Neil Martin Ltd v HM Revenue & Customs

Income and Corporation Taxes Act 1988, section 561(2), imposed a mandatory duty to issue a tax certificate when the statutory conditions were met. It did not impose a statutory duty to issue or refuse it within a reasonable or otherwise ascertainable time. Delay was governed by public law duties enforceable by judicial review, not by a private damages action.

Where Parliament had not created a private right to damages, a public authority owed no direct common law duty merely to process the statutory application with reasonable expedition. Ordinary administrative errors by its staff did not create such a duty. A different result followed where an employee purported, without authority, to make a different application for the claimant: that conduct involved an assumption of responsibility and could found vicarious liability.

The appellant construction sub-contractor sought damages for losses said to result from delay in obtaining a CIS6 tax certificate under section 561(2) of the Income and Corporation Taxes Act 1988. The delay included erroneous advice about company accounts, unsigned forms, the unauthorised processing of forms as an application for a registration card, an incorrect tax reference, and posting the certificate to the wrong address.

The High Court dismissed the claim after deciding that neither breach of statutory duty nor negligence gave rise to a damages claim, although it made alternative findings of breach: [2006] EWHC 2425 (Ch). The company appealed. The Revenue sought, by respondents’ notice, to limit the alternative breach findings. The central issue was whether the statutory scheme or common law afforded a damages remedy for the delay.

Decision

1. The appeal was allowed in part. The court upheld the rejection of a statutory damages claim, but held that a limited vicarious-liability claim could proceed. It set aside the dismissal of the action.

2. Section 561(2) of the Income and Corporation Taxes Act 1988 required the Revenue to issue a certificate once satisfied that the conditions were met. Properly construed, it did not require a certificate to be issued or refused within a reasonable or otherwise ascertainable period. The absence of a deemed-refusal appeal, and the variable inquiries required by the statutory conditions, supported that construction. The general law nevertheless required reasonable dispatch, enforceable by judicial review; section 561(9) provided an appeal following an actual refusal. Parliament had not created a private right to damages for delay.

3. Section 3 of the Human Rights Act 1998 did not require a different construction. The tax-deduction regime was compatible with article 1 of the First Protocol, and public-law remedies and the refusal appeal addressed avoidable delay. In any event, the alleged acts and omissions pre-dated the Act’s commencement.

4. There was no direct common law duty owed by the Revenue to process the application with reasonable expedition. Following Stovin v Wise, Gorringe and Customs and Excise Commissioners v Barclays Bank plc, a common law duty could not be derived directly from a statutory duty where the statutory scheme did not provide a private damages action.

5. Nor did Mr Harrison assume responsibility for the correctness of his information about company accounts or for detecting that the July forms were unsigned. The company chose the basis and form of its application, had consulted its own accountant, and the forms made the signature requirement clear. Ordinary processing errors, including the wrong tax reference and incorrect postal address, likewise could not found a duty without introducing by the back door the excluded statutory claim.

6. The employee who completed the declaration for a registration-card application on the company’s July form stood differently. That employee was not merely processing the company’s application, but purported to make an application which the company had neither chosen nor made. This was an assumption of responsibility. It was fair, just and reasonable to recognise a duty of care, for whose breach the Revenue could be vicariously liable.

7. The appeal against paragraph 1(1) of the order was dismissed. The appeal against paragraph 1(3) was allowed only to record that limited duty. The cross-appeal concerning paragraph 1(4) was allowed to the same extent, and the dismissal of the claim was set aside.

• Court of Appeal (Civil Division): allowed the company’s appeal to the limited extent identified in the judgment, allowed the Revenue’s cross-appeal only to limit the alternative breach finding, and set aside the dismissal of the claim: [2007] EWCA Civ 1041.
• High Court, Chancery Division: determined preliminary issues against the company on statutory duty and common law duty, made alternative findings of breach, and dismissed the claim: [2006] EWHC 2425 (Ch).
• High Court, Chancery Division: earlier refused the Revenue permission to withdraw an admission in its defence: [2006] EWHC 245 (Ch).