Valentines Homes & Construction Ltd, R (on the application of) v HM Revenue & Customs

Commencing judicial review alongside private debt proceedings is not automatically an abuse of process. The court must assess the context, including the effectiveness and convenience of any alternative remedy, the relief sought, and the public interest in resolving issues concerning a public authority’s general policy. Where a statutory deeming provision leaves no private-law defence and the challenge concerns failure to apply such a policy, judicial review may be reasonable. In an unusual case, the applicant should not be penalised in costs for taking that course. A compromise of back tax based on accurate calculations is materially different from an arbitrary agreement concerning future tax liabilities.

HM Revenue and Customs pursued the appellants in the County Court for PAYE said to be due under statutory notices. Following the directors’ incapacity, the appellants paid the amount calculated as actually due and the County Court proceedings were settled in June 2008, with the appellants paying £630 in costs.

The appellants had also commenced judicial review proceedings challenging HMRC’s failure to apply its equitable liability practice. Permission was initially granted on the papers but was later set aside for defective service. On 10 February 2009 Lloyd Jones J refused permission because the matter had become academic following settlement and ordered the appellants to pay £500 for HMRC’s preparation of its acknowledgement of service. The appeal concerned whether pursuing judicial review had been abusive or unreasonable and what costs order should follow.

1. Appeal allowed. Lord Justice Pill, with Lord Justice Moore-Bick and Sir David Keene agreeing, quashed the order requiring the appellants to pay £500 and substituted an order for £6,000 in their favour.
2. Whether judicial review brought alongside private proceedings is an abuse or misuse of process, or unreasonable for costs purposes, depends on the context. The court must consider the effectiveness and convenience of the alternative remedy, the relief sought, and the public interest. Flexibility is required in distinguishing public-law from private-law proceedings. Wandsworth London Borough Council v Winder [1985] AC 461, Kay v Lambeth LBC [2006] 2 AC 465 and R v Huntingdon District Council, Ex p Cowan [1984] 1 WLR 501 illustrated the relevant considerations.
3. Under the Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682), the statutory deeming provisions made the amount claimed due, leaving no private-law defence to the County Court debt claim. The appellants therefore acted reasonably in seeking a stay and challenging in the Administrative Court HMRC’s failure to apply its general equitable liability policy. The policy issue had wider public implications and the Administrative Court had particular expertise in resolving it. The case was unusual, but it was not an abuse of process.
4. The principle that access to the courts is not excluded except by clear words, stated in Pyx Granite Co. Ltd. v Ministry of Housing and Local Government [1960] A.C. 260, supported the appellants’ recourse to judicial review. The late argument that HMRC might reopen the settlement was fanciful. Al Fayed v Advocate General for Scotland [2004) SPC 1703 concerned an arbitrary forward-tax agreement and did not assist in relation to an accurate compromise of back tax.
5. The appellants’ costs claim was inadequately particularised. Although substantial work had been required, £6,000 was appropriate on the material supplied. No sum was awarded for the late ultra vires argument.

1. Court of Appeal (Civil Division): allowed the appeal, quashed the £500 costs order and substituted an order for £6,000 in the appellants’ favour.
2. Queen’s Bench Division, Administrative Court: Lloyd Jones J refused permission to apply for judicial review as the matter had become academic after settlement of the County Court proceedings and ordered the appellants to pay £500.