Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2010] CSOH 23
	OPINION OF LORD BRACADALE in the Petition of DAVID JESNER Petitioner; for Judicial Review of a Decision of the General Commissioners of Income Tax for the Division of Renfrew Upper Ward ­­­­­­­­­­­­­­­­­________________

Pursuer: Richardson, Advocate; Morton Fraser

4 March 2010

Introduction

[1] This is a petition for judicial review of a decision of the General Commissioners of Income Tax for the Division of Renfrew Upper Ward ("the Commissioners") refusing to state a case for the opinion of this court. The petition invites this court to quash the decision of the Commissioners to refuse to state a case and to make an order in terms of Section 45(b) of the Court of Session Act 1988 ordaining them to send a draft of the case to be stated to the petitioner within 56 days in terms of Regulation 21(1) of the General Commissioners (Jurisdiction and Procedure) Regulations 1994 ("the 1994 Regulations"). The petition has been served on the clerk to the Commissioners and on HM Commissioners for Revenue and Customs ("HMRC") but neither lodged answers or took part in the proceedings. At the first hearing I was fully addressed by Mr Richardson, counsel for the petitioners.

The statutory provisions

[2] Until 1 April 2009 appeal from a decision of the Commissioners was by way of stated case under section 56 of the Taxes Management Act 1970 and regulation 20 of the 1994 Regulations. Regulation 20 sets out the procedure for requiring a stated case. Paragraph (1) provides that within 30 days after the final determination any party to the proceedings, if dissatisfied with the determination as being erroneous in point of law, may by notice served on the clerk require the Tribunal to state and sign a case for the opinion of the High Court. Paragraph (3) provides:

"After a party has required a case to be stated under paragraph (1) above, the Tribunal may by notice served on him require him within a period of time stated in the notice, not being less than 28 days, to identify the question of law on which he requires the case to be stated.

(4) If a party fails to comply with a notice served under paragraph (3) above, or if the Tribunal is not satisfied that the question identified is a question of law, or until the fee specified in Section 56(3) of the Management Act has been paid, the Tribunal may refuse to state a case."

[3] The Tribunals, Courts and Enforcement Act 2007 ("the 2007 Act") introduced a new tribunal system across the United Kingdom. The Act provides for a system of First-tier tribunals with a right of appeal to the Upper Tribunal. Under this legislation the functions previously carried out by the Commissioners were transferred to the jurisdiction of the First-tier tribunal and in terms of paragraph (1) of schedule 8 to the Act the office of the Commissioners and their clerk were abolished. The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009, which commenced on 1 April 2009, effected the transfer of the functions of the Commissioners. Schedule 3 provides transitional and saving provisions. Paragraph 11(3)(a) of schedule 3 provides as follows:

"Subject to the modifications specified in sub-paragraphs (4) and (5) the following enactments continue to apply for the purposes of a case to be stated, a review, or for correcting an irregularity in respect of any decision of the Commissioners for the general purposes of the income tax made before the commencement date, as if the amendments in this Order had not been made-

(a) sections 56 and 58 of the Taxes Management Act 1970,

(b) regulations 17 and 20 to 24 of the General Commissioners (Jurisdiction and Procedure) Regulations 1994, and

(c) the General Commissioners of Income Tax (Costs) Regulations 2001"

Accordingly, as the decision of the Commissioners in the case of the petitioner had been made prior to 1 April 2009, the procedure for requiring a stated case laid down in Regulation 20 of the 1994 Regulations remained in force in relation to the petitioner's appeal.

The factual history of the case

[4] The factual history of this case is important and requires to be examined in some detail. In the course of 2008 the Commissioners heard appeals by the petitioner against revenue assessments for the years 1995/96 and 1996/97. In a letter dated 20 February 2009 the Commissioners gave their decision in principle and on 25 March 2009, the relevant figures having been agreed, issued their determination. In the letter dated 20 February the Commissioners stated:

"It emerged in the course of the hearing that what was in dispute and what formed the basis of your appeal was that HMRC had disallowed two claims which, if allowed, would have reduced the sums assessed. These claims are as follows:-

"1. That a sum of £350,000 was due to your brother, Philip Jesner, resident in Israel, as a commission or finder's fee for finding the buyer of land at Hillington ("the Hillington land"), the profit on the sale of which featured in the assessments under appeal.

2. That you were entitled to have the profit of the sale of the Hillington land averaged over two years as you claimed to be due the benefit of the overlap profit rules arising from the changeover from the preceding year basis to the actual year basis of assessment on the introduction of self assessment."

The Commissioners disallowed both claims. In relation to the first claim the Commissioners found that on the evidence before them the buyer had not been found by the brother of the petitioner but that the transaction had been entered into as a result of an approach by William O'Hara of Montague Evans, Chartered Surveyors, Glasgow to Paul Jacobs, Senior Acquisitions Manager for Ikea UK who bought the Hillington land in the name of a pension fund. The Commissioners disallowed the second claim because they reconsidered it to be an isolated transaction.

[5] At the hearing before the Commissioners, and subsequently, the petitioner was represented by Mr Paul J. Renz, a partner of Scott Moncrieff, Chartered Accountants.

[6] In the letter dated 25 March 2009 giving the determination of the Commissioners the clerk to the Commissioners stated the following:

"I also refer you to the enclosed notice regarding your right of appeal. This refers to the Court of Session in Edinburgh but as from 31 March 2009 the whole system is changing. However, if you want to appeal you would need to contact me in the way spelled out in the notice and I could let you know then where your appeal would go once the Commissioners had stated a case."

The attached notice contained information in relation to an appeal against the determination of the Commissioners. The notice contained the following:

·     You can only appeal against a determination on a point of law. This means that you must be able to show that the Tribunal applied the law wrongly in your case. Either you or the Inland Revenue and any other party involved in the matter can appeal...

·     If you decide to appeal you must write to the clerk to the Commissioners within 30 days of the final determination. Your letter should ask for a case to be stated for the Court of Session, which is where your appeal will be heard. A 'case stated' sets out the final determination and the facts of the case which led to it. You will have to pay a fee (currently £25) which you should send with your request.

·     The Tribunal can ask you to identify the question of law on which you want your case stated. You will be sent a request which will give you at least 28 days to apply and to identify a point."

The notice goes on to state the following:

"The Tribunal can refuse to state a case if:

· You do not pay the fee

· You do not reply to the Tribunal's request to identify the question of law; or

· It is not satisfied that the question you identify is a question of law."

On 2 April 2009 Mr Renz wrote to the clerk to the Commissioners requesting a case to be stated.

[7] By letter dated 6 April 2009 the Commissioners required the petitioner to identify the question of law on which he required a case to be stated. The clerk went on to state in his letter:

"In terms of Regulation 20(4) of the General Commissioners (Jurisdiction and Procedure) Regulations 1994 if you fail to comply with this notice or if the Commissioners are not satisfied that the question identified is a question of law the Commissioners may refuse to state a case."

In response to the requirement made by the Commissioners for the petitioner to identify the question of law on which the case was to be stated Mr Renz wrote to the clerk to the Commissioners on 24 April 2009 in the following terms:

"As you will be aware, the regulations you cite and which you advertise the Commissioners as intending to insist upon, predate the coming into force of the Human Rights Act 1998.

Accordingly, there is now a requirement to deliver a fair hearing which innately obliges any Tribunal to issue reasons in law for reaching its decision on the key points at issue. (See H. Balani v Spain Etc for authorities).

When a party is not satisfied with a decision reached by a Tribunal and therefore wishes to lodge a further challenge, it is patently unreasonable, and now unlawful, under Section 6(1) of the HRA 1998 for the Tribunal to refuse to identify the legal basis and statutory authority for their decision.

I must therefore formally advise you that Mr Jesner is presently instructing solicitors to seek a judicial review of HMRC's finding, therefore he needs an interlocutor identifying the ratio decided [sic] in supporting the decision of the Commissioners."

On 30 April 2009 the clerk to the Commissioners sent an email to Mr Renz in which he stated:

"All I need to respond to really is what appears to be a request in your last paragraph. However, you already have the information that you seem to be asking for. In the decision in principle letter of 20 February 2009 the reasons for the Commissioners decision were fully spelled out. Your client already knows the grounds in law on which the decision is based."

On 5 May 2009 the petitioner himself replied by e-mail explaining that Mr Renz was currently unavailable because he was undergoing surgery. The petitioner went on to reiterate what had been said by Mr Renz in the earlier letter. On 2 June 2009 the clerk to the Commissioners wrote to the petitioner stating:

"You have not identified the question or questions of law in connection with your request for a stated case within the time allowed in my letter of 6 April notifying you of the necessity for this. Therefore I now write to tell you that in these circumstances the Commissioners have refused to state a case."

[8] The petitioner then instructed Morton Fraser, Solicitors, who wrote to the clerk to the Commissioners on 29 June 2009. The letter contained the following:

"The procedure for appealing the summarised decision of 20 February 2009 is not clear given the terms of the Tribunals, Courts and Enforcement Act 2007; the various commencement orders and in particular the Transfer of Tribunal Functions and Revenue and Customs Appeal Order 2009/56. It is not clear to us the provisions under which our client may appeal and where an appeal lies. We note in passing that correspondence from you had also suggested that the route for proceeding was yet to be determined.

We are of the view that an appellate court will require a full written decision in order to exercise its supervisory function. That must be particularly so when, as we understand it, the hearing in this case lasted for 6 days and considerable evidence was heard by the Commissioners. Nevertheless, we have stated below questions of law and matters of procedure upon which the Tribunal determined during the course of the hearing and upon which we require a reasoned decision of the Commissioners. We submit that it may be simpler for a full decision of the Commissioners to be issued. If that is not to be forthcoming then we must reserve our right to intimate further points of law on which we require clarification. We are instructing senior counsel who may indicate further grounds of challenge in early course."

There followed a list of points on which the solicitors indicated that they required a reasoned decision. At the same time the solicitors wrote to the office of the Upper Tribunal seeking leave to lodge late an appeal to the Upper Tribunal and stating that there was uncertainty as to where the appeal lay.

[9] On 31 July 2009 the clerk to the Commissioners replied to the petitioner's solicitors in the following terms:

"When a request for a stated case is made the Tribunal may require the party requesting the case to identify the question of law on which he requires the case to be stated. The Commissioners made this a requirement here and Mr Jesner has not complied. Therefore the Commissioners have refused to state a case. That as far as the Commissioners are concerned is the end of the matter unless Mr Jesner can have this refusal overturned by a higher court.

In their decision the Commissioners identified two points they considered had to be decided. They made a decision on these two points and gave reasons."

[10] On 1 September 2009 the clerk to the Upper Tribunal wrote to the solicitors stating that in their view the Upper Tribunal had no authority in the matter and any appeal lay to the High Court. She added that the obligation to state a case remained with the General Commissioners who heard the appeal. She referred to the transitional provisions. This was confirmed by an email to the solicitors dated 11 September 2009 from the policy officer of the Central London Tribunals.

Submissions and discussion

[11] Mr Richardson submitted that in refusing to state a case in response to the solicitors' letter of 29 June 2009 the Commissioners had acted unreasonably and their decision was open to review by this court. He submitted that the Commissioners had made two serious errors in law. They had wrongly referred to a change in procedure regulating the procedure whereby the petitioner challenged the decision of the Commissioners and they apparently considered that they had no discretion to consider questions of law raised by the petitioner outwith the time period allowed. He submitted that taking these two errors in law cumulatively, and adding a number of further factors, the decision of the Commissioners to refuse to state a case was one which no reasonable Commissioners, properly instructed in the law, would have made. The additional factors were as follows. First, the letter dated 20 February 2009 was no more than a summary and did not contain a full statement of reasons or findings in fact. It made no reference to any of the various procedural decisions which had a material bearing on the outcome. Secondly, the Commissioners were aware that for a material part of the time during which the petitioner had been required to identify the questions of law he had been unrepresented because Mr Renz had been undergoing hip replacement surgery and was out of commission for a period of 4 weeks. Thirdly, in the letter dated 29 June 2009 the petitioner had eventually set out points of law.

The first error

[12] Mr Richardson submitted that the reference to the new procedure in the letter dated 25 March 2009 was plainly wrong and its result could be traced through the subsequent correspondence. He pointed out that under the new provisions there was a requirement on the First-tier Tribunal to issue full written reasons and the time limits did not start until they were issued. The erroneous reference to the new procedure had never been clarified. The consequences of this error should weigh heavily in the consideration of whether it was reasonable for the Commissioners to refuse to consider the questions of law included in the letter dated 29 June 2009.

[13] It seems to me that Mr Richardson sought to read too much into the reference to the new procedure in the 25 March 2009 letter. All the clerk did was to draw attention to the changes happening in the whole system. What, however, he instructed the petitioner to do was to make the application in terms of the stated case procedure and that he would advise the petitioner where the appeal would go once the Commissioners had stated a case (emphasis added). Subsequently, the petitioner consulted solicitors, who apparently failed to understand the transitional provisions. I am unable to accept the proposition that in the letter dated 25 March 2009 the clerk to the Commissioners made an error which thereafter infected the whole procedure.

The second error

[14] Mr Richardson submitted that the reasonable inference to be drawn from the 31 July 2009 letter was that the Commissioners considered that they had no discretion to consider the points of law raised in that letter. It was plain from Regulation 20(4) that they did have a discretion. That paragraph referred to the words "may refuse". The Commissioners had unreasonably fettered their discretion in a manner in which no reasonable Commissioners, properly instructed in terms of Regulation 20(4), would have done. Mr Richardson went on to submit that, even if his construction of the letter was wrong, the fact that the Commissioners did have a discretion and failed to exercise it, when taken along with the first error, was a relevant consideration in deciding whether their action in response to the 29 June letter was reasonable.

[15] Although I heard no argument to the contrary, I am of the view that the construction of regulation 20(4) for which Mr Richardson contended is correct and that the Commissioners did have a discretion as to whether to accept questions of law submitted outwith the time period allowed. However, I do not read the letter dated 31 July 2009 as indicating that the Commissioners had formed the view that they could not consider late questions of law and had thereby fettered the exercise of their discretion. The response in that letter has to be examined in the light of the history of the case. In his letter dated 24 April 2009 Mr Renz, in response to the requirement to identify the legal questions, made it plain to the Commissioners that the petitioner did not intend to comply with that requirement. No sensible explanation for refusing to do so was offered. Relatively general questions of law could easily have been focused. As Mr Richardson pointed out under reference to R (on the application of Rouf (trading as the New Balaka Restaurant)) v General Commissioners for Dundee [2008] STC 1557, relatively general questions of law may be sufficient. Both in the notice attached to the letter from the clerk to the Commissioners dated 25 March 2009 and in the letter from the clerk dated 6 April 2009 the potential consequences of failing to identify questions of law were made clear to the petitioner. In the letter dated 29 June 2009 the solicitors did not offer any explanation for the failure to comply with the earlier requirement to identify questions of law; they did not request the Commissioners to exercise their discretion by considering late questions of law; and the points of law listed in the letter were presented in the context of an attempt to invoke the new procedure. In these circumstances the question of exercising the discretion to allow late questions of law did not arise. In any event, even if the question had arisen, the Commissioners would have been well entitled to have refused to exercise their discretion in favour of the petitioner.

The additional factors

[16] In the light of the view at which I have arrived in relation to the two errors which formed the backbone of Mr Richardson's submissions, I can deal briefly with the remaining points. In relation to the question of the adequacy of the reasons given in the decision letter dated 20 February 2009, it seems to me that sufficient reasons were given to allow the petitioner to identify questions of law. I note that in Rouf the Commissioners had failed to give any reasons and the general questions of law identified by the petitioner in that case were held to be sufficient points of law to require the Commissioners to state a case. I am unable to accept the unavailability of Mr Renz as being a significant point. I note that Mr Renz had issued the letter dated 24 April 2009 before he became indisposed; by e-mail dated 5 May 2009 the petitioner himself reiterated the points made by Mr Renz; and it is inconceivable that the interests of the clients of Mr Renz, who was a partner in a large firm of accountants, would not be looked after by others while he was indisposed.

[17] In my opinion the petitioner has failed to demonstrate that the Commissioners acted unreasonably in refusing to state a case in response to the letter dated 29 June 2009. Whether he was well served by his professional advisers is not a matter on which I require to express a view.

Decision

[18] For the reasons discussed above I shall refuse the prayer of the petition. In these circumstances no question of expenses arises.