HM Revenue & Customs v Benchdollar Ltd & Ors

Estoppel by convention in non-contractual dealings requires an expressly shared assumption, responsibility for that assumption, actual reliance in subsequent mutual dealings, and detriment or benefit sufficient to make departure unjust. Reliance need not be exclusive, but must materially influence conduct. Forbearance from proceedings may constitute a mutual dealing.

The estoppel operates only to the extent required by the equity. Discovery of the mistake permits a reasonable period for protective action. A party's informed decision thereafter to allow claims to become statute barred may outweigh the other's continued benefit from forbearance. A contract or promise is implied only where necessary. An acknowledgement or part payment expressly denying liability does not restart time under section 29(5) of the Limitation Act 1980.

HM Revenue and Customs brought 14 claims against employers for unpaid National Insurance contributions arising from payment-in-kind avoidance schemes. The claims were commenced in Newcastle upon Tyne County Court and transferred to the High Court for determination of common limitation and estoppel issues. Statutory proceedings concerning contribution liability did not suspend the six-year limitation period for civil recovery.

To avoid issuing protective proceedings while liability remained disputed, the Revenue obtained signed acknowledgements of its claims or a £1 part payment. Each expressly denied liability. The parties nevertheless understood that these steps restarted limitation under section 29(5) of the Limitation Act 1980. Their statutory ineffectiveness was subsequently accepted. The Revenue relied instead on implied contracts or estoppel by convention.

The Revenue received unequivocal advice about the mistake on 9 August 2001. By 11 September 2001 it had deliberately decided against protecting claims whose limitation periods remained unexpired. Several employers also disputed the authority of DPC, their accountants, to provide acknowledgements or make the payment. The court determined these preliminary issues rather than final liability and quantum.

1. The preliminary issues were determined. Employers were estopped by convention from asserting limitation against contribution claims whose primary six-year limitation periods expired on or before 11 September 2001. They could rely on limitation against claims becoming barred after that date. The defences of want of authority failed.

2. Section 9 of the Limitation Act 1980 imposed a six-year recovery period running from the contributions' due dates. Pending statutory appeals did not postpone it. Section 117 A(5) of the Social Security Administration Act 1992 instead required recovery proceedings to be adjourned. An acknowledgement under section 29(5) required acknowledgement of liability, and part payment required evidence of an admission of liability. The express denials therefore prevented fresh accrual: Surrendra Overseas Ltd v. Government of Sri Lanka applied.

3. The correspondence contained no promise by the Revenue to abstain from proceedings. Necessity governed both implication of terms and inference of a contract: Baird Textile Holdings Ltd v. Marks & Spencer plc applied. The parties' conduct was adequately explained by their belief that protective proceedings had become unnecessary. Neither a Revenue promise nor an employer promise to waive limitation needed to be implied.

4. A concluded agreement was unnecessary for estoppel by convention. In non-contractual dealings, the assumption had to be expressly shared. The party to be estopped had to assume responsibility by conveying an expectation of reliance. Actual reliance had to occur in subsequent mutual dealings. Resulting detriment or benefit had to make departure unjust or unconscionable. These requirements were derived from Keen v. Holland and the authorities examining it.

5. The exchanges sufficiently shared the mistaken assumption and expressed the employers' intention that the Revenue should rely on it. Reliance could be subordinate to the Revenue's own legal understanding, provided it remained a significant consideration. A decision against issuing proceedings could constitute subsequent mutual dealing. For claims already barred before discovery of the error, the Revenue suffered irretrievable detriment and the employers obtained the anticipated benefit of avoiding protective proceedings.

6. Discovery did not necessarily terminate protection immediately. Applying London Borough of Hillingdon v. ARC Ltd, a reasonable response period included 9 August to 11 September 2001. Thereafter, the Revenue knowingly allowed protectable claims to expire. That loss resulted from its informed decision rather than reliance on the convention. Injustice had to be assessed in the round. The employers' continued benefit carried relatively modest weight against that decision. The court would not speculate favourably about its reasons where an apparently available relevant witness had not been called without explanation.

7. On the balance of probabilities, DPC had actual authority in each disputed case. Witnesses' lack of recollection did not displace the probabilities arising from the longstanding professional relationships and surrounding evidence.

Final liability and quantum remained outstanding. Counsel were invited to agree, or make submissions on, the appropriate order.

The 14 recovery claims were commenced in Newcastle upon Tyne County Court. They were transferred to the High Court and ordered to be tried together because they raised common limitation and estoppel issues. The High Court determined preliminary issues; final liability and quantum remained outstanding.