18950
LONDON TRIBUNAL CENTRE Reference No: LON/03/1245
Copy sent to:
Appellant/Applicant
Respondents
IAN TUPPEN T/A KINGSWOOD TRADING SERVICES Appellant
- and -
THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents
Tribunal: ANGUS NICOL (Chairman)
Sitting in public in London on 2 April 2004
REASONS FOR DIRECTION
- This appeal is concerned with the refusal of the Commissioners to make repayments of VAT of £192,004.19 in respect of the return for July 2003 and of £934,886.08 in respect of the return for August 2003. On 21 October 2003 the Commissioners made repayments of £2,350.66 and £111,442.50 respectively. Solicitors acting for the Appellant wrote to the Commissioners inviting them to make full repayments or to give a reasoned decision for not so doing which was capable of being appealed under section 83 of the Value Added Tax Act 1994. On 2 December 2003 the Commissioners made an appealable decision, and on 23 December 2003 the Appellant served a notice of appeal, which included a hardship application.
- On 30 December 2003 the Tribunal notified the Commissioners of the appeal. In accordance with rule 8 of the Value Added Tax Tribunals Rules 1986 ("the Rules"), the Commissioners were obliged to serve their statement of case within 30 days, that is not later than 29 January 2004. On 26 January 2004 the Commissioners made an application for an extension of time for serving their statement of case until 1 March 2004. No reasons were given for making such an application. That application has never been listed for hearing nor has any direction been given by the Tribunal in respect of it. Since the direction sought is no longer capable of being made that application is no longer live.
- On 5 February 2004 the Appellant made a cross-application for a direction that, the Commissioners being out of time in serving their statement of case, the appeal should be allowed under rule 19(4) of the Rules.
- The statement of case was not served by 1 March 2004, and was not in fact served until 30 March 2004, nor was any further application for an extension of time for so doing made.
- In the meantime, on 18 November 2003, the Appellant had issued proceedings for judicial review in respect of the Commissioners' continued failure either to make the repayments of VAT or to give an appealable and reasoned decision that they were not going to make those repayments. On 21 November 2003 the Commissioners made a further repayment of £162,355.60 in respect of the return for August 2003. On 16 February 2004 an order was made in the judicial review proceedings, which had become academic in view of the Commissioners' decision of 2 December 2003, that the Appellant should be awarded his costs of the judicial review proceedings.
- The Appellant's cross-appeal has now come before the Tribunal for determination. With the consent of both parties, it was heard in public.
The Commissioners' contentions
- Miss Nicola Shaw appeared for the Commissioners. She pointed out, first, that the statement of case had now been served. She said that the Tribunal had no jurisdiction to allow the appeal under rule 19(4) if the Commissioners had failed to comply with a direction of the Tribunal. The decision of Lloyd J in Customs and Excise Commissioners v Neways International (UK) Ltd [2003] STC 795), upholding a decision of the Tribunal allowing an appeal where the Commissioners had failed to comply with a direction, was referred to. In the present case, Miss Shaw said, there had been no failure to comply with a direction, no direction having been made. As a result, all that the Tribunal could do was give directions for the service of the statement of case and list of documents. Miss Shaw very properly accepted that the delay by the Commissioners, both in making an appealable decision and in serving the statement of case, was unsatisfactory. However, she said, and it was not in dispute, this was a very complex appeal, the hearing of which might take in excess of ten days and there was a very large number of documents. The nub of the application was the lateness of the application, and the Commissioners were unable to give any explanation for this.
- However, Miss Shaw continued, in the circumstances the delay was not unduly long, and she invited the Tribunal to waive the breach of the Rules. She contended that the judicial review proceedings were unfounded, because the Commissioners were entitled to a reasonable opportunity to investigate a large claim for repayment of input tax. This was a difficult case, of the type known as a "carousel" fraud, involving liaison with foreign tax authorities, which was very time-consuming. It was not appropriate to level a charge of causing prejudice to the Appellant, since the Commissioners had done what they were obliged to do as quickly as they could.
The Appellant's contentions
- The Appellant was represented by Mr Andrew Young. He conceded that the Commissioners were entitled to a reasonable time to investigate the claim to repayment. But things were not as clear cut as that. As things were, the Appellant was having to wait for a long time for the repayment of tax to which he was entitled. He was, in the ordinary way, entitled to interim relief, though the Tribunal had no jurisdiction to make such an award. Certain decisions on the point were awaited from the European Court of Justice.
- Any application to the Tribunal must be made under rule 11 of the Rules. Rule 11(2)(c) requires that the grounds for the application must be set out. No grounds were given for the Commissioners' application of 26 December 2003; Miss Shaw had said that she did not know what the grounds were, so clearly there were none. There was, therefore, no proper valid application for an extension of time.
- Under rule 18(2) of the Rules, the Tribunal can dismiss an appeal where the appellant has failed to prosecute the appeal, in fact has behaved as the Commissioners have in the present case. If there is no corresponding rule, empowering the Tribunal to allow an appeal where the Commissioners fail to contest the appeal the Rules, or at least rule 18, are not compliant with Article 6 of the Convention on Human Rights. It is, he contended, therefore necessary to turn to rule 19(3) for relief. Rule 19(3) should be read in such a way that allows the Tribunal to allow an appeal in such circumstances. Rule 19(3) empowers the Tribunal, on the application of a party, to "give or make any direction as to the conduct of or as to any matter or thing in connection with the appeal or application which it may think necessary or expedient to ensure the speedy and just determination of the appeal...." Mr Young contended that allowing the appeal would indeed be a speedy and just determination. He observed that in making the application he had to satisfy the Tribunal, first, that on the merits it would be appropriate to exercise the discretion to allow the appeal, and, secondly, that the Tribunal had jurisdiction to do so under rule 19(3).
- Mr Young referred to the final paragraph (paragraph 87) of a witness statement made by Mr Holland, the Appellant's solicitor, in connexion with the judicial review proceedings, in which Mr Holland said,
"The Commissioners ... Have treated and are continuing to treat Kingswood with utter contempt. They consider that a reasonable period of time is as long as they want it to be irrelevant of the facts of the particular case. They have a complete disregard both for the effects of their behaviour on Kingswood's business and the duties and responsibilities which the have to Kingswood as a member of the public."
Mr Young said, in behalf of his client, that the delay in payment was having a serious and adverse effect upon the Appellant's business.
The Commissioners' reply
- Miss Shaw contended that the wording of rule 19(3) did not permit the Tribunal to allow the appeal. That would be a very serious course of action, and it would need express words in the rule. No express infringement of Article 6 had been argued. That required that the Appellant should have a fair trial, and that is exactly what he would get, and was getting. If rule 18(2) had no corresponding provision for allowing the appeal, it was only rule 18(2) which was not compliant with Article 6. But there was a good reason for this. An appeal is brought by the appellant. An appeal may be allowed on the ground of a failure to comply with a direction by the Commissioners, but rule 18(2) deals only with want of prosecution by the appellant who initiated the appeal. It enables the Tribunal to strip out spurious appeals which are not prosecuted. This does not apply to the Commissioners at all.
- But if rule 19(3) was to be construed as the Appellant contended, it was the Commissioners' case that there had been no inordinate or inexcusable delay, as the chronology shewed. There were two different types of delay: first, the delay in giving an appealable decision and in making any repayment, and secondly the delay in serving the statement of case. The former was a shortcoming, but did not attach to the substance of the statement of case nor to the appeal itself. It also had to be said that some responsibility lay with the Tribunal itself for failing to list the application of 26 December 2003. It would be disproportionate to allow the appeal, even if rule 19(3) could be so construed after only a two-month delay in what was admittedly a very complex case.
The relevant rules
- The relevant parts of rules 18 and 19 provide as follows:
"18-(1) . . .
(2) A tribunal may dismiss an appeal for want of prosecution where an appellant or the person to whom the interest or liability of the appellant has been assigned or transmitted, or upon whom such interest or liability has devolved, has been guilty of inordinate and inexcusable delay.
(3) . . .
19-(1) . . .
(2) . . .
(3) Without prejudice to the preceding provisions of this rule a tribunal may of its own motion or on the application of a party to an appeal or application or other person interested give or make any direction as to the conduct of or as to any matter or thing in connection with the appeal or application which it may think necessary or expedient to ensure the speedy and just determination of the appeal including the joining of other persons as parties to the appeal.
. . ."
Reasons for direction
- This application is essentially for the appeal to be allowed on the ground of inordinate and inexcusable delay. I was told, and the chronology (which is not disputed) shews, that there had been delay, first, from the time when the claims for repayment were made until an appealable decision was made, and, secondly, from the time when the notice of appeal was served until the eventual service of the statement of case. The Appellant's principal, but not only, complaint, as I understood the matter, was in connexion with the first of those delays. There was also a complaint about the failure to serve the statement of case and about the making of an application for an extension of time only three days before that time ran out. The effect of the first delay, I was told, has had a severely adverse effect upon the Appellant's business. That is not very surprising when one considers that the repayment claimed amounted to £1,126,890, of which £850,741 remains outstanding. The delay was from 31 August in respect of the July return and from 30 September in respect of the August return, until the dates of payments and the date of the appealable decision on 2 December 2003, three months and two months respectively, until the decision, and a month less than that until the part repayments. After the notice of appeal had been served, there was a delay of two months until service of the statement of case.
- So far as the appeal is concerned, and this application has to do with the appeal and not the earlier delay, it is only the time elapsed from 30 December 2003 until 30 March 2004 with which this Tribunal is concerned. Whether there is more to be repaid to the Appellant remains to be seen after the hearing of this appeal. There may or may not, depending upon the circumstances, be other claims arising under section 78 or 79 later.
- It is, in my view, bad practice to make an application for an extension of time so late that there is no possibility of the application being challenged while the time originally limited is still running. It is not the correct way in which to observe the Rules. Still less is it acceptable to let time pass without making any application and then, after a further period which has been neither agreed nor allowed, do the act for which the time was limited. If this appeal is so complex and so many documents are to be considered that it was reasonable for a greater time than 30 days to be allowed for the service of the statement of case, there was nothing to prevent the Commissioners either seeking the consent of the Appellant to an extension, or making an application early in January 2004 for such an extension. That there was no actual opposition to the application of 26 January 2004 appears to be the fault of the Tribunal which failed to list the application for hearing. But even had it done so, by the earliest that the hearing could have come on the Commissioners would already have had an extension of nearly two weeks. The fault is compounded by the application having been backed by no reasons for needing the extension, and again by the fact of the statement of case not having been served even by the date to which the extension was sought.
- Having said that, I consider the extent of the delay after service of the notice of appeal. It is not disputed that this is a complicated appeal, and that there are some hundreds of documents involved. That being so, it must have been plain from the beginning that 30 days would be inadequate for drafting the statement of case. It may be that a further two months was a reasonable time for this. The Commissioners list of documents included 200 documents. There was no evidence before me as to the time needed to liaise with foreign tax authorities; but I can well believe that that is a time-consuming exercise. The Appellant is in a position to have some notion of how long it would be likely to take. It was not suggested that three months was obviously much longer than was necessary. In all the circumstances, it does not appear to me that the delay itself was inordinate and inexcusable.
- As I have mentioned, no direction was given by the Tribunal with respect to the extension of time. There was therefore no failure to comply with a direction. Therefore, there is no jurisdiction to allow the appeal under rule 19(4).
- Is it possible, then, so to read rule 19(3) that it has the converse effect of rule 18(2)? As Miss Shaw rightly pointed out, there is nothing in that subrule which empowers the Tribunal to allow an appeal for a failure by the Commissioners simply to comply with the Rules, in the absence of a direction. I agree with her contention that express words would be needed; had it been intended, such words could easily have been included in the rule, or in another specific rule. The words of rule 19(3) do not approach such an effect.
- But Mr Young suggested that, in order that the Rules should be compliant with Article 6, they should be so read that the convese of rule 18(2) is a provision. The only rule that could conceivably be so read is rule 19(3). The relevant part of Article 6 provides:
"1. In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law...."
There is a difference between the position of an appellant and that of the respondent Commissioners in any appeal under the Value Added Tax Act 1994. The appellant brings the appeal, and it is therefore for him to prosecute it with reasonable speed. If he does not, and if his failure to do so continues for a considerable amount of time, the respondents will wish to know if the appeal is still live or if it has been abandoned. If it has been abandoned, or appears, after inquiry and after giving the appellant the opportunity to explain the delay, to have been abandoned, or if after such time no fair trial is possible (to give obvious examples) it is logical and reasonable that such an appeal should be dismissed. The respondent, on the other hand, has not initiated the appeal and, acting within the Rules and in compliance with any directions of the Tribunal, has to await the actions of the appellant. It does not appear, therefore, that simply for the Rules, or for a particular rule, to provide for the dismissal of an appeal that has not been prosecuted to the extent that there has been inordinate and inexcusable delay", without providing for an appeal to be allowed in the case of delay by the respondents, in any way denies to any person a fair and public hearing within a reasonable time. Justice, after all, works both ways, and has to be done to appellant and respondent alike. In my judgment the Rules, and specifically rule 18(2), shew no failure to comply with Article 6. I agree with Miss Shaw's contention on this topic.
- For the above reasons, the Appellant's cross-application is dismissed.
- The Appellant applied for his costs of this application to be paid by the Commissioners in any event. The purpose, he submitted, of the application was to find out the reason for the Commissioners' delay. No reason has been disclosed. The Appellant had no choice but to make this application in the circumstances, and should therefore have his costs. Miss Shaw said that the delay had been explained, though not the reason for the delay in making the application. The Appellant was not forced to make his cross-application, and, the statement of case having been served, could have vacated the hearing. In my judgment, at this hearing the Commissioners have effectively succeeded. But as at 5 February 2004 there was some need for the Appellant to take some action to stimulate the Commissioners into action, since nothing appeared to the Appellant to be happening. It is true that when the statement of case was served this application could have been withdrawn and the hearing vacated. However, the statement of case was served only on 30 March, with an interval of only two days between that and the hearing, and was notified to the Appellant on the day after service. I was told, and would expect, that by that time most of the Appellant's costs of this hearing had been incurred. Doing the best that I can short of a detailed taxation, I direct that the Commissioners pay one half of the Appellants costs of an incidental to the cross-application. That payment of costs will be subject to an adjustment in respect of certain costs relating to travelling time which were discussed briefly at the end of the hearing.
- Draft directions were submitted for the future conduct of the appeal, which were considered and submissions made relating to them. Thereafter I gave directions in accordance with what was agreed.
DIRECTION
NOW THIS TRIBUNAL DIRECTS
- that the Appellant's cross-application be dismissed
- that the Appellant shall serve his list of documents on the Commissioners within 7 days after the date of this hearing
- that any requests by the Appellant for inspection or copies of documents disclosed by the Commissioners should be made to the Commissioners not later than 4.0 p.m. on 14 April 2004
- that any requests by the Commissioners for inspection or for copies of documents disclosed by the Appellant should be made to the Appellant not later than 4.0 p.m. on 28 April 2004
- that the Commissioners serve witness statements of all witnesses upon whose evidence they intend to rely not later than 4.0 p.m. on 28 May 2004
- that the Appellant may serve witness statements of all witnesses upon whose evidence he intends to rely not later than 4.0 p.m. on 25 June 2004
- that not later than 14 days after this hearing both parties notify the Tribunal and each other of dates to avoid for a hearing (estimated length: 10 days) between 4 October and 22 December 2004
- that the Commissioners pay one half of the Appellant's costs of the hearing of this cross-application
- that each party shall be at liberty to apply to the Tribunal generally and in default of agreement as to costs
ANGUS NICOL
Chairman
Release Date: 14 April 2004
LON/03/1245
