England and Wales High Court (Administrative Court) Decisions

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

		Manchester Civil Justice Centre Manchester M60 9DJ
		22/05/2015

The Honourable Mrs Justice Swift :

The application for permission

1. This is an application by the Applicant, NCM 2000 Ltd, for permission to bring a claim for judicial review of a decision by the Respondent, the Commissioners of HM Revenue and Customs (HMRC). The decision in respect of which the application is made is a decision to refuse the Applicant's claim for compensation for economic loss caused by what the Applicant claims was a misdirection, incorrect advice or a mistake by one or more of the Respondent's officers as to the liability to value added tax (VAT) of supplies made by the Applicant and by its predecessors-in-title, a partnership trading as Northern Computer Markets, which has since been dissolved. For convenience, I shall refer to both NCM 2000 Ltd and Northern Computer Markets as "the Applicant".

The factual background

2. The Applicant was founded in 1992 by Mr Andrew Reed and Mr Damian McEvoy (the partners). The company organises computer exhibitions, hiring out stalls to computer traders and charging the public an admission fee to attend. In late 1992, the partners realised that the Applicant's turnover was approaching the threshold at which VAT becomes payable. They applied to the Respondent for VAT registration. The Applicant's case is that, at that stage, it was advised by the Oldham VAT office that VAT should be charged on its supplies of stall hire. The Applicant says that it accepted that advice and registered for VAT with effect from 1 April 1992. The giving of that advice is not accepted by the Respondent.
3. The Applicant's case is that, after registering, the partners became aware from customers that many of the Applicant's competitors were not charging VAT on supplies of stall hire at events which they organised. The Applicant's case is that its partners made a further enquiry of the Oldham VAT office in 1993 to confirm the position. They say that they were advised that VAT was chargeable and were told that, if it was not collected, the Applicant would be retrospectively charged for any VAT not collected. Again, the Respondent does not accept that any such advice was given.
4. In 1995, one of the Respondent's officers, Mr Norris, carried out an inspection at the Applicant's offices. In the course of that inspection, he informed the partners that, since the Applicant was supplying services, not rights over land, VAT was payable on the supply of stall hire. It is accepted by the Respondent that that advice, which was documented in Mr Norris' report of the inspection, was given and that, subsequently, on 4 August 2009, the Respondent decided that VAT was not after all payable on the supply of stall hire. The Respondent points out, however, that, at the time the advice was given, this was a somewhat uncertain area and remains the subject of ongoing litigation in other cases before the First-tier Tribunal (Tax Chamber).
5. In 2000, the Applicant became a limited company, with Mr Reed and Mr McEvoy as directors and shareholders. It retained its predecessor's VAT number. It is alleged by the Applicant that, at further inspections conducted by the Respondent in 1997, 2002 and 2005, Mr Reed again questioned the Respondent's officers as to whether the Applicant should be paying VAT for the hire of stalls and was assured that it should. The Respondent does not accept that such enquiries were ever made. It points out that no such enquiries, or any responses thereto, were documented in the reports of the inspections. Meanwhile, the Applicant continued to charge its customers VAT and to repay that VAT to the Respondent. On occasion, the inspections resulted in claims being made by the Respondent for the under-declaration of VAT by the Applicant. Thus, the Applicant says, the Respondent's officers must have continued to believe that VAT was payable.
6. It seems that, between 1992 and 2008, the partners of the Applicant did not seek the advice of its accountants in respect of the payment of VAT on the hire of stalls. However, in 2008, the Applicant started organising regular car boot sales. It sought advice from its accountants as to whether it should charge VAT on the hire of pitches at such sales. The accountants advised that VAT would not be chargeable. That led to questions about why stall hire should be treated differently from pitch hire. The accountants made enquiries and informed the partners of the Applicant that, in fact, VAT was not payable on stall hire. The Applicant therefore stopped charging its customers VAT on stall hire as from 1 December 2008 and, thereafter, paid no VAT to the Respondent.
7. The Applicant then obtained a new accountant, Mr Michael Leahy. On 24 March 2009, he issued a letter of claim to the Respondent on behalf of the Applicant seeking repayment of the VAT on stall hire which had been paid by the Applicant during the period from 1 April 1992 until 25 October 2008. The claim was in the sum of £2,116,150. Mr Leahy also issued a claim on behalf of Europa Exhibitions Ltd, another company owned by Mr Reed and Mr McEvoy which carried on similar business to the Applicant. Mr Leahy explained that the directors of the Applicant considered that the imposition of VAT had had a significant impact on their business. Because they had accounted for VAT on their hiring fees, they had had to charge higher prices than their competitors and had therefore lost sales and, as a result, the Applicant had been less profitable than it would otherwise have been. Mr Leahy asserted that the Applicant's financial loss was in a sum identical to the amount of VAT which had erroneously been paid.
8. On 4 August 2009, Mr Gowan, an officer of the Respondent, wrote to Mr Leahy in response to the claim. He confirmed that the hiring of stalls was exempt from VAT and that the Applicant would be entitled to a refund of over-declared VAT output tax. However, he made clear that any refund must take account of the input tax that had been claimed by the Applicant from its customers. Mr Gowan went on to explain that the Respondent would be treating the Applicant's claim differently according to the periods of time in which the loss was incurred. He indicated that the Respondent would only consider claims for over-declared output tax during the VAT accounting periods between July 1992 and October 1996 ("Period 1") and the VAT accounting periods between April 2006 and October 2008 ("Period 3"). However, VAT which had been over-declared during the intervening VAT accounting periods, i.e. between January 1997 and January 2006 ("Period 2") would be refused. The amount of over-declared output tax during Period 2 formed a substantial part of the Applicant's claim: Mr Gowan had calculated that it amounted to £1,783,216.
9. In a subsequent letter dated 16 November 2009, written in response to a further letter from Mr Leahy, Mr Gowan explained the Respondent's reasons for treating the various VAT accounting periods differently. He explained that, following the House of Lords decision in the case of Michael Fleming (t/a Bodycraft) v Customs and Excise Commissioners [2008] UKHL, the Respondent had granted claims where, inter alia an amount had been over-declared as output tax in VAT accounting periods ending before 4 December 1996. He explained also that the Respondent's position had been reflected in section 121 of the Finance Act 2008, which had provided a transition period running until 31 March 2009, giving businesses "one final opportunity" to make claims falling within the requisite parameters before the claims fell within the scope of the normal time limits. Those limits provide for a cap for claims of four years. Thus, he said, applying the relevant VAT accounting periods, the Applicant's claim for over-declared VAT up to December 1996 was eligible for a four-year period from July 1992 and expiring in October 1996. The claim must, however, be adjusted to reflect the fact that the Applicant had received input tax from customers.
10. As to the VAT over-declared during the period between April 2006 and October 2008 (Period 3), Mr Gowan explained that it fell within the Respondent's "normal capping rules", i.e. statutory provisions which permit a business to recover over-declared output tax for a maximum period of three years up to the time the claim is made. In this case, the claim was made in March 2009.
11. As to the claim for Period 2, Mr Gowan explained that, under the relevant statutes and case law, all claims for over-declared VAT were now limited to four years or up to April 2006, whichever is the shorter period. Since that part of the Applicant's claim relating to Period 2 did not fall within either of those criteria, it was out of time and was therefore rejected.
12. Having given these explanations, Mr Gowan gave information about the steps open to the Applicant if it did not agree with his decision, i.e. a review by another officer of the Respondent or appeal to an Independent Tribunal.
13. Mr Leahy wrote a letter to Mr Gowan dated 10 December 2009, contending that the time limits referred to by Mr Gowan were applicable only when there had been a misinterpretation by the taxpayer of the VAT Regulations. He argued that the time limits were wholly inapplicable to a "misdirection" which had been caused by the fault of the Respondent. It appears that Mr Leahy's letter was taken as a request for a review since the Applicant's claim for Period 2 was then passed over from Mr Gowan to the Respondent's local Compliance Complaints Team ("the Complaints Team") for consideration.
14. The review was conducted by Ms Taylor of the Complaints Team. In a letter dated 2 August 2010, Ms Taylor gave her findings. She dealt with the issue of misdirection in this way:

"It may help if I explain that in general a fundamental principle of VAT is that it is a self-assessed tax and the responsibility to "get it right" rests with the trader. However, I can see that in the first visit made to NCM in 1995 that the assurance officer made clear notes to indicate that, in his view, NCM supplies were taxable rather than zero rated.

In fact it is now agreed and confirmed that the supplies are exempt and my understanding is there has been no change in the way the business has operated from the outset in respect of those supplies.

In response to your comments regarding the subsequent visits, I would advise that the programme of assurance visits undertaken by HMRC are not full audits and traders should not rely on the findings of a VAT visit for assurance about the accuracy of tax deductions."

Ms Taylor went on to explain that, before consideration could be given to the question of whether the Respondent was bound by incorrect advice, there were a number of tests to be met. One of those tests was whether the taxpayer would suffer detriment if the over-declared VAT were not repaid. Ms Taylor stated:

"It is this test that in my view your client's complaint of misdirection for the period 01/97 to 01/06 fails. VAT was charged and paid by the customer, money which NCM is not entitled to. I would also confirm that it is only in the most extreme circumstances that the 3 year and now 4 year cap can be lifted. The cap is in place to give some certainty to both HMRC and the taxpayer, I do not consider that it is appropriate to lift the cap in the circumstances you describe."

She continued:

"As I have already indicated to you, my view is that your claim for the period 01/97 to 01/06 neither meets the criteria of misdirection nor can it be refunded as it is out of time."

She then went on to inform Mr Leahy of the Respondent's Complaints Procedure, indicating that she had attached a copy of the Respondent's Complaints Fact Sheet to the letter. She concluded:

"I hope that you will be satisfied with the careful attention that I have given your complaint, even if you had hoped for a different decision.

If there is anything I have overlooked or anything further you would like me to consider please let me know. Alternatively, if you are not satisfied with the way I have dealt with your complaint please specify your remaining concerns in writing and send them to me in the first instance. I will then arrange for a further independent review to be undertaken."

15. Mr Leahy responded by a letter dated 26 August 2010 to the effect that the Respondent considered that "the evidence completely supports a claim for misdirection" and asked Ms Taylor to reconsider the information at her disposal "before [the Respondent] reviews alternative action". He challenged the decision on a number of grounds. In particular, he stated that, because its competitors had not been paying VAT, the Applicant had not charged VAT to its clients and had had to absorb the VAT costs itself in order not to lose business. This, he said, prevented the Applicant from having access to funds that could otherwise have been used to provide more profit and/or to develop and expand the business. Mr Leahy repeated his assertion that no time limits should apply to the Applicant's claim.
16. Ms Taylor replied on 28 September 2010, emphasising the necessity for the Applicant to establish financial detriment before consideration could be given to refunding over-declared VAT. She indicated that, if the Applicant could quantify its detriment during the period she had been concerned with (Period 2), she would reconsider the Respondent's position. After that, there was a further interchange in which Mr Leahy stated, inter alia, that the necessary evidence of detriment had already been provided and that the time limits should not apply.
17. Ms Taylor responded by a letter dated 8 December 2010, in which she made clear the Respondent's policy – indeed, she said, obligation – to comply with the specified time limits set for the refund of over-declared VAT. She quoted the words of the Respondent's Policy Team:

"If we were to grant an individual extra-statutory remission to repay VAT over-declared over three years earlier because, for example, of official or taxpayer error, then we would be putting aside the clear will of Parliament and that would not be right or, even contemplated under collection and management powers."

Ms Taylor then stated that, although the Respondent was unable to refund the over-declared VAT, it was able to consider making a payment on an ex gratia basis. Before doing so, however, it would have to be satisfied that the Applicant had suffered an actual financial loss. That would involve the Applicant making a claim supported by proper evidence. She indicated that, in order for an ex gratia payment to be made, the Respondent would also have to be entirely satisfied that its error was the sole cause of any demonstrable economic loss. She stated:

"It is clear to me that HMRC would need to see clear evidence of losses suffered before consideration can be given to an ex gratia payment, the quantum, if any, of which is not likely to be equivalent to the claim made in these circumstances."

18. Mr Leahy responded in a letter dated 16 December 2010, in which he repeated his contention that the Applicant's financial loss amounted to the sum of the VAT overpaid by it. Ms Taylor responded on 19 January 2011, repeating that it was for the Applicant to prove that it had suffered demonstrable financial loss. She emphasised that, although Mr Leahy appeared to feel that the Applicant had already provided sufficient detail, it had not in fact done so.
19. Ms Taylor had of course only been considering that part of the Applicant's claim which related to the period from January 1997 until January 2006 (Period 2). By January 2011, the claims in respect of Periods 1 and 3 had still not been determined. In the case of those claims, there was an acceptance by the Respondent that the Applicant was entitled to repayment of its losses in principle. However, those claims would not be paid in full if the Respondent could prove that such payment would result in unjust enrichment for the Applicant. Ms Taylor expressed the view that it would be "inappropriate and unfair" for her to proceed further with the claim for Period 2 until the claims for the other two periods had been resolved. She suggested that the final decision on those two claims would give the parties a clearer view of what loss, if any, the Applicant may have incurred in connection with what she considered to be its claim for an ex gratia payment for Period 2.
20. Mr Leahy disagreed with the suggestion that further consideration of the claim for Period 2 should be delayed pending resolution of the claims for Periods 1 and 3. Ms Taylor wrote, repeating her contention that the Respondent would consider making an ex gratia payment for Period 2 if the Respondent could demonstrate "beyond reasonable doubt" that it had suffered an actual and quantifiable financial loss which had deprived it of funds and had been caused solely by an error by the Respondent.
21. On 23 February 2011, Mr Wright, an officer of the Respondent's VAT Error Correction Team, wrote to Mr Leahy, requesting information in support of the Applicant's claim that it had borne part or all of the cost of the over-declared VAT during Period 3. Mr Wright requested the provision of specific financial and other information. A meeting took place at the Applicant's premises so as to enable Ms Ready, another officer of the Respondent who was involved in dealing with the Period 3 claim, to examine documents. Arrangements were then made for the Applicant to provide further information which was done.
22. In an email dated 21 November 2011, Ms Ready wrote to Mr Leahy with her decision. She had concluded that a full refund of over-declared VAT for Period 3 would amount to unjust enrichment of the Applicant. She indicated that, if the Applicant could provide evidence in support of its position, she would reconsider the matter. Mr Leahy responded very angrily, arguing that the Respondent had failed to establish that there would be any unjust enrichment. He referred to the evidence provided by the Appellant, contending that it showed that no such enrichment would take place.
23. On 9 December 2011, Mr Reed, as a director of the Applicant, wrote a letter of claim for loss of profits to the Respondent. On 13 December 2011, Mr Gowan, who was then still dealing with the claim in respect of Period 1, wrote to inform the Applicant of the Respondent's decision to pay £82,746 (plus interest) in respect of the claim for that period. That sum was a little less than had been claimed, but clearly Mr Gowan had concluded that there would be no unjust enrichment if the sum was paid.
24. In a letter to Mr Leahy dated 14 December 2011, Ms Taylor stated that, despite the fact that no decision had yet been made in relation to the claim for Period 3, she would now be pleased to consider "quantified and evidenced claims of actual financial loss" in respect of the period with which she was dealing, i.e. period 2. She emphasised the difference between a "capped claim" for refund of over-declared VAT (i.e. the claims for Periods 1 and 3) and an "uncapped claim" where there was no legal entitlement to make a payment. She made clear that the Respondent's decision not to pursue the defence of unjust enrichment in the capped claim in respect of Period 1 did not confer any automatic right to what would, in the case of the claim for Period 2, be entirely discretional compensation.
25. In a letter from Mr Leahy to Ms Taylor dated 3 January 2012, Mr Leahy confirmed that the Applicant had received a cheque for £220,510 from the Respondent in respect of its claim for Period 3. He repeated his assertion that, during Period 2, the Applicant had suffered loss of profit equating to the whole amount of the VAT which had been paid as a result of the Respondent's error. He stated that the Respondent had all the necessary information available to it and that the relevant evidence demonstrated that the Applicant was entitled to compensation in respect of Period 2. On 26 January 2012, Ms Taylor responded that she was handing over the claim for Period 2 to be reviewed by the Respondent's Central Advisory Team, which was responsible for the Respondent's Redress Policy.
26. In a letter dated 27 February 2012, one of the Respondent's officers, Mr Keith Dunn, explained the Respondent's Redress Policy. He repeated that the Policy did not give rise to any statutory right to or expectation of compensation. However, the Respondent would consider making financial redress in certain defined circumstances which were set out in its Complaints and Remedy Manual. Where economic loss is claimed, the onus is said to be on the Claimant to show beyond reasonable doubt that a clear and quantifiable loss was suffered directly and solely as a result of unreasonable delay by the Respondent. Mr Dunn quoted the Guidance given by the Respondent to its employees:

"We do not compensate for hypothetical, notional, speculative or potential loss. Only the net amount of actual financial loss, which can be demonstrated, evidenced and quantified, may be reimbursed."

Mr Dunn observed that, up to that point, the Applicant's claim had "amounted to little more than a request for repayment of the VAT, less input tax, supported by some anecdotal evidence". He suggested that the Applicant's claims had been founded on the premise that the incorrect advice given in 1995 was the sole cause of any loss that may have been suffered. He then listed a number of questions that would have to be answered, and various types of documentary evidence that would be required in order to found a successful claim. Mr Leahy responded on 22 March 2012, repeating that the relevant evidence had already been provided and insisting that the Applicant had a legitimate claim for compensation and was determined to pursue it.

27. Mr Dunn replied by letter dated 17 May 2012, repeating that it was for the Applicant to prove its case and to provide credible explanations for its own actions in respect of what is a self-assessment tax. He expressed the view that the Applicant had "not yet come near to achieving that". He suggested that the Applicant had had many opportunities to appeal against the Respondent's advice that VAT was payable on its business but had failed to do so. He emphasised the difference between the concept of "unjust enrichment" and the proof of actual financial loss. He concluded by re-iterating that the Applicant would have to show that it had been "deprived of income". He continued:

"They have not so far done that and on the evidence available at present I cannot recommend any payment of financial redress. I am sorry that this reply is not as positive as I am sure you would like, but the very limited information and evidence you have provided do not allow us to move forward. I therefore suggest that if you and your clients remain dissatisfied you ask the Adjudicator's office to investigate the matter. "

28. Following receipt of that letter, Mr Leahy informed Mr Dunn that it was the Applicant's intention to "seek specialised legal and professional advice to pursue the matter further". Mr Leahy wrote again to Mr Dunn on 13 August 2012, reiterating his view that the Respondent had failed to advise the Applicant appropriately in the course of its officers' visits to inspect the Applicant's affairs. He indicated that the Applicant had taken legal advice which indicated that it had a good chance of success in challenging the Respondent's refusal to meet its claim and suggested that settlement of the Applicant's claim would be advisable.
29. Mr Dunn responded on 26 September 2012 indicating that, whilst the Respondent's officers could have given appropriate advice about the payment of VAT on the hiring of stalls, its Guidance makes clear that it is the taxpayer's responsibility to ensure that the correct VAT payments are made.
30. On 20 December 2012, Mr Nigel Gibbons, a specialist in VAT and Customs Duty Appeals and Disputes instructed by the Applicant, wrote to the Respondent, requesting it to "reconsider [the Applicant's] claim afresh". He indicated that, if the Respondent was not prepared to make any offer in settlement, his advice to the Applicant would be to initiate civil proceedings against the Respondent for damages. Mr Dunn responded on 3 January 2013, pointing to the fact that the Applicant had not initiated any appeal against the Respondent's advice about the payment of VAT and indicating that his views had not changed. He expressed himself willing to consider any further representations the Applicant wished to make, but suggested that it might be appropriate for the Applicant to approach the Adjudicator and, if that failed, the Parliamentary Ombudsman.
31. In a letter dated 28 March 2013, Mr Gibbons wrote once again. On this occasion, he enclosed a witness statement from Mr Reed, as director of the Applicant. He expressed the hope that Mr Dunn would be able to review the case further in the light of the representations contained within the witness statement.
32. In a letter dated 18 April 2013, Mr Dunn stated that Mr Reed's statement had not "moved any closer" to establishing beyond a reasonable doubt that the Applicant had suffered an economic loss between 1992 and 2008 or that the Respondent was solely responsible for it". He went on to say:

"In any case, his claims do not materially alter my view that any economic or financial loss cannot possibly be ascribed solely to alleged mistakes on the part of [the Respondent]."

The letter concluded:

"I am sorry that I cannot give you a more positive reply to your letter. I can only suggest now that your clients pursue the options set out at the end of my letter to you of 3 January."

The Applicant's case is that Mr Dunn's conclusion in this letter constituted the Respondent's "decision" for the purposes of the application for judicial review.

The claim for judicial review

33. The Applicant made its claim for judicial review on 17 July 2013, i.e. just within a three month period of receipt of the letter of 18 April 2013. On 9 August 2013, the parties agreed that the proceedings should be stayed until October 2013 so as to permit time for alternative dispute resolution (ADR). The ADR produced no results and, by an Order dated 7 April 2014, HHJ Pelling QC, sitting as a judge of the High Court, extended time for filing and serving the Respondent's Acknowledgment of Service (AoS) and Summary Grounds of Resistance (SGR) to 23 May 2014.
34. On 30 April 2014, the parties made a joint application to vary the judge's Order to extend the time for filing and service of the AoS and SGR to 26 September 2014. That application was approved by a High Court Judge on 22 May 2014, but the relevant Order was not sealed by the Court until 27 May 2014. In the meantime, and as a precautionary measure, the Respondent had filed SGR, which had not been not drafted by Counsel, before the expiration of the original time limit. On 26 September 2014, i.e. the extended date agreed in the Order sealed on 27 May 2014, the Respondent filed further SGR which had been drafted by Counsel. That document was significantly more detailed than the previous SGR and raised new Grounds of Resistance, notably the contention that the claim for judicial review had been filed out of time.

The Applicant's preliminary submissions

35. The Applicant's first submission before me was that the Respondent should not be permitted to rely on its second SGR. It was contended that, absent a formal application to amend its original SGR, the Respondent was bound by its original SGR and should not be permitted to amend it at this stage. For the Respondent, Mr Singh pointed to the Order for an extension of time that had been agreed by the parties in May 2014. He argued that it must have been obvious to the Applicant at the time the Respondent filed its first SGR, just before the expiration of the original time limit, that the Respondent was merely protecting its position and that the SGR on which it intended to rely would follow within the extended time limit.
36. I do not consider that there is any merit in the Applicant's submission. It must have been clear to the Applicant that, in filing the SGR in May 2014, the Respondent was merely protecting itself from a potential failure to comply with the Order of HHJ Pelling QC. If the Respondent had intended to rely on the SGR filed in May 2014, there would have been no point in agreeing to a time limit which would expire some four months later. Furthermore, the second SGR was filed more than four months prior to the hearing of the application for permission, so that the Applicant was well able to deal with the matters raised in the second document. Indeed, the Applicant raised its objections to the second SGR only in its Skeleton Argument for the hearing. It has suffered no prejudice except the raising of a Ground of Resistance which was unwelcome to it.
37. The Respondent's second SGR raised for the first time the issue of delay in the filing of the claim for judicial review. The Applicant contends that the Respondent's late reliance on this issue amounts to an abuse of process. In particular, the Applicant relies on the fact that, subsequent to the service of the judicial review proceedings, the parties pursued ADR for a lengthy period, during which time the Respondent did not suggest that the claim was out of time. For the Applicant, Ms Graham-Wells argued that, had the Respondent raised the issue at the commencement of the proceedings, it could have been determined as a preliminary issue and, if the Respondent had been successful on the point, a great deal of time and expense could have been saved.
38. I do not consider that the fact that the Respondent has raised the issue of delay relatively recently can amount to an abuse of process. The Applicant made the claim. The Respondent cannot be criticised for acquiescing in an attempt to negotiate settlement of the dispute between the parties. It seems likely that what occurred is that the significance of the issue of delay was first recognised when Counsel was instructed to draft the second SGR. The idea that there was a deliberate tactical decision not to pursue the issue earlier I find wholly implausible. I do not consider that it can be said that the Respondent has misused or abused the process of the Court. Nor can it properly be said that the Respondent was in breach of its "obligations of candour" in not raising the issue of delay in the course of the ADR process.
39. I therefore reject the Applicant's request that I refuse permission to the Respondent to rely on its second SGR. The Respondent shall have the necessary permission to rely on the second version of its SGR.

The issue of delay

40. I turn now to consider the issue of delay. CPR 54.5(1) provides that the claim form in judicial review proceedings must be filed

(a) promptly; and

(b) in any event not later than 3 months after the grounds to make the claim arose.

In general, the courts require strict adherence to the time limit. It is open to the Court to grant an extension of time under CPR3.1(2)(a) in an appropriate case. However, there must be a good reason or adequate explanation for the delay and the Court must be satisfied that extending the time limits will not cause substantial hardship or substantial prejudice or be detrimental to good administration.

41. The Applicant's case is that the "decision" which was being challenged was that notified in Mr Dunn's letter of 18 April 2013 (see paragraph 32 of this judgment) and that therefore the "grounds to make the claim arose" then. For the Applicant, Miss Graham-Wells contended that the letter of 18 April 2013 represented the final stage in a process of "staged decision making" which had started on 24 March 2009 with the letter of claim from Mr Leahy. She submitted that, although the Respondent's letters of 2 August 2010 (see paragraph 14), 8 December 2010 (paragraph 17), 14 December 2011 (paragraph 24) and 3 January 2013 (paragraph 30) indicated that the claim (at least in respect of Period 2) would not be met, all the letters evinced a willingness to consider further representations and therefore indicated that no final decision had been reached. Miss Graham-Wells argued that, in his letter of 27 February 2012 (paragraph 26), Mr Dunn for the first time identified the Guidance used by the Respondent in considering the claim for Period 2. She contended that the decision to use that Guidance was flawed; the Respondent should have used different Guidance.
42. For the Respondent, Mr Singh argued that Mr Dunn's letter of 18 April 2013 could not be regarded as the disputed decision, i.e. the grounds for making the claim for judicial review. He submitted that the decision to refuse the Applicant's claim for Period 2 was in fact made clear by Ms Taylor in her letter of 2 August 2010: see paragraph 14. In that letter, having indicated her decision, Ms Taylor went on to inform the Applicant of the Respondent's Complaints Procedure. She left the way open for the Applicant to raise anything she had "overlooked" or "anything further" it wanted her to consider and, in the event of dissatisfaction, offered an independent review.
43. Mr Singh argued that the fact that Ms Taylor had indicated a willingness to accept further representations/evidence did not mean that there had not been a decision. He referred to the lengthy history of correspondence, which I have summarised in this judgment. He pointed out that, throughout that correspondence, the Respondent's officers had repeatedly set out their adherence to the decision originally stated on 2 August 2010. He suggested that, looking at the correspondence, it could not be said that Mr Dunn's letter dated 18 April 2013 represented a new or final decision.
44. I accept the Respondent's argument that, in her letter of 2 August 2010, Ms Taylor set out a clear decision. However, that decision was made on the basis that the Applicant's claim for Period 2 did not meet the criteria for redress by reason of "misdirection" and was out of the capped time limit. Thus, it amounted to a decision in relation to that type of claim.
45. In her letter of 8 December 2010, Ms Taylor for the first time raised the possibility that the Respondent might be prepared to make an ex gratia payment to the Applicant. Thereafter, the Applicant continued to contend that its claim for Period 2 should be treated as a "claim for misdirection". The Respondent's position was that the claim was debarred from being treated as a misdirection claim by reason of the time limits imposed following the Fleming decision and would therefore be treated as a claim for an ex gratia payment. Not surprisingly, the criteria for the latter are more demanding than for the former.
46. After 8 December 2010, the Respondent's officers repeatedly emphasised the need for the Applicant to provide clear documentary evidence of actual financial loss suffered by the Applicant as a result of the over-declaration of VAT in Period 2 in order for an ex gratia payment to be made. They did not accept the contentions of Mr Leahy and Mr Reed that the Applicant had already provided sufficient evidence. They also emphasised the fact that the criteria they were required to apply required the Applicant to establish that its financial loss had been caused solely by the Respondent's error and not by its own action or inaction. This was another issue of dispute between the parties, with the Applicant contending that its financial loss had plainly been caused solely by the Respondent's misdirection and incorrect advice and the Respondent saying that, in the final analysis, the responsibility was on the taxpayer to ascertain the correct position as to the payment of VAT.
47. I consider that Mr Dunn's letter of 17 May 2012 (paragraph 27) amounted to a clearly expressed decision that the claim for an ex gratia payment was refused. Taken in conjunction with the repeated refusals by the Respondent to countenance a "misdirection claim", the letter made clear that the Applicant's whole claim in respect of Period 2 had failed. The fact that the Applicant recognised that this was the case is supported by the fact that, immediately following receipt of the letter, Mr Leahy informed Mr Dunn that it was the Applicant's intention to seek legal and professional advice. Moreover, it is clear that the Applicant took that step shortly afterwards. The terms of the letter dated 17 May 2012, were final and unequivocal. Having set out his decision, Mr Dunn suggested that, if the Applicant remained dissatisfied with the outcome of its claim, it should ask the Adjudicator's Office to investigate the matter. In other words, it should exercise its right to access the remedy which was open to it.
48. By contrast to the letter of 17 May 2012, the letter dated 18 April 2013, on which the Applicant relies, was extremely short. Having referred to the witness statement of Mr Reed, recently sent by the Applicant, Mr Dunn merely indicated that the witness statement did not change his previously expressed conclusion. The letter therefore amounted to a reiteration of a previous conclusion, not a statement of a newly made decision. Although it suggested that, if dissatisfied, the Applicant should pursue the options previously suggested by Mr Dunn (i.e. an application to the Adjudicator), there is no specific mention of that remedy.
49. I am satisfied that, at the very latest, the grounds to make the claim first arose upon receipt of Mr Dunn's letter dated 17 May 2012. That fact is reflected by the fact that, immediately after its receipt, the Applicant's then accountant, Mr Leahy, indicated that the Applicant would be seeking legal and/or professional advice. The fact that the Respondent continued, to a limited extent, to respond to further submissions made by the Applicant does not mean that no decision had taken place. The mere fact that one party seeks to persuade another party to change its mind does not negate the original decision.
50. The claim was therefore filed as long as 14 months after the decision which was the subject of the claim and formed the grounds for making it. That is a very substantial delay. No reason has been given for that delay. I infer that it was caused by a continuing hope on the part of the Applicant that the Respondent would change its mind and accept its claim. However, that does not seem to me to be a sufficiently good reason or adequate explanation for the delay to justify my granting an extension of time. Such a hope must be a common occurrence in connection with decisions made in a public law context. If it were deemed to be a good reason for delay in bringing a claim, it would provide an excuse for delay in very many such claims. Moreover, the Applicant is a company with ready access to professional accountancy and legal advice. It availed itself of such advice shortly after receipt of the letter dated 17 May 2012. Having received such advice, Mr Leahy informed Mr Dunn (in his letter of 13 August 2012: paragraph 28) that the Applicant had been advised that it had a good chance of succeeding in a High Court claim. Proceedings were therefore being considered, but were not commenced until July 2013. In the circumstances, I do not consider that it would be appropriate to extend the time limit in this case.

The issue of an alternative remedy

51. My decision on delay must inevitably lead to refusal of the Applicant's application for permission to apply for judicial review. However, I shall also deal with the Respondent's contention that the Applicant has an adequate alternative remedy. Judicial review is a remedy of last resort and, where an adequate alternative remedy is available, the Court will usually refuse permission to apply for judicial review unless there are exceptional circumstances justifying the claim proceeding.
52. The Respondent contended that there is an alternative remedy open to the Applicant, namely an application to the Adjudicator, an impartial and independent referee whose role is to consider whether or not the Respondent and other similar bodies have handled complaints properly and have given a reasonable decision. When the Adjudicator considers that the Respondent has fallen short, she will recommend what it needs to do to put matters right, including the payment of compensation. Mr Dunn had of course specifically alerted the Applicant to the possibility of referring its case to the Adjudicator in his letter of 17 May 2012.
53. For the Respondent, Mr Singh pointed out also that, in the event that the Applicant is dissatisfied with the outcome of an application to the Adjudicator, it would be open to it to approach the Parliamentary and Health Service Ombudsman (PHSO). The PHSO would have the power to direct the payment of appropriate compensation by the Respondent to the Applicant.
54. Miss Graham-Wells contended that this Court was the Applicant's last resort, since no other avenue it can pursue will offer an adequate, suitable or otherwise effective remedy. She argued that the case involves matters of law with which neither the Adjudicator nor the PHSO could deal. Neither could they reach conclusions as to whether the disputed decision was irrational, unreasonable, conspicuously unfair or otherwise in breach of natural justice, procedural fairness and/or an abuse of power. Miss Graham-Wells also submitted that, since the Adjudicator and the PHSO only have the power to make "recommendations" to Government Departments, there is no guarantee that, even if they recommended payment of substantial compensation to the Applicant, the Respondent would comply with that recommendation. Only this Court, she said, could bind the Respondent.
55. The Respondent acknowledges that it is not open to the Adjudicator or the PHSO to consider disputes of law. However, Mr Singh submitted that they would be well able to consider the adequacy of the Respondent's findings on the central questions raised by the Applicant's judicial review claim, namely whether the Applicant had demonstrated that it had suffered an economic loss in the relevant period and, if so, whether the Respondent was solely responsible for that loss.
56. I do not consider that this claim involves issues of law or policy. The Applicant contends that the Respondent was wrong to apply the capping restrictions to the claim for Period 2 and that it applied the wrong Guidance when determining the Applicant's claim. However, those are not issues of law; they concern what are in essence alleged errors in the Respondent's application of its decision-making system. There is no reason why the two alternative organisations concerned could not deal with those issues. They would also be in a good position to reach a conclusion as to whether the Respondent has acted unfairly and/or improperly, as alleged by the Applicant. Moreover, the fact that the two organisations would not have the power to declare the Respondent's actions unlawful does not mean that they do not provide an adequate remedy. The organisations are able to make a recommendation for the payment of monies and that is the outcome which the Applicant is seeking. The argument that the claim involves a breach of Article 1 of the ECHR is somewhat fanciful and cannot form the basis for a decision that the Applicant has no adequate alternative remedy.
57. In addition, the Applicant's claim involves factual issues, e.g. the dispute about the extent of the advice given to the Applicant by officers from the local VAT Office and the dispute about the nature and adequacy of the financial information provided to the Respondent by the Applicant in support of its claim. Such factual issues would be much more appropriately explored by the Adjudicator and/or the PHSO than by this Court.
58. As to the possibility that the Respondent might not comply with a recommendation by the Adjudicator or the PHSO that it should pay a substantial sum of money (potentially more than £1 million) to the Applicant, that seems to me very small indeed. In its website, the PHSO acknowledges that it does not have the power to enforce its recommendations. However, it records that, in 2012-13, the organisations in respect of which the PHSO made recommendations complied with those recommendations in over 99% per cent of cases. It is true that most of those cases will have involved the payment of relatively small sums of money (if indeed, they involved the payment of any money at all), but that does not mean that, in an appropriate case, a substantial payment would not be made. It is evident from the reforms that result from decisions of the PHSO that it is a highly respected organisation and it seems implausible that the Respondent would choose to ignore its clear recommendations, particularly in the light of its submissions in this claim that the PHSO would provide an adequate alternative remedy.
59. I therefore consider that the application for permission must also fail on the ground that an adequate alternative remedy is available to the Applicant.

Final decision

60. In the light of my decision on these two issues, it is not necessary for me to consider the merits of the application. In the circumstances, it seems to me inappropriate to do so since there is a risk that anything I say might be considered to bind the organisations which provide the alternative remedy to which I have referred.
61. The application for permission is therefore refused.

Costs

62. The Respondent seeks an order that the Applicant should pay the Respondent's costs of the preparation of the Acknowledgment of Service and Summary Grounds of Defence which were filed on 26 September 2014. Those costs form part of a Statement of Costs which was served by the Respondent together with its Acknowledgment of Service. The costs claimed were as follows:

Counsel's fee for settling the Summary Grounds of Defence: £2,280

1 hour of a Grade B Solicitor's time spent considering the draft Summary Grounds of Defence @ £242 per hour: £242

Total costs claimed: £2,522

63. Miss Graham-Wells filed written submissions contesting the Respondent' costs claim. She did not dispute that, in principle, the Respondent, as the successful party, would usually be entitled to its costs, subject to assessment. However, she contended that, since the Statement of Costs submitted by the Respondent had been unsigned and undated, the Respondent was not entitled to any part of its costs.
64. In the event that her primary submission failed, Miss Graham-Wells challenged the amount of costs claimed. She acknowledged that the fees claimed by Mr Singh were entirely reasonable and proportionate, given the issues involved in the case. There was therefore no dispute in relation to that item.
65. However, Miss Graham-Wells argued that, so far as the costs of the Respondent's Solicitor, Ms Sarah Hickling, were concerned, both the hourly rate (£242) and the time (one hour) taken to do the relevant work were excessive. She noted that Ms Hickling was a Grade 7 Government Legal Service Lawyer, who worked within the VAT legislation team of the Respondent's Solicitors Office in London. She argued that the application for permission to bring the claim for judicial review had been issued in the Manchester District Registry, so that it would have been proportionate for a lawyer from the Respondent's Manchester Office to deal with the case instead of Ms Hickling. She suggested that, based on the Guideline Rates for Summary Assessment in the 2015 White Book (pp1821-1823), the hourly rate should be taken from Band One (i.e. the appropriate rate for Manchester). The top rate for a Grade B fee earner in Band One is £192. Miss Graham-Wells suggested that the hourly rate payable to Ms Hickling should be between Grades B and C, i.e. £171.
66. Miss Graham-Wells submitted also that, by reason of Ms Hickling's previous experience of VAT matters and her previous involvement with this case (in the ADR proceedings), she would have been very familiar with the issues covered in the Summary Grounds of Resistance so that the expenditure of as long as one hour on consideration of the document drafted by Mr Singh was excessive. She suggested that half an hour would have been more appropriate.
67. For the Respondent, Mr Singh pointed out that a Statement of Costs had been filed by the Respondent at the same time as its Summary Grounds of Defence. He acknowledged that the document had not been dated or signed, and thus did not comply fully with the relevant Rules. However, he argued that there was no doubt that the work which was the subject of the claim for costs had been carried out and in the circumstances, it would be unfair if the Respondent was barred from having the usual award of costs made in its favour.
68. As to the hourly rate charged for Ms Hickling, Mr Singh submitted that there was good reason for Ms Hickling to have continued to have conduct with the case. She had already been involved with the ADR proceedings and, given her familiarity with the case, it was far more appropriate for her to continue to deal with it. Thus, the Central London rates should apply. The Grade B rate for Central London is £242. Mr Singh argued that there was no reason for reducing that figure. He submitted that an hour's work was entirely reasonable, having regard to the detailed nature of the Summary Grounds of Defence.
69. I consider that it would be unnecessarily harsh to deny the Respondent its costs solely because of the fact that the Statement of Costs was unsigned and undated. Signature of such documents is of course important, since it amounts to a statement of truth. In many cases, it may be vital. In the present case, however, the costs claimed are very limited and there is no doubt that the relevant work has been done.
70. So far as the other issues are concerned, I accept the Respondent's submission that it was appropriate, and indeed proportionate, for Ms Hickling to continue to deal with the case, despite the fact that she was employed in London. Had the case been transferred to the Respondent's Northern Office, it would have been necessary for another lawyer to familiarise himself/herself with the circumstances. That could have taken a great deal longer than an hour. Continuity was particularly important in this case, given its complex and protracted history. So far as the hourly rate is concerned, it appears that Miss Graham-Wells had the erroneous impression that the Respondent had taken the City of London, rather than the Central London, rate and had reduced it to somewhere between Grades B and C. In fact, the Respondent had taken the Grade B rate for Central London and had made no reduction. I can see no reason for reducing the rate from £242. The Summary Grounds of Defence consisted of 19 pages of detailed submissions and I do not regard one hour's work on it as excessive, unreasonable or disproportionate.
71. I therefore made on order that the Applicant shall pay the Respondent's costs of the Acknowledgment of Service and Summary Grounds of defence summarily assessed at £2,522.