.png)
.png)
After yesterday’s full argument by leading counsel for Davies and anor and for Gaines-Cooper, most spectators eagerly waited to hear HMRC’s arguments, writes Ximena Montes Manzano.
To everyone’s surprise, the morning’s part-heard hearing started with the judges asking the Revenue’s representative, Ingrid Simler QC, whether she was still contesting the appeal against refusal for permission to apply for judicial review (JR), and whether she would need further time to put in evidence.
Miss Simler replied that HMRC’s position was that there has been no change in practice or in the application of IR20, but simply that the department does not accept allegations from taxpayers that they fall within the terms of IR20. Any evidence received from taxpayers is no longer taken at face value.
Moses LJ added that in light of the ‘serious allegations’ by Mr Davies on oath (by way of a written witness statement) that HMRC had changed their practice and approach to IR20, and in light of the fact that IR20 is very important to many taxpayers, the taxman would not be in a position to object to permission being given.
Moses LJ acknowledged that the Court was concerned about Miss Simler’s suggestion that HMRC were applying IR20 in a less ‘gentlemanly way’.
The barrister responded that this had been ‘an unfortunate turn of phrase’ and an ‘off the cuff’ remark that she ought not to have said, and she apologised for it.
She added that if the court was minded to grant permission, HMRC would indeed need time to put in evidence, but that they saw no need to send matters back to the Administrative Court because the case would inevitably end up in the Court of Appeal: every single decision in these cases had been challenged by the Appellants so far.
Miss Simler accepted she would be content to argue the case on the basis that permission was granted.
In response, David Goldberg QC, representing Davies and anor, and David Milne QC, representing Robert Gaines-Cooper, expressed satisfaction, but they asked that the matter be reserved to the same panel of judges and that the appellants be given sufficient time to answer evidence presented by HMRC.
The court was then addressed on the question of costs: both those of the hearings in the courts below and any wasted costs as a result of the further adjournment of the substantive hearing. Mr Goldberg asked for the costs of the previous four hearings on an indemnity basis.
He argued that the Revenue should have never objected to permission being granted, and in the circumstances it was wholly unreasonable for the department to do so.
The case is plainly arguable, he said. Although HMRC knew perfectly well that this was an important issue to a significant number of taxpayers, and the taxman had seen all the articles on the subject, the department had turned up to court and had chosen to ‘obfuscate’.
Moses LJ added to the debate by saying that some government bodies should recognise – even if they think they have a good argument – that there are cases that ought to be argued fully in court. They should not take the attitude of the normal litigant and litigate every point of a challenge.
His lordship added that perhaps it had been his fault that the parties did not appreciate that the hearing may also be a substantive hearing of the issues, because he had failed to allow the appeal against the refusal for permission on the papers. (He was unaware that he had the powers to do so.)
Mr Milne supported Mr Goldberg’s arguments but emphasised that in Mr Gaines-Cooper’s case the court procedure had been different. He explained that after being refused permission to apply for JR on the papers, Cranston J had ordered a ‘rolled-up’ hearing in the Administrative Court in front of Lloyd-Jones J, which meant that the position had been somewhat different to that in Davies and anor.
Mr Milne added that HMRC should have served their evidence then and, in any event, they had between March and October 2008 to do so – but they had failed to do so. Depending on whether the same panel could be reconstituted for the next hearing, any wasted costs could amount to very little.
Miss Simler distinguished between the costs of the adjournment and the costs below. She accepted that HMRC could not resist any costs thrown away by the adjournment because the Revenue should have put in further evidence and failed to do so, but she insisted that no costs should be awarded on an indemnity basis (one designed to penalise unreasonable conduct).
The barrister went on to argue that because in Davies and anor there had been no agreement as to the facts, it was difficult for them to challenge the decision on irrationality.
She said she had received the support of the Court of Appeal in holding this view and so she had returned to the Administrative Court on that basis. She maintained that the same argument applied in the Gaines-Cooper case, and as HMRC had asked for clarification of the order by Moses LJ granting leave to appeal – he had said that he could not give permission for JR on his own – the Revenue had decided to continue on the basis that there would be no full hearing of the JR.
The court decided to award costs of the adjournment and any wasted costs against HMRC on a standard basis and reserve other costs until the end of the JR.
The Court did not find unreasonable conduct to warrant the indemnity basis.
HMRC argued they would need until 10 September to ‘find the right people’ (a task that Moses LJ described as a challenge in itself because since the 2005 merger ‘all the good people’ in the Revenue had left).
In light of the summer recess and court-listing issues, it is uncertain whether the substantive hearing will even be heard by the end of 2009.
