Eclipse Film Partners No. 35 LLP v Revenue & Customs

A tribunal’s general case-management power may require parties to undertake procedural work which entails their own expenditure. It does not, however, authorise an express order allocating or sharing the costs of compliance where the applicable costs rule exhaustively confines costs orders to specified circumstances.

An order made during proceedings is still an order in respect of costs. The comprehensive machinery for applications, assessment and payment confirms that the costs rule governs such an order. A tribunal may instead vary case-management directions so that each party performs identified work, even though that direction has costs consequences.

The taxpayer appealed against a decision of the Upper Tribunal (Tax and Chancery Chamber), Judge Roger Berner, which held that the First-tier Tribunal had no jurisdiction to require the parties to share equally the cost of preparing hearing bundles.

The First-tier Tribunal had made the order during a complex tax appeal after the taxpayer had agreed to prepare the bundles and the Revenue required extensive additional material. The taxpayer had opted out of the ordinary costs-shifting regime for complex cases. The central issue was whether the order was a permissible case-management direction under the Tribunal Procedure Rules or a prohibited order in respect of costs.

1. Appeal dismissed. Lord Justice Moses gave the judgment, with which Lady Justice Black and Lord Justice Kitchin agreed.

2. Section 29 of the Tribunals, Courts and Enforcement Act 2007 gives the tribunal discretion over costs subject to the Tribunal Procedure Rules. Rule 10(1) accordingly exhausts the circumstances in which it may make an order in respect of costs. Apart from the specified exceptions, an express costs order was unavailable after the taxpayer had excluded the proceedings from potential costs liability.

3. Rule 5 permits effective case management. A tribunal may direct both parties to participate in preparing bundles, appoint a joint expert, or share the expense of an official transcript. Such directions may require each party to incur expenditure as a consequence of compliance. That consequence does not itself make the direction an order in respect of costs.

4. The distinction is between directing procedural work and expressly determining which party must bear its cost. The impugned direction required the taxpayer, which had already agreed to prepare the bundles, to recover half its preparation costs from the Revenue. It was therefore an express order in respect of costs and fell within Rule 10(1).

5. Rule 10 applies to an order made during, as well as after, proceedings. Rule 10(3) to (7) forms a comprehensive code for costs applications and assessment. Its breadth reinforced the conclusion that Rule 5 could not supply a parallel power to allocate compliance costs.

6. The First-tier Tribunal could have varied its earlier directions. It could, for example, have required the Revenue to prepare an amendment to the bundle, thereby placing the cost of that work upon it as a consequence of a case-management direction. It could not make the express costs-sharing order sought. Any unreasonable insistence by the Revenue on documents could still be addressed through the unresolved issue of unreasonable conduct under Rule 10.

• Court of Appeal (Civil Division): dismissed the taxpayer’s appeal and upheld the conclusion that the First-tier Tribunal lacked jurisdiction to make the express costs-sharing order.

• Upper Tribunal (Tax and Chancery Chamber): Judge Roger Berner held that the First-tier Tribunal had no jurisdiction to make the order.

• First-tier Tribunal (Tax Chamber): initially ordered that the hearing-bundle preparation costs be shared equally, then ruled on 31 May 2012 that it had jurisdiction to do so.