United Kingdom VAT & Duties Tribunals Decisions

King & Anor (t/a Barbury Shooting School) v Customs & Excise [2003] UKVAT V18313 (12 September 2003)

COSTS – determination of amount – relevance of CPR – hourly rates

LONDON TRIBUNAL CENTRE

MR AND MRS J KING

T/A BARBURY SHOOTING SCHOOL Appellants

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: MR R L BARLOW (Chairman)

Sitting in public in London on 11 June 2003

Mr J Gillett of Dennis and Turnbull accountants, for the Appellants

Mr A McNab of counsel, instructed by the Solicitor for HM Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2003


 


DECISION
1. This decision deals with the quantification of costs recoverable by the appellants following the tribunal's decision in decision number 17822. In that decision the tribunal, consisting of myself and Mr Davda, found in favour of the appellants on the issue whether they would be unjustly enriched by the repayment to them of VAT overpaid by them. Although that decision in fact led to the matter being concluded it was a preliminary ruling on the issue of unjust enrichment alone. Issues as to quantum and the period for which overpayments could be recovered remained to be determined but those issues have been settled between the parties and, as it has transpired, the preliminary issue will be the only one to be adjudicated upon by the tribunal, apart from the question of costs.
2. At the hearing of the appeal the appellants were represented by Mr Gillett and his colleague Mr Williams and Customs and Excise were represented by Mr T Ward of counsel. The hearing lasted one day but it would have taken another day had it not been for the agreement of the parties referred to above.
3. The case concerned a claim for a refund of just over £35,000 and that was on the basis that the three year limit on claims would apply. With the addition of interest the amount actually recovered as a result of the tribunal's decision was approximately £49,000.
4. Perhaps surprisingly, Customs and Excise had conceded that private tuition in shooting fell within the exemption for private tuition in subjects ordinarily taught in a school or university, i.e. that such supplies are exempt under item 2 of Group 6 to Schedule 9 of the VAT Act 1994. There had been an issue between the parties about this but it was resolved in the appellants' favour by a concession made by Customs and Excise at an early stage before the service of their statement of case.
5. At the hearing of the substantive case seven authorities were cited and whilst the citation of previous tribunal cases merely for their similarity to the facts of the case before the tribunal is to be discouraged, the cases cited were mainly ones containing guidance on issues of principle concerning unjust enrichment.
6. The substantive case concerned questions of both fact and law and although it was by no means in the category of the most complex VAT tribunal cases it was, in my judgment, not a straightforward or routine case.
7. The total bill for the appellants' costs was £22,117.29 exclusive of VAT. Some items in the bill were challenged by Customs and Excise as duplication of work or on other specific grounds and during the hearing Mr Gillett and Mr McNab were able to agree that the hours charged should be reduced by 13 hours as shown on a Schedule headed 'Barbury Shooting School – Disputed Hours' provided by Mr McNab. Those items relate to work done either by Mr Gillett or by Mr Williams and subject to those items the number of hours properly chargeable are as shown on the detailed narrative produced by the appellants' representatives.
8. By my calculation, from those two schedules, the total claimed is now reduced by £4,012.50 to £18,104.79 exclusive of VAT. I make no finding as to the amount in dispute as I may have misunderstood the schedules but I have calculated the amount as best I can so as to be aware of the approximate amount claimed which is potentially relevant to a decision in principle about the costs to be awarded.
9. The main issue between the parties on costs relates to the assessment of the appropriate hourly rates.
10. Mr Gillett is a partner in the firm of Dennis and Turnbull, chartered accountants, and Mr Williams is a chartered tax advisor employed by that firm. The expertise of both was apparent at the hearing of the substantive appeal. The firm has charged Mr Gillett's time at £375 per hour and Mr Williams' time at £225. These are their rates applicable to specialist work and their respective rates for professional work which they do not classify as specialist are £225 and £125 respectively.
11. Customs and Excise have said that the hourly rate for Mr Gillett should be £150 and for Mr Williams it should be £135. Mr McNab pointed out that rule 29(2) of the VAT Tribunal Rules specifically makes Order 62 of the Rules of the Supreme Court 1965 applicable, with necessary modifications, to the taxation of costs under rule 29(1)(b). He mentioned that the rule has not been amended since the replacement of the Rules of the Supreme Court by the Civil Procedure Rules (the CPR) but I hold that the Interpretation Act 1978, sections 17 and 23, make an amendment unnecessary.
12. However, rule 29(2) only applies the CPR in cases where the tribunal refers the assessment of costs to the Supreme Court under rule 29(1)(b) and the parties have both contended that in this case the tribunal should determine the costs issue under rule 29(1). The CPR are therefore not directly applicable. Mr McNab cited Nader Trading as Try Us –v- Customs and Excise Commissioners [1993] STC 806 as Court of Appeal authority for the proposition that when the tribunal determines costs under rule 29(2) they are to be determined 'in accordance with the principles or rules applicable in the High Court'. That case was under rule 29(2)(b) so those rules certainly applied to it but Farquharson LJ, giving the lead judgment, said this:

'It is not to be supposed that if the tribunal itself assesses the costs it can make its determination capriciously, or on any basis which is not justified in law. In other words, the relevant law governing the assessment of costs in this context is the same whether the costs are determined by the tribunal or by the taxing master.'

It should be borne in mind that what was in issue in the Nader case was a point of principle about losses allegedly sustained by the appellant as a result of the closure of its business pending the outcome of the appeal.

13. There must be some difference between a case where rule 29(2) of the Tribunal Rules applies the CPR and one where it does not because otherwise rule 29(2) to would simply refer to both paragraphs of rule 29(1) whereas it specifically refers only to 29(1)(b).
14. It is entirely consistent with the Tribunal Rules and Farquharson LJ's dictum to conclude that the correct legal position is that the general rules for the award and assessment of costs apply where the tribunal makes a determination of costs but that the individual rules in the CPR do not apply directly.
15. Mr McNab also cited TDG (UK) Ltd –v- Customs and Excise Commissioners (tribunal decision E00380). In that case the tribunal was dealing with an award of costs on an indemnity basis and what that basis means. Dr Brice, giving the decision, refers in paragraph 27 to its still being 'necessary to apply Part 44.4(1) of the Civil Procedure Rules' but in context it seems clear that she meant that those rules provide guidance about the meaning, in general terms, of the phrase indemnity basis, as is clear from paragraph 28 where she summarises the general principles which apply.
16. Mr McNab also cited Mahindra Dave –v- Customs and Excise Commissioners (E00182) and Broomco (1984) Ltd –v- Customs and Excise Commissioners (C00123). In Dave the chairman of the tribunal, Mr Wallace, said 'A determination by the tribunal is of course much less sophisticated than an assessment under the CPR, however the basic principles must be the same'. In my judgment the approach in Broomco was materially the same.
17. The reason why it has become necessary to consider the precise way in which the CPR might affect the determination of costs in this case is that Customs and Excise have argued that the hourly rates payable in respect of the professional work done by Mr Gillett and Mr Williams should be determined in effect under the CPR rules by reference to the guideline hourly rates for solicitors in Swindon. Under the guidelines issued by the Supreme Court Costs Office, and cited by Customs in this case, the applicable rates are £175 for solicitors with eight years litigation experience and £155 for other solicitors and legal executives with equivalent experience. Customs and Excise argued that the rates applicable in this case should be £150 for Mr Gillett and £135 for Mr Williams.
18. Those guidelines are referred to by Senior Costs Judge Hurst in Civil Costs (2000 Sweet and Maxwell). He says that it had become common for designated civil judges to publish local rates and it seems clear that the guidelines Mr McNab cited are at least analogous to the ones referred to by Judge Hurst. However, Judge Hurst says that they are for 'run of the mill cases' and refers to the judgment of Evans J in Johnson –v- Reed Corrugated Cases Ltd [1992] 1 All E.R. 169 in which the reference is to 'routine cases i.e. ones of a particular kind with no unusual features'. Mr McNab also relied upon the Johnson case.
19. In support of his contention that this case was a routine case Mr McNab mentioned that as the tribunal adopts an informal procedure it could be argued that the appropriate rate should be lower than the published rates but that Customs and Excise were content to accept a figure around the summary assessment figure.
20. The informality of the proceedings is not relevant and it is doubtful if the summary assessment figures have any direct relevance as they usually apply to one day cases which as I have already explained this was not or to fast track cases.
21. The question does arise whether the appeal can be said to be a routine case of a particular type with no unusual features or a run of the mill case. In my judgment it was not. Few, if any, VAT appeals involving questions of both law and fact will fall into those categories. Most lawyers and accountants will seldom, if ever, have to argue a VAT appeal in the course of their practice and even specialist accountants like Mr Gillett will only have to present cases occasionally. It is significant that Customs and Excise have not treated this case as routine. They instructed an experienced barrister appointed from a panel chosen by the Attorney General to appear regularly for Customs and Excise to present the appeal and he was no doubt instructed by both a specialist solicitor and someone from the Customs and Excise head quarters office who had special knowledge of the subject matter. Mr Ward was instructed on that basis and it is reasonable and fair that the appellants should be similarly represented by an experienced person, as indeed they were.
22. Mr McNab cited the overriding objective in rule 1.1 of the CPR and clearly it is relevant. The overriding objective is that the courts should deal with cases justly and that includes ensuring that the parties are on an equal footing, saving expense and dealing with the case in a proportionate way having regard to the amount involved, the importance of the case, the complexity of the issues and the financial position of each party.
23. Mr McNab cited Lownds –v Home Office [2002] 4 All ER 775 and Giambrone –v- JMC Holidays [2003] 1 All ER 982 on the question of proportionality and I have taken from them the conclusion that what is required of the person assessing costs is that the conduct of both parties is relevant and a sensible judgment is required but that ultimately the proportionality of the overall amount of costs is a matter for judgment (in this case no issue arises as to the proportionality of any individual item).
24. Mr Gillett's submission about costs was that the work done was fully justified, which is no longer in dispute now that the parties have agreed the number of hours, and that the rates charged were justified as they were the amounts actually charged (which is not in dispute) and at the relevant fee earners' usual rates for specialist work (that they were at the usual rates is not in dispute). He also produced evidence about the hourly rates charged by one of the largest firms of accountants with an office in a town near to Swindon.
25. Whilst these arguments are understandable, there is no doubt that when costs are to be determined the amount expended by the litigant is not necessarily the correct amount for an award. The standard basis, which is the applicable basis in this case, limits recovery on the indemnity principle to a maximum of the amount actually incurred but it does not necessarily lead to a full recovery of that amount.
26. On the other hand as I have already decided this is not a routine or run of the mill case.
27. I also have to bear in mind the conduct of the parties. No criticism of Customs and Excise can be made but it is relevant to have regard to the fact that they clearly treated this appeal as being of some importance and deployed considerable resources in an attempt to win it. Customs and Excise are in many respects in a privileged position as a litigant in a case like this. They can afford to employ specialist counsel and solicitors and for a case like this cost is unlikely to be a consideration for them at all. On the other hand, the figure in dispute represented a large proportion of the distributed profits for a year for the appellants and the case was certainly important to them. Applying the overriding objective of dealing with the case justly and ensuring that the parties are on an equal footing would certainly argue strongly in favour of its being proportionate for the appellants to have engaged specialist advisors and that they should expect to be able to recover costs on the basis that their conduct of the litigation was reasonable in that respect.
28. It is a matter of judgment to assess how complicated an appeal this one was and clearly there are cases that are both significantly more complex and difficult and significantly less so than this one. In my judgment an appropriate hourly rate for Mr Gillett for the conduct of this case is £280 and that for Mr Williams is £160. The parties were not in dispute as to any items other than the rates once they had agreed the number of hours properly claimable.
29. I leave it to the parties to calculate the final sum and give liberty to apply to the tribunal if agreement cannot be reached.
30. The parties said that they were confident they could agree the costs of this costs hearing and I award the appellants their costs of this hearing to be determined by a chairman of the tribunal sitting alone, if not agreed between the parties.
R BARLOW CHAIRMAN RELEASED:

LON/02/228