HM Revenue & Customs v BMW AG

On an application to stay an order pending appeal, the court must make the order that best accords with the interests of justice. The ordinary position is that a successful litigant should enjoy the fruits of the judgment, so an appeal does not automatically justify a stay. The court must balance the risks of harm and injustice arising from each alternative. The perceived strength of the appeal may be relevant where the justice of refusing a stay is in doubt, but the court need not conduct a premature merits assessment. Administrative inconvenience and the possibility that steps may later need to be reversed will not necessarily outweigh substantial financial prejudice to the successful party.

HMRC appealed against an order of Tugendhat J dated 9 May 2008, which had quashed HMRC’s decision requiring BMW to account for VAT quarterly rather than monthly. Permission to appeal had been granted and a stay of the order was imposed pending the appeal.

BMW applied to lift the stay. It argued that continuing quarterly accounting would cause substantial cash-flow loss, whereas HMRC relied on the administrative burden of restoring monthly returns and potentially reversing those arrangements if the appeal succeeded. The central issue was which course best served the interests of justice pending determination of the appeal.

1. Stay pending appeal. The stay was lifted. The ordinary rule is that a successful litigant is entitled to the fruits of success, and commencing an appeal does not itself stay that entitlement.
2. The court has an unfettered discretion to stay an order where the justice of the case requires it. The governing exercise is to balance the competing alternatives and select the course likely to cause the least injustice. This approach was stated in Leicester Circuits Ltd v Coates Brothers Plc [2002] EWCA Civ 474, at paragraph 13.
3. Rimer LJ accepted that HMRC had a good arguable case, but considered it impossible on the stay application to assess the likely outcome of the appeal. BMW’s additional grounds also meant that the merits were not one-sided.
4. The relevant prejudice included BMW’s continuing and substantial cash-flow loss from delayed VAT repayments, together with the practical possibility that accounting arrangements might later have to be reversed. HMRC would also face administrative work and possible reversal of its actions, but BMW was willing to bear the corresponding burden in order to avoid the continuing loss. HMRC offered no cross-undertaking in damages.
5. The balance comfortably favoured BMW. Administrative inconvenience and expense did not outweigh BMW’s entitlement to enjoy the benefit of Tugendhat J’s order. The stay was therefore lifted.

• Court of Appeal (Civil Division): The stay imposed pending HMRC’s appeal was lifted.
• Administrative Court: Tugendhat J quashed HMRC’s decision requiring BMW to make quarterly VAT returns: [2008] EWHC 713 (Admin).