UT/2023/000018 - [2024] UKUT 00165 (TCC)

For the reasons given, we consider that the FTT erred in law in its approach to the Third RMC Stage. We cannot conclude that the FTT would have reached the same conclusion but for its error. The error was material, so we must set aside its decision in relation to the Third RMC Stage.

This conclusion is sufficient for HMRC to succeed on Ground 1. Since Ground 2 was presented by HMRC on the basis that it fell to be determined if we rejected Ground 1, there is no need to consider Ground 2, and we do not do so.

We discuss below the disposition of the appeal.

It is helpful to begin by describing the issue. At the Third RMC Stage, it is necessary to take into account all relevant facts and circumstances in determining whether the hypothetical contracts would have been contracts of employment. That is so whether or not that determination is made by taking an “RMC approach” or a “Hall v Lorimer approach”. In Atholl House CA, Sir David Richards said at [122]:

However, in Atholl House CA, the Court of Appeal expressed a limitation on the factors which could be properly taken into account. Sir David Richards identified it at Atholl HouseCA [123]-[124], quoted above.

The only other reasoned decision in Atholl House CA was given by Arnold LJ, who endorsed this view, at [170];

As we have described, HMRC wish to argue in support of their grounds of appeal that the FTT erred in law by failing to take into account, and BBL failed to prove, whether relevant matters were known or reasonably available to the BBC and/or ITV. We refer to this as the knowledge issue. BBL object to this, arguing that the issue was not raised before the FTT and it would be procedurally unfair to permit it to be argued in this appeal. In granting permission to appeal, Judge Cannan left this matter to be determined by the Upper Tribunal.

Mr Rivett made the following arguments in his written and oral submissions:

Mr Tolley argued as follows:

The first question is the extent to which the statements of the Court of Appeal in AthollHouse CA on the knowledge issue are binding. As valiantly as Mr Rivett argued his case, we consider it clear that those statements are intended to set out general guidance as to the position in law regarding the factors which can permissibly be taken into account at the Third RMC Stage. That is so regardless of whether those comments form part of the ratio of the decision. Nor do we accept that because earlier authorities did not deal with the issue, and the Court of Appeal did not intend to call any of those authorities into doubt, we do not need to follow the Court of Appeal’s guidance. The Court of Appeal decision on this issue does in our view develop (or at the least clarify) the law, and as a decision of a superior court setting out general guidance we must follow it.

As to whether either party is somehow at fault for not raising the issue in its pleadings and evidence, we do not think that either the parties or the FTT were in any way remiss in not dealing with this issue. HMRC’s reliance on the burden of proof on BBL to displace the assessment is misplaced, and we do not regard recourse to the burden of proof as helpful in determining the way forward in this situation. Nor do we accept HMRC’s assertion that this is not a new point. It was not in play before the FTT. In our view, the reason it was not in play is that until Atholl House CA this restriction on the factors which are relevant at the Third RMC Stage had not been identified, at least explicitly, in the authorities (Footnote: ³). It is a new ground of appeal.

The decision as to whether HMRC should be permitted to rely on that ground in this appeal must take into account all the facts and circumstances, including procedural fairness. The principle of finality in litigation militates against the admission of new grounds of appeal, particularly where they raise questions of fact. However, in this case there are two other important factors to weigh in the balance. First, unlike Ritchie, in practice the ground was, in our view, not one which either party would be likely to have thought to raise before the FTT. This was not a case where HMRC sat on their hands and made a deliberate or tactical choice not to raise an issue before the FTT. Whether one regards the Court of Appeal’s decision on this issue as a development of the law or merely as explicit clarification, the primary reason why the ground has arisen late is because of that decision. Second, we have decided that the FTT’s decision in relation to the Third RMC Stage must be set aside in any event. So, the FTT’s decision in relation to the Third RMC Stage must either be remade by this tribunal, or remitted and reconsidered by the FTT with directions: section 12(2)(b) of the Tribunals, Courts and Enforcement Act 2007 (“TCEA”). This means that if the knowledge issue were not to be admitted, then that process would produce a fresh decision which did not take into account the position in law regarding relevant factors at the Third RMC Stage as set out in Atholl House CA.

We have not found this to be an easy decision. The toll which the prolonged appeal process has already taken on Mr Chiles is significant, and was described by him in a powerful witness statement which we have considered again and with care in preparing this decision. That has caused us great concern, both at the hearing and subsequently, in relation to procedural unfairness. While the decision to set aside the FTT’s decision on the Third RMC Stage in any event does weigh in favour of admitting the argument, in practice the consequence of admitting it would be that additional questions of further evidence and fact-finding would arise for determination, which is relevant to procedural unfairness.

It was largely those concerns which prompted us to direct towards the end of the hearing that the parties should attempt to agree as many facts as possible relevant to the knowledge issue in this appeal. Our aim was to establish the extent to which the issues relevant to actual or constructive knowledge, primarily relevant to Mr Chiles’ business activities outside the Contracts, could be narrowed by being agreed and therefore resolved in advance of any remaking or remittal of the FTT’s decision as to the Third RMC Stage. That, we hoped, would reduce the extent to which the tribunal was required to make further findings of fact, and to consider applications from the parties to adduce further evidence.

The process did not prove constructive. On 20 February 2024, as directed, HMRC produced “a statement of facts regarding other work carried out by BBL which it is accepted by HMRC were, at the time that the relevant contracts were entered into, known or reasonably available to each of (i) ITV and (ii) the BBC”. On 5 March 2024, as directed, BBL produced an 8-page response. This stated that “BBL’s position, with considerable regret, is that the Statement demonstrates that HMRC are unable or unwilling to adopt a position that would enable the knowledge issue to be determined by the FTT within reasonable and proportionate evidential and legal perimeters [sic] were the appeal to be remitted to the FTT and HMRC granted permission to argue that relevant facts were not known or reasonably available to ITV and the BBC”. The response set out a number of criticisms of HMRC’s statement and their past conduct, and repeated various submissions made at the hearing, but what it did not do was, as we had hoped, suggest drafting changes or additions to HMRC’s draft statement of agreed facts. We recognise that concerns about the duration and course of the process to date may have inhibited BBL’s response, but we think that HMRC’s statement of facts was a genuine and useful effort to identify facts that could be in dispute on the question of actual or constructive knowledge. It was certainly a much more helpful approach than its earlier refusal to engage which we have referred to at paragraph 96(6) above, which, without going into all the procedural details, we think was unfortunate.

We have reached the conclusion that, on balance, HMRC should be permitted to raise the argument that the FTT erred by failing to make findings as to whether factors identified as relevant at the Third RMC Stage, particularly in relation to Mr Chiles’ activities outside the Contracts, were within the actual or constructive knowledge of the BBC and ITV, as described in Atholl House CA. The new argument relates to a change in the legal principles which had been generally understood to be applicable in that respect, and the FTT’s decision on the Third RMC Stage is being set aside in any event and so must be remade or remitted.

Having admitted the argument, we consider it clear that it succeeds. The FTT did not make the relevant findings in relation to the knowledge issue. We repeat that in our view no blame for this lies with the FTT or either party. However, in making the assessment required at the Third RMC Stage, the position as regards factors which may be taken into account as relevant is now as set out in Atholl House CA.

The error of law was material. Therefore, HMRC succeed on this ground of appeal.

We set aside the FTT’s decision in relation to the Third RMC Stage.

With reluctance, we have concluded that we should not remake the decision on this issue but should remit it for reconsideration by the FTT. The error of law relating to the approach to the Third RMC Stage must be corrected by framing the question correctly and the error of law relating to the knowledge issue must be corrected by making any necessary findings as to knowledge. As the Court of Appeal expressed it, in Atholl House CA at [163]:

The Third RMC Stage requires a multifactorial assessment of all the terms and circumstances relevant to the hypothetical contracts. The FTT’s assessment was, unfortunately, approached through the wrong prism, asking whether the Contracts were entered into as part of Mr Chiles’ business on own account outside the Contracts, and the FTT is best placed to reframe the question and carry out that assessment through the correct prism. In relation to Mr Chiles’ activities outside the Contract, including the knowledge issue, the FTT is also best placed to determine what findings to make, and what evidence to admit from the parties. Without in any way tying the FTT’s hands, we think and hope that HMRC’s statement of facts of 20 February 2024 may provide a starting point which enables any further fact finding on the knowledge issue to be limited, and to require no, or only very little, further witness evidence, particularly taking into account what the Court of Appeal says about the relevance and significance of the knowledge issue in Atholl House CA.

We remit the Decision for reconsideration by the FTT, with the following directions:

We see no reason why the remitted hearing should not be heard by the same panel as that which made the Decision, if practicable. Judge Cannan has recently been appointed a salaried judge of this Tribunal, but may, of course still sit in the FTT. Indeed, if Judge Cannan and Mr Woodman are available, it would be more efficient for them to hear the remitted case, given their familiarity with the facts and issues.