HM Revenue & Customs v Hyde Industrial Holdings Ltd

A statutory requirement to adjourn collection proceedings pending an appeal does not immunise a party from procedural orders or sanctions. An unless order may properly lead to strike-out where it is ignored, but the court must separately decide whether relief from sanctions is required. Relevant considerations include the default, promptness, explanation, prejudice, limitation, the statutory appeal structure and the risk of extinguishing a substantial claim without determination. In proceedings of this unusual kind, the ordinary case-management imperative to progress a claim has limited force. Reinstatement may therefore be required in the administration of justice despite serious default, while costs sanctions remain appropriate.

The Revenue brought protective proceedings against Hyde to recover National Insurance Contributions alleged to be due for the 1996/7 and 1997/8 tax years. Hyde had appealed the Revenue officer’s decision, so the county court stayed the proceedings under section 117A(5) of the Social Security Contributions and Benefits Act 1992.

The Revenue failed to comply with directions requiring information about the statutory appeal. The claim was struck out, and a later application for reinstatement and relief from sanctions was refused. His Honour Judge Tetlow dismissed the Revenue’s appeals. On a second appeal, the Court of Appeal considered whether section 117A removed the court’s jurisdiction or discretion, and whether justice required reinstatement despite the Revenue’s defaults.

1. Jurisdiction and statutory stay. The Court of Appeal allowed the appeal and ordered the claim reinstated. Section 117A of the Social Security Contributions and Benefits Act 1992 did not remove the county court’s jurisdiction to require information about progress or to sanction non-compliance with its orders. If the court had jurisdiction to make an order, it retained power to impose sanctions, ultimately including strike-out where appropriate. The court should ordinarily grant the initial stay contemplated by section 117A(5), subject to the exceptional limitation circumstances identified by Waller LJ.
2. Appellate review and strike-out. Discretionary decisions could be challenged only for an error of principle, failure to take account of a material factor, taking account of an immaterial factor, or a decision that was wholly wrong because the factors had not been fairly balanced, applying the approach in AEI Rediffusion Music Ltd v Phonographic Performance Ltd [1999] 1 WLR 1507 at 1523. The original strike-out order was permissible because an unchallenged unless order had been ignored and the Revenue had made no attempt to comply.
3. Reinstatement and relief from sanctions. The refusal to reinstate was different. The court had to balance the Revenue’s serious and inadequately explained defaults against the unusual statutory context. The proceedings had been issued to preserve the claim during a pending statutory appeal. Hyde had accepted that a lead case should determine the issue, had suffered no identified prejudice from the delay, and had itself requested that the Revenue hold its hand. Strike-out would have relieved Hyde from potentially paying substantial contributions that might be found due, without determination of liability. The administration of justice therefore required reinstatement, notwithstanding the lack of promptness and other failures.
4. Context and orders. Lloyd LJ emphasised that liability was for the General or Special Commissioners, while the county-court proceedings remained suspended to avoid the six-year limitation bar. The ordinary CPR imperative to progress a claim had limited relevance, but the Revenue still had to comply with or promptly challenge court orders. Relief was granted as a final indulgence, with costs sanctions imposed against the Revenue.

1. Court of Appeal (Civil Division) — On 28 April 2006, allowed the Revenue’s second appeal, granted relief from sanctions and ordered reinstatement of the county-court claim.
2. Tameside County Court — District Judges Osborne and Gaunt struck out the claim and refused reinstatement. His Honour Judge Tetlow dismissed the Revenue’s appeals by order dated 28 April 2005.