England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Sitting at: Manchester Civil Justice Centre 1 Bridge Street West Manchester M60 9DJ
		31st July 2012

MR JUSTICE KING:

1. This is a challenge by way of judicial review of a decision of the Upper Tribunal not to grant permission to the claimant to appeal against a decision of the First-tier Tax Tribunal. The First-tier Tribunal were concerned with an appeal by the claimant against an assessment to VAT made by the HMRC in respect of the periods 24 September 2003 to 17 August 2005, and 18 August 2005 to 31 October 2007. These assessments followed on the HMRC on 15 June 2007 compulsorily registering the claimant for VAT. The claimant carried on business manufacturing clothesware for work. His case was that during the relevant periods, he himself had not been carrying out the business personally, but he had been carrying out the business through a company.

2. The background facts were that the claimant had acquired a limited company, Hygicare Limited, which operated from 1 May 1998 to 12 June 2001, when it was dissolved. After the dissolution the claimant formed a company, Sitegold Limited, otherwise known as Sitegold One, and between May 2001 and 23 September 2003 the claimant traded under the name of Sitegold Limited, albeit using the VAT number for Hygicare.

1. The Inland Revenue had assessed the company Sitegold for the period 21 May 2001 to 23 September 2003. What was under challenge in the appeal to the First-tier Tribunal was the assessments to VAT for the succeeding periods; that is to say, September 2003 to August 2005, and August 2005 to October 2007. There were initially negotiations between the HMRC and the claimant, which resulted in the HMRC on 17 May 2007 indicating to the claimant that the HMRC would be making an assessment against a second Sitegold company, which had been formed by the claimant in August 2005 under the name of Deskfirst Limited (although it changed to Sitegold Limited in June 2006) for the period 18 August 2005 to April 2007, within one of the two periods under challenge in the appeal to the First-tier Tribunal.
2. But subsequently, HMRC, as explained in its letter dated 15 June 2007, allegedly because Sitegold Limited 2 was struck off on 15 May 2007, and because the basis of the agreement reached in May 2007 had been in effect undermined, issued an assessment against Mr Phillips personally for the second period beginning August 2005, in addition to the other period under challenge, September 2003 to August 2005. I just quote for present purposes what is set out in the letter of 15 June 2007 by the HMRC through its Higher Officer to the claimant:

"On 18 April at a meeting at your accountant's office, a VAT application was completed by you in the name of Sitegold Limited, and was submitted by me on the understanding that this company was fully operational and would trade in the future, in accordance with Companies House obligations and the PAYE scheme which would be set up properly by this company. We have since been advised that Sitegold Limited (5540168) has been struck off by Companies House, as you have once again failed to fulfil your obligations as Director of the company to have your accounts submitted."

The Statutory Appeal

3. The appeal to the First-tier Tribunal from those assessments is under the regime established in 2009. There is now a single first instance tax tribunal, the First-tier Tribunal. It is not in dispute that before the First-tier Tribunal, the burden was on the claimant to satisfy the tribunal that he was not trading as a sole proprietor, and thereafter the assessment was excessive. This is expressly set out in paragraph 10 of the First-tier Tribunal decision in this case.
4. The First-tier Tribunal dismissed the appeal to themselves by a written decision dated 10 June 2010. Under section 11 of the Tribunals, Courts and Enforcement Act 2007, there is a right of appeal from that decision on any point of law; see section 11(1). However, under subsection (2), that right of appeal may be exercised only with permission. Permission in this case was first sought from the First-tier judge himself. That was refused in a short decision notice of 31 August 2010 issued on 3 September 2010.
5. The claimant then sought permission to appeal from a judge of the Upper Tribunal. This was dealt with on the papers, and permission was refused by a decision notice of 1 October 2010. That application for permission was then renewed at an oral hearing on 11 July 2011 before the presiding Upper Tribunal Judge, Mr Colin Bishopp. He reserved his decision. He subsequently issued a decision notice later in which he refused permission. I append to this judgment in its entirety first the decision of the First-tier Tribunal in respect of which permission to appeal was sought, and the decision notice of Mr Bishopp giving his written reasons and decision refusing permission to appeal dated 14 July 2011 and issued on 15 July 2011.
6. One of the complaints made by the claimant is that at the oral hearing, according to the witness statements of Mr Ruffles and Mr Gibbon, Mr Gibbon being the VAT consultant representing the appellant, and Mr Ruffles a VAT expert, assisting him, Judge Bishopp gave every indication that he was with them on the application for permission, and was minded to grant permission with a view to the Upper Tribunal remitting the matter to the First-tier tribunal. According to their witness statements, Judge Bishopp initially suggested he would remit the matter straightaway if both parties agreed. However, in the absence of any such agreement, the matter was reserved for him to give his decision later, although he gave every indication that he was minded to grant permission in respect at least of the second of the two periods under challenge, that between August 2005 and April 2007.
7. There is no right of appeal to the Court of Appeal against the refusal of permission by HHJ Bishopp. This is a consequence of the statutory provisions contained in section 13 of the 2007 Act under which, although there is a general right of appeal on a point of law, this does not extend to an excluded decision. Under subsection (8) an excluded decision includes any decision of the Upper Tribunal on an application under section 11(4)(b) (an application for permission or leave to appeal).

Challenge to the refusal of permission by way of judicial review: the second appeals criteria

8. It is now established, however, that a challenge can be made by way of judicial review against such a refusal to grant permission. This was established in the decision of the Supreme Court in R (Cart) v The Upper Tribunal [2011] 3 WLR 107 [2011] UKSC 28. That decision made clear that there was a threshold which had to be overcome before permission to proceed for judicial review would be granted, by reference to the criteria for the second tier appeal to the Court of Appeal. Those criteria are set out in CPR Part 52 at Rule 13(2), according to which the Court of Appeal will not give permission unless it considers that the appeal would raise an important point of principle or practice, or there is some other compelling reason for the Court of Appeal to hear it. The judgments in Cart set out the reasoning of the Supreme Court for applying those criteria. Baroness Hale said this at paragraph 57:

"... the adoption of the second-tier appeals criteria would be a rational and proportionate restriction upon the availability of judicial review of the refusal by the Upper Tribunal of permission to appeal to itself. It would recognize that the new and in many ways enhanced tribunal structure deserves a more restrained approach to judicial review than has previously been the case, while ensuring that important errors can still be corrected. It is a test which the courts are now very used to applying. It is capable of encompassing both the important point of principle affecting large numbers of similar claims and the compelling reasons presented by the extremity of the consequences for the individual."

9. At paragraph 130, Lord Dyson said this:

"It seems to me the second appeal criteria approach offers a number of advantages ... Secondly, and positively, it ensures that errors on important points of principle or practice do not become fossilised within the UT system. An individual who has been unsuccessful before the FTT will be able to raise an important point of law in the courts if the UT refuses to grant permission to appeal to itself. As explained by the Court of Appeal in Uphill v BRB (Residuary) Ltd [2005] 1 WLR 2070, it is not enough to point to a litigant's private interest in the correction of error in order to obtain permission for a second appeal. Permission will only be given where there is an element of general interest, which justifies the use of the court's scarce resources ... It follows that, if the law is clear and well established but arguably has not been properly applied in the particular case, it will be difficult to show that an important point of principle or practice would be raised by an appeal. The position might be different where it is arguable that, although the law is clear, the UT is systematically misapplying it...

131. Thirdly, the second limb of the test ('some other compelling reason') would enable the court to examine an arguable error of law in a decision of the FTT which may not raise an important point of principle or practice, but which cries out for consideration by the court if the UT refuses to do so. Care should be exercised in giving examples of what might be 'some other compelling reason', because it will depend on the particular circumstances of the case. But they might include (i) a case where it is strongly arguable that the individual has suffered what Laws LJ referred to at para 99 as "a wholly exceptional collapse of fair procedure" or (ii) a case where it is strongly arguable that there has been an error of law which has caused truly drastic consequences."

In a subsequent decision of the Court of Appeal, namely PR (Sri Lanka) and Ors v SSHD [2011] EWCA Civ 988, at paragraph 35 Carnworth LJ giving the judgment of the court emphasised the narrowness of the "other compelling reason" exception:

"Judicial guidance in the leading case of Uphill emphasised the narrowness of the exception. The prospects of success should normally be 'very high', or (as it was put in Cart para 131) the case should be one which 'cries out' for consideration by the court. The exception might apply where the first decision was "perverse or otherwise plainly wrong", for example because inconsistent with authority of a higher court. Alternatively a procedural failure in the Upper Tribunal might make it 'plainly unjust' to refuse a party a further appeal, since that might, in effect, 'deny him a right of appeal altogether'. In Cart Lord Dyson, following Laws LJ, characterised such a case as involving 'a wholly exceptional collapse of fair procedure' (para 131). Similarly, Lord Hope in Eba referred to cases where it was 'clear that the decision was perverse or plainly wrong' or where, 'due to some procedural irregularity, the petitioner had not had a fair hearing at all'."

Then at paragraph 36 the Court said as follows:

"It is true that Lady Hale and Lord Dyson in Cart acknowledged the possible relevance of the extreme consequences for the individual. However, as we read the judgments as a whole, such matters were not seen as constituting a free-standing test. In other words 'compelling' means legally compelling, rather than compelling, perhaps, from a political or emotional point of view, although such considerations may exceptionally add weight to the legal arguments."

10. In this case, permission to apply for judicial review was granted by Foskett J. But it is conceded by the claimant that Foskett J did not grant permission on the basis that he had found that the second appeals test had been satisfied; rather, he merely indicated in a very short judgment that it was arguable that that might be the case.
11. A witness statement from Mr Julian Patrick Winkley, a barrister employed as a senior lawyer within the solicitor's office of the HMRC, attended the permission hearing, states this at paragraph 5:

"I attended the oral permission hearing before Foskett J on 23 April 2012. The honourable judge gave only brief reasons for granting permission. He did so because he considered it arguable that the claimant might satisfy the 'some other compelling reason' limb of the second appeal test i.e. not that he found as a fact that the claimant actually did so. My contemporaneous notes include as follows: 'intend to grant permission but no indication of ultimate outcome. Confused thinking on behalf of FTT may be some compelling reason for grant of permission, but not totally enthusiastically. Just about crossed threshold to have JR'."

12. It follows that although in a recent authority, that of Daha Essa v Upper Tribunal (Immigration and Asylum Chamber) [2012] EWHC 1533 (Admin), it was agreed that the grant of permission in that case had included a finding that the second appeals criteria test had been satisfied, it is always a question of fact in every case. It follows that a critical issue before me is whether or not this case satisfies the second appeal test.
13. Mr Henderson, on behalf of the claimant, says that both limbs are satisfied in this case. As far as the important point of practice or principle is concerned, he says this is raised not by reference to the decision of the First-tier Tribunal and the grounds of appeal to the Upper Tribunal, but in the very process by which HHJ Bishopp refused permission to appeal. He submits that the way in which the judge refused permission to appeal, and the test he applied, raises the important point of principle of law or practice as to what the test is when determining whether permission should be granted; Should it be, for example, the test provided for the purposes of granting permission in the High Court in civil litigation, which is set out in the CPR in Part 52, at Part 52.3(6):

"Permission to appeal may be given only where –

(a) the court considers that the appeal would have a real prospect of success; or

(b) there is some other compelling reason why the appeal should be heard."

In paragraph 5 of his decision, of HHJ Bishopp, approached the question in this way:

"I make the point I am required to decide not whether the First-tier Tribunal is right, but whether it is reasonably arguable that it was not. I was at first considerably troubled on this point, finding as I do that its reasoning, particularly at paragraph 15, of the decision is difficult to follow. However, having reflected on the parties' submissions, I am satisfied the First-tier Tribunal conclusion is a finding of fact which was supported by evidence, and was not irrational."

14. Mr Henderson invites me to say that this is an opportunity for this court in granting judicial review to clarify, for the benefit of the wider body of users of the tax appeal system, when permission should be granted. It is said the case requires consideration in this context of the following points: whether it is appropriate for a judge to indicate a willingness to remit a case to the FTT at an oral permission hearing only to change his mind in a written decision notice, which absent this judicial review would bring an end of the appellant's own appeal; in what circumstances a judge who has identified significant errors and acknowledges concerns about an FTT decision should grant permission to appeal; precisely what test or issue should apply; the extent to which a permission judge should allow himself to prejudge the outcome of a substantive Upper Tribunal at the hearing permission stage. It is submitted this is what HHJ Bishopp did, and in that respect fell in error.
15. Then it is said that the court should find, in any event, there is "some other" compelling reason for the appeal to be heard, to satisfy the second limb of the second appeal criteria. The matter, it is said, went badly wrong in the First-tier Tribunal, and then in the permission process. It cries out, to use Lord Dyson's words, to be remedied, and hence presents a compelling reason to grant judicial review of the refusal of permission to appeal.
16. For the reasons I am about to explain, I do not accept that in this case the second appeals criteria have been satisfied.
17. Firstly, I do not accept that any important point of principle or practice is raised by this case. My initial consideration was that when in Cart the Supreme Court were referring to an important point of principle of law or practice, the court was referring to the content of the proposed appeal itself, which was sought to be brought from the First-tier Tribunal. However, I am prepared to accept for the moment without finding it necessary to decide the matter, that it could in certain circumstances apply to the claim for judicial review itself, in other words, the challenge to the way the refusal of permission was decided. However, I find nothing in the way HHJ Bishopp decided the issue of permission to appeal which raises any important point of practice or principle. He proceeded on the basis that he had to decide not whether or not that the First-tier Tribunal was right, but whether it was reasonably arguable it was not. That is in fact a low test to satisfy in order for permission to be granted, although I would accept that it might better have been expressed as to whether or not there is arguably a material error of law in the First-tier Tribunal decision since it is only on the basis of such an error that an appeal will lie. The real argument against his decision has been how he purported to apply that test, and the argument is that he applied it wrongly by asking himself whether or not he would allow the appeal himself. I am bound to say however, his approach is not stated on the face of his decision, certainly as stated in paragraph 8, which clearly proceeds on the basis that that there has to be an arguable error of law which is not demonstrated by a rational finding of fact supported by evidence.
18. But whether that be a fair complaint or not, and my present view is that it is not, it is still only a complaint about the way the principle has been applied. There is in fact nothing in the statute which sets out criteria for the grant of permission to appeal. This case, in my judgment, is not one in which this court should go down the road of seeking to give general guidance upon the test to be applied, beyond that which I have already indicated.
19. I should add in this context that the complaints about how the judge reacted before giving his reserve decision does not in my judgment give rise to any important point of principle or practice. The whole purpose of reserving a decision is to reserve it to consider submissions, and to reach a conclusion having reflected upon the matters raised. Even if an indication was given as to the way the judge's mind was working before he reserved that decision, it does not seem to me to undermine the legitimacy of his final decision on the matter.
20. Nor do I consider that there is any other compelling reason within the claim to judicial review, or in the proposed appeal to the Upper Tribunal, why judicial review should be granted, or why the appeal should be heard. It does not, in my judgment, cry out in the way suggested by Lord Dyson in Cart and I have very much in mind the observations of the court in PR. The claimant is undoubtedly disappointed with the result before the First-tier Tribunal, and the claimant is undoubtedly disappointed that he will not, if the refusal of permission is not quashed, have the opportunity to argue before the Upper Tribunal the points he wishes to raise as to why there is an error of law on the part of the first tribunal in reaching the decision it did. But when one analyses, how the claim to an error of law is put, it is no more than by way of challenge to the findings of fact which were made by the First-tier Tribunal, by seeking to demonstrate that those findings of fact were not supported by the evidence before the Tribunal, and/or were contradictory to other findings within the decision of the Tribunal itself. The challenge seeks to raise the argument that although these are complaints about findings of fact, they do give rise to an error of law on the part of the Tribunal by reference to the well-known principle in Edwards v Bairstow [1956] AC 14. I should add that a separate point was raised before Judge Bishopp, although not pursued before me, that the findings of the First-tier Tribunal disclosed an error of law, by reference to the complaint (see Judge Bishopp's decision at paragraph 7)

"The HMRC cannot change its mind, having first assessed the second Sitegold Limited company, for the 18 August 2005 to 30 April 2007 decision."

21. I will come in a moment to my analysis of the individual 'erroneous errors of fact' said to amount to errors of law, being the individual grounds upon which the claimant sought, and continues to seek, permission to appeal the decision of the Upper Tribunal. However, on any view, in my judgment, as I shall demonstrate, the strength of those grounds are not such that there is some other compelling reason for the appeal to be heard.
22. Thus I have no doubt at all that the second appeal test just has not been satisfied in this case.

The merits of the proposed appeal

Overview: lack of evidence identified by the First -Tier tribunal

23. However I go further: the decision I have come to is that not withstanding the cogency and the clarity with which Mr Henderson has put his case on the merits, I do not consider that the decision to refuse permission to appeal was itself irrational or wrong in law, regardless of the second appeals test. The point emphasised to me by Mr Donmall who appears on behalf of the HMRC as an interested party and which I consider is a key point in this case, is that the burden of proving that the assessment of the HMRC should be overturned on appeal to the First-tier Tribunal was on the claimant. It was on the claimant to satisfy the tribunal that he was not trading as a sole proprietor, and therefore the assessment was excessive. Although the decision of the First-tier Tribunal contains statements of fact which are challenged by the claimant as unsupportable by the evidence, or contradictory to other findings, the decision contains at various stages references to the lack of evidence on matters which went straight to this question of whether Mr Phillips had satisfied the tribunal he was not trading as a sole proprietor.
24. The appellant had had an interview with the HMRC before the assessments were made in which he set out what he said his position was as to the companies through whom he was trading during the relevant periods. It is not in dispute that the appellant's case was that after Sitegold Limited 1 had been struck off in 2003, he thereafter traded through one or other of a number of limited companies which he had formed or acquired. In the course of the judgment of the First-tier Tribunal, there is set out the tribunal's understanding of the claimant's case as to which those companies were. As Mr Donmall put it in his written skeleton argument:

"During the period 24 September 2003 to 30 April 2007, the turnover of the business undertaken by the claimant was £1.5 million. No VAT or corporation tax or PAYE was accounted for. The First-tier Tribunal observed that six other companies were involved, all of which were eventually struck off by Companies House for his failure to lodge accounts and to complete annual returns. One, Weaverange Limited, incorporated on 4 December 2002, dissolved 14 June 2005 not having filed any accounts. (2) Wildagent Limited, incorporated 11 December 2002 and dissolved 30 August 2005, no accounts filed. (3) Stockfresh Limited, incorporated 11 December 2002 and struck off 13 October 2009, not having filed any accounts. Labeldesk Limited, incorporated 25 August 2005, dissolved on 14 January 2010, having submitted no VAT or accounts, save for dormant accounts to 27 August 2007. (5) Deskfirst Limited, formed on 18 August 2005, which changed its name to Sitegold Limited on 7 June 2006, and then dissolved on 15 May 2007. (6) Pencil Group Limited, incorporated on 13 March 2007."

25. Mr Henderson informed me that the claimant's case was always put as during the first period under challenge, between September 2003 and August 2005 the claimant was carrying on his business through the company Stockfresh Limited. And as regards the second period under challenge, that is, between August 2005 and September 2007; that it was carried on through a company called Sitegold Limited or Sitegold Limited 2. In fact, the origins of that company is the Deskfirst Limited company to which I have referred, which changed its name to Sitegold Limited on 2 June 2006.

Tricane limited

26. One of the complications in this case arising out of the number of companies acquired by the claimant is represented by a company called Tricane Limited. Tricane Limited, according to paragraph 5 of the decision of the First-tier Tribunal, was a company which Mr Phillips actually acquired. Paragraph 5 of the decision reads:

"The Hygicare business had operated from Wrexham which manufactured clothing for local businesses. Mr Phillips advised that another company, Tricane Limited, was also acquired, which operated from the second unit in Wrexham, and operated the same type of business. It was unclear when Tricane Limited was formed, but we were told it was dissolved on 1 May 1993."

There was before the First-tier Tribunal, and indeed in the documentation before this court, a copy of a decision by the Shrewsbury Employment Tribunal of March 2004, in which it declared amongst other things that:

"By consent Mr Phillips and Sitegold Limited are dismissed from the application. The correct respondent is Tricane Limited, and all employees are employed by Tricane Limited. All the employees' continuity of employment are preserved."

The respondent, Tricane Limited undertook to send draft contracts of employment conditions to all the employees for consideration.

27. The tribunal in paragraph 6, commenting on this consent decision, said that this was 'extraordinary, as the hearing was on 2 March 2004, and Tricane Limited had been dissolved on 9 May 2003, some ten months earlier. Mr Phillips knew that Tricane Limited had been dissolved, but appears not to have advised the Employment Tribunal or the t parties of the facts'
28. Mr Henderson has told this court that the First-tier Tribunal in effect got all this wrong; that in fact, Mr Phillips had never acquired the company Tricane Limited, but at best he had simply acquired assets of that company, including sewing machines and so on, and that his position was that his intention was to change the name of Stockfresh to that of Tricane Limited. Indeed, at paragraph 6 the First-tier Tribunal say this:

"At this tribunal he had advised the business was by that time [that of course would be March 2004] purported to be run through Stockfresh Limited ... He stated that the intention had been to change the name of Stockfresh Limited to Tricane Limited, in order to continue that business, and in those circumstances the decision was correct."

31. These passages concerning Tricane Limited are all relied on by the claimant in support of the general "symptomatic submission" that there are so many errors of fact in this First-tier Tribunal judgment as to undermine it as a matter of law. Reference is made to the Tribunal having given a wrong date of dissolution for Tricane Limited.

32. More importantly, in my judgment, however, is that not only is there no attack by way of the purported grounds of appeal or the claim in this court on the particular statements within the First-tier Tribunal decision of what Mr Phillips was saying his case was as regards Tricane Limited; but the tribunal's consideration of his case in paragraph 6 is a good example of the First-tier Tribunal being fully aware of what the claimant's case was as to his trading through one or other of his companies, but making statements to the effect that there was no evidence on matters which undoubtedly, were critical to any decision whether the claimant had satisfied the tribunal that he was not trading during the relevant periods as a sole proprietor. Thus in paragraph 6 of the decision, it says this: (the emphasis is the emphasis of this court)

"We cannot accept the decision of the Employment Tribunal in any way assists Mr Phillips in his contention he traded through the various companies. The decision was by consent, and based on a mistaken understanding of the legal position. Mr Phillips never suggested that he had traded other than as Sitegold Limited, so that alleged employment contracts in the name of Tricane Limited, (formerly Stockfresh Limited,) would not assist. Although the first company trading as Sitegold Limited had been struck off on 23 September 2003, Mr Phillips continued to run the business in the name of Sitegold Limited. No evidence was produced as to the transfer of the Hygicare business assets from Sitegold Limited to Mr Phillips, or of any of the companies. He merely continued the business utilising the original Hygicare VAT number and the Sitegold bank accounts."

33. I might add in parentheses at this stage that whatever complaints are made by Mr Henderson on behalf of his client about this paragraph, (although this paragraph in itself does not appear in the written challenge to the findings of fact in this case, amounting allegedly to errors of law), it is crystal clear on the documentation before the tribunal that Mr Phillips, in particular as far as invoices were concerned, continued to run his business in the name of Sitegold Limited, albeit it had been struck off, and purported to use the VAT number of a company which was no longer in existence, namely Hygicare.

34. However let me continue with identifying statements within the First–tier Tribunal Decision of 'no evidence' of critical matters. At paragraph 12, headed "The Decision", the opening sentence begins:

"We have considered the facts and the law, and we have dismissed the appeal. Mr Phillips has produced no evidence of the transfers of various businesses to Sitegold Limited. We are surprised that the HMRC have conceded the business was run through the first Sitegold Limited up to 23 September 2003."

Then at paragraph 14:

"HMRC clearly accept that Mr Phillips traded through the first Sitegold company after Hygicare went into liquidation. Apart from the use of the Hygicare VAT number, the enterprise was run through the first Sitegold company until it was struck off in September 2003. Thereafter, there is no evidence that any of the other companies traded. There was no evidence that the assets of the first Sitegold company were transferred to any of the other companies. There is no evidence that Tricane transferred its business to Stockfresh Limited, or that Tricane's employees were employed by Stockfresh."

35. The reason I emphasise at the outset these clear statements of the First-tier Tribunal of the lack of evidence on critical points - and as to which no challenge is made in the grounds of appeal - is that the whole thrust of Mr Henderson's submissions to me, to the effect that Judge Bishopp made a perverse decision and was wrong in law in refusing permission, is that he did not take on board the critical relevance to this case of the Edwards v Bairstow principle by which an error of law, can be demonstrated by reference to findings of fact.

29. The Edwards v Bairstow principle is not controversial. I was referred to the classic exposition of the principle, which necessarily was that of Lord Radcliffe in Edwards v Bairstow, in particular the passage beginning at page 35,

"I think that the true position of the Court in all these cases can be shortly stated. If a party to a hearing before Commissioners expresses dissatisfaction with their determination as being erroneous in point of law, it is for them to state a Case and in the body of it to set out the facts that they have found as well as their determination. I do not think that inferences drawn from other facts are incapable of being themselves findings of fact, although there is value in the distinction between primary facts and inferences drawn from them. When the Case comes before the Court, it is its duty to examine the determination having regard
to its knowledge of the relevant law. If the Case contains anything ex facie which is bad law and which bears upon the determination, it is, obviously, erroneous in point of law. But, without any such misconception appearing ex facie, it may be that the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. In those circumstances, too, the Court must intervene. It has no option but to assume that there has been some misconception of the law and that this has been responsible for the determination. So there, too, there has been error in point of law. I do not think that it much matters whether this state of affairs is described as one in which there is no evidence to support the determination or as one in which the evidence is inconsistent with and contradictory of the determination
or as one in which the true and only reasonable conclusion contradicts the determination. Rightly understood, each phrase propounds the same test. For my part, I prefer the last of the three, since I think that it is rather misleading to speak of there being no evidence to support a conclusion when in cases such as these many of the facts are likely to be neutral in themselves and only to take their colour from the combination of circumstances in which they are found to occur."

In particular, I emphasise the following passage:

"If the Case contains anything ex facie which is bad law and which bears upon the determination, it is, obviously, erroneous in point of law. But, without any such misconception appearing ex facie, it may be that the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. In those circumstances, too, the Court must intervene. It has no option but to assume that there has been some misconception of the law and that this has been responsible for the determination."

37. The principle is one by which a claimant is entitled to submit, as an error of law, first that the findings of fact made by the first tribunal do not justify, and could not justify, the ultimate determination. Quoting again from Lord Radcliffe:

"...the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal."

Alternatively, it is a basis for submitting that although the findings of fact concerned would justify the determination, those findings of fact were wrongly reached, in the sense that there was no evidence which could properly entitle any reasonable fact-finding tribunal, to reach those facts.

Materiality

38. But important throughout the principle of Edwards v Bairstow is that the findings of fact under attack must be material to the determination. If in fact the evidence, or indeed lack of evidence, (when the burden of proof is applied), before the tribunal was such that the determination under challenge was fully justified, the fact that the appellant can identify erroneous findings of fact must be to nothing.

30. This has been clearly brought out by subsequent decisions considering the Edwards v Bairstow principle. In particular I had my attention drawn to the decision of Lewison J at first instance in Gaines-Cooper v HMRC and the subsequent decision of the Court of Appeal on appeal from that decision. The first instance decision is reported at [2007] EWHC 2617 (Ch), and the subsequent appeal decision is at [2008] EWCA Civ 1502.
31. For present purposes, all I need record as far as the facts of that decision was concerned is that it was concerned with domicile, and it concerned an appellant appealing against a finding that he had not acquired a domicile of choice in the Seychelles in 1976. The appellant in Gaines-Cooper attacked certain factual findings, including (1) from 1979 to 1986 the appellant was married to Mrs Dilona Gaines-Cooper and lived with her at a house in California; and it is said that was a wrong finding of fact because there was unchallenged evidence that that first marriage broke down after about a year; and a second finding that then after 1976 the appellant retained a chief residence in England, even though his former residence there at Grove House was leased out for four years from 1976.
32. However, as Evans LJ observed in the case of Georgiou v Customs and Excise Commissioners [1996] STC 463, in a passage cited at paragraph 17 of Lewison J in Gaines-Cooper, materiality is everything, and consideration of the totality of the evidence before the tribunal is everything:

"It follows, in my judgment, that for a question of law to arise in the circumstances, the appellant must first identify the finding which is challenged; secondly, show that it is significant in relation to the conclusion; thirdly, identify the evidence, if any, which was relevant to that finding; and, fourthly, show that that finding, on the basis of that evidence, was one which the tribunal was not entitled to make. What is not permitted, in my view, is a roving selection of evidence coupled with a general assertion that the tribunal's conclusion was against the weight of the evidence and was therefore wrong."

What was key in the Gaines-Cooper case, and which resulted in the appeal failing, was in effect that whatever those errors of fact may have, and it was conceded they were errors of fact, those I have identified, they did not undermine as a matter of law the determination that a domicile had not been acquired. This was because the appellant in that case had failed to show that he had formed the necessary intention to acquire that domicile and because of what was said to be an unimpeachable finding by the decision maker that the appellant did not have the necessary intention to reside permanently in the Seychelles.

33. To return to this case, I am about to go through the 'erroneous findings of fact' identified in the grounds of appeal to the Upper Tribunal, (see in particular document at tab 11 of my bundle, headed "Errors in the Decision of the First Tribunal"). However, in each of the instances, I am quite satisfied that on any view of the First-tier Tribunal Decision, they were not critical, that is to say not material, to its ultimate determination, and that on the evidence before it, it could not be said that it was not entitled to come to its ultimate determination, whether those particular errors had been made or not.
34. One of the points made by Mr Henderson is that Judge Bishopp fell into error because he, on the issue of materiality, determined the question of materiality himself. The complaint is made that he should have simply found there was an arguable case on materiality, and left materiality to the Upper Tribunal hearing the appeal, and on that basis should have granted permission to appeal. In other words, once he found errors in findings of fact which says Mr Henderson, were arguably material to the ultimate decision, then he should have granted permission; because if materiality was arguable, then whether there was an error of law on the Edwards v Bairstow test, it would be arguable. I would not disagree that there may be cases where materiality is arguable in that sense, and I would not disagree that there can be cases where on that basis permission to appeal should be granted.
35. However, I consider it to be unarguable to say that these were material errors in the sense contended for. As identified by Judge Bishopp, the key to this decision of the First-tier Tribunal was the lack of evidence produced by the claimant to show that the business he contended was not run by himself in his own capacity, had in fact been transferred to whichever company is looked at, and the lack of evidence that those companies had ever traded. I have already set out the material passages, but they are key in my judgment to this case.

The Findings of Fact Under Challenge

36. Let me take each of the individual findings under challenge.
37. First, the challenge is to the finding of the First-tier Tribunal in paragraph 14, that no company existed between September 2003 and August 2005. I will read the passage concerned to see it in its context. I have already in fact referred to this passage earlier, but I will start at paragraph 14 at the very beginning:

"HMRC clearly accept that Mr Phillips traded through the first Sitegold company when Hygicare went into liquidation. Apart from the use of the Hygicare VAT number, the entire enterprise was run with the first Sitegold company, until it was struck off in September 2003. Thereafter, there was no evidence that any of the other companies traded. There was no evidence that the assets of the first Sitegold company were transferred to any other companies. There was no evidence that Tricane transferred its business to Stockfresh Limited, or that Tricane's employees were employed by Stockfresh. It would appear from the evidence of the P14 summary for the year 2003 to 2004 that their employment status might have been with Wallace Workwear Limited, as the PAYE returns are in that company's name. None of the companies were compliant with the requirements of company law, nor did they prepare accounts or deal with their tax affairs. For Mr Gibbon to submit that the HMRC cannot pierce the corporate veil it is necessary for there to be a veil. Mr Phillips undoubtedly ran the business in his own capacity from September 2003 to August 2005, as there was no company in existence which he could have used."

38. Mr Henderson on behalf of the claimant roundly attacks the statement "Mr Phillips undoubtedly ran the business in his own capacity from September 2003 to August 2005, as there was no company in existence which he could have used". That statement, he says, was factually wrong, and indeed is contradicted by an earlier passage, which is paragraph 6 of the decision of the First-tier Tribunal, which shows clearly that there were companies in existence at the time which he could have used. So, argues Mr Henderson, that finding was key to the decision of the tribunal that Mr Phillips ran the business in his own capacity from September 2003 to August 2005, and that it would have infected its subsequent findings for the subsequent periods. It has also meant that -- and I quote from the skeleton argument -- "The first tribunal did not go on to explore the question of whether the business was carried on by one or more of the companies, and that if therefore this judicial review is successful it may be that there is a need for remission to the First-tier Tribunal following an Upper Tribunal appeal." Further says Mr Henderson, the First-tier Tribunal in wrongly considering that Mr Phillips must have been trading in his own right in this period, has opened the door to deciding he was trading in his own right in the later periods.
39. Judge Bishopp dealt with these contentions at paragraph 6 of his decision:

"There was no appeal against the assessment addressed as Sitegold 1. Mr Phillips challenged the assessment directed to himself for period September 2003 to August 2005, on the grounds that the business had been carried by one or other of the companies he formed following the demise of Sitegold 1. The tribunal dismissed that argument, observing that it was surprising that the HMRC had been willing to accept that Sitegold 1 had carried on the business in the period before its dissolution. Before me, Mr Gibbon took issue with the tribunal's comment that during this period there was no company in existence which he could have used. Taken by itself, the comment is incorrect, as the tribunal's own decision shows, though it is necessary to take it in context, and if it is rewritten with the addition of the word 'lawfully', seems to me to be right. Perhaps more importantly, as Mr Gibbon conceded, it is perfectly plain that Mr Phillips made no attempt to transfer the business to any of those companies, or to resume Sitegold's business (if indeed it was Sitegold 1's business) using one of those companies. There is nothing to connect them with the business beyond Mr Phillips have control of them. HMRC's case that during that period he was trading on his own account is irresistible, and the application for permission to appeal against that finding must be dismissed."

40. This approach of HHJ Bishopp is roundly attacked for ignoring the fact that this error of fact had given rise to a statement that therefore Mr Phillips must have run the business, and roundly attacked on the basis that it was not for HHJ Bishopp to rewrite the First-tier Tribunal's judgment. I have sympathy with that second point, although I suspect that what is referred to is perhaps a reference to the failure to register the companies for VAT. But where I have no sympathy is the contention that Judge Bishopp was wrong when he emphasised the context of that statement, and the reference in his paragraph 6 to the following:

"More importantly, as Mr Gibbon conceded, it is perfectly plain that Mr Phillips made no attempt to transfer the business to any of his companies, or to resume Sitegold 1 business if indeed it was Sitegold 1's business, using one of those companies."

41. The position as I read it is all one way: that the First-tier Tribunal were flagging up at various stages of their decision that there was no evidence that any of the companies upon which the claimant relies ever traded, and there was no evidence that the business was transferred to any of the companies. The assertion by HHJ Bishopp that there was nothing to connect them, that is the companies, with the business beyond Mr Phillips' having control of them, was one which patently arises from the statements of "no evidence" which I have already highlighted contained within the First-tier Tribunal's decision.
42. I accordingly accept the submission made on behalf of the HMRC that the error of fact identified under this head could not be said – even arguably - to be a material error. As was said in the skeleton argument on behalf of the HMRC at paragraph 34(b):

"There is no materiality in the error, because there was no evidence that any of the companies controlled the business at issue, and the burden was upon him to show that he did not undertake that business as a sole trader. [Judge Bishopp] took the view, again consistent with the approach in Gaines-Cooper, that any factual error in the recitation of the evidence did not amount to a mistake of law in particular, given that the conclusion, was one to which the Tribunal was entitled to come, given the absence of any evidence to connect the companies to the business."

Mr Henderson describes that that conclusion of the First–tier Tribunal that Mr Phillips ran the business in his own capacity from September 2003 to August 2005 as being on the evidence before it, irresistible. I would prefer to express the position as being one in which it has not been demonstrated – even arguably - that there was no evidence before the tribunal which entitled it to come that conclusion.

No company was properly constituted between September 2003 and August 2005

43. The second head of attack is made on the finding of fact in paragraph 12 of the First-tier Tribunal decision, to the effect that "No company was properly constituted between September 2003 and August 2005". This appears in paragraph 12 in the following context. Again I have referred to part of it already:

"We have considered the facts and the law and we dismissed the appeal. Mr Phillips has produced no evidence of the transfer of the various businesses to Sitegold Limited. We are surprised that HMRC have conceded the business was run as the first Sitegold Limited after 23 September 2003. As they have done so, we have not been asked to consider that assessment. For the period of 35 months, from the dissolution of the first Sitegold Limited company in 2003 to the formation of Deskfirst Limited in August 2005, none of the other companies through which he allegedly had traded had been properly constituted."

44. The statement of fact that none of the other companies through which he allegedly traded had been properly constituted is again attacked as being contrary to the evidence. This is accepted by Mr Donmall subject to the argument that it is unclear what "properly constituted" means. There was certain documentation from Companies House, including the bundle before the First-tier Tribunal, to show that they were properly constituted, though it may well be that the First-tier Tribunal were considering issues as to the registration for VAT. Mr Henderson complains that Judge Bishopp did not consider this point at all in his decision, notwithstanding it was raised as part of the permission application.
45. It is however the materiality point, in my judgment, which again undermines the reliance on this particular factual error on the part of the First-tier Tribunal. Again as the HMRC submitted, it was for the claimant to prove that the business was undertaken not by himself as a sole trader but by one or more of the other companies, and he brought no evidence to suggest he did so, a finding of fact which the claimant has not criticised. In other words, the observation by the First-tier Tribunal that none of the other companies through which he allegedly traded had been properly constituted, even if one assumes it to be an error, must, beyond argument, be immaterial to the ultimate decision of the First-tier Tribunal, and can provide no basis for an appeal on the Edwards v Bairstow principle. I further consider that the failure of HHJ Bishopp specifically to address this error is of no significance in the context of this case, given that he was fully alive to a similar point being made under the first heading, and on the merits, each founder on the same ground of lack of materiality.

Sitegold (2) Limited did not trade between August 2005 and April 2007

46. Then dealing with the determination dealing with the period between August 2005 and April 2007, the attack is made on the finding at paragraph 15 of the decision of the First-tier Tribunal, that Sitegold 2 did not trade between August 2005 and April 2007. Such a statement does not actually appear in paragraph 15, but it is a fair inference that that is what was being found. Paragraph 15 is linked to the complaint made by the claimant at the First-tier Tribunal that the HMRC had changed its mind. It had originally been prepared to assess Sitegold 2 for the period 18 August 2005 to 30 April 2007, but then changed its mind on the grounds that Sitegold Limited had gone into liquidation in May 2007.
47. The Tribunal in paragraph 15 dealt with this matter in this way:

"Mr Gibbon submits that HMRC cannot change its mind, having first assessed the second Sitegold Limited for the period 18 August 2005 to 30 April 2007. We cannot accept that submission. There is no doubt that the negotiations in April 2007 were designed to reach a settlement acceptable to all the parties. It was part of that settlement that Mr Phillips should be compliant in the way that he dealt with the second Sitegold Limited. He was aware at the time of the negotiations that the second Sitegold Limited would be struck off, and he chose not to tell HMRC. In the circumstances, HMRC were entitled to take the view that Mr Phillips was continuing to trade in his own capacity as assessed for the periods 24/9/2003 and 17/8/2005. We therefore dismiss the appeal."

48. Submission is made to me that the finding which should be inferred from this namely that Sitegold 2 Limited did not trade between 18 August 2005 and 30 April 2007 was irrational, and it was this finding which allowed the First-tier Tribunal to conclude that Mr Phillips must have traded in his own name over that period. The tribunal, it is said, could not simply adopt the HMRC view that Mr Phillips was continuing to trade in his own capacity for the periods 24 September 2003 to 17 August 2005. The tribunal had to investigate the question of fact whether Mr Phillips was continuing to trade, and it was a piece of evidence which should have been considered, when considering that question that the HMRC had agreed as part of a settlement with Mr Phillips in April 2007, that Sitegold 2 Limited had been trading between 2005 and 2007.
49. As I read the paragraph 15 under attack, it would appear before the First-tier Tribunal that the claimant, through Mr Gibbon was challenging matters on the basis of an estoppel; I observe that in the 'Statement of Errors in the First-tier Tribunal Decision' put in by the claimant, to which I have already referred, such a challenge appears headed "Separate error of law in relation to the period 18/8/2005 to 30/4/2007", and continues: "... In any event, the tribunal was wrong as a matter of law to hold that HMRC was entitled to change their mind, in circumstances where they were already agreed that supplies had been made by Sitegold Limited …"
50. As I have indicated, Mr Henderson does not seek to rely on an estoppel argument; His argument is that the finding of the First-tier Tribunal in this context that the second Sitegold company did not trade during the relevant period was irrational, because it failed to pay any attention to a piece of evidence to which it should have given weight, namely, that the HMRC had agreed what it had in that settlement.
51. I myself do not see any validity in that submission for this reason which goes back to the question of materiality: it was not for the HMRC to demonstrate that Mr Phillips was continuing to trade in his own capacity for the particular period, it was for Mr Phillips to show the contrary. And the fact is that there was no evidence before the First-tier tribunal of any trading by any of the companies including Sitegold 2.
52. I do not repeat at this stage all the passages in the First-tier Decision, to which "no evidence" is referred to. In my judgment the failure, if it was a failure, of the First-tier Tribunal to give weight to the settlement decision of the HMRC is really to nothing, although I am bound to say that what the First-tier Tribunal were doing at paragraph 15 were really dealing with the argument on estoppel, and what they were saying was that given that the claimant had not himself carried out that which he said he would carry out as part of the settlement, and be compliant as far as ensuring that Sitegold 2 was put into a form so that it could trade properly, being VAT registered, and so forth, that that fatally undermined any argument based on an estoppel – even if such a principle could ever be applicable. Again as Mr Donmall submitted, 'there remains no explanation why the FTT was precluded as a matter of law from finding as a fact that Sitegold 2 had not undertaken the trading in question, simply because HMRC had provisionally considered, conditional upon evidence to be provided, that it may have done so'
53. Judge Bishopp in his Decision dealt with this matter, at paragraph 7 and 8:

"7. Mr Gibbon argued that it was not open to HMRC to assess Mr Phillip himself for the tax which HMRC had accepted, (as the assessment originally issued to it showed) was due for Sitegold 2. Once they accepted that Sitegold 2 made the supplies in which the tax due, they could not change their minds as here, in the light of later events. Mr Shields' response was that HMRC were entitled to conclude from Sitegold 2's failure to do as Mr Phillips had agreed during the negotiations, that it was just another company to which Mr Phillips had not transferred the business, and the reality was that he had continued to trade on his own account. The First-tier Tribunal endorsed that view.

8. I make the point that I am required to decide not whether the First-tier Tribunal was right, but whether it is reasonably arguable that it was not. I was at first considerably troubled on this point, finding as I do that its reasoning particularly at paragraph 15 of the decision, is difficult to follow. However, having reflected on the parties' submission, I am satisfied that the first tribunal's conclusion is a finding of fact which was supported by evidence, and is not irrational."

Mr Henderson emphasises to me the "particular trouble" expressed by Judge Bishopp in this passage, and complains that without offering any explanation he had gone on to determine that the overall conclusion of the First-tier Tribunal that Mr Phillips had made the supplies in his own capacity through the period in dispute, was supported by evidence and was not irrational.

54. In my judgment, the passage relied on by Mr Henderson does not demonstrate any fundamental flaw on the part of Judge Bishopp in considering whether or not to refuse permission to appeal. He regarded the reasoning of the First-tier Tribunal as difficult to follow. In my judgment, it is not difficult to follow if one views paragraph 15 as no more than considering an estoppel argument on the part of the claimant, the argument that the HMRC were not entitled to change its mind. What Judge Bishopp was ultimately having to consider was whether it was reasonably arguable that the First-tier Tribunal's conclusion, namely that the appellant was properly to be assessed for the given period, on the basis that he was a sole proprietor acting in his personal capacity during the period, was on the face of its Decision reached by a process which disclosed an error of law and/or was not one to which the Tribunal was entitled to come based on the evidence before it. Even applying the error of law route of the Edwards v Bairstow principle, it is impossible in my judgment to say that Judge Bishopp was irrational in not so finding.

Systemic errors of fact

55. I have not forgotten throughout the systematic point being raised as a ground of appeal from the First-tier Tribunal to the Upper Tribunal raised by Mr Henderson. I have already dealt with some of what might be regarded as trivial errors which Mr Henderson has pointed out to me. One of the particular errors which I should deal with is the final specific head of Error of Fact complained of, that the First-tier Tribunal found at paragraph 7, that the Deskfirst Limited name was never formally changed to Sitegold Limited. At paragraph 7 the tribunal found as follows, halfway down the passage:

"On 7 June 2006 the company controlled by Mr Phillips which was previously known as Deskfirst Limited, changed its name to Sitegold Limited. Deskfirst Limited had been formed on 8 August 2005, some 35 months after the original Sitegold Limited had been dissolved in September 2003, although Mr Phillips is purported to have continued to trade as Sitegold Limited. There had been a delay in changing the name to Sitegold Limited because another company had acquired the name at the time of the dissolution of the first Sitegold Limited and the name had only become available in 2006. Subsequently, when Deskfirst Limited, having changed its name over to Sitegold Limited, was dissolved on 15 May 2007, Pencil Group Limited, which had been incorporated on 13 March 2007, ostensibly took over the undertaking of Deskfirst Limited, and changed its name to Sitegold Limited on 7 July 2007. Again, no evidence was given as to the transfer of the second Sitegold Limited's business assets to Pencil Group Limited, or any evidence of notification to Companies House of the purported change of name."

56. In fact, the claimant's bundle included a Companies House document recording Pencil Group Limited's change of name, and the complaint is made that Judge Bishopp did not consider this particular point, although it was highlighted in the schedule before the court by the claimant. But again, this is a very minor matter. As the HMRC point out , Pencil Group Limited was only formed in March 2007 a matter of weeks before the end of the second period of assessment in issue and there was no evidence before the Tribunal that it undertook the relevant trading in that time. It does not in any way enable the claimant to identify an error of law in the First-tier Tribunal's decision, and I see no basis for the challenge to HHJ Bishopp's decision by reference to that particular matter.
57. There were indeed other so-called systematic errors in the judgment of the First-tier Tribunal identified by Mr Henderson, including the miscalculation, at paragraph 12, of the period between September 2003 to August 2005, as being one of 35 months when it was in fact 23 months. However, in the round, I do not find a systematic argument gives rise to any reasonable grounds of appeal on the basis of error of law as contended for by Mr Henderson.

Overall conclusion

58. I remain of the view that it was the lack of evidence before the First-Tier Tribunal that the claimant was trading through one or other of his companies, during the relevant periods, in the critical aspects highlighted in its decision, in particular in the passages I have identified, which means that it is impossible to argue, notwithstanding the errors of fact made or arguably by the Tribunal identified by the claimant, that the conclusion of the Tribunal which the claimant seeks to challenge on appeal was not one to which it was entitled to come on the evidence which was before it.

63. For all these reasons, on the merits I do not find that the claimant has made out a case that the Decision of Judge Bishopp was irrational in refusing permission, or discloses an error of law. I stress however that even if I had considered materiality arguable here in relation to any of the alleged errors of fact, I would still not have concluded that the second appeals test had been made out, under either limb.

64. So for all these reasons, this claim fails.

(following submissions on costs)

65. In the exercise of my discretion, I will make no order as to costs. I emphasis it is in the exercise of my discretion, and should not be used as a precedent. In one sense, the interested party can lay claim to the normal principle of costs that costs follow the event, and that the unsuccessful party should pay that the costs of the successful party, and that this has been a substantive hearing for judicial review of a decision. It has not been simply an oral hearing of whether there should be permission to proceed with judicial review. But I cannot hide from my considerations that the subject matter of the judicial review is in fact a refusal of permission to appeal a decision of the First-tier Tribunal to the Upper Tribunal, and that to my mind is an important matter. The actual respondent to this appeal, the Upper Tribunal, understandably has chosen not to attend, and has simply put in an acknowledgment of service, which as I indicated in my judgment went simply to reminding the court of the application of the Cart decision, and the application of the second appeal criteria to claims of this sort.

68. I also bear in mind that while this is not necessarily a determinative point, that had this been simply a renewal of the application for permission to appeal the First-tier to the upper tier, and I was sitting in my capacity as a High Court judge sitting in the upper tier, which I could do, the normal practice would be that on a failure of that oral application, there would be no order as to costs save possibly the costs of the acknowledgment of service of respondent. I also take on board that the interested party is an interested party; it did not have to attend, and could simply have sent in written submissions, since ultimately its position would be protected even if this was successful and permission to appeal were granted as between the First-tier and upper tier, they would be protected because they could attend on that occasion and fight the substantive appeal, and costs no doubt then would follow the event.

69. So in all the circumstances, I simply make no order for costs.