Deluni Mobile Ltd, R (on the application of) v Customs and Excise

Tax authorities investigating repayment claims must act reasonably and proportionately and should keep the taxpayer informed of the stage reached. They are not generally required to disclose the detailed nature, timing or content of their investigations where doing so could prejudice the investigation or impose impractical administrative burdens. Delay inherent in investigating transactions exposed to carousel or missing-trader fraud does not, without evidence of maladministration, establish unreasonable delay. A claim for judicial review brought solely to obtain further investigative detail is misconceived. Where such a claim is withdrawn after being shown to be hopeless, the court may make a costs order reflecting both the merits and the claimant’s later acceptance that the proceedings should not continue.

Deluni Mobile Limited, a trader in mobile telephones and a repayment trader, sought permission for judicial review against the Commissioners of Customs and Excise. It alleged unreasonable delay and disproportionate enquiries concerning VAT returns for September and October 2003. By the hearing, decisions had been made on the returns, enabling appeals, and the application for permission was withdrawn.

The remaining issues were whether the claimant should receive any contribution towards its costs and whether the Commissioners should recover costs. The court considered the reasonableness of the investigations and the extent of information which the Commissioners were required to provide.

1. Investigations. The claim was wholly misconceived. There was no evidence that the Commissioners’ enquiries were unreasonable or had caused unreasonable and disproportionate delay. The mobile-telephone trade was exposed to carousel and missing-trader fraud, so investigations could inevitably take time, even where there was no allegation that the particular taxpayer was involved in fraud.
2. Extent of explanation required. The Commissioners were required to conduct reasonable and proportionate investigations and to notify the taxpayer of the stage reached. They were not obliged to explain when the investigations began or ended, or to disclose their detailed content. Requiring such disclosure could prejudice the investigations and impose impractical burdens, particularly where other persons in the transaction chain might be fraudulent.
3. The correspondence showed that the Commissioners had adopted a rational and responsible approach. They had explained the stage reached and the reasons why the investigations remained incomplete. There was no evidence that an office had simply ignored correspondence or adopted an irresponsible attitude.
4. Disposition and costs. Although the application had been withdrawn, the judge stated that permission would have been refused. The claimant was not awarded costs. Applying the principles explained by the Court of Appeal in Mount Court Limited, particularly at paragraph 76, the Commissioners were entitled to the costs of the acknowledgment of service. Given the hopeless nature of the claim, the claimant was ordered to pay half of the Commissioners’ costs, assessed at £5,000, together with the acknowledgment-of-service costs.

First-instance judicial review proceedings in the Administrative Court. The application for permission was withdrawn after interim relief had been refused by Pitchford J on 13 February 2004.