UT (Tax & Chancery) UT/2023/000096 - [2024] UKUT 00203 (TCC)

There is no restriction on when the FTT can exercise the power under Rule 37. The FTT can amend a decision under Rule 37 of its own initiative or following application or notice by the parties. Rule 37 is not limited to cases where there has been an application for permission to appeal and the FTT is satisfied that the decision contains an error of law. There is no procedural requirement as to giving notice to the parties before making any changes. The restriction on the FTT’s power to amend a decision under Rule 37 is one of substance – the power is to “correct any clerical mistake or other accidental slip or omission”.

A review under Rule 41 may only be undertaken following an application for permission to appeal and if the FTT is satisfied that there was an error of law in the decision. Where the FTT undertakes a review of a decision, it may not take any action in relation to that decision without first giving every party an opportunity to make representations in relation to the proposed action. Where Rule 41 applies, the FTT has broad powers as set out in s9(4) TCEA 2007.

whether the Revised Decision was the result of a review of the Original Decision under Rule 41 or correction of accidental slips under Rule 37; and

whether the changes made were ones that the FTT was entitled to make under the relevant process.

“His argument was that that could be relied upon to evidence the fact that there must have been some sort of verbal loan. There is absolutely no evidence to that effect. As can be seen from paragraphs 83 to 87 above, both appellants signed loan agreements copies of which were produced to HMRC but it was only when HMRC instigated enquiries in 2014 that it transpired that Mandaconsult AG had never signed the agreements. The witness statements of both appellants refer to the loans and both said that they assumed that Mandaconsult AG had executed the loan agreements. There is absolutely no reference to any verbal loan; indeed both state that they proceeded on the basis that the loan agreements were key to the arrangements and existed. In oral evidence Anthony Outram said that he would not have entered into the Pendulum Contract without the loan and Ross Outram said that it was the existence of the loan that made it attractive and the existence of the loan was the “deciding factor”.”

the contents of the letter of 25 September 2023 are inexplicable, including the reference not only to Rule 37 but to the release date of the decision remaining as 21 July 2021 – the Original Decision was released on 27 April 2021, and the release date of the Revised Decision, which was attached to the letter, had been changed on the final page to 25 September 2023; and

the PTA Decision, having recounted the background and in particular the submissions received from BR on behalf of the Appellants, stated at [17] thereof that the Appellants’ original application for leave to appeal should be granted and ended with “Accordingly the proposed revisions will not be made.” Yet the version of the Revised Decision which was released to the parties did include some, but not all, of the revisions which had been proposed in the May 2023 Draft.

The change of language in [143] from the message (from Montpelier) about trading “does not appear to have been understood by them” to “does not appear to have been acted upon by them” is significant. It is part of the FTT’s findings as to what the Appellants did or did not do, and is relied upon by the FTT (albeit without express cross-reference) in its reasons for concluding that the conduct was deliberate.

The deletion in [149] of “In any event, the losses could only be created if there was a loan” initially appears very significant, particularly in the light of the Appellants’ submissions on Grounds 1 and 4 which included that the FTT’s findings in relation to the loans revealed, in the Appellants’ submission, that the FTT had failed to understand the arrangements and the basis on which the losses were expected to be claimed. However, we recognise that at [171] of the Revised Decision the FTT states “Crucially the appellants do not and never did have any liability to repay a purported loan. Therefore they did not incur expenditure and they incurred no losses that were capable of being relieved.” This makes substantially the same point as that which had been made by the deleted language and we consider that this reduces the significance of the deletion in [149].

The appeal was heard by a single judge whereas the relevant Practice Statement of the Senior President of Tribunals on the Composition of Tribunals provides that a disability living allowance appeal must be decided by a panel consisting of a judge and two members, and one member must be a medical practitioner and the other must have a disability qualification.

The amended reasons were provided by the fee-paid judge who heard the appeal. That Practice Statement provides that the exercise of the power of review under s9 must be carried out by a salaried tribunal judge. The Upper Tribunal considered that amended reasons could not properly be written by a salaried judge who was not a member of the original panel, with the result that power is given to a salaried judge who may not be in a position to implement it. The Upper Tribunal considered that the solution to this is that if the salaried judge considers it may be appropriate to amend the reasons, the proper course is to invite the hearing judge to prepare such reasons as are consistent with the tribunal’s reasoning at the time of its decision, and the salaried judge must then decide whether they satisfy the criterion of being amended reasons.

The powers under the rules of procedure must be exercised fairly and justly; this means that they must be exercised transparently. Here, the district tribunal judge did not give the parties an opportunity to make representations – this was said to be inappropriate and unfortunate (at JS[9]). The Upper Tribunal did not comment on the hearing judge’s failure to provide the parties with the opportunity to comment on the amended reasons.

At JS[28] the Upper Tribunal referred to the decision of the Supreme Court in In the matter of L and B (Children) [2013] UKSC 8 (“L and B”) at L and B[17] and [19], stating that “the Supreme Court has recently emphasised that the integrity of the appeal process should not be subverted by diverting matters to an alternative process”.

In L and B, Baroness Hale, in a judgment with which the other members of the court agreed, identified the issue in that case as being whether and in what circumstances a judge who has announced her decision is entitled to change her mind. In an oral judgement on 15 December 2011, the “preliminary outline judgment approved by the court” had concluded that the father was the perpetrator of non-accidental injuries to a child. In a written “perfected judgment” on 15 February 2012 she expanded upon the earlier judgment but reached a different conclusion, stating “I am unable to find to the requisite standard which of the parents it was…It could have been either of them who injured [child] and that is my finding”.

Baroness Hale said a judge is entitled to reverse his decision at any time before his order is drawn up and perfected. There is no jurisdiction to change one’s mind thereafter unless the court has an express power to vary its own previous order. The proper route of challenge is by appeal. The judge did have power to change her mind, and the question was whether she should have exercised it. Baroness Hale set out at L and B[27] that the judge’s overriding objective must be to deal with the case justly, and a relevant factor must be whether any party has acted upon the decision to his detriment. Referring to examples of cases where it might be just to revisit, these were said to be only examples, and a carefully considered change of mind can be sufficient; every case is going to depend upon its particular circumstances. The court ordered that the father’s appeal be allowed; the welfare hearing should proceed on the basis of the findings in the judgement of 15 February 2012.

However, L and B is a case in which there was no separate review process. Baroness Hale expressly allowed for cases where the court (or tribunal) has an express power to vary its order. The review procedure under Rule 41 is a part of such a process, and ordinarily the FTT is not subverting the appeals process by exercising this power (as it is designed to avoid unnecessary appeals). In any event, the FTT has to exercise the power to undertake a review of a decision in the light of the overriding objective and should be mindful of circumstances in which exercise of the power might disrupt the progress of an appeal.

At JS[34] the Upper Tribunal stated that the common law or inherent power and the decisions on its exercise form part of the background against which, and by analogy provide guidance on how, s9 TCEA 2007 is to be interpreted and applied. Those decisions “make clear that the power to give additional reasons is only to be exercised exceptionally and with safeguards”. They referred to Mummery LJ’s speech in Woodhouse School v Webster [2009] ICR 818 (“Woodhouse”) (in particular Woodhouse[26] to [28] of that speech).

The Employment Tribunal (“ET”) had been divided as to why an employee had resigned. One lay member thought there was no constructive dismissal; the majority took a different view of the evidence. The Employment Appeal Tribunal (“EAT”) made an order that the ET be asked to answer certain questions in relation to its written reasons, and was asked to give its answers by reference to its notes of evidence.

Mummery LJ had emphasised at Woodhouse[25] the importance of taking care to observe the limits of the exceptional Burns/Barke procedure, which is available where the EAT considers that there is possibly an inadequacy in the ET’s reasons for its decision. The EAT may, before it finally decides the appeal, refer specific questions to the ET at the preliminary hearing of the appeal, requesting it to clarify or supplement its reasons where no reasons were given or where the reasons were inadequate. He said it is not desirable for the ET to do more than answer the request – it should not, eg, advance arguments in defence of its decision. Mummery LJ’s concerns were twofold: the EAT should identify correctly the point on which the ET’s reasons may be inadequate; and having been asked questions, the ET chairman went further than the questions required and further than was justified.

We note that in JS the Upper Tribunal said at JS[35] this reasoning is equally applicable to the review power under s9. However, the reasoning in Woodhouse was based on common law principles, whereas the power of review is granted by statute, and is embodied in the relevant Tribunal rules.

At JS[36] the Upper Tribunal recorded that one of the limits on the power to supplement reasons is that it must not be used to correct defective reasoning or to provide a commentary on the grounds of appeal, and considered this is equally applicable to the review power. They referred to the decision of the Court of Appeal in Brewer v Mann [2012] EWCA Civ 246 (“Brewer”).

In Brewer, the Court of Appeal said at Brewer[31] “where a judge has received no request from the parties to reconsider his judgment or add to his reasons, and has not demonstrated the need in conscience to revisit his judgment, but on the contrary has received grounds of appeal and an application for permission to appeal on the basis of the alleged inadequacies of his judgment, then it would be most unwise for him to rewrite his judgment (other than purely editorially) and it would take the most extraordinary reasons, if any, to justify such a course on his part”.

This guidance, although expressed as provisional, is given in forceful language. But the point remains that this was given against the background that there was no statutory power to review a decision.

At JS[27] and [41] the Upper Tribunal referred to Mummery LJ’s speech in Space Airconditioning plc v Guy [2012] EWCA Civ 1664. Mummery LJ stated that that the judgment should be an accurate record of the judge’s findings and of the reasons for the decision; and before a judge corrected a judgment, the judge should give both sides an opportunity to make submissions on whether there is a valid objection.

The starting-point of Mummery LJ (in a speech with which the other members of the court agreed) was that CPR Part 52.11(3) sets out that the appeal court will allow an appeal where the decision of the lower court was either (a) wrong or (b) unjust because of a serious procedural error or other irregularity in the proceedings in the lower court. In that case, judgment had been given and an order made and the judgment contained what was described as a plainly wrong finding of fact. After the judgment had been handed down the judge had acknowledged that the finding was wrong but declined to correct it as a typographical slip and refused permission to appeal.

The appellant’s submissions included that the erroneous finding meant it had not had a fair trial – the wrong finding gave rise to a real doubt as to whether the judge appreciated the importance of the confidentiality factor central to its claim. The judge misunderstood much of the crucial evidence going to the heart of its case, and the error had a knock-on effect as it coloured the judge’s assessment of the evidence on other issues.

Mummery LJ did not accept the respondent’s suggestion that the error was typographical only. One reason given was that the judge herself had acknowledged the error but did not say it was typographical. He allowed the appeal on the ground that the decision appealed was either wrong or it was unjust as a result of an irregularity. The retention of the erroneous finding was an “irregularity in the proceedings” which makes the decision an unjust one.

We note that Mummery LJ had said that before the correction is made the judge should obviously give both sides an opportunity to make submission on whether there is a valid objection to a proposed amendment. That requirement is embedded in Rule 41(3).