Strand, London, WC2A 2LL
B e f o r e :
| COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS
|- and -
|BENCHDOLLAR LIMITED AND OTHERS
1st Floor South, South West Bush House, Strand, London WC2B 4RD) for the Claimant
Mr Edward Bartley Jones QC
(instructed by Knights Solicitors LLP The Brampton, Newcastle Under Lyme, Staffordshire ST5 0QW) for the Defendants
Hearing dates: 4th – 5th June 2009
Crown Copyright ©
Mr Justice Briggs :
The Common Factual Background
"The court shall adjourn the [recovery] proceedings until such time as the final decision is known; and that decision shall be conclusive for the purpose of proceedings."
"Since we are bound in the collection of National Insurance arrears by way of the Limitation Act, we are required to obtain a protective writ, in order to protect the [relevant] tax year debt from becoming time barred. However, if you or your authorised agent were to provide either a signed acknowledgement of the debt or make a payment or part payment of the debt, the Limitation period would run from the date of the acknowledgement or payment/part payment and there would therefore be no requirement at this stage for us to obtain a writ.
If this is the course of action you would prefer to take, please sign and return the enclosed declaration as soon as possible.
It should be emphasised that this would be an acknowledgement of the debt, and not an admission of liability.
We look forward to hearing from you."
"FOR PURPOSE OF THE LIMITATIONS ACT 1980
Re: [name of employer]
Section 29(5) of the Limitations Act 1980 (fresh accrual of action on acknowledgement or part payment), states,
"Where any right of action has accrued to recover,
(a) any debt or liquidated pecuniary claim
and the person liable or accountable for the claim acknowledges the claim or makes payment in respect of it, the right shall be treated as having accrued on and not before the date of the acknowledgement or payment."
We, on behalf of/as the defendants, hereby acknowledge the claim of the Inland Revenue for National Insurance Contributions for the years [identified], for the purpose of S29 of the Limitations Act 1980.
This is not an admission of liability regarding the claim for National Insurance Contributions.
"When arrears of National Insurance Contributions (NIC's) are owed for a period approaching six years ago, it will be for the Inland Revenue to seek or commence proceedings in the Civil Court to safeguard the debt from the effect of the Limitations Act 1980.
Section 29(5) of the Limitations Act permits an "acknowledgement" of the NIC's debt to be given without the need to take legal action to protect the arrears through the courts system. You will note the drafted acknowledgement is not an admission of liability.
If you are in agreement, to prevent the necessity for Civil Court action, an appropriate person should sign and return the enclosed forms of acknowledgement within the next 21 days.
If no response is received we intend to place the matter before the Civil Court for recovery of the debt. However, as there is a matter to be resolved outside this Court's jurisdiction by your appeal, it is our intention to notify the Court of your appeal and to request immediate adjournment until your appeal has been cleared."
"Re [relevant company- relevant asset]
For the purposes of Section 29(5) of the Limitation Act 1980 I acknowledge your claim for Class 1 Contributions amounting to [amount] for the [relevant period]. This is not an admission of liability.
"We enclose a copy of an extract from the Inland Revenue's Enforcement Office Manual which states that the six year time limit starts afresh from the date the person liable (or their agent) acknowledges the debt in writing or makes part payment.
Accordingly, although we dispute the debt, we are conscious of your position and, without prejudice, we enclose our cheque in the sum of £1 in part payment.
We would therefore ask you to consider refraining from taking action at this time since, according to the enclosed, you will now have 6 years from this date in which to commence proceedings by which time we hope the matter will be finally resolved."
The letter included an extract from the relevant Manual together with DPC's cheque for £1.
"2. The cheque for £1 has been accepted as acknowledgement by the company of the Class 1 debt and the interest accrued to date. Mr Redrup has been notified and will be copied this letter as confirmation.
3. The company now have 6 years from the date the cheque was received in the Inland Revenue, 8 August 2000, to clear the Class 1 debt. I must, however, re-iterate that interest on the debt will continue to accrue at the daily rate previously advised until payment in full is received."
"Client anxious to avoid court proceedings. … Please confirm claim will not be issued."
They repeated this request by letter and the Revenue replied:
"I can confirm that the County Court proceedings previously needed to protect this amount will now not need to be issued.
The Commission of Inland Revenue reserve the right to issue new proceedings to enforce collection of the debt should your client fail to provide payment for any amount held to be due as a result of this appeal."
"Until the appeal has been decided we are required to issue protective proceedings to the County Court appropriate to your business/company address. The requirement to issue a protective claim can be avoided by either: -
-completing the statement which acknowledges the NICs debt outstanding or,
-making a part payment towards the debt
In doing so the limitation period for the collection of the debt is effectively extended for another 6 years. The requirement to issue the Protective Claim will therefore be negated.
It must be stressed that failure to respond within 14 days will leave the department with no alternative but to proceed with the County Court Claim."
Law and Analysis
"It could not be right to adopt a test of necessity when implying terms into a contract and a more relaxed test when implying a contract – which must itself have terms."
"An intention to create legal relations is normally presumed in the case of an express or apparent agreement satisfying the first requirement (an agreement on essentials with sufficient certainty to be enforceable): see Chitty on Contracts (28th Ed.) Vol. 1 para.2-146. It is otherwise, when the case is that an implied contract falls to be inferred from parties' conduct: Chitty, para.2-147. It is then for the party asserting such a contract to show the necessity for implying it. As Morison J said in his paragraph 12(1), if the parties would or might have acted as they did without any such contract, there is no necessity to imply any contract. It is merely putting the same point another way to say that no intention to make any such contract will then be inferred."
"This is not a case in which, the parties having evidently sought to make a contract, the court seeks to uphold its validity by construing the terms to produce certainty. Rather it is a case in which the lack of certainty confirms the absence of any clear evidence of an intention to create legal relations…. It cannot be said, let alone with confidence, that the conduct of the parties is more consistent with the existence of the contract sought to be implied than with its absence. The implication of the alleged contract is not necessary to give business reality to the commercial relationship between M & S and Baird."
"It is settled that an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared by them both or made by one and acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption: K Lokumal & Sons (London) Ltd v. Lotte Shipping Co Pte Ltd  2 Lloyd's Rep 28; Norwegian American Cruises A/S v. Paul Mundy Ltd  2 Lloyd's Rep 343; Treitel, The Law of Contract, 9th ed. (1995), pp. 112-113. It is not enough that each of the two parties acts on an assumption not communicated to the other. But it was rightly accepted by counsel for both parties that a concluded agreement is not a requirement for an estoppel by convention."
"Thus the court is not so rigid and inflexible as to insist on the parties being held to an assumed and incorrect state of fact or law when there is no injustice in allowing a party to resile therefrom (see, for example, Multon v. Cordell (1988) 277 Estates Gazette 198). Further, if the estoppel applies it will do so only "for the period of time and to the extent required by the equity which the estoppel has raised" (per Ralph Gibson LJ in Troop v. Gibson at p.1144). Thus, once a common assumption is revealed to be erroneous the estoppel would not apply to future dealings between the parties (per Purchas LJ in the same case at p.1144)."
Lord Donaldson summarised the point in Hiscox v. Outhwaite as follows:
"Once a common assumption is revealed to be erroneous, the estoppel will not apply to future dealings."
"Before anyone can be estopped, he must have played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it. But the law does not leave such a question of fairness or justice at large. It defines with more or less completeness the kinds of participation in the making or acceptance of the assumption that will suffice to preclude the party if the other requirements for an estoppel are satisfied. A brief statement of the recognised grounds of preclusion is contained in the reasons I gave in Thompson v. Palmer (1933) 49 CLR at page 547, and it is convenient to repeat it: - "whether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him in occasioning its adoption by the other party. He may be required to abide by the assumption because it formed the conventional basis upon which the parties entered into contractual and other mutual relations, such as bailment; or because he has exercised against the other party rights which would exist only if the assumption were correct, …; or because knowing the mistake the other laboured under, he refrained from correcting him when it was his duty to do so; or because his imprudence, where care was required of him, was a proximate cause of the other party's adopting and acting upon the faith of the assumption; or because he directly made representations upon which the other party founded the assumption.""
Counsel before me both invited me to treat that statement as a valuable guide, rather than an exhaustive code. They were right to do so.
"The terms of section 2(1) are mandatory once the factual situation therein described exists, as it does here, and it cannot, as we think, be overridden by an estoppel even assuming that otherwise the conditions for an estoppel exist … having regard to the purpose of the Act of 1948, it cannot be said to be unconscionable for the tenant who is protected by it to rely upon the protection which the statute specifically confers upon him."
It was common ground that no such protection is afforded by the Limitation Act 1980, the parties being free in effect to contract out of it, by substituting a longer or shorter limitation period for that provided by the Act.
"That is sufficient to dispose of the argument but there seems to us to be other insuperable obstacles to a successful plea of estoppel. This is not strictly a case of the parties having established, by their construction of their agreement or their apprehension of its legal effect, a conventional basis upon which they have regulated their subsequent dealings as in the Amalgamated Investment case  QB 84. The dealing alleged to give rise to the estoppel is the entry into the agreement itself in the belief that it would produce a particular legal result. In fact, for reasons which had nothing to do with the defendant, the plaintiffs got it wrong: and what Miss Williamson appears to us to be contending for is a much wider conventional estoppel than has yet been established by any authority, namely that where parties are shown to have had a common view about the legal effect of a contract into which they have entered and it is established that one of them would not to the other's knowledge have entered into it if he had appreciated its true legal effect, they are, without more, estopped from asserting that the effect is otherwise than they originally supposed.
So broad a proposition cannot be deduced from the actual decision in the Amalgamated Investment case and although it may be supported on the basis of the very wide proposition of Lord Denning M.R. in the Amalgamated Investment case referred to above, it cannot, in our judgment, be right. If, for instance, the parties had been negligently advised by a solicitor that a yearly tenancy was not protected by the Act of 1948 and had entered into one accordingly, it would, we should have thought, be an impossible contention (quite apart from Johnson v. Moreton  A.C.37) that the tenant was estopped from invoking the protection which the Act confers on such a tenancy."
"Mr Hodge's suggestion that the words "without more" indicate that a convention could be established in the circumstances described by Oliver LJ provided that the essential additional element of unconscionability could be established, does not appear to me to accord naturally with the meaning of the words in that context. In my opinion, Oliver LJ was indicating that some course of dealing after the contract in question had been entered into was necessary."
A similar conclusion is to be found in Ferris J's analysis of the effect of Keen v. Holland in Colchester v. Smith (supra), at page 496.
"However, the element of an estoppel by convention (given the authorities which establish that such an estoppel may be as to law), that is lacking in their example, is communication by the party to be estopped to the estoppel raiser that he shares the relevant view, such as to render him accountable to the estoppel raiser for its correctness."
This is developed in the following passage from paragraph VIII.5.7:
"It is this issue of the assumption of responsibility for the correctness of the relevant proposition that … the requirement that the party estopped actually (or as reasonably understood by the estoppel raiser) intended the estoppel raiser to act in reliance on the representation, is designed to address. In the context of estoppel by convention, the question here is whether the party estopped actually (or as reasonably understood by the estoppel raiser) intended the estoppel raiser to rely on the subscription of the party estopped to their common view (as opposed to each, keeping his own counsel, being responsible for his own view)."
i) It is not enough that the common assumption upon which the estoppel is based is merely understood by the parties in the same way. It must be expressly shared between them.
ii) The expression of the common assumption by the party alleged to be estopped must be such that he may properly be said to have assumed some element of responsibility for it, in the sense of conveying to the other party an understanding that he expected the other party to rely upon it.
iii) The person alleging the estoppel must in fact have relied upon the common assumption, to a sufficient extent, rather than merely upon his own independent view of the matter.
iv) That reliance must have occurred in connection with some subsequent mutual dealing between the parties.
v) Some detriment must thereby have been suffered by the person alleging the estoppel, or benefit thereby have been conferred upon the person alleged to be estopped, sufficient to make it unjust or unconscionable for the latter to assert the true legal (or factual) position.
"If a common assumption existed up to this moment in time, ARC were entitled to a reasonable time to re-act to the disappearance of their assumption. In the circumstances of this claim that period might be measured in weeks rather than days, but not in months."
"In almost all cases, such unconscionability must be based on the prejudice which would be caused to the claimant if the strict legal position applied. As I see it, the claimant must also establish that that prejudice arises from its reliance upon the convention. In other words, the court generally must be satisfied that (a) the claimant will suffer real prejudice, and (b) the prejudice arises from its reliance (upon) the convention. It should be emphasised that, even if the claimant satisfies these criteria, there may be no estoppel, because there may be other, more powerful, factors pointing the other way."
Issues Affecting Particular Defendants
i) In relation to all NIC claims in respect of which the primary limitation period of 6 years under section 9 of the Limitation Act 1980 expired on
or before 11th September 2001, the employer defendants to such claims are estopped by convention from asserting that those claims are statute barred.
ii) In relation to NIC claims which became statute barred by the expiry of 6 years on any date after 11th September 2001, the defendants to such claims are not estopped from relying upon the Limitation Act 1980.
iii) None of the defences of want of authority have been established by the facts.