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UT (Tax & Chancery) UT/2022/000103 - [2024] UKUT 00183 (TCC)
Fecha: 13-Mar-2024
Ground 1 – Acquiescence and estoppel
Ground 1 – Acquiescence and estoppel
Ground 1 concerns TTSL’s contention that the FTT was wrong in law in not finding that HMRC had acquiesced in TTSL bringing the Claim Appeal. Alternatively, TTSL says that HMRC were otherwise estopped from raising their procedural or jurisdictional objections to the Claim Appeal. In support of this, TTSL relied heavily on the decision of the House of Lords in Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1 (“Gore Wood”).
In considering whether HMRC were estopped from applying to strike out the Claim Appeal, the FTT considered that Gore Wood could be distinguished on its facts. HMRC had taken no procedural issue in their original statement of case dated 25 May 2018, but changed their view and did take the procedural issue in their letter dated 15 July 2021. The FTT regarded this as a matter of case management rather than acquiescence or estoppel. It held at [101] that there was no case management reason why HMRC should not be permitted to change their legal arguments. In any event, in relation to estoppel, the FTT considered that TTSL was required to show detriment to establish an estoppel and concluded that there was no detriment.
Mr Michael Jones KC appearing on behalf of TTSL submitted that, by 15 July 2021, when HMRC “revisited” the jurisdictional issue, they had acquiesced in TTSL bringing the Claim Appeal. He relied in particular on the correspondence with Mr Boobyer, including Mr Boobyer’s acceptance in his letter dated 12 April 2017 that withdrawal of the Assessment Appeal did not affect TTSL’s entitlement to pursue the Claim. He also relied on the absence of any reference to the procedural issue in HMRC’s statement of case or at any time up to 15 July 2021. Mr Jones KC submitted that the FTT was wrong to distinguish Gore Wood and to treat the matter as being purely a question of case management.
We agree with Mr Jones KC that the FTT was wrong to treat the issues of acquiescence and estoppel raised by TTSL as issues of general case management. We consider that, in the context of a strike out application based on estoppel and abuse of process, the lateness of the application could give rise to a substantive defence based on acquiescence or estoppel. Case management issues might arise from the lateness of an application but TTSL did not take any case management issue here. It did not object to HMRC amending the statement of case.
In Gore Wood, Mr Johnson and his business, Westway Homes Ltd (“W Ltd”) had potential claims in negligence against the firm Gore Wood & Co (“GW”). GW had been instructed in relation to a property purchase. W Ltd’s claim against GW was settled at trial in 1992. At that time, Mr Johnson had been willing in principle to negotiate an overall settlement of W Ltd’s claim together with his personal claim, that had not yet been brought. However, GW’s solicitor stated that the personal claim “would be a separate claim and it would really be a matter for separate negotiation in due course”. The settlement agreement limited the amount of any claim by Mr Johnson for loss of income as a shareholder in W Ltd to £250,000, but expressly stated that it did “not limit any other of Mr Johnson’s rights against [GW]”. Mr Johnson commenced his personal action against GW in 1993 and, between 1993 and 1997, the parties pleaded and re-pleaded their cases. In 1997, GW applied to strike out the action as an abuse of process. Mr Johnson contended that GW was estopped from contending that his claim was an abuse of process.
At first instance, on the trial of various preliminary issues, Pumfrey J held that GW was estopped by convention from contending that Mr Johnson’s action was an abuse of process. He found that there was a common assumption that the personal claim would be made and entertained by the court and that it was unconscionable for GW to allege that the personal claim was an abuse of process.
The Court of Appeal held that there was no estoppel by convention, but that there was an abuse of process by Mr Johnson pursuant to the rule in Henderson v Henderson (1843) 3 Hare 100. In short, the Court of Appeal considered that Mr Johnson should have pursued his claim at the same time as the claim of W Ltd.
The House of Lords were unanimous that there was no abuse of process by Mr Johnson. Lord Bingham conducted an extensive review of the authorities on abuse of process and the rule in Henderson v Henderson. He noted, in the well-known passage at p 31A:
But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not.
In relation to estoppel by convention, Lord Bingham cited at p33D the familiar passage from Lord Denning MR’s judgment in Amalgamated Investment and Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84, 122:
The doctrine of estoppel is one of the most flexible and useful in the armoury of the law. But it has become overloaded with cases. That is why I have not gone through them all in this judgment. It has evolved during the last 150 years in a sequence of separate developments: proprietary estoppel, estoppel by representation of fact, estoppel by acquiescence, and promissory estoppel. At the same time it has been sought to be limited by a series of maxims: estoppel is only a rule of evidence, estoppel cannot give rise to a cause of action, estoppel cannot do away with the need for consideration, and so forth. All these can now be seen to merge into one general principle shorn of limitations. When the parties to a transaction proceed on the basis of an underlying assumption—either of fact or of law—whether due to misrepresentation or mistake makes no difference — on which they have conducted the dealings between them — neither of them will be allowed to go back on that assumption when it would be unfair or unjust to allow him to do so.
Lord Bingham went on to find at p33G that Mr Johnson and GW had proceeded on the basis of an underlying assumption that a personal action by Mr Johnson would not be an abuse of process and that it would be unfair or unjust to allow GW to go back on that assumption. He then stated at p34C:
If, contrary to my view, GW is not estopped by convention from seeking to strike out Mr Johnson's action, its failure to take action to strike out over a long period of time is potent evidence not only that the action was not seen as abusive at the time but also that, on the facts, it was not abusive…
Lord Bingham stated his overall conclusion at p 34G:
In my opinion, based on the facts of this case, the bringing of this action was not an abuse of process.
Lord Goff agreed with Lord Bingham that there was no abuse of process by Mr Johnson. However, he did not agree that estoppel by convention prevented GW from contending that Mr Johnson’s action was an abuse of process. He set out his view at pp 40 and 41 that an estoppel by convention required an agreed assumption as to facts. Mr Johnson was arguing that GW was estopped from contending that the personal claim was an abuse of process because both parties assumed that the personal claim could be made. That related to a matter of law and not fact. He did however consider that there could be an estoppel by representation:
… It could, however, be appropriate subject matter for an estoppel by representation, whether in the form of promissory estoppel or of acquiescence, on account of which the firm is, by reason of its prior conduct, precluded from enforcing its strict legal rights against Mr. Johnson (to claim that his personal proceedings against the firm constituted an abuse of the process of the court). Such an estoppel is not, as I understand it, based on a common underlying assumption so much as on a representation by the representor that he does not intend to rely upon his strict legal rights against the representee which is so acted on by the representee that it is inequitable for the representor thereafter to enforce those rights against him. This approach, as I see it, is consistent with the conclusion of my noble and learned friend Lord Millett, who considers that the firm would be so precluded by virtue of its acquiescence in the manner in which Mr. Johnson had conducted the litigation hitherto. In the context of the present case, moreover, I can see no material difference between invoking promissory estoppel or acquiescence as the ground on which the respondent firm should be precluded from asserting that the appellant had abused the process of the Court… In the end, I am inclined to think that the many circumstances capable of giving rise to an estoppel cannot be accommodated within a single formula, and that it is unconscionability which provides the link between them.
Lord Cooke and Lord Hutton both agreed with Lord Bingham on the subject of abuse of process. They made no observations on estoppel, although on one view their agreement with Lord Bingham on abuse of process might be said to extend to what he said in relation to estoppel by convention.
Lord Millett conducted his own review of the authorities on abuse of process starting with Henderson v Henderson. At pp 60H to 61F, he rejected GW’s contention that there was an abuse of process by Mr Johnson and considered in the alternative whether GW were estopped from asserting an abuse of process:
Accordingly, I would reject the firm's contention that it was an abuse of process for Mr. Johnson to bring his action after the Company's claim had been resolved. Even if this were not the case, however, I agree with the trial judge that it would be unconscionable for the firm to raise the issue after the way in which it handled the negotiations for the settlement of the Company's action. I would not myself put it on the ground of estoppel by convention. Like the Court of Appeal, I have some difficulty in discerning a common assumption in regard to a matter about which neither party thought at all. This is not to say that estoppel has no part to play in this field. I would regard it as operating in the opposite way. Given that Mr. Johnson was entitled to defer the bringing of his own proceedings until after the Company's claims had been resolved, it would have been unconscionable for him to have stood by without disclosing his intentions and knowingly allowed the firm to settle the Company's action in the belief that it was dealing finally with all liability arising from its alleged negligence in the exercise of the option. To bring his own claim in such circumstances would, in my opinion, amount to an abuse of the process of the Court. But nothing like this took place.
This makes it unnecessary to deal with Mr. Johnson's submission that it is too late for the firm to raise the issue. If necessary, however, I should have regarded the delay as fatal. Indeed, I should have regarded it as more than delay; I think it amounted to acquiescence…
But the premise in the present case is that Mr Johnson has a good cause of action which he should have brought earlier if at all. I do not consider that a defendant should be permitted to raise such an objection as late as this. A defendant ought to know whether the proceedings against him are oppressive. It is not a question which calls for nice judgment. If he defends on the merits, this should be taken as acquiescence.
We have cited these passages at length because Mr Jones KC relied on what was said by Lord Goff and Lord Millett as authority for the proposition that GW was precluded by virtue of acquiescence from alleging abuse of process on the part of Mr Johnson. He submitted that the FTT ought to have treated the passages as authority for that proposition and ought to have applied the same reasoning to the facts of the present appeal. HMRC, by defending on the merits, had acquiesced in TTSL bringing the Claim Appeal. They ought to have taken steps to make their objection known at the time, or shortly after the appeal was lodged. He submitted that if it was necessary to show unconscionability, then in the present case it was unconscionable for HMRC to raise the procedural issue and seek to strike out the appeal.
The Supreme Court has recently considered the question of estoppel in the context of tax proceedings in Tinkler v HM Revenue & Customs [2021] UKSC 39 (“Tinkler”). It held that an estoppel by convention arose that prevented Mr Tinkler from alleging that an enquiry into his self-assessment return had not been validly opened. That finding was reached on the basis that there was a common assumption that a valid enquiry had been opened. It endorsed the principles set out by Briggs J, as he then was, in HM Revenue & Customs v Benchdollar Ltd [2019] EWHC 1310 (Ch) (“Benchdollar”), as approved subject to one qualification by the Court of Appeal in Blindley Heath Investments Ltd v Bass [2015] EWCA Civ 1023. The fifth principle at [52] of Benchdollar requires detrimental reliance:
Some detriment must thereby have been suffered by the person alleging the estoppel, or benefit thereby have been conferred upon the person alleged to be estopped, sufficient to make it unjust or unconscionable for the latter to assert the true legal (or factual) position.
We were also referred to the judgment of Carnwath LJ, as he then was, in ING Bank NV v Ros Roca SA [2011] EWCA Civ 353 (“ING”) at [55] – [73] where he accepted the requirement for detrimental reliance in the context of estoppel by convention – see in particular [64(v)].
The Supreme Court in Tinkler considered the role of unconscionability in relation to estoppel by convention at [64]:
What about unconscionability? This was mentioned as part of the fifth of Briggs J’s principles in Benchdollar; and in other leaner formulations - such as that of Lord Steyn in The Indian Endurance - it has been put forward as playing an even more central role. In most cases, in line with Briggs J’s statement of principles, unconscionability is unlikely to add anything once the other elements of estoppel by convention have been established and, in particular, where it has been established that the estoppel raiser has detrimentally relied on the common assumption. However, one can certainly envisage exceptional cases where unconscionability may have a useful additional role to play. For example, even if all the other elements of estoppel by convention can be made out, fraudulent conduct by the estoppel raiser would rule out estoppel by convention … But such examples are likely to be rare. Even though HMRC was primarily at fault on the facts of this case - by carelessly sending the notice of enquiry to the wrong address and its consequent misrepresentation to BDO - I agree with the approach in Amalgamated Investment, The Amazonia and Benchdollar so that that does not amount to unconscionable conduct barring the establishment of estoppel by convention.
In relation to estoppel by acquiescence, Mr Jones KC relied upon the decision of the House of Lords in Republic of India v India Steamship Co [1998] AC 878, (the “Indian Endurance” – it is The Indian Endurance referred to in Tinkler). In that case, the Court of Appeal held that the plaintiffs were debarred from bringing the action because they had obtained a judgment on part of the claim in India. It also held that the defendants were not estopped by convention or acquiescence from seeking to debar the plaintiff. The House of Lords upheld that decision, Lord Steyn stating at pp 913 and 914:
That brings me to estoppel by acquiescence. The parties were agreed that the test for the existence of this kind of estoppel is to be found in the dissenting speech of Lord Wilberforce in Moorgate Mercantile Co. Ltd. v. A Twitchings [1977] A.C. 890. Lord Wilberforce said, at p. 903, that the question is:
"whether, having regard to the situation in which the relevant transaction occurred, as known to both parties, a reasonable man, in the position of the 'acquirer' of the property, would expect the 'owner' acting honestly and responsibly, if he claimed any title in the property, to take steps to make that claim known ..."
Making due allowance for the proprietary context in which Lord Wilberforce spoke, the observation is helpful as indicating the general principle underlying estoppel by acquiescence. The question was debated whether estoppel by convention and estoppel by acquiescence are but aspects of one overarching principle. I do not underestimate the importance in the continuing development of the law of the search for simplicity. I, also, accept that at a high level of abstraction such an overarching principle could be formulated. But Mr. Rokison, for the defendants, persuaded me that to restate the law in terms of an overarching principle might tend to blur the necessarily separate requirements, and distinct terrain of application, of the two kinds of estoppel.
All their lordships in Gore Wood found that the circumstances in which Mr Johnson made his personal claim did not amount to an abuse of process. In so far as necessary Lord Bingham, and possibly Lord Cooke and Lord Hutton, held that there was in any event an estoppel by convention which would have precluded GW from alleging an abuse of process. Mr Jones KC disclaimed any reliance on estoppel by convention, accepting that there was no common assumption as between TTSL and HMRC that HMRC would not seek to strike out the Claim Appeal as an abuse of process. That was why Mr Jones KC relied on estoppel by acquiescence. His case was that positive acts on the part of HMRC indicated to TTSL that HMRC had no procedural objections to the Claim Appeal arising from the prior Assessment Appeal which had been withdrawn.
We do not accept Mr Jones KC’s submission that an estoppel by acquiescence could arise on the facts of the present case. The FTT at [102], under the heading “No Detriment”, rejected Mr Jones KC’s submission that he was not relying on estoppel by convention. It went on to find that TTSL had suffered no detriment and therefore could not rely on estoppel by convention, which was Issue Two before the FTT:
No detriment
In relation to the parties’ submissions about detriment, I begin by rejecting Mr Jones’s argument that the Appellant was not relying on estoppel by convention, but instead on estoppel by representation. As Mr Elliott said, the Appellant’s case on Issue Two rested on Gore Wood, in which the leading judgment was given by Lord Bingham. As set out later in this decision, see §226, Lord Bingham held that estoppel by convention applied, and in Tinkler, the Supreme Court referred only to Lord Bingham’s judgment. Mr Jones relied on dicta from the minority judgments of Lord Goff and Lord Millett, which are plainly of less authority.
As a result, to succeed on Issue Two, the Appellant has to meet all the requirements in Benchdollar, including that:
“Some detriment must thereby have been suffered by the person alleging the estoppel, or benefit thereby have been conferred upon the person alleged to be estopped, sufficient to make it unjust or unconscionable for the latter to assert the true legal (or factual) position.”
In considering whether there had been detriment, I asked myself what would have happened if HMRC had always maintained that the VAT for the Overlap Period was not recoverable. It seemed to me that there were the following possible outcomes:
the Appellant would have made the same appeal, on the same basis, because they had been advised they would succeed;
the Appellant would have reduced the Claim so as to exclude the Overlap Period; or
the Appellant would not have made the Claim at all, because the cost to risk ratio made it unattractive.
Of these three options:
The most probable is the first: the Appellant would have continued with the appeal on the same basis. I come to this conclusion because of PwC’s clear view that HMRC was wrong to think that the Claim could not include the Overlap Period: see their letter of 5 December 2016 which relied on Matalan, and their repetition of this reliance in their Grounds of Appeal to the Tribunal.
However, even if the Appellant had instead taken the second option, its legal costs were unlikely to have been any less: the dispute was unrelated to quantum or to the number of VAT periods; moreover there was also no related evidence to support such a submission.
Had the Appellant not have appealed at all, as Mr Elliott said, it would have lost the £456,555 it will now receive for the later periods.
It follows from the above that the Appellant has not shown it has suffered detriment by way of costs or otherwise. I also considered Mr Jones’s submission that HMRC had acted unconscionably. However, as Lord Burrows said in Tinkler, this is the position only in “rare or exceptional cases”, and Mr Jones did not explain why this was such a case, and I could think of no basis on which it satisfied those requirements.
The FTT had recorded at [72] and [82] Mr Jones KC’s submission that HMRC had acquiesced in TTSL bringing the appeal. It is not clear to us why the FTT then sought to re-characterise Mr Jones KC’s submission as being based on estoppel by convention. Be that as it may, the FTT made a clear finding of fact that TTSL had suffered no detriment as a result of HMRC changing its position on the Claim Appeal and seeking to raise the procedural issue in July 2021.
Mr Elliott rightly acknowledged that estoppel by acquiescence is a recognised form of estoppel. He referred to a decision of Blair J in Starbev GP Ltd v Interbrew Central European Holdings BV [2014] EWHC 1311 (Comm) which treated it as a sub-set of estoppel by convention. The case was determined on different grounds, but Blair J noted at [127] that in a contractual context, silence on the part of a party can only amount to acquiescence where there is a duty to speak. Mr Elliott submitted that in the present context there was no duty to speak and there could be no estoppel by acquiescence. Mr Jones KC disagreed and submitted that there was a duty to speak, in the sense that HMRC were obliged to state their case in full.
In the event, it is not necessary for us to resolve that issue or to determine whether HMRC can be said to have acquiesced in TTSL pursuing the Claim Appeal by failing to make their strike out application until July 2021. That is because we are satisfied that it is a necessary ingredient of estoppel by acquiescence, as for any estoppel by representation, that the party claiming the benefit of the estoppel has suffered detriment. The FTT made a clear finding that TTSL had not suffered any detriment and it has not appealed that finding.
Mr Jones KC submitted that in the Indian Endurance there was no reference to a requirement for detrimental reliance when setting out the test for estoppel by acquiescence. Nor, so he said, was there any reference to a requirement for detrimental reliance in the speeches of Lord Goff and Lord Millett in Gore Wood when they were dealing with acquiescence. However, as Lord Goff said, estoppel by acquiescence is a form of estoppel by representation, like promissory estoppel and estoppel by convention, all of which have a requisite element of detriment. Indeed it is implicit that there is such a requirement in Lord Goff saying, as quoted above, that the representation or acquiescence must have been “so acted on by the representee that it is inequitable for the representor thereafter to enforce those rights against him”.
Furthermore Lord Steyn in the Indian Endurance referred to the debate as to whether estoppel by convention and estoppel by acquiescence are aspects of one overarching principle. Whilst he did not seek to identify an overarching principle, there is no suggestion in that case or in any of the other authorities that estoppel by acquiescence does not require detrimental reliance.
Mr Jones KC submitted that detriment is simply a facet of unconscionability, and that detriment is not the only route to establishing that it would be unconscionable for HMRC to rely on abuse of process. He said that HMRC’s conduct in the present case was similar to GW’s conduct in Gore Wood. In particular, he said that it was unconscionable for HMRC to have indicated to TTSL that its appeal could proceed without procedural objection, and to state, in effect, that they would meet the claim in full if TTSL succeeded on the substantive issue, only then to reverse their position shortly before trial, having conceded the substantive issue.
In the light of Tinkler at [64] and ING at [64(v)], we do not accept that submission.We are satisfied that detrimental reliance is a requirement of both estoppel by convention and estoppel by acquiescence, both being different forms of estoppels by representation.
At one stage, Mr Jones KC submitted that if detriment was a requirement, then there was detriment to TTSL on the facts. He said that we could not rely on the FTT’s finding that there was no detriment because it was considering the wrong estoppel. If we have to re-make the decision then we should, if necessary, make a finding of detriment.
We do not accept that submission. The FTT considered that no detriment arose from HMRC’s conduct in raising the procedural issue late in the day. On the facts of this case, that finding does not depend on whether TTSL was relying on an estoppel by convention or an estoppel by acquiescence. It was a finding of no detriment in the circumstances of this case and given that there is no appeal from that finding, we cannot overturn it.
We therefore reject Ground 1 of the appeal.