Tribunal Decision on Procedural Costs: Eastenders Cash and Carry Plc v. Revenue & Customs: First-tier Tribunal (Tax)

Introduction

Eastenders Cash and Carry Plc ("the Appellant") appealed a decision by Her Majesty's Revenue and Customs (HMRC) to refuse its application for a licence under the Warehousekeepers and Owners of Warehoused Goods Regulations 1999 ("WOWGR"). The dispute centered on whether HMRC acted reasonably, particularly in not considering all relevant factors, thereby making an unreasonable decision under the Finance Act 1994.

The key issues in this case revolved around procedural aspects, specifically the application of tribunal rules concerning the awarding of costs after a successful appeal. The Appellant sought costs under Rule 29 of the VAT Tribunal Rules 1986 and Rule 10 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, despite the application being made out of the prescribed time limits.

The parties involved were Eastenders Cash and Carry Plc, represented by Geraint Jones QC of Anami Law, and HMRC, represented by Richard Smith, the General Counsel and Solicitor.

Summary of the Judgment

The First-tier Tribunal (Tax Chamber), presided over by Judge Guy Brannan, addressed an application by the Appellant for costs related to the appeal decision dated 29 December 2010. The tribunal had to determine whether to award costs under procedural rules that were either out of time or governed by newer regulations introduced in April 2009.

The tribunal examined three main questions:

Whether the application for costs was made out of time and if discretion should be exercised to entertain it.
If the late application was allowed, whether Rule 29 of the VAT Tribunal Rules 1986 should apply.
Alternatively, whether costs should be awarded under Rule 10 of the 2009 Rules due to HMRC's unreasonable conduct.

After thorough consideration, the tribunal concluded that neither Rule 29 nor Rule 10 applied favorably to the Appellant. The application for costs was deemed out of time, and the reasons for the delay were insufficient to warrant discretion. Furthermore, HMRC's conduct was not found to meet the threshold for unreasonableness required under Rule 10.

Consequently, the tribunal declined to award costs to the Appellant under either rule.

Analysis

Precedents Cited

The judgment extensively referenced previous cases to inform its decision-making process:

Atlantic Electronics Limited v HMRC [2012] UKFTT 45 (TCC) - This case addressed the complexities of cost awards in "straddle appeals," where proceedings span different regulatory frameworks.
Hawkeye Communications Limited v HMRC [2010] UKFTT 636 (TC) - This decision highlighted the importance of conducting a balancing exercise when determining cost awards under conflicting rules.
Surestone Limited v HMRC [2009] UKFTT 352 (TC) - Emphasized that the categorization of a case as complex depends on its inherent nature rather than formal classifications.
Everest Limited v HMRC [2010] UKFTT 621 (TC) - Clarified that being part of "current proceedings" alone does not mandate the application of pre-existing procedural rules.
Customs and Excise Commissioners v Dave [2002] STC 900 - Established that costs incurred prior to a certain point in proceedings may not be recoverable.
Kittel v Belgium (Case C 439/04) and Mobilx v HMRC [2010] STC 1436 - Provided context on the application of customs and excise management powers.

These precedents collectively influenced the tribunal's approach to assessing procedural fairness and the application of cost awards amid evolving regulatory frameworks.

Legal Reasoning

The tribunal's legal reasoning hinged on the interpretation and application of procedural rules governing cost awards:

Discretion under Rule 5(3)(a) of the 2009 Rules: The tribunal assessed whether to exercise discretion to allow a late application for costs, balancing potential prejudice to both parties.
Application of Rule 29 vs. Rule 10: Rule 29 of the 1986 Rules allowed for a general cost award, whereas Rule 10 of the 2009 Rules required an assessment of unreasonableness in conduct. The tribunal evaluated the applicability of each rule based on the timing and circumstances of the application.
Balancing Test: Emphasized by Warren J in Atlantic Electronics, the tribunal undertook a balancing exercise weighing the fairness and justice for both the Appellant and HMRC.
Impact of Delay: The tribunal considered whether the delay in applying for costs was justifiable. Factors such as the Appellant's receivership and subsequent business challenges were examined but deemed insufficient to excuse the late application.
Merits of the Application: While the Appellant presented a strong case for the reasonableness of its primary appeal, the tribunal determined that this did not override procedural constraints and considerations of fairness.

Ultimately, the tribunal concluded that the time elapsed since the introduction of the 2009 Rules and the majority of costs being incurred under these rules outweighed the Appellant's arguments for applying the older Rule 29.

Impact

This judgment underscores the judiciary's commitment to procedural adherence and the limited scope of discretionary powers in cost awards. Key impacts include:

Strict Adherence to Time Limits: Parties must adhere to procedural timelines when seeking cost awards, as leniency is not guaranteed even in cases of apparent fairness.
Precedence for Procedural Transitions: The decision reinforces the importance of recognizing and adapting to transitions between different procedural rule sets, ensuring consistency and predictability in tribunal proceedings.
Limited Grounds for Cost Awards: The case demonstrates that demonstrating unreasonableness in conduct is insufficient without meeting the specific criteria outlined in Rule 10, thereby setting a high threshold for cost awards based on procedural conduct.
Reinforcement of Balancing Principles: Subsequent cases will likely refer to the balancing exercise approach as a foundational principle in determining fair and just outcomes in cost-related disputes.

The judgment serves as a crucial reference point for future tribunal decisions regarding cost awards, especially in scenarios involving overlapping or transitioning procedural frameworks.

Complex Concepts Simplified

The judgment delves into several legal concepts and procedural rules that may be complex to those unfamiliar with tribunal operations. Here are simplified explanations:

Rule 29 of the VAT Tribunal Rules 1986: A provision allowing tribunals to award costs to a party based on the expenses incurred during the appeal process. It is an older rule that has been largely superseded by newer regulations.
Rule 10 of the Tribunal Procedure Rules 2009: A newer rule governing cost awards, which requires the tribunal to assess whether a party has acted unreasonably during the proceedings before awarding costs.
Balancing Exercise: A judicial process where the tribunal weighs various factors and interests to arrive at a fair decision, especially when applying discretionary powers.
Straddle Appeal: An appeal that begins under one set of procedural rules and continues under a different set due to changes in legislation or regulations during the appeal process.
Receivership: A legal process where a receiver is appointed to manage the affairs of a company, typically due to financial difficulties or insolvency.
Wednesbury Unreasonableness: A standard of judicial review in British law, where a decision is so unreasonable that no reasonable authority would ever consider imposing it.
Legitimate Expectation: A principle where an individual or entity has a reasonable expectation that a certain procedure or outcome will follow, based on previous interactions or established practices.

Conclusion

The tribunal's decision in Eastenders Cash and Carry Plc v. Revenue & Customs highlights the critical importance of adhering to procedural timelines and the limited discretion tribunals possess in overriding these rules. Despite a strong substantive case on the merits, the Appellant's failure to timely apply for a cost award under the appropriate ruleset resulted in the denial of such costs. This case reinforces that procedural compliance is paramount and that tribunals will meticulously evaluate the fairness and justness of allowing deviations from established rules.

Moving forward, parties engaged in similar appeals must prioritize understanding and complying with current procedural rules, seeking timely applications for cost awards, and substantiating any exceptions to standard procedures with compelling justifications. This judgment serves as a precedent for maintaining procedural integrity within tax tribunals and underscores the judiciary's role in ensuring fair and just proceedings.

Tribunal Decision on Procedural Costs: Eastenders Cash and Carry Plc v. Revenue & Customs