respondents, who appeared for the Respondents on that occasion that if Mr Knowles were to raise Human Rights Points, he would wish to instruct counsel.  For these reasons, therefore, I directed that the matter should be re-listed for hearing at Manchester on 21 November 2003.

11.	I should mention that Mr Knowles said that the Appellants went into administration in February or March of 2003.  I do not have the details.  No points relating to its relevance have been raised by the Respondents.

12.	Rule 4 of the VAT Tribunals Rules 1986 SI 1986/590 (as amended) provides:
“Subject to  paragraph (2) of this Rule and any direction made under Rule 19, a Notice of Appeal shall be served at the appropriate Tribunal Centre before the expiration of 30 days after the date of the documents containing the disputed decision of the Commissioners”
Rule 19 provides:
“(1)	A tribunal may of its own motion or on the application of any party to an appeal or application extend the time in which the party to the appeal or application or any other person is required or authorised by these rules or any decision or direction of the tribunal to do anything in relation to the appeal or application (including the time for service of Notice of Application) upon such terms as it may think fit.”
Mr Puzey, for the Commissioners, referred me to the decision of the tribunal (Mr R K Miller CB, Chairman) in J Walter Thompson UK Holdings Limited v Customs and Excise Commissioners [1996] DR145.  This, citing authorities of the High Court, sets out the principles to be applied by the tribunal in considering an application for leave to appeal out of time.  The tribunal referred, at p151, to the decision of the Court of Appeal in Lewis v Harewood, The Times 11 March 1996, where the Court of Appeal summarised the law relating to the extension of time:
“A judge exercising the discretion to extend the time in such circumstances had     to conduct the enquiry in two stages.

He must first be satisfied, at stage one, that there was good reason to extend time, and also that the plaintiff had given a satisfactory explanation for his failure before the valisity expired.  If he was not satisfied that was the end of the proceedings.

If he was satisfied then he must go on to stage two, to a general exercise of a discretion involving consideration of all the circumstances including the  balance of prejudice or hardship.

Matters relevant at stage two, were not however relevant at stage one.  There was a degree of overlap and the judge addressing the inquiry at stage one was entitled and bound to take into account any matters which appeared to him to be relevant to the issues of goods reason and satisfactory explanation, notwithstanding that the same matters would also be relevant, assuming that it arose at all, to the exercise of his discretion at stage two.”

13.	Since that decision, in Customs and Excise Commissioners v Eastwood Care Homes (Ilkeston) Limited, The Times, 7 March 2000, Lightman J considered the factors to be taken into account on an application of an extension of time for service of Notice of Appeal.  These include the length of delay, the explanation for the delay, the prejudice of the delay to the other party, the merits of the appeal, the effect of the delay on public administration, the importance of compliance with time limits bearing in mind that they were there to be observed and the resources of a party which might, in particular, be relevant to the question of prejudice.  The learned judge placed emphasis on the fact that the time limits were there to be observed and stated that justice might be seriously defeated is there were laxity in respect of compliance with the rules: see also Civil Procedure Rule 1998, Rules 3.1.2 and 3.9.

14.	In the present case, I consider that there has been some confusion about the service of document at the Tribunal Centre.  I make no finding as to where the fault for this lies.  I do not think, however, that the points could be resolved without oral evidence.  For the purpose of the present matter, therefore, I shall consider the chronology upon the footing that the appeals of the Appellants were effectively made on 10 December 2002, the date of the “Application”.  That is the “best possible case” from the point of view of the Appellants.  This means that the strict time limit for appealing against the amended decisions contained in the letters dated 5 December 2001 expired on 4 January 2002.   The delay then ran until 10 December 2002.

15.	Applying the stage one test of Lewis v Harewood, Mr Knowles said that the parties were negotiating throughout the period of delay and in addition they were specifically advised by the Respondents that they had not grounds to make an appeal to the tribunal.  I do not consider that the first point constitutes any excuse.  The Respondents had carefully drawn the attention of the Appellants to the possibility of making an appeal: see the Notice Requiring Security letters.  As to the latter point of Mr Knowles, I do not accept that Mr Conaboy’s note of the 6 March 2002 meeting substantiates this point.  It is most unfortunate that this document was not produced at an earlier stage and more particularly that its purported effect was not mentioned on an amended Trib 1 in accordance with the directions made by Mr Johnson on 28 June 2003.  I am not satisfied, that the Appellant passed the stage one test laid down in Lewis v Harewood.  

16.	In case, for no reason, I was wrong in reaching the above conclusion, I will set out my views on stage two of the Lewis v Harewood test.  Here I will consider the factors mentioned by Lightman J in Eastwood Care Homes case.  I can say first that I find the length of the delay, in all the circumstances of the case, significant.  I do not find the explanation given by Mr Knowles convincing.  I consider that there is clear prejudice to the Respondents caused by the trading on the part of the Appellants without giving security.

17.	Perhaps most significant of the Eastwood Care Homes case factors is that relating to the merits of the appeal. 

18.	Paragraph 4(2) of Schedule 11 to the 1994 Act provides:
“If they think it necessary for the protection of the revenue, the Commissioners may require a taxable person, as a condition of his supplying or being supplied with goods or services under a taxable supply, to give security, or further security for the payment of VAT that is or may become due from –
(a)	the taxable person ,or
(b)	any person by or to whom the relevant goods or services are supplied.”
An appeal against such a requirement upon the part of the Commissioners lies to the tribunal under Section 83 (l) of the 1994 Act.  In such an appeal, the tribunal has to examine whether it had appeared requisite to the Commissioners for the protection of the revenue, to require the tax payer to give security.  In examining whether that statutory condition was satisfied, the tribunal has to consider whether the Commissioners had acted in a way in which no reasonable panel of Commissioners could have acted or whether they had taken into account some irrelevant matter or had disregarded something to which they should have given weight.  The tribunal might also consider whether the Commissioners had erred on a point of law.  The jurisdiction of the tribunal is supervisory not appellate.  The tribunal cannot exercise a fresh discretion: as to this point see John Dee Limited v Customs and Excise Commissioners [1995] STC 941 CA.  In my view, there is no material or argument before me upon which a case relating to the exercise of their discretion by the Commissioners could be made out.

19.	Taking into account the whole of the circumstances, mentioned above, relating to this case, I do not consider that it is in the interest of justice that the Appellants’ applications for an extension of time should be allowed.  I, therefore, dismiss them.

20.	I come, finally, to the issue of costs.  The costs of the hearing before me in Newcastle on 28 October 2003 were reserved.  At the conclusion of the hearing on 21 November 2003 I gave my decision orally with the reasons for it, in writing, to follow.  On the footing of the decision, Mr Puzey applied for an order that the Appellants should pay the Commissioners costs of both hearings.  Mr Knowles argued that the appeals had been properly presented and submitted that there should be no order as to costs.  I consider that these appeals are without merit.  I direct that the Appellants do pay the Respondents their costs of and incidental to the hearings of 28 October 2003 and 21 November 2003, such costs to be taxed if not agreed.

MR J H FRYER-SPEDDING OBE
CHAIRMAN
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