Archive for month: February, 2026

The BPP issue

 

In BPP Holdings v HMRC [2016] EWCA Civ 12 the appeal concerned whether the First-tier Tribunal (“FTT”) was entitled to make an order debarring the Commissioners for HM Revenue and Customs (“HMRC”) from defending an appeal concerning liability for VAT brought by three companies in the BPP Group of companies (“BPP”).  The effect of such an order would bring HMRC’s defence to an end and was obviously a very big step for the Tribunal to take.

 

The facts

 

Between 1999 and 2006, BPP Holdings Ltd supplied education and books to students. Following a corporate rearrangement in 2006, one company, BPP Learning Media Ltd, supplied books and another, BPP University College of Professional Studies Ltd, supplied education. BPP considered that this involved separate supplies by separate companies, one of education (which is standard rated for VAT purposes) and the other of books (which is zero-rated). Accordingly, BPP did not account for VAT on the supplies of books. In November 2012, HMRC issued two VAT assessments, prepared on the basis that BPP should have accounted for VAT at the standard rate on the supplies of books from 2006. HMRC also issued a decision to that effect in December 2012.

 

In May 2013, BPP appealed against the two assessments and the decision to the Tax Chamber of the FTT. HMRC served its statement of case on 21st October 2013, 14 days late, and subsequently provided disclosure, which was also late. On 11th November 2013, BPP requested that HMRC provide further information of their case, and subsequently applied to the FTT for an order that HMRC supply the information within 14 days of making the order, failing which BPP’s substantive appeals should be allowed. On 9th January 2014, Judge Hellier made an order in terms that: “if the respondents fail to provide replies to each of the questions identified in the appellants’ request for Further Information by 31st January 2014, the respondents may be barred from taking further part in the proceedings.”

 

On 31st January 2014, HMRC served a response to BPP’s request. On 14th March, BPP issued an application for an order barring HMRC from taking further part in the proceedings (“a debarring order”) as the response did not reply to “each of the questions identified in [BPP’s] request for further information.” HMRC then withdrew the two assessments and conceded those appeals, but BPP’s third appeal against HMRC’s decision proceeded. Meanwhile, HMRC supplied a defective disclosure statement and list of documents some eight days late on 8th May, and did not apply for an extension of time until four weeks later. BPP maintained its claim for a debarring order in the surviving appeal.

 

On 23rd June 2014, Judge Mosedale granted BPP’s application and made a debarring order. On 25 September 2014, Judge Herrington refused HMRC’s application to lift the debarring order but gave HMRC permission to appeal against Judge Mosedale’s decision. Judge Bishopp in the Tax and Chancery Chamber of the Upper Tribunal (“UT”) allowed HMRC’s appeal. The Court of Appeal, however allowed BPP’s appeal and restored Judge Mosedale’s debarring order.  HMRC appealed to the Supreme Court.

 

In the Supreme Court

 

The Supreme Court praised the ‘careful’ judgement of FTT Judge Mosedale.

 

“13.       In paras 2 to 36 of her judgment, Judge Mosedale set out the facts more fully than I have done. In the course of doing so, she said in para 22 that HMRC’s statement of case made hardly any “reference to facts, so far as the third appeal was concerned”, so it followed that she concluded that BPP’s request of 11 November 2013 was justified. In paras 33 to 36, she referred to the earlier failures of HMRC to comply with time limits. In paras 37 to 54 of the judgment she then addressed the question whether HMRC were in breach of their obligation to “comply with the Unless order”, ie to provide the further information which they were recorded as having agreed to provide in the Order of 9 January 2014. Judge Mosedale concluded that they were. In effect, she said, by the end of January 2014 hardly any further information had been supplied by HMRC.”

 

The Supreme Cout then dealt with the crucial issue of whether the authorities relied upon by Judge Mosedale, which applied to cases proceeding through the courts, which are governed by the Civil Procedure Rules, might extend to those before the Tribunals.

 

“25.       Such guidance to tribunals on tax cases was given by Judge Sinfield in the UT in McCarthy & Stone. In para 43, after referring to differences and similarities between the CPR and the tribunal rules, in that case the Tribunals Procedure (Upper Tribunal) Rules 2008 (SI 2008/2698), he accepted that “the CPR do not apply to tribunals” but added that he did not “accept that the UT should adopt a different, ie more relaxed, approach to compliance with rules, directions and orders than the courts that are subject to the CPR”. The same view was expressed by Ryder LJ in paras 37 and 38 in the Court of Appeal in this case, including this: “I can detect no justification for a more relaxed approach to compliance with rules and directions in the tribunals”, and added that “[i]t should not need to be said that a tribunal’s orders, rules and practice directions are to be complied with in like manner to a court’s”.

 

26. It is not for this Court to interfere with the guidance given by the UT and the Court of Appeal as to the proper approach to be adopted by the Ft-T in relation to the lifting or imposing of sanctions for failure to comply with time limits (save in the very unlikely event of such guidance being wrong in law). We have twice recently affirmed a similar proposition in relation to the Court of Appeal’s role in relation to the proper approach to be taken in such cases by first instance judges – see Global Torch Ltd v Apex Global Management Ltd (No 2) [2014] 1 WLR 4495 and Thevarajah v Riordan [2016] 1 WLR 76. The guidance given by Judge Sinfield in McCarthy & Stone was appropriate: as Mr Grodzinski QC, who appeared for BPP pointed out, it is “an important function” of the UT to develop guidance so as to achieve consistency in the Ft-T: see R (Jones) v First-tier Tribunal (Social Entitlement Chamber) [2013] 2 AC 48, para 41, per Lord Carnwath. And, by confirming that guidance in this case, the Senior President, with the support of Moore-Bick V-P and Richards LJ, has very substantially reinforced its authority. In a nutshell, the cases on time-limits and sanctions in the CPR do not apply directly, but the Tribunals should generally follow a similar approach.”

 

The Supreme Court upheld the debarring order.

 

“33.       Finally, it was said that, bearing in mind all the circumstances, a debarring order was outside the scope of what a reasonable judge in the position of Judge Mosedale could have ordered, even if she made no specific errors. I accept that the decision to make a debarring order against HMRC was tough, and I also accept that some Ft-T judges may not have made that decision. However, the issue whether to make a debarring order on certain facts is very much one for the tribunal making that decision, and an appellate judge should only interfere where the decision is not merely different from that which the appellate judge would have made, but is a decision which the appellate judge considers cannot be justified.”

 

The key principles to apply as to whether the Tribunal will grant relief from any default

 

The approach of the Tribunal, following the decision in Denton v T H White Ltd, [2014] EWCA Civ 906 which is applicable to Tribunals by virtue of BPP Holdings, can be summarised as follows:

 

1. Identify the default and assess its “seriousness or significance”: relief will usually be granted for breaches which are neither serious nor significant.
2. Consider why the default occurred (i.e. whether there is a good reason for it);
3. Consider “all the circumstances of the case, so as to enable [the court] to deal justly with the application”. It is not the case that an application for relief from sanctions for a non-trivial breach for which there was no good reason will automatically fail. The particular factors mentioned in the rule (the need for litigation to be conducted efficiently and at proportionate cost and to enforce compliance with rules, practice directions and court orders) may not be of paramount importance, but are of particular importance and should be given particular weight. The promptness of the application, and other past or current breaches, will also be relevant at this stage.

 

 

A nuanced approach

 

In Denton v T H White the Court of Appeal said:

 

“We are concerned that some judges are adopting an unreasonable approach to rule

3.9(1). As we shall explain, the decisions reached by the courts below in each of the

three cases under appeal to this court illustrate this well. Two of them evidence an

unduly draconian approach and the third evidences an unduly relaxed approach to

compliance which the Jackson reforms were intended to discourage. As regards the

former, we repeat the passage from the 18th Implementation Lecture on the Jackson

reforms to which the court referred at para 38 of its judgment in Mitchell: “[i]t has

changed not by transforming rules and rule compliance into trip wires. Nor has it

changed it by turning the rules and rule compliance into the mistress rather than the

handmaid of justice. If that were the case then we would have, quite impermissibly,

rendered compliance an end in itself and one superior to doing justice in any case.

38. It seems that some judges are approaching applications for relief on the basis that,

unless a default can be characterised as trivial or there is a good reason for it, they are

bound to refuse relief. This is leading to decisions which are manifestly unjust and

disproportionate. It is not the correct approach and is not mandated by what the court

said in Mitchell: see in particular para 37. A more nuanced approach is required as

we have explained. But the two factors stated in the rule must always be given

particular weight. Anything less will inevitably lead to the court slipping back to the

old culture of non-compliance which the Jackson reforms were designed to eliminate.”

 

Parties not to try to trip each other up

 

The Court of Appeal then went on to say:

 

“We think we should make it plain that it is wholly inappropriate for litigants or their

lawyers to take advantage of mistakes made by opposing parties in the hope that relief

from sanctions will be denied and that they will obtain a windfall strike out or other

litigation advantage. In a case where (a) the failure can be seen to be neither serious

nor significant, (b) where a good reason is demonstrated, or (c) where it is otherwise

obvious that relief from sanctions is appropriate, parties should agree that relief from

sanctions be granted without the need for further costs to be expended in satellite

litigation. The parties should in any event be ready to agree limited but reasonable

extensions of time up to 28 days as envisaged by the new rule 3.8(4).”

 

Conclusion

 

When the writer of this article started practice, back in the mists of time (1990 to be exact), non compliance with the then procedural rules of the Courts was widespread.  Today, in 2026, the position is very different and procedural rigour is very much more important to the Judges of both Courts and Tribunals.  It is important to recognise this and if any application for relief needs to be made to act promptly to apply for the appropriate relief.  The indulgence of the Tribunal cannot be taken for granted.