In the recent case of The Commissioners for Her Majesty’s Revenue and Customs v McCarthy & Stone (Developments) Ltd and another http://abytx.co/1m6BvPa the Upper Tribunal (Tax and Chancery Chamber) (“UT“) was asked to consider whether it should grant HMRC an extension of time to serve its notice of appeal.
Although the decision itself is not particularly controversial (the UT refused HMRC’s application for an extension of time), the reasoning behind it is of interest. Judge Sinfield came to his decision, and formulated his judgment, based on the Civil Procedure Rules (“CPR“), notwithstanding that, in his own words, they “do not apply to tribunals”.
On 1 April 2013, the much anticipated Jackson Reforms were finally implemented.
Prior to implementation, Jackson LJ conducted a review of the costs of civil litigation in England and Wales, and came to the conclusion that:
“Courts at all levels have become too tolerant of delays and non-compliance with orders. In so doing they have lost sight of the damage which the culture of delay and non–compliance is inflicting of the civil justice system. The balance therefore needs to be redressed.”
It was against this back drop that the Jackson Reforms were introduced, prompting various changes to the CPR. Perhaps most notably, and certainly most importantly in this case, are the changes to CPR3.9 (Applications for Relief from Sanctions), which now requires the court to “enforce compliance with rules, practice directions and orders”.
Recent decisions, including the Court of Appeal’s decision in Mitchell v News Group Newspapers http://abytx.co/Mbltnb (referred to by Judge Sinfield in his judgment) illustrate the approach now being taken by the courts; it is becoming increasingly clear that the Jackson Reforms have marked a significant change in the courts’ attitude to non-compliance with orders, directions, and rules. Greater weight is being placed on enforcement, and it would appear that the growing trend towards a stricter approach in the civil courts is now being adopted by the UT too.
Facts of the case
Following changes in personnel, HMRC overlooked an email notification dated 5 April 2013, informing the tax department that it had obtained permission to appeal to the UT.
Under Rule 23(2)(a) of the Tribunal Procedure (Upper Tribunal) Rules 2008 (“UT Rules“), HMRC then had one month in which to provide a notice of appeal to the UT. It failed to provide such a notice within this time period, and filed its notice of appeal on 1 July 2013, 56 days out of time!
In an attempt to rectify the error, at the same time as providing the notice of appeal, HMRC also filed an application for an extension of time (under Rule 5(3)(a) of the UT Rules), in the hope that the notice of appeal would subsequently be permitted. HMRC cited general organisational changes (including various changes in personnel) as the reasons for the application.
Judge Sinfield refused HMRC’s application for an extension of time and HMRC’s notice of appeal was therefore not admitted.
In his relatively detailed judgment, the judge said that whilst the CPR does not apply to tribunals, and the overriding objective in the UT Rules is not the same as the overriding objective contained in CPR 1, there was no reason for the UT to adopt a different, or more relaxed approach to compliance with rules, directions and orders, than the courts to which the CPR applies.
The Court of Appeal decision in Mitchell was relied upon by the UT, and quoted extensively, with the judge querying whether HMRC’s breach could be seen as “trivial”. He concluded that it was not, and commented that unless a breach can be classed as such, non-compliance cannot, and will not, be tolerated.
Judge Sinfield also commented that the reasons given in Mitchell, for a stricter approach, are useful guidance when deciding whether to grant an extension of time in the UT, and in relation to the UT Rules in general. As HMRC was unable to provide a good reason as to why it had not complied with the requisite time limit, the UT held that it was not consistent with the need to ensure that appeals are conducted efficiently to allow HMRC to serve a notice of appeal almost two months after the time limit had expired.
Judge Sinfield concluded:
“Taking all the circumstances of the cases into account, and bearing in mind the overriding objective of the UT Rules, I consider that the two requirements specifically mentioned in the new CPR3.9, namely the need for appeals to be conducted efficiently, and the need to enforce compliance with the UT Rules, lead ineluctably to the conclusion that HMRC’s application to submit a notice of appeal after the time limit has expired should be refused.”
It is important that those conducting tax litigation before the Tax Tribunals understand the implications of non-compliance with the relevant Rules, particularly in light of this decision. Although the CPR do not apply to the Tax Tribunals, it is clear from this decision that Tribunal judges are prepared to consider the CPR where it is appropriate to do so. It would appear that the stricter approach to compliance with rules and practice directions in the civil courts following the Jackson Reforms is being followed the UT.
The RPC Tax Blog, Tax Take, can be viewed here http://blog.rpc.co.uk/tax-law
Author: Natalie Drew, Trainee Solicitor, RPC