The Executors of the Estate of Peter John Linington & Anor v The Commissioners for HMRC

The Upper Tribunal has jurisdiction to make a protective costs order in an appeal. The Corner House criteria are flexible guidelines, not statutory conditions, and must be applied with the Tribunal’s overriding objective. A private interest in the outcome is relevant but is not an automatic bar.

An order remains exceptional in the practical sense that it should be made only when the criteria, viewed overall, make it fair and just. Where an appeal concerns tax-planning arrangements that ceased to be effective following statutory change, and the appellants have a substantial personal financial interest, general public importance may be absent. The public interest in correct taxation alone will usually add little, since it arises in most tax appeals.

The appellants sought a protective costs order in appeals against a decision of the First-tier Tribunal concerning inheritance-tax planning arrangements involving interests in a discretionary trust. The First-tier Tribunal had granted permission on one ground and the Upper Tribunal had granted permission on a further ground.

The appellants argued that the issues had wider significance because similar arrangements had been considered in Salinger v HMRC. They also relied on their limited means and asserted that, without costs protection, they would discontinue the appeals. HMRC opposed the application. The central issue was whether it was fair and just to protect the appellants from liability for HMRC’s costs, or to make an analogous appeal costs order.

1. Jurisdiction and governing approach. The Upper Tribunal had jurisdiction to make a protective costs order or analogous order. Following Drummond v HM Revenue & Customs, the principles in R (Corner House Research) v Secretary of State for Trade & Industry, as refined by later authorities, were applicable flexibly and subject to the overriding objective in rule 2 of the UT Rules.
2. Public importance and public interest. The appeal concerned whether particular arrangements achieved an inheritance-tax saving. Since Finance Act 2012 had made such arrangements ineffective, the issues were not of general public importance. Although there was a general public interest in the proper construction and application of taxing legislation, and in taxpayers paying the correct amount of tax, that consideration applied to most tax appeals and did not justify a protective order.
3. Private interest and resources. The appellants had a substantial private interest, effectively representing the interests of beneficiaries who stood to recover approximately £500,000 if the appeal succeeded. Private interest was not an absolute bar, but it was an important factor. The evidence concerning the appellants’ resources was limited, although the judge accepted that Mrs Pearce was of relatively modest means. A wider financial inquiry was unnecessary because it would not affect the overall conclusion.
4. Overall assessment and alternative relief. The risk that the appeal would be discontinued without protection was assumed. Nevertheless, the absence of general public importance, the substantial personal interest and the nature of the tax-planning challenge meant that it was not fair and just to expose the general body of taxpayers to irrecoverable costs. The application for a protective costs order was refused. An appeal costs order under CPR 52.19 was also inappropriate, particularly because substantial sums turned on the outcome and there was nothing unfair in exposing the appellants to ordinary costs risk.

• First-tier Tribunal (Tax Chamber): The tribunal released its decision on 30 January 2023. Permission to appeal was granted on one ground in a decision notice dated 16 May 2023.
• Upper Tribunal (Tax and Chancery Chamber): Permission was granted on a further ground. The application for a protective costs order was considered on paper and refused.