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Cite as: [2006] UKSPC SPC00556, [2006] UKSPC SPC556

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Halewood International Ltd v Revenue & Customs [2006] UKSPC SPC00556 (25 July 2006)

SPC00556

PROCEDURE – Lead case – Application to be removed from proceedings – Appellant subject to direction binding it to outcome of lead case proceedings – Appellant applies under rule 7A(4) to be released from direction – Whether Appellant should be excluded from the case proceedings – No – Special Commissioners (Jurisdiction and Procedure) Regs, 1994/1811, r.7A

THE SPECIAL COMMISSIONERS

HALEWOOD INTERNATIONAL LIMITED Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents

Special Commissioner: STEPHEN OLIVER QC

Sitting in public in London on 18 July 2006

No representative for the Appellant

David Rees, counsel, instructed by the acting general counsel and solicitor to HMRC, for the Respondents

© CROWN COPYRIGHT 2006

DECISION

The Appellant, Halewood International Ltd ("Halewood") has applied for an order that it should be removed from the scope of the lead case proceedings under the name Spectrum Computer Supplies Ltd. I made a direction under regulation 7A of the Special Commissioners (Jurisdiction and Procedure) Regulations 1994 that Spectrum Computer Supplies Ltd should be designated as "lead case" in respect of liability to NI Contributions arising out of the provision of bonuses by way of the assignment of trade debts. The lead case was to decide common issues of fact and law. The common issues to be decided were set out in the directions as were the companies bound by the lead case procedure.

On 6 June 2006, on the application of the Respondents, I directed that further companies (including Halewood) should be added to the register and that they should be bound by the decision in the lead case in respect of the specified common issues of fact and law. I also directed that the appeals of these further companies should be stayed but that the directions should not take effect for 21 days to give those companies an opportunity to apply to me, as the Presiding Special Commissioner.

By a letter from its agent, Deloitte, dated 22 June 2006, the Appellant applied to be heard before me in order to set out its objections to being bound by the lead case. I gave directions on 11 July 2006 in which I directed that Halewood's application should be heard on 18 July and informing Halewood that it was entitled to attend and make representations in support of its application.

The lead case (Spectrum Computer Supplies Ltd) is due to be heard from 24 July 2006.

In a letter of 11 July 2006 Deloitte made the point that in their view "there is a material difference between what we think are the facts of the lead case and those relating to our client's case. In our client's case, the assignment of trade debt includes "bad debts", and so there is an element of commercial loss." The letter concludes as follows:

"Due to the short notice of the hearing scheduled for 18 July 2006, we are unable to attend in person however, we trust that this correspondence will be sufficient for this purpose."

When the application came on for hearing, there was no one to represent Halewood. I nonetheless decided to go ahead and hear it on the strength of the information provided by the Respondents. In the circumstances, I decided that the application should not be allowed. The result is that Halewood remains bound to the outcome of the lead case proceedings.

My first reason for deciding that Halewood should remain bound is that they have two more opportunities, as the lead case proceedings develop, to apply to be "unbound". Rule 7A(5) directs as follows:

"Without prejudice generally to the parties' rights of appeal and to paragraphs (8) and (9) as appropriate, the Tribunal's determination of the same issues in the lead case shall be binding on the parties to each of the same issues proceedings unless the Tribunal or the Presiding Special Commissioner directs otherwise."

It follows from that that Halewood may, at any time in the course of the hearing of the lead case proceedings, during which proceedings they will have been able to assess the distinguishing features, apply to the Special Commissioners to be unbound. Then rule 7A(8) enables any party to the same issues proceedings to apply to the Presiding Special Commissioner, within 21 days of the release of the determination of the same issues in the lead case appeal, that the determination as to the same issues in the lead case shall not apply to them. It follows that Halewood will have the opportunity, when they have examined the eventual decision of the Special Commissioners on the outcome of the lead case proceedings, to request to be unbound on the basis that Halewood's case is distinguishable. For those reasons I am satisfied that Halewood will suffer no unfairness and no prejudice as the result of my refusal to allow their present application.

The second reason for my decision that Halewood should remain bound is that, having regard to a summary of the facts and circumstances relied on by the Respondents in the lead case proceedings, the facts of Halewood are sufficiently similar to those of the lead case for me to reach a prima facie conclusion that Halewood should remain bound by the outcome of the lead case proceedings. Deloitte have pointed to at least one difference that they see as significant. This is that the existence of some bad debts distinguishes it from the facts and Spectrum. I note that in Spectrum all the debts assigned to the employee in question were paid. However, in the present case, the unpaid debts are so small as to be de minimis (0.26% and 0.25% respectively of the total assigned debt on the two occasions that the scheme was operated). In this connection I note that at the same time as the lead case the facts of another case, in which a small number of the debts assigned turned out to be bad debts, will be heard. While the decision in this other case will not be binding on Halewood in the same way that the decision in Spectrum will be, the decision in this other case should afford strong guidance on the relevance or otherwise of bad debts.

For all those reasons I dismiss the application of Halewood that it should be released from the lead case direction.

Costs

The Respondents have made an application for an order awarding them the costs of the hearing on 18 July of Halewood's application to be "unbound". Rule 21(1) of the Special Commissioners (Jurisdiction and Procedure) Regulations provides that costs may be awarded against any party to the relevant proceedings if the Tribunal "is of the opinion that the party has acted wholly unreasonably in connection with the hearing in question." It should be noted that rule 21(2) directs that no costs order is to be made against a party, such as Halewood, without first giving that party an opportunity of making representations against the making of the order.

The Respondents have asked for an order awarding them £600 as being the costs of or incidental to the hearing of Halewood's application. They point out that since 11 July Halewood have been aware of the present proceedings. No representative for Halewood has attended the present application. It would, the Respondents say, have been quite possible for Halewood to have withdrawn their application without putting the Respondents to the expense of attending the present hearing and making submissions.

I have no doubt that the right thing for Halewood to have done would have been to have withdrawn their application before the present hearing. At the same time I recognize that the first of the directions given on 11 July 2006 states that "the Presiding Special Commissioner will consider the application of Halewood … on 18 July 2006 and that Halewood is entitled to attend and make representations in support of its application." This indicates that the Special Commissioners had it in mind to go ahead in any event and hear the application whether Halewood attended or not. That factor, in my view, removes Halewood's failure to withdraw from the class of behaviour described as "wholly unreasonable" in rule 21(1).

For those reasons I dismiss the Respondents' application for costs.

STEPHEN OLIVER QC

SPECIAL COMMISSIONER

RELEASED: 25 July 2006

SC/2037/06