Revenue and Customs v Grattan Plc

A tribunal must comply with mandatory procedural notice requirements unless the parties agree otherwise. A party cannot transform an application made under the ordinary notice procedure into an application made at the hearing merely by asking the tribunal to determine it immediately. A serious procedural irregularity arises where a party is denied proper notice and a fair opportunity to prepare, adduce evidence and present its case. In deciding whether the irregularity caused injustice, the court assesses the denial of a fair hearing and its effect on the party’s ability to deploy its case, rather than attempting to predict only whether the result would have differed.

Grattan plc appealed to the VAT and Duties Tribunal against HMRC’s refusal to pay compound interest on overpaid VAT. HMRC applied under rule 6 of the VAT Tribunals Rules 1986 for the appeal to be struck out or dismissed, and also sought a stay.

The tribunal listed the stay application for hearing but proceeded to consider the rule 6 application. HMRC contended that it had not received the notice required by rule 23(3), had not agreed to an abridged hearing date, and was not ready to deal with the application. The tribunal nevertheless dismissed HMRC’s application to strike out or dismiss the appeal. The issue was whether that course involved a serious procedural irregularity causing injustice.

1. The appeal was allowed and HMRC’s rule 6 application was remitted to a differently constituted tribunal.

2. Under rule 23(3) of the VAT Tribunals Rules 1986, an application under rule 6 is an application to which the ordinary notice period applies. Unless the parties agree otherwise, the hearing must be at least 14 days after notice is sent. Rule 23(2), concerning an application made at a hearing, did not apply merely because Grattan urged the tribunal to determine part of HMRC’s application immediately. A respondent cannot hijack an application by inviting the tribunal to proceed when the applicant has not received the notice to which it is entitled.

3. The failure to comply with the mandatory notice requirement was a serious procedural irregularity. The tribunal’s essential function was to give each party an opportunity to be heard. HMRC had not been given the opportunity to adduce evidence under rule 27, prepare its legal and factual case, or deploy its arguments on the rule 6 application.

4. Applying part 52(11) of the Civil Procedure Rules, the irregularity caused injustice. The relevant question was not whether the court could predict a different outcome by comparing the actual decision with a hypothetical decision. The focus was whether the denial of a fair hearing substantially impaired HMRC’s ability to conduct its case. The approach in Checkpoint Limited v Strathclyde Pension Fund [2003] EWCA Civ 84 provided useful guidance by analogy.

5. The tribunal’s alternative exercise of discretion was legally flawed because it failed to consider compliance with rule 23, the adequacy of notice, possible evidence, and HMRC’s preparedness. The proper course was remission rather than determination of the rule 6 application by the High Court.

• High Court (Chancery Division): allowed the appeal from the VAT and Duties Tribunal and remitted HMRC’s rule 6 application to a differently constituted tribunal.
• VAT and Duties Tribunal: following a directions hearing on 23 July 2008, dismissed HMRC’s application under rule 6 to strike out or dismiss Grattan’s substantive appeal.