CO/2651/2007 
Neutral Citation Number: [2008] EWHC 710 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION 
THE ADMINISTRATIVE COURT 
Royal Courts of Justice 
Strand
London WC2A 2LL 

Date: Thursday, 20th March 2008
 
B e f o r e: 

MR JUSTICE CRANSTON
- - - - - - - - - - - - - - - - - - - - -
Between: 
THE QUEEN ON THE APPLICATION OF 
(1) BLACKPOOL FOOTBALL CLUB PROPERTIES LIMITED
(2) OWEN JOHN OYSTON 
Claimants

v 

HM REVENUE & CUSTOMS 
Defendant 
- - - - - - - - - - - - - - - - - - - - -
Computer‑Aided Transcript of the Stenograph Notes of  
WordWave International Limited
A Merrill Communications Company 
190 Fleet Street  London EC4A 2AG
Tel No: 020 7404 1400 Fax No: 020 7831 8838
(Official Shorthand Writers to the Court)
- - - - - - - - - - - - - - - - - - - - -
Anthony Scrivener QC (instructed by Blackpool Football Club Properties Limited) appeared on behalf of the Claimants
Philip Jones QC (instructed by HM Revenue & Customs) appeared on behalf of the Defendant 
- - - - - - - - - - - - - - - - - - - - -
J U D G M E N T 

1.	MR JUSTICE CRANSTON:  This is an application for permission to apply for judicial review.  It was lodged on 30th March 2007.  The claimants seek permission to challenge a decision, which they contend is based on a representation made to the second claimant's accountant by a senior official of the defendant, Her Majesty's Revenue & Customs ("HMRC"), at a meeting held on 20th June 2005.  The representation concerns tax relief on moneys that were introduced into the first claimant company Blackpool Football Club Properties Limited ("the Company").  The claimants are litigating before the Special Commissioners for Her Majesty's Revenue & Customs, but they contend that they have a separate public law claim as a result of the representation.  They have asked for an extension of time for this permission application.
2.	Let me briefly set out the background.  Mr Owen Oyston, the second claimant, is claiming relief from capital gains tax through what is called Enterprise Investment Scheme Relief (EIS).  In broad outline, this is a form of tax relief which allows tax on any chargeable gains to be sheltered if the amount of the gain is invested in subscribing for ordinary shares in a trading company carrying on a qualifying trade.  The Company (the first claimant) is a company carrying on a qualifying trade.  The second claimant had gained EIS relief in the past by subscribing for ordinary shares in the Company.  
3.	When the second claimant was in prison, one of his trusted employees, a Mr Oakley, was, on his account, supposed to invest moneys by subscribing for further shares in the company to obtain EIS relief.  However, on the second claimant's account, Mr Oakley falsely told the Company that the second claimant had changed his mind about investing in shares and instead used the moneys supposed to be invested in shares in making loans to the company.  On the second claimant's account, that was probably so that the employee (Mr Oakley) could subsequently withdraw and divert the moneys for his own purposes.  Certainly we know that Mr Oakley was subsequently convicted for dishonesty and was imprisoned.  At this point, I simply note that the issue of EIS relief is the issue before the Special Commissioners. 
4.	To take a step back, the second claimant negotiated with HMRC as to whether he could obtain tax relief, given the behavior of Mr Oakley.  He did that through Ms Carol Barrie, an experienced tax accountant working for a firm in Birmingham.  In law, there is no doubt that she was the second claimant's agent.  Ms Barrie had various discussions with HMRC.  Then on 20th June 2005, there was a meeting between her and a Mr David Hartnett, the director general and a member of the board of HMRC.  It is what, on the claimant's account, was said on that occasion that is the basis of these judicial review proceedings.
5.	The first account of what was said at that meeting is contained in a note which Ms Barrie made of the meeting.  It reads as follows:
"[Mr Hartnett] advised [Ms Barrie] that the matter of [the second claimant's] reinvestment relief had been referred by the board's solicitor to leading counsel.  Leading counsel did not believe that the case had yet been made for relief to be given.  He did agree however that if we could make out a reasonable case which demonstrated that Robin Oakley knew that the money had to go into Blackpool Football Club as share capital in order to obtain reinvestment relief, the Revenue would not litigate the matter but would grant the relief." 
As a result of what the claimants say was the representation made at that meeting, Ms Barrie collected and submitted evidence to the Revenue to put the claimant's case.  Time and money were expended.  However, on 23rd August 2006 she was finally told, on the telephone, that HMRC would be taking the matter to the Commissioners.  The claimants contend that what Mr Hartnett said at that 20th June 2005 meeting engendered a legitimate expectation.  In their claim form, it is the failure to honour that representation made at the 20th June 2005 meeting which is the decision now under challenge.  The relief claimed is a mandatory order for HMRC to grant the relief.
6.	Before me, Mr Scrivener QC advanced three main points with all his legendary skill.  First, he said that this is a matter which is fact‑dependent.  He would need to examine and cross‑examination witnesses as to what was said at the 20th June meeting, and what HMRC subsequently did, as a result of which the representation, in the claimants' case, was not given effect.  He took me to CPR Schedule 1, rule 9.5, which provides that where a declaration, injunction or damages are sought and the court considers that it should not be granted on an application for judicial review but might have been granted if it had been sought in a claim begun by the applicant at the time of making his application for judicial review, the court may, instead of refusing the application, order the judicial review proceedings to be continued as proceedings brought under CPR Part 7.
7.	Secondly, in relation to the legitimate expectation point, Mr Scrivener QC said that it was a basic principle of fairness which arises where a decision‑maker has led someone affected by the decision to believe that he will receive or retain a benefit or advantage.  In his submission, and I am sure there is no gainsaying this, the protection of legitimate expectation is at the root of the rule of law. Mr Scrivener QC referred to the well‑known passage in the judgment of Simon Brown LJ in the R v Devon County Council ex parte Baker [1995] 1 All ER 73 at page 88.  He submitted that the form of representation is unimportant as long as it appears to be an assurance, undertaking or promise of a benefit, advantage or course of action.  He referred me to cases where the principle has been applied to the Revenue and where the Revenue has entered into an agreement, for example under particular sections.  He also pointed out, as is indeed the case, that the Revenue can give advice through officially‑published statements and unofficial rulings and that they have a discretion to disapply the law by means of extra‑statutory concessions under its power of wide managerial discretion.  
8.	He referred me to several authorities where taxpayers had not only parallel cases before the Commissioners and before the courts in relation to the issue of taxation, but also where simultaneously they had raised issues requiring a public law remedy.  On this legal basis, Mr Scrivener QC submitted that there was a denial of a legitimate expectation.  At the 20th June meeting, Mr Hartnett had represented to Ms Barrie that the issue was the second claimant's intention and Mr Oakley's knowledge of that intention, the intention relating to whether money was going into the Company as share capital.  If the claimants could satisfy HMRC as to those matters, relief would be given.  The legitimate expectation was denied when HMRC refused tax relief.  
9.	I was taken to a letter which Mr Scrivener QC contended evidenced the failure of HMRC to address the issues of knowledge and intention.  That letter is dated 24th April 2006 and is addressed to Ms Barrie at her Birmingham firm.  It sets out that the Revenue had conducted the review, had given consideration to the representations and documentation that had been provided, and had sought advice from counsel.  Then, in the fourth paragraph, the letter says:  
"At best the additional documentation indicates that Mr Oyston would have been aware that money needed to go into [the Company] as share capital and that he relied upon his associates to accomplish that, but that they failed him by putting money into the company as loan capital."
The letter then goes on to say that the Revenue, in their view, did not take the situation outside the relevant statutory provision, and then continues: 
"On its plain wording, the provision is not concerned with the intention or bona fides of the taxpayer but simply with whether the taxpayer receives a return of value from the company at any time during the relevant period." 
In Mr Scrivener QC's submission, that demonstrates that the Revenue did not comply with the representation that Mr Hartnett had given to Ms Barrie at their 20th June 2005 meeting.
10.	Thirdly, in relation to delay in bringing the claim, Mr Scrivener QC said I could be assured that there were good reasons and that there was no prejudice to HMRC.  The material dates, as I have set out, were the date of the meeting, 20th June 2005; the telephone call to Ms Barrie on 23rd August 2006, when HMRC finally indicated that they were sending the matter to the Special Commissioners; and the next date, 7th November, when the defendant sent a pre‑action protocol letter.
11.	Of course, as I said at the very outset, the judicial review application was not lodged until 30th March 2007.  Mr Scrivener QC submits that the delay after August 2006 is explicable because during that period a businessman, Mr Frank McGrath, who was a friend of the second claimant, sought to negotiate with HMRC on the applicant's behalf.  He had had dealings with the Revenue on a number of matters, which culminated in the Revenue paying him a substantial sum by way of damages.  During that time, he made contact with various officers of HMRC, and he told the second claimant that he felt that he could assist in resolving the matter.  
12.	I was taken to witness statements of Mr Kenneth Chadwick, head of corporate affairs for the Oyston Group, supporting this and indicating that the claimants had firm hopes of a favourable outcome as a result of Mr McGrath's intervention.  So, in Mr Scrivener QC's submission, the delay was reasonable, Mr McGrath was the intermediary of the second claimant and was in essence accepted as such by HMRC.  
For the purposes of this permission application, I accept what Ms Barrie says occurred at that 20th June 2005 meeting.  In my view, there is no need, then, for cross‑examination about that.  I should say that HMRC's case is that Mr Hartnett cannot recollect giving that undertaking at all, and his assistant's note of the meeting contains no reference to it.  As director general of HMRC, Mr Hartnett was meeting with the second claimant because the second claimant had raised concerns about HMRC's behaviour which, as I understand it, had been taken up on his behalf by a Member of Parliament.  HMRC also contend that if the representation of 20th June 2005 was so important, why was it not until almost a year later (9th June 2006) that the second claimant, through Ms Barrie, wrote to HMRC referring to it.  In reply to that, Mr Scrivener QC has referred me to correspondence where, after the 2005 meeting, the claimants had referred to, or at least alluded to, the representation that they contend was given by HMRC on 20th June 2005.
13.	Let me accept for present purposes that a representation was made on 20th June 2005, and let me accept as well that it did give rise to a legitimate expectation, which does give rise to a public law remedy.  The claimants' case, as I have said, is that this justifies a mandatory order to grant the tax relief.  However, Mr Scrivener QC's submissions assume that the legitimate expectation was denied.  There is, as I have said, the Revenue's letter of 27th April 2006.  In my judgment, however, it cannot be said that the legitimate expectation of the claimants, if there was such, was not fulfilled.  At its highest, the expectation was that if the claimants made out a case about the money and the second claimant's instructions, and that Mr Oakley knew the money had to go into the Company as share capital, tax relief would be given.  I digress to say that other accounts given by the claimants of the meeting are that HMRC had to be convinced of the second claimant's authorisation and intention that the money should go in as share capital, and that the second claimant's directions had not been followed up by Mr Oakley.  But in any event, the condition to the legitimate expectation being effective was for the claimants to make out a case in relation to the money that went into the Company.  The plain fact is that HMRC concluded that a case was never made out.  They considered the information which Ms Barrie collected and submitted, they took counsel's opinion, but at the end of the day HMRC was not satisfied that the claimant could make out a case that all the moneys which were advanced by the second claimant to the Company were unauthorised payments.  So in terms of HMRC's conclusion, it was that whether any such representation was given by Mr Hartnett was not relevant because in their view the claimants had not satisfied the condition necessary for the relief.
14.	HMRC might be quite wrong about this.  The second claimant may be correct and may well be entitled to tax relief.  I note that the "Draft statement of facts not in dispute", prepared by the claimants for the Commissioners, paragraph 7 refers to representatives of the second claimant meeting with tax inspectors in 1999, who: 
"explained the unlawful activities of Oakley and that it had been discovered that despite the specific instructions of Oyston, all moneys introduced to the company should be by way of share subscription.  Oakley had not carried out this instruction.  Without authority, and contrary to the specific instructions of Oyston, Oakley had introduced the moneys into the Company either as loans from Oyston or as loans from Zabaxe" [I interpolate to say that that is one of Mr Oyston's companies]. 
The paragraph then goes on to describe what the second claimant proposed to do to overcome the problem.  In fairness to HMRC, I point out that their response to that before the Special Commissioners addresses this issue and "takes the view" that they do not accept "Oakley had specific instructions that all moneys introduced to the Company should be introduced by way of share subscription."  In that response they refer also to the fact that the second claimant had given a general power of attorney to his wife and son, and that he had other advisers who carried on the company during his absence.  In other words, some at least of what was going on was with the second claimant's authority.
15.	So, despite Mr Scrivener QC's submissions, in my judgment, even if there was a representation of 20th June 2005, even if it generated a legitimate expectation, that expectation was not denied.  On their own case, the claimants had to make a case to HMRC, and they failed to make that case.  On any sensible reading of Ms Barrie's note, in my judgment, it had to be a case acceptable to HMRC.  It may be, as I said, that HMRC have got it wrong, but that is a matter for the Special Commissioners.  As I said earlier, it is clear law that there may be separate remedies, both before the Commissioners and also arising before this court, in relation to a taxpayer's liability.  In this case, however, the issue before both venues is the same.  It is before, in my judgment, the Special Commissioners.  For that separate reason, the claimants before this court have not exhausted their remedies.   
16.	I have accepted that the claim is within time.  Mr Scrivener QC submitted that there were good reasons for that.  However unusual it may seem to the outsider, I am prepared to accept that the second claimant genuinely thought that Mr McGrath was acting in an intermediary role and that he might produce a result.  So I am prepared to give the benefit of the doubt and to accept that there were good reasons for the delay.  I also accept Mr Scrivener QC's submissions that there was no hardship or prejudice detrimental to good administration to the defendant as a result of that delay.  
17.	In summary, in my view permission must be refused.  The dispute, including the dispute about the representations of 20th June 2005 and its implications, are before the Special Commissioners.  Judicial review acts as a backstop and the consequence is that in this case I defer to the Special Commissioners.  The issue can be thrashed out there by evidence and by cross‑examination.  Thank you. 
18.	MR SCRIVENER:  Much obliged. 
19.	MR JONES:  I would ask for the claimant to be dismissed, and I would also ask for the costs of the defendant to be paid.  This is an appropriate case for costs to be paid by the claimants to the defendants.  This is not a case where the application was refused on paper and it was a renewed application made orally where the defendant decided to turn up but was under no obligation to turn up.  This is a case where Beatson J did not make an order either way on the paper application, but directed that there should be an oral hearing.  Indeed, directed skeleton arguments to be filed 7 days before the hearing.  So this is a proper inter partes hearing.  My Lord, this is a case where, I make no criticism of my learned friend who has obviously been landed with this at (inaudible), but it is a case where if one just read the papers it would be difficult to make head or tail of the case.  Therefore, this was a proper case for us to attend and we should have our costs to be assessed if not agreed.
20.	MR JUSTICE CRANSTON:  Mr Scrivener? 
21.	MR SCRIVENER:  My Lord, it is a permission application and it is not usual to award costs on permission applications.  In my submission, my learned friend could have waited to see what happened and then applied to have the order set aside.  One does not want to encourage inter partes hearings which are really permission hearings, which this was.  This would be the right sort of case not to order to pay costs. 
22.	MR JUSTICE CRANSTON:  The difficulty in one sense is because Beatson J ordered that there be an inter partes hearing.  Normally it would have been dealt with at an earlier stage. 
23.	MR SCRIVENER:  Yes, quite. 
24.	MR JUSTICE CRANSTON:  I think, though, given that we have all turned up and that there have been skeleton arguments, I am going to have to award costs against you.
25.	MR SCRIVENER:  My Lord, not to be paid forthwith.  That is the effect of the order my learned friend is seeking. 
26.	MR JUSTICE CRANSTON:  Yes. 
27.	MR SCRIVENER:  Just ordinary costs paid in the ordinary way.  I think my learned friend was asking for an order which would have meant we had to pay straightaway. 
28.	MR JUSTICE CRANSTON:  No, I do not think so. 
29.	MR JONES:  I am asking for it to be a detailed assessment if not agreed. 
30.	MR JUSTICE CRANSTON:  Yes.  In case this is going to go any further, I do not mind either of you suggesting corrections to the judgment because I thought last night I had a firm grip of EIS relief, but I think this morning I may have actually forgotten at one point. 
31.	MR SCRIVENER:  Much obliged.  Can we thank you for sitting on Maundy Thursday.
32.	MR JUSTICE CRANSTON:  No trouble at all.  I apologise for the inconvenience of the time.  Thank you very much.