The Commissioners for HMRC v John Douglas Wardle

A protective costs order application in the Upper Tribunal is governed by the Corner House guidelines as refined by later authority, applied flexibly with the Tribunal’s overriding objective in view. “Exceptionality” is not a separate threshold, and an applicant’s private interest does not bar relief. The Tribunal weighs public importance and the need for public resolution against the parties’ means, likely costs, overall fairness, and whether the applicant would probably discontinue reasonably without protection. Where authoritative guidance has settled the legal approach, and the applicant has not shown inability to meet adverse costs or probable withdrawal, a protective costs order may be refused. An appeal costs order may also be refused where it is not needed to secure access to justice.

HMRC appealed a First-tier Tribunal decision allowing Mr Wardle’s appeal against a closure notice that denied entrepreneurs’ relief on his disposal of an interest in Biomass UK No 1 LLP. The underlying appeal concerned when the LLP began trading by selling electricity generated from wood waste or renewable obligation certificates. The appeal was stayed pending Putney Power Ltd v HM Revenue and Customs ([2026] UKUT 105 (TCC)), in which the Upper Tribunal gave guidance on the legal approach to commencement of trade. HMRC then amended its ground to argue that the FTT had used the steps in Mansell v HM Revenue & Customs ([2006] STC (SCD) 605) instead of a multi-factorial evaluation. While HMRC’s appeal remained pending, Mr Wardle applied for a protective costs order. The question was whether costs protection, or alternatively an appeal costs order limiting recoverable costs, was fair and just in the circumstances.

1. The Upper Tribunal had jurisdiction to make a protective costs order in an appeal. An appeal costs order is a species of protective costs order, and the Tribunal could use Drummond v HM Revenue & Customs ([2016] UKUT 221 (TCC)) and the Linington decision as guidance on that jurisdiction.
2. The Tribunal applied the flexible guidelines derived from R (Corner House Research) v Secretary of State for Trade & Industry ([2005] EWCA Civ 192). The considerations include general public importance, the need for resolution in the public interest, the applicant’s private interest, the parties’ means and likely costs, and whether the applicant would probably discontinue without an order and act reasonably in doing so. The principles are guidelines, not statutory conditions. “Exceptionality” is not an additional requirement. A private interest is relevant but is not a bar, as explained in R (Compton) v Wiltshire Primary Care Trust ([2008] EWCA Civ 749) and Morgan & Anor v Hinton Organics (Wessex) Ltd ([2009] EWCA Civ 107).
3. The Tribunal proceeded on HMRC’s concession that the issue raised general public importance, although it had reservations. There was no real public interest in deciding trade commencement on this appeal’s particular facts because Putney Power Ltd v HM Revenue and Customs ([2026] UKUT 105 (TCC)) had already supplied authoritative guidance, which applied equally in this context. HMRC’s guidance had not yet been updated, but it had no authoritative status.
4. Mr Wardle had a substantial private interest: about £87,000 in tax was at stake. He gave no evidence of his financial position and did not claim that he could not meet an adverse costs order. The Tribunal therefore inferred that he could meet such a liability. His conditional statement that it would not be prudent to continue without protection fell short of showing that he would probably withdraw. The absence of a real public interest in a further determination on the facts, together with his ability to meet costs, weighed most heavily. The PCO application was refused.
5. The Tribunal also considered an appeal costs order by analogy with rule 52.19 of the Civil Procedure Rules, having regard to both parties’ means, all the circumstances, and access to justice. HMRC had substantial means, but there was no evidence of Mr Wardle’s means and the Tribunal was not satisfied that an order was necessary to facilitate his access to justice. It refused an appeal costs order as well. Mr Wardle was directed to confirm within 28 days whether he would defend HMRC’s appeal or withdraw his case on the appeal.

• Upper Tribunal (Tax and Chancery Chamber): Refused Mr Wardle’s protective costs order application and declined to make an appeal costs order. The underlying HMRC appeal remained pending. Mr Wardle was directed to confirm within 28 days whether he would pursue his defence or withdraw his case on the appeal.
• First-tier Tribunal (Tax Chamber): By a decision released on 19 June 2024, allowed Mr Wardle’s appeal against the closure notice. HMRC received permission to appeal. The Upper Tribunal appeal was stayed pending the separate decision in Putney Power Ltd v HM Revenue and Customs ([2026] UKUT 105 (TCC) ).