Tax tribunal applies Denton to brush off delay

Tax dispute

Case centred on company director’s remuneration

A senior tax judge has become one of the first to go through the Denton principles on relief from sanction, in finding that an 11-day delay in serving a statement of case was not significant.

In his ruling in the Tax Chamber of the First Tier Tribunal, Judge Jonathan Cannan outlined how the approach set out in Denton could be applied by other non-specialist courts.

Judge Cannan said the first stage of the Denton test was to focus “not on whether the breach has been trivial, but on whether it has been serious or significant”.

He went on: “Whether a breach imperils future hearing dates or otherwise disrupts the conduct of the litigation may well be a useful measure of whether it has been serious or significant.”

Judge Cannan said the first stage of the test did “involve consideration of unrelated failures”, which were better dealt with at the third stage.

He said that when, during the second stage of the test, courts considered why the default occurred, they could find “good and bad reasons” in the Mitchell ruling. “Plainly pressure of work will rarely be a good reason.”

The judge went on: “The third stage involves consideration of all the circumstances of the case. The need for litigation to be conducted efficiently and at proportionate cost and the need to enforce compliance with rules are of particular importance in the third stage and should be given particular weight.”

Judge Cannan was ruling in Elder v HMRC [2014] UKFTT 728 (TC), a case in which HMRC failed to serve its statement of case as directed; 11 days after the deadline, the time for service was extended by a tribunal judge. The applicable rule does not contain a sanction, but the claimant sought to have HMRC disbarred from taking part in the proceedings and Judge Cannan said the Denton guidance was directly relevant, and that – as the Court of Appeal said in its ruling – it was not necessary to cite pre-Denton rulings.

Referring to Lord Dyson’s comment in Denton that courts should always “have regard to all the circumstances of the case”, Judge Cannan said the 11-day delay was not “serious or significant”. “That is not a significant delay in the context of appeals generally, or in the context of the first and second appeals in the present case.

“That is not to say that such delays are to be in any way encouraged. However it did not imperil a future hearing date. Nor should it have disrupted the conduct of these appeals or other appeals.”

Judge Cannan accepted that there was “no good reason” for HMRC not to have sought extension of time for service of the documents, and noted its failure to engage with the appellant to agree directions and that the statement of case did not “deal adequately with quantum”.

However, “apart from these aspects”, the judge said he was not satisfied that any other breaches were significant. He dismissed the application.




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