In the recent case of General Healthcare Group Limited v HMRC,[1] the First-tier Tribunal (Tax Chamber) ('FTT'), considered the application of Rule 18 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules (2009/273) ('the Rules') to follower cases where the lead case has chosen not to appeal the decision of the FTT.

Background

Most tax appeals will concern a taxpayer's own affairs and he will progress his appeal before the FTT on his own behalf. However, there will be occasions when there are two or more cases which give rise to common or related issues of fact or law. In such situations, the FTT may issue a direction, pursuant to Rule 18 of the Rules, specifying that a case proceed as a lead case and staying the other cases (the 'related cases'). Such a situation arose in this case.

Following a hearing before the FTT on 30 June 2011, the FTT issued a direction under Rule 18 of the Rules specifying that another case, Nuffield Health ('Nuffield'), should proceed as a lead case and the appeal of General Healthcare Group Limited ('Healthcare') should be stayed.

The FTT released its decision in the lead case on 8 May 2013 and dismissed Nuffield's appeal. Nuffield decided not to appeal the decision.

Healthcare made an application to the FTT under Rule 18(4), which gives a party in a related case the right to apply for a direction that the decision in the lead case does not apply to, and is therefore not binding on, it.

FTT's decision

Counsel for Healthcare had argued that it should be unbound from the Nuffield case under Rule 18(4), so that the FTT could make substantive findings of fact in relation to Healthcare's case and determine the matter on the basis of Healthcare's arguments on the law. It was submitted that the test was that the FTT should accede to an application under Rule 18(4) by a party to a related case where the lead case had been heard, the appeal dismissed and no further appeal made, unless the FTT could be absolutely confident that the result would always be the same on the facts as asserted by the related case appellant – in other words, however the case should progress there was no realistic possibility that the result would be different.

The FTT was of the view that it could not be right that a related case appellant should be unbound from the decision in the lead case as a matter of course if the lead case appellant did not appeal and the appellant in a related case wished to challenge the decision in the lead case. Judge Berner said (at paragraph 18 of the decision) that he did not accept that that was an appropriate test:

"in my judgment, a direction under Rule 18(4) should be made only in circumstances where the binding effect on a party would create an injustice that cannot be avoided by any other procedural means which preserves the integrity of the lead case process. On making a lead case direction, the Tribunal must be satisfied that the cases give rise to common or related issues of fact and law."

The instant case was, in the judge's view, a good example of the care that should be taken before an appeal is designated as a related case under Rule 18. He said "a lead case direction is not one that is made lightly, nor should it routinely be capable of being cast aside". Although he would not go as far as the FTT in the case of 288 Group Limited and others [2013] UKFTT 659 (TC) to describe Rule 18 as creating binding precedent, it was incumbent on the FTT and the parties, to ensure that the common or related issues, of law or fact, or both, are properly recorded in the lead case direction. Failure to identify the common or related issues would inevitably lead to applications under Rule 18(4) for cases to be unbound.  

The judge noted that there is no provision in Rule 18 for a party to a related case to appeal the decision in the lead case. There must first be a determination by the FTT of the related case. While it was noted that in most cases, the determination of the related case under Rule 18(5) may simply follow from the result of the lead case, it would not always be so.

Healthcare submitted that not only had the FTT made an error of law in its handling of the lead case, but that even if the law was correctly stated in the Nuffield case, its case could be distinguished from that case, on the facts, such that there should be a different outcome. Judge Berner reiterated that it was the decision on the point of law alone that was binding on a follower case under Rule 18(3), even if the matter was not unbound. Accordingly, the appropriate course of action in the judge's view was for the FTT to first determine, in the light of the binding decision, whether, on the particular facts which the FTT found, the appeal of Healthcare should be allowed or dismissed. Any right of appeal thereafter would flow from that decision. In the judge's view, that was the correct way of dealing with the issues that remained between the parties and he held that no injustice would be created by the follower case remaining within the Rule 18 procedure.

Comment

This case provides a timely warning to taxpayers considering a Rule 18 application that they should give careful consideration to whether there are indeed common or related issues of fact or law, such that it is appropriate to seek a lead case direction under Rule 18. The decision illustrates the difficulties which taxpayers might face if they attempt to become unbound from a Rule 18 decision in circumstances where the lead case appellant has decided not to appeal. Judge Berner's decision has helped clarify the procedural position in such circumstances.