Revenue and Customs Commissioners v Xicom Systems Ltd [2008] EWHC 1945 (Ch), [2008] All ER (D) 39 (Aug)
Chancery Division, David Richards J, 4 August 2008
The High Court has jurisdiction to give leave for a set-off under s 72 of the County Courts Act 1984 (CCA 1984) of orders for costs in the VAT and Duties Tribunal (the tribunal) against the Revenue and Customs Commissioners (the commissioners) and a judgment relating to the unpaid tax of a taxpayer company, but will not necessarily exercise its discretion to do so depending on the reasons why costs were made against the commissioners.
Nicholas Bacon (instructed by the Solicitor for Revenue and Customs) for the commissioners. Colin Challenger (instructed by Thomas Cooper) for the defendant.
In the course of proceedings before the tribunal between the commissioners and the taxpayer company, X, in relation to X’s liability under a county court judgment for unpaid PAYE income tax and national insurance contributions, the tribunal awarded costs in the sum of £30,500, against the commissioners because of their “serial failures to comply with the time limits in the tribunal, rules and directions”.
Certificate
An order was made in the High Court by the Supreme Court Costs Office (SCCO) in respect of the costs awarded by the tribunal and a certificate was issued pursuant to s 25(1) of the Crown Proceedings Act 1947.
X accepted that it had no means of paying the county court judgment against it. It sought payment by the commissioners of some of the costs awarded by the tribunal in its favour.
The commissioners applied, pursuant to s 72 of CCA 1984, to the High Court for an order to set-off their liability to X. The issues arose as to whether: (i) the court had jurisdiction to make the order; and (ii) if so, whether it should decline to make the order in the exercise of its discretion.
Mr Justice David Richards:
Section 72(1) of CCA 1984 permitted either the High Court or the county court in which a judgment had been entered to give leave to set off a High Court judgment against a county court judgment.
For X, it was submitted that the order for costs against the commissioners had been made by the tribunal, not the High Court, and that there was no authority in s 72 or elsewhere for a set off of a tribunal order against a county court judgment. The answer was that although the award of costs was made by the tribunal, it was the SCCO as part of the High Court which in terms ordered the payments by the commissioners to X. It was an order in the High Court to which s 72 applied.
Second, X submitted that the application for set-off should have been made to the SCCO. His lordship was doubtful that the SCCO, whose task was to assess the costs awarded by the tribunal and to make an order for their payment in the assessed amount, had jurisdiction to consider the issue of set-off. But even if it did, it could not deprive the commissioners of a right to apply instead by a new application to the High Court under s 72.
Primary ground
X’s primary ground for its submission that the court had no jurisdiction to give leave for a set-off was based on s 25 of the Crown Proceedings Act 1947. A certificate in respect of the costs order had been duly issued under s 25(1) on 7 March 2008. X submitted that the issue of that certificate had created a statutory duty under s 25(3) on the commissioners to pay the certified amount. That duty could not be avoided by a set-off under s 72.
Section 25
Section 25 involved a trade-off between a prohibition on any execution to enforce orders against the Crown and the creation of a statutory duty to pay the amount due under orders.
It would be a remarkable result if the Crown, alone among litigants, could not benef t from a set-off of orders for payment. Nothing in s 25 suggested that that was the intended result, and there was a clear answer to X’s submission. Section 21(1) provided: “In any civil proceedings by or against the Crown the court shall, subject to the provisions of this Act, have power to make all such orders as it has power to make in proceedings between subjects, and otherwise to give such appropriate relief as the case may require.”
That section permitted the court to give leave for a set-off of orders in favour of, and against, the Crown. Therefore the High Court had jurisdiction to give leave for a set-off under s 72.
His lordship turned to the application of s 72 to the instant case. The set-off for which the section provided was not the legal or equitable set-off which provided a defence to claim and which did not involve an exercise of discretion. Second, it did not arise as part of the court’s discretion to order costs under s 51 of the Supreme Court Act 1981.
Giving leave
In the absence of persuasive factors against permitting set-off , it would be right to give leave for set-off.
X had accepted that it had no means of paying the county court judgment against it. It relied on a number of factors, including that the tribunal had awarded costs against the commissioners because of their “serial failures to comply with the time limits in the tribunal rules and its directions”, which “hamper the administration of justice and can prejudice the other party”.
Those were considerations which could justify a refusal of leave to permit set-off , so as to impress on the commissioners the importance of the timely and proper conduct of proceedings.
On balance, it was right to permit the set-off . But the commissioners had to recognise that they could not assume that orders for costs made in the future as a result of tardy or inadequate conduct of the tribunal proceedings would be treated in the same way.
