WM Mangement and Marketing Ltd  v Customs and Excise [2005] UKVAT 19075 (12 May 2005)

19075
PRACTICE – Reinstatement – Hardship application – Hearing in Appellant’s absence – Appeal struck out without unless order – Extension of time under Rule 19(1) to apply under Rule 26(3) to set aside direction – Appeal reinstated – Immediate strike out contrary to proportionality

LONDON TRIBUNAL CENTRE

                    W M MANGEMENT AND MARKETING LTD	Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

		Tribunal:	THEODORE WALLACE    (Chairman)

Sitting in public in London on 17 March 2005

H M Lask of Harris and Trotter LLP, for the Appellant 

Jonathan Holl, advocate, for the Respondents

© CROWN COPYRIGHT 2003

DECISION  ON APPLICATIONS
1.	This decision gives the findings and reasons for two directions.  The first gave the Appellant leave to apply out of time under Rule 26(3) to set aside a direction striking out the appeal given after a hearing on 29 October 2004 in the Appellant’s absence.  The second direction set aside the direction and so reinstated the appeal.
2.	I directed that the application be heard in public.
3.	By a notice dated 23 August 2004 the Appellant appealed against a decision that certain supplies were taxable and against an assessment.  The notice of appeal did not include a copy of the assessment.  
4.	On 2 September 2004 Customs applied for the appeal to be dismissed on the grounds that the tax had not been paid and no hardship application had been made.  The Appellant thereupon made a hardship application stating that the supplies had been zero-rated and payment of the tax which had not been collected would cause “severe hardship”.  Customs opposed the application and made a further application for the appeal to be dismissed.  On 17 September the Appellant sent a copy of its latest bank statement to Customs and the Tribunal showing a credit balance of £7041.11.
5.	A hearing of the hardship application was notified for 29 October 2004.  Customs served a certificate that £54,590.52 VAT was outstanding.
6.	Prior to the hearing Mr Lask telephoned the Tribunal and was told by the clerk that the information provided would be given to the chairman and that there was no need for him to attend.
7.	When the application was called on the chairman considered it under Rule 26(2) and granted the application by the solicitor appearing for Customs that the appeal should be dismissed.  Mr Holl was unable to tell me what material had been put before the chairman.
8.	It is not the normal practice of the Tribunal to direct the immediate dismissal of an appeal following an unsuccessful hardship application.  The normal direction is that the appeal shall be dismissed unless the tax is paid within a specified time, usually 28 days.
9.	Under Rule 30(7) where a direction dismissing an appeal is given in the absence of an appellant either the direction must state that he is entitled to apply to have the direction set aside or it must be accompanied by a note to that effect.  This requirement was not fulfilled.
10.	When he received the direction released on 16 November 2004, Mr Lask misunderstood it and thought that Customs appeal against the hardship application had been struck out.  He wrote to the tribunal on 19 November asking when the appeal was to be heard.
11.	After the matter had been referred to a chairman, a proper officer replied on 13 December 2004 explaining that the appeal had been struck out and that if the Appellant wished to apply to have the direction set aside he would have to apply under Rule 19(1) for an extension of time to do so.
12.	Mr Lask did this on 16 December 2004.
13.	The applications to reinstate the appeal and for the appeal to be entertained on grounds of hardship were notified on 29 December 2004 for 17 March 2005.
14.	Customs opposed the application by notice on 19 January giving as their grounds that the Appellant had not provided sufficient evidence in support of the hardship application.
15.	On 16 February 2005 Customs wrote with an extensive questionnaire directed to hardship.
16.	Mr Newman, one of Mr Lask’s partners, replied serving the latest accounts (to 31 July 2003), stating that there were no management accounts or cash flow forecasts and that the company had no investments.  He wrote that the company had no overdraft facility and no assets on which a bank could take security.  Customs responded with a further series of questions including the names of all suppliers and asking for  a letter evidencing the refusal of a loan.
17.	Mr Lask confessed to embarrassment at having misunderstood the original direction which he had read quickly; it had not been accompanied by a note that he could apply for reasons.  He said that Customs had been out of time in opposing the reinstatement application.
18.	Mr Holl pointed out that the Tribunal had not initially sent to Customs a copy of the Appellant’s application for reinstatement.
19.	This is unfortunately correct and I therefore waived the failure by Customs to comply with the time limit of 14 days under Rule 11(7) for objecting to an application.
20.	Mr Holl said that the Tribunal was not satisfied as to hardship on 29 October 2004 and had directed that the appeal be struck out.  The Appellant had not applied for reinstatement with 14 days of release of the direction.  He said although the Tribunal did not comply with Rule 30(7), the matter was covered in the Explanatory Leaflet to appellants.  He opposed both the extension of time to apply for reinstatement and the reinstatement itself.  He said that Customs had been under no obligation to ask for an unless order.
Conclusions
21.	This was a clear case for an extension under Rule 19 of the time to apply for a reinstatement.  Unfortunately neither the Direction nor the covering letter informed the Appellant of the right to apply for re-instatement as is required under Rule 30(7).  It is surprising that Mr Lask misunderstood the direction, however it is most unlikely that he would have done so if the Tribunal had observed Rule 30(7).  Once the position was explained, the response was immediate.  I had no hesitation in allowing a late reinstatement application to be made.
22.	I now turn to the reinstatement application.
23.	Since Customs were opposing reinstatement, it is unfortunate that Mr Holl, who of course had not been present, could give no assistance as to what had happened on 29 October.  He was in no position to dispute Mr Lask’s statement that he was told that he need not attend.  I accept Mr Lask’s statement as to this.
24.	I have already pointed out that it is not the normal practice of the Tribunal to dismiss an appeal following a hardship application without an unless order.
25.	Mr Holl is technically correct in saying that Customs were under no obligation to ask for an unless order if he was referring to a legal obligation.  However in my judgment Customs owed a duty to the Tribunal not to ask for an order which departed from the normal practice without making it clear that this is being done and explaining why.  It is most unlikely that this can have been done.
26.	If an Appellant is to have no opportunity on failing in a hardship application to pay the tax in order to have his appeal entertained, he will be under great pressure to pay the tax notwithstanding that hardship may be involved.  Many appellants would be reluctant to risk an unsuccessful hardship application.  
27.	It is clear that without the exception in cases of hardship the requirement to pay the disputed tax as a condition of an appeal being entertained would be incompatible with Community Law.  The immediate and unconditional dismissal of an appeal on rejection of a hardship application undermines the right to make a hardship application and infringes the principle of effectiveness.  The unconditional direction dismissing the appeal should not have been made.
28.	In fact Customs’ notice opposing reinstatement gave no indication of any reason apart from the lack of material supporting hardship.  Furthermore Customs sought evidence of hardship in letters demanding considerable information on 16 February and 9 March 2005.  Some of the material requested was unreasonable for a business of the Appellant’s size.  If Customs intended to oppose consideration of hardship in the application before me they should have give the Appellant clear notice of this.
29.	It was clear from the material before me that the hardship application had considerable prospects of success.
30.	I had no hesitation in allow reinstatement of the appeal.  I allowed the hardship application and directed that the Statement of Case be served by 17 May 2005.

THEODORE WALLACE
CHAIRMAN

RELEASED: 12 May 2005

LON/04/1267