HM Revenue & Customs v Benchdollar Ltd & Ors

A non-contractual estoppel by convention requires an expressly shared assumption, responsibility for its correctness, actual reliance in subsequent mutual dealings, and sufficient detriment or benefit to make departure from the assumption unjust. An implied contract or term cannot be created merely because it would be convenient; necessity is required.

An estoppel operates only to the extent required by the equity. A party which discovers that the shared assumption is wrong has a reasonable time to protect itself. It cannot rely on estoppel where subsequent loss resulted from its informed decision not to use available protection. These principles may prevent reliance on limitation under the Limitation Act 1980.

The Revenue brought 14 joined claims for unpaid employer National Insurance Contributions. The defendants had used arrangements intended to treat valuable assets transferred to employees as payments in kind. Liability was contested through the statutory appeal process.

To avoid issuing protective recovery proceedings while those appeals continued, the Revenue obtained written acknowledgements or a £1 part-payment. Each expressly denied liability. The parties mistakenly assumed that these steps started a fresh limitation period under section 29(5) of the Limitation Act 1980.

All recovery claims were brought outside the primary six-year period. The central questions were whether the correspondence created contractual promises or an estoppel by convention preventing the employers from relying on limitation, and whether certain accountants had authority to act for their clients.

1. Preliminary declarations were granted in part. Employers were estopped by convention from relying on limitation for National Insurance Contribution claims whose primary six-year period expired on or before 11 September 2001. They were not estopped in respect of claims that became statute-barred after that date.

2. The acknowledgements and part-payment did not themselves engage section 29(5) of the Limitation Act 1980. They expressly denied liability. The parties’ correspondence also created no contract. It contained no promise by the Revenue not to sue and no promise by the employers to forgo limitation. Following Baird Textile Holdings Ltd v Marks & Spencer plc [2001] EWCA Civ 274, a term or contract could be implied only where necessary. Both parties simply assumed that effective acknowledgements made protective proceedings unnecessary.

3. Applying the principles of estoppel by convention stated in Republic of India v India Steamship Co Ltd (No 2) [1998] AC 878, the court held that the three forms of exchange established a shared legal assumption. The employers had expressed an intention that the Revenue should rely on it. The Revenue did rely on it when it did not issue protective proceedings, and that forbearance formed part of the parties’ mutual dealings.

4. For claims already statute-barred when the Revenue obtained definitive advice in August 2001, the Revenue had suffered detriment through that reliance and the employers had received the expected benefit of not being sued. It was therefore unjust to permit a limitation defence. Discovery of the error did not end the estoppel immediately. The Revenue had a reasonable time, extending to 10 or 11 September 2001, to react.

5. After that point, the Revenue knew that the acknowledgements were ineffective and could still issue protective claims or negotiate effective tolling agreements. Its decision not to do so was the cause of the later loss. Continued freedom from proceedings was an insufficient countervailing benefit. The court also found that DPC had actual authority to provide the relevant acknowledgements and part-payment.

not stated in the judgment.