Canterbury Hockey Club & Canterbury Ladies Hockey Club v Customs and Excise [2005] UKVAT V19086 (25 May 2005)
19086
APPEAL Strikeout Appeal by recipient of supplies Appellant claims exemption Supplier withdrew appeal against assessment in respect of those supplies Appellant as recipient of supplies wishes to contend that supplies are exempt Whether principles of proportionality require Appellant to show it has a sufficient interest No Whether supplier's withdrawal results in a section 85 agreement binding Appellant No Whether abuse of process for Appellant to pursue its appeal No Whether doctrine of res judicata prevents Appellant from pursuing its appeal No Whether rule 19(3) Tribunals Rules enable the Tribunal to refuse to entertain the appeal unless the supplier is joined No Application dismissed
LONDON TRIBUNAL CENTRE
CANTERBURY HOCKEY CLUB &
CANTERBURY LADIES HOCKEY CLUB Appellants
- and -
THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents
Tribunal: STEPHEN OLIVER QC (Chairman)
Sitting in London on 28 April 2005
M G Macdonald for the Appellants
Nicola Shaw, counsel instructed by the Solicitor of HM Customs & Excise, for the Respondents
© CROWN COPYRIGHT 2001
DECISION
- This is an application by the Commissioners for a direction under rule 18 that the appeal of Canterbury Hockey Club and Canterbury Ladies Hockey Club ("Canterbury Hockey") be struck out. Rule 18(1) provides:
"A tribunal shall
(a) strike out an appeal where no appeal against the disputed decision lies to a tribunal; and
(b) dismiss an appeal where the appeal cannot be entertained by a tribunal."
The application was made on 17 March 2005.
- Canterbury Hockey has appealed against the decision of the Commissioners dated 15 October 2003. The ruling in the decision letter is that the supplies made by England Hockey Ltd ("England Hockey") to its members in respect of affiliation fees are properly standard rated and are not exempt under item 3 of Group 10 of Schedule 9 to VAT Act 1994. England Hockey promotes and develops the sport in England and selects and trains the national squad. In consideration for a fee, national hockey clubs can become affiliated to England Hockey. Affiliation entitles the club to services such as a training course, access to funding, club management facilities, insurance cover, organized competitions and events and access to a national database for clubs, coaches and umpires.
- The decision letter was sent to England Hockey. England Hockey appealed the decision and the consequent assessment by Notice of Appeal on 5 November 2003 and the sum of money in dispute was stated to be £73,647.
- Canterbury Hockey appealed the decision by Notice of Appeal of 26 March 2004. The amount in dispute was stated to be £480. Since then, in relation to Canterbury Hockey's appeal:
(i) The Commissioners were directed to provide a Statement of Case on 27 April 2004,
(ii) the Commissioners applied for and on 7 June 2004 were given an extension of time in which to provide a Statement of Case and
(iii) the Commissioners invited Canterbury Hockey to "stand behind" the England Hockey appeal and on 22 July 2004 they applied for Canterbury Hockey to state its intentions in this regard.
On 27 July 2004 England Hockey notified the Tribunal that it was withdrawing its appeal. On 9 August 2004 the Commissioners withdrew their application requiring Canterbury Hockey to state its intentions.
- On 9 September 2004 the Commissioners applied for further and better particulars and on 14 September 2004 Canterbury Hockey provided these.
- On 26 October 2004 the Commissioners asked for a further extension of time in which to serve their Statement of Case and by 26 November 2004 the Commissioners had not lodged their Statement of Case and the Tribunal notified them of the hearing to determine what to do. Eventually, on 20 December 2004, the Commissioners provided their Statement of Case. The hearing of Canterbury Hockey's appeal was listed for 26 May 2005. The Commissioners applied on 17 March 2005 for the appeal to be struck out.
The grounds for the Commissioners strike out application
- The first ground is that Canterbury Hockey, being the final consumer and not the relevant taxable person, does not have a sufficient interest to bring its appeal when the amount at stake in its appeal (£480) is compared with the amount at stake in the appeal started and subsequently abandoned by England Hockey (ie. £77,647). It would be disproportionate for Canterbury Hockey to be allowed to appeal. And bearing in mind that the decision of the Tribunal in Canterbury Hockey's appeal relates to England Hockey's liability to VAT and could then impact on England Hockey's wider VAT position, it would be wrong to allow Canterbury Hockey to bring the appeal against the decision without England Hockey's consent.
- The second ground for the Commissioner's application is that the appeal against the decision has been finally determined by reason of England Hockey's withdrawal of their appeal on 27 June 2004. As a result section 85(4) of VAT Act 1994 applies to treat the matter as determined in favour of the Commissioners; the Tribunal has no jurisdiction to reinstate it and Canterbury Hockey cannot now re-litigate the decision. Had been the matter been litigated by England Hockey and lost by them, England Hockey would be estoppel from litigating the same matter. The position is no different, it is said, as regards Canterbury Hockey. For the same reason, public interest requires that Canterbury Hockey should not be allowed to re-litigate exactly the same decision.
- Alternatively, if the Commissioners be wrong so far, they contend that Canterbury Hockey's appeal should only be entertained on the basis that England Hockey be joined as a third party. Otherwise the Commissioners might be prejudiced in not being able to adduce confidential information and documents relating to the affairs of England Hockey. To ensure the speedy and just determination of the appeal, therefore, the Tribunal should exercise its powers in rule 19(3) and join England Hockey as a party.
Canterbury Hockey's preliminary challenge
- The Commissioners are, say Canterbury Hockey, abusing the process of law by seeking to use rule 18(1), through their application of 17 March 2005, to found a strike out application in the present circumstances. The right course should have been for the Commissioners to invoke rule 6 which in terms allows this course when they consider that an appeal does not lie; but a strike out application must be made as soon as practicable after receipt of the notice of appeal (i.e. on 27 April 2004).
- Rule 6(1) reads as follows:
"Where the Commissioners contend that an appeal does not lie to, or cannot be entertained by, a tribunal they shall serve a notice to that effect at the appropriate tribunal centre containing the grounds for such contention and applying for the appeal to be struck out or dismissed, as the case may be, as soon as practicable after the receipt by them of the notice of appeal."
Rule 18(1) is set out at the start of this decision and directs the tribunal to strike out or dismiss an appeal where, as the case may be, no appeal against the disputed the decision lies to the tribunal or the appeal cannot be entertained by the tribunal.
- While I have sympathy for Canterbury Hockey on this point because the Commissioners have strung them out by asking for extension after extension of time to serve their Statement of Case, I do not think that I am required to dismiss the Commissioner's appeal in the present circumstances. Rule 6(1) and 18(1) cover the same states of affairs, i.e. where no appeal lies or where, for some technical reason such as non-payment of a tax in dispute, the appeal cannot be entertained. Here the thing that triggered the Commissioner's application was England Hockey's withdrawal of its appeal in late July 2004, i.e. more than four months after Canterbury Hockey appealed and after the Commissioners had taken action by asking Canterbury Hockey whether its intended to "stand behind" England Hockey's appeal. I accept that the Commissioners could have made the present application earlier. But if the application is made on legally sound grounds, the tribunal can entertain it under rule 18(1) at any time either at its own initiative or at the instigation of the Commissioners.
Sufficient interest grounds
- Is there any qualification to Canterbury Hockey's right of appeal on the basis that it does not have a sufficient interest? Section 83 provides that, subject to section 84, an appeal shall lie-
"
with respect to the following matters
(b) the VAT chargeable on the supply of any goods or services:
.
(p) an assessment
or the amount of such an assessment."
Here the "matter" in question is the decision of the Commissioners in their letter of 15 October 2003 that the services supplied by England Hockey to member clubs in consideration of affiliation fees should be standard rated. Canterbury Hockey is such a member club and is directly affected by the decision. It has to bear the VAT chargeable on those fees. The words of section 83(b) apply on the face of it to admit Canterbury Hockey's right of appeal. But is there a necessary implication that, to have a right of appeal, the person in question must have a sufficient interest?
- The Commissioners say that Canterbury Hockey's interest, ie tax of £480 which it says should not be paid, is disproportionately small compared with £73,647 which England Hockey has accepted as the tax at the standard rate on its outputs. Does that mean that Canterbury Hockley is to be barred from appealing?
- Three preliminary points should be made in this connection. First, if the Act does implicitly require proportionality to be a test in determining whether a taxpayer has access to the tribunal, it gives no guidance as to the points of comparison. I know nothing of the make-up £73,647 assessed on England Hockey. Was it tax for a quarter, for a year or for a larger period? Did it result from some other circumstance such as a refusal of relief for input tax? Second, although the Commissioners contend that it would be wrong to allow Canterbury Hockey to bring an appeal in the present circumstances, the Tribunal has no discretion in the matter. Either Canterbury Hockey's appeal qualifies under the rules in section 85 or it does not. Third, the words of section 83(b) are equally applicable to the recipient of a supply as they are to the supplier; the fact that a decision that supplies are to be standard rated has been issued to the supplier does not disqualify the recipient, who has to bear the tax, from appealing. So far as the recipient is concerned the matter to which the decision relates is a matter "with respect to
the VAT chargeable on the supply".
- I can see no reason in principle, and consequently no necessary implication in the wording of section 84, that requires the right of appeal in section 83(b) (or in any of the other headings in section 83) to be qualified by some measure of proportionality. What may be seen as proportionate to a "small" user of a supply process may appear insignificant to the revenue authority which has wider considerations in mind. And here of course the Commissioners have bigger fish, such as England Hockey, to fry. Moreover I agree with Canterbury Hockey that the opening words of Article 13 A.1 of the Sixth Directive leave no room a "proportionate" approach. Member States are required to exempt activities which fall within Article 13 A. Canterbury Hockey claims the present services do. If Canterbury Hockey are correct, they are entitled to exemption.
Does section 85(4) apply to shut out Canterbury Hockey's right of appeal?
- Section 85, so far as is relevant, reads as follows:
"(1) Subject to the provisions of this section, where a person gives notice of appeal under section 83 and, before the appeal is determined by a tribunal, the Commissioners and the appellant come to an agreement (whether in writing or otherwise) under the terms of which the decision under appeal is to be treated
(a) as upheld without variation, or
(b) as varied in a particular manner or
(c ) as discharged or cancelled,
the like consequences shall ensue for all purposes as would have ensued if, at the time when the agreement was come to, a tribunal had determined the appeal in accordance with the terms of the agreement (including any terms as to costs).
(4) Where
(a) a person who has given a notice of appeal notifies the Commissioners, whether orally or in writing, that he desires not to proceed with the appeal; and
(b) 30 days have elapsed since the giving of the notification
,
the proceeding provisions of this section shall have effect as if, at the date of the appellant's notification, the appellant and the Commissioners had come to an agreement, orally or in writing, as the case may be, the decision under appeal should be upheld without variation."
England Hockey's appeal was against the decision letter of 15 October 2003 and against the assessment of £47,647 of VAT. Both decisions are, therefore, treated as upheld without variation. So far as England Hockey is concerned, it follows that that England Hockey is bound by the "agreement " as if the tribunal had determined (i) that the supplies described in the decision letter were properly standard rated and (ii) £73,647 of tax was due to the Commissioners. But the recipients of the supply, Canterbury Hockey, were not parties to the "agreement" deemed to have been made by subsection (4). They are not therefore covered by the concluding words of section 85(1). It is open to them to contend that VAT has been wrongly charged on the affiliation charges made by England Hockey, which are the consideration for the supplies to them.
Is Canterbury Hockey's appeal an abuse of process?
- The Commissioners contend that - "It would be tantamount to an abuse of process to allow the Appellants to reopen a matter which has already be compromise by England Hockey". Those words come from the Commissioner's Skeleton Argument. I take them to signify that, in the Commissioner's view, Canterbury Hockey is precluded by doctrine of estoppel, cause of action of estoppel and res judicata" from pursuing as its grounds of appeal the contention that the decision letter of 15 October 2003 was wrong.
- Those doctrines are, Patten J observed in paragraph 36 of the decision in Bennett v Customs and Excise Commissioners [2001] STC 150 in paragraph 36, "all designed to prevent the re-litigation of facts and other issues which have been or could have been decided in earlier proceedings between the same parties". Here Canterbury Hockey was not party to the proceedings between England Hockey and Commissioners. Canterbury Hockey had appealed quite independently. It had neither been joined in proceedings, with England Hockey; nor had it even under taken steps to "stand behind" England Hockey as the Commissioners had sought from their application of 22 July 2004 (withdrawn on 9 August 2004). In any event England Hockey's withdrawal of its appeal meant that the matter in dispute was neither fully investigated nor decided in a formal action such as to render Canterbury Hockey's endeavour to achieve that an abuse of process.
Should the Tribunal invoke rule 19(3)?
- The Commissioners contend that the Tribunal should invoke rule 19(3) and entertain Canterbury Hockey's appeal if and only if England Hockey agrees to be joined as a third party.
- Rule 19(3) reads
"Without prejudice to the preceding provisions of this rule a tribunal may of its own motion or on the application of a party to an appeal or application or other person interested give or make any direction as to the conduct of or to any matter or thing in connection with the appeal or application which it may think necessary or expedient to ensure the speedy and just determination of the appeal including the joining of other persons as parties to the appeal."
- The Commissioners argue that issues of taxpayer confidentiality would mean that they (the Commissioners) might be substantially prejudiced if relevant details and information relating to England Hockey could not be adduced at the hearing of the appeal. Furthermore, the potential for prejudice is, they say, exacerbated by the fact that the Tribunal's jurisdiction in relation to disclosure in rule 20 is limited to directions against the parties to the appeal. It is quite possible that the Commissioners would require disclosure of relevant documents and other evidence within the custody and control of England Hockey and the Commissioners would suffer an inequality of arms if the Tribunal's jurisdiction was limited as against England Hockey.
- I do not read rule 19(3) as empowering this or any other the tribunal to make it a condition of the party's right to appeal that a third party is joined. The tribunal can deal with matters of taxpayer confidentiality at any time during the course of the proceedings. In any event, I am not at present satisfied that the points referred to by the Commissioners will seriously impact on their chances of success in relation to the particular supplies in issue here. Moreover fundamentally I do not consider that the tribunal has power to compel an otherwise unwilling party to join an appeal as a third party. Moreover England Hockey may be precluded from being joined and relitigating the matter by virtue of the section 85 agreement referred to above. It is correct that a tribunal has power to respond to an application by a third party to be joined. This happened in Barclays Bank Plc v Customs and Excise Commissioners and Visa [1992] VATTR 229. But to cause someone to join an appeal process where that person has not sought to engage the jurisdiction of the tribunal is a quite different matter. The Tribunal has no power or jurisdiction over that person unless either he has already appealed, in which case his appeal may if appropriate be joined with another party litigating the same matter, or he applies to be joined.
- For all those reasons I have dismissed the Commissioner's application.
- I should point out that I dismissed the appeal with a formal Direction given on 5 May 2005. With the parties agreement this decision is released as a public decision.
- Neither party made any application for costs. Canterbury Hockey is at liberty to apply within 30 days.
STEPHEN OLIVER QC
CHAIRMAN
RELEASED: 25 May 2005
LON/2004/0823
