BPP Holdings v Revenue And Customs

Tax tribunals should adopt a firm approach to compliance with procedural rules, directions and orders. The starting point is compliance unless there is good reason to the contrary. When exercising a case-management discretion, a tribunal may give significant weight to compliance and to the efficient conduct of litigation at proportionate cost.

The tribunal must nevertheless consider all relevant circumstances. These include the reason for default, resulting prejudice and the effect on the wider tribunal system. Procedural flexibility does not justify delay or non-compliance. The approach to compliance reflected in the civil courts is consistent with the overriding objective in the tax tribunal rules and may guide its application by analogy.

The First-tier Tribunal barred HMRC from further participation in VAT proceedings after a serious and prolonged failure to comply with an order requiring proper particulars of its case. It found that HMRC had provided no explanation for the default and had caused the taxpayer significant expense and delay.

The Upper Tribunal allowed HMRC’s appeal. It held that the First-tier Tribunal had erred by giving disproportionately prominent weight to compliance, adopting by analogy the stricter approach under the Civil Procedure Rules.

This was a second appeal under rule 52.13 of the Civil Procedure Rules 1998. The central issue was the proper approach of tax tribunals to breaches of procedural orders, including whether the policy expressed in Mitchell and Denton was consistent with the tribunal rules.

1. Appeal allowed. The First-tier Tribunal made no error of law when it barred HMRC from further participation. The Upper Tribunal should not have interfered with that case-management decision. The First-tier Tribunal’s order was restored.

2. The overriding objective in rule 2 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 incorporates proportionality, cost and timeliness. Nothing in its wording is inconsistent with the stricter policy towards compliance described in Mitchell and Denton. Tribunal rules, directions and orders are to be obeyed in the same manner as those of a court. The proper starting point is compliance unless good reason is shown, preferably in advance.

3. The interests of justice extend beyond the effect of default upon the parties to the individual case. They include the burden placed on the wider tribunal system and the time expended in securing compliance. Flexibility, although characteristic of tribunal procedure, does not permit a casual approach to delay or procedural obligations. State bodies have no preferred procedural status.

4. The Upper Tribunal, as a superior court of record with powers comparable to those of the High Court, may interpret its procedural rules and provide guidance without awaiting amendment by the Tribunal Procedure Committee. The contrary approach in Leeds City Council v HMRC was displaced. McCarthy & Stone correctly recognised that civil-procedure authorities could provide useful guidance by analogy.

5. The First-tier Tribunal did not directly apply rule 3.9 of the Civil Procedure Rules 1998. It recognised that it was deciding whether to impose a sanction under rule 8(3)(a), rather than considering relief from an existing sanction. It considered all relevant circumstances and permissibly gave significant, but not paramount, weight to compliance and efficient, proportionate litigation.

6. The exercise of discretion was supported by three substantial considerations: serious non-compliance, the absence of any explanation and prejudice through significant delay and expense. Questions of weight were for the First-tier Tribunal, subject to an overall standard of Wednesbury unreasonableness. The balance on the established facts strongly supported barring HMRC.

1. Court of Appeal (Civil Division): Allowed BPP’s second appeal and restored the First-tier Tribunal’s order barring HMRC from further participation: [2016] EWCA Civ 121.
2. Upper Tribunal (Tax and Chancery Chamber): Allowed HMRC’s appeal, set aside the First-tier Tribunal’s decision for error of law and decided that HMRC should not be barred. No citation is stated in the judgment.
3. First-tier Tribunal (Tax Chamber): Barred HMRC from further participation because of its serious and prolonged breach of an order requiring proper particulars of its case. No citation is stated in the judgment.