In a recent decision, Glencore Energy UK Limited v Commissioners of HMRC [2017] EWHC 1476 (Admin), the Administrative Court (Green J) held that permission to apply for judicial review should be refused where there are alternative remedies available to a claimant which are in substance adequate and appropriate.

Key points

  • The Court emphasised the principle that judicial review is a remedy of last resort: alternative remedies should be exhausted first unless, exceptionally, such alternatives are ineffective or inappropriate to address the substance of complaints at issue

  • Where grounds of judicial review as formally drafted cannot be advanced in the alternative forum, this is not by itself conclusive: the focus is on substance over form

  • Where the alternative remedy exists by virtue of statute, construction of that statute is important

  • Non-judicial alternatives can suffice as adequate and effective remedies

  • Although the relative time and expense of an alternative remedy compared to judicial review can be relevant, this consideration will not hold sway, particularly where the judicial review would not obviate the need for the alternative procedure

Background

The statutory regime at issue in the Finance Act 2015 ("FA 2015") targets tax planning by multinational corporates aimed at diverting profits away from the UK which otherwise would have been subject to corporation tax. It created a new tax, Diverted Profits Tax ("DPT"), charged on "taxable diverted profits". The FA 2015 established a six-stage procedure governing the imposition of DPT. This case involved the claimant, Glencore, seeking to apply for judicial review at stage 3 of that procedure (HMRC issuing a charging notice), rather than having it run its course through to stage 6, which would have involved Glencore paying the DPT within 30 days, then HMRC conducting a mandatory review within 12 months of the end of the 30 day payment period, and then finally 30 days from the end of the review period for Glencore to notify HMRC of any appeal to the First-tier Tribunal ("FtT").

Glencore claimed: (1) the Designated Officer had applied a test not in accordance with the statutory requirements; (2) the Designated Officer had failed to take account of Glencore's representations; (3) the Designated Officer had failed to give any or any adequate reasons for the DPT calculation; and (4) the calculation was in any event irrational. HMRC contended that it was not open to Glencore to apply for judicial review as other alternative remedies must be exhausted first, namely the full statutory process stipulated by the FA 2015. Glencore countered that the statutory process was slow, inappropriate, ineffective and did not oust judicial review.

Decision

The Court reiterated the basic principle that judicial review is a remedy of last resort such that, where an alternative remedy exists, it should be exhausted before any application to apply for judicial review is made. The Court's analysis focused on:

  • Is there an alternative forum capable of amounting to a substitute for judicial review, ie are the proposed grounds for judicial review capable of being adjudicated upon in that alternative forum?
  • Is the alternative as effective and appropriate as judicial review, taking into account factors such as the existence of non-judicial alternatives, speed and expedition, costs and expense, the need for fact finding, utility and finality, the desirability of an authoritative ruling, and the strength of the issues?

The Court found that, looking at the substance of the grounds raised, the six-stage procedure in the FA 2015 was capable of amounting to an alternative remedy. The Court was influenced by considerations including:

  • The HMRC review process was designed to work in conjunction with the statutory appeal procedure, given that it was designed as a form of mandatory mediation or ADR prior to litigation, with the aim of narrowing the legal and evidential disputes prior to litigation.
  • The review process was set to work to a fixed timetable, reflecting Parliament's judgment as to what is reasonable for the resolution of the sorts of issues that might arise in such cases.
  • HMRC had a duty to engage in the review.
  • The process covered both liability and quantum issues (rather than, as Glencore contended, quantum alone).

The Court also found that the statutory review process would be effective and appropriate:

  • Judicial review would not guarantee savings in time or expense and would likely leave the disputed issues as live and awaiting resolution – as such, it could serve to defer and extend the "inevitable" statutory review and appeal.
  • Each of the proposed grounds could be effectively determined in the statutory process.
  • The Court's impression was that Glencore's case would be weak in a formal judicial review but it could be materially stronger in the context of the statutory alternative remedies where the substance of the complaints would be addressed (although the Court expressly refrained from getting into the merits).
  • There was no overriding public benefit to the points of law arising being determined by the High Court, as the public law points were too intertwined with the factual context to make them of wide significance.
  • When comparing the relief which the claimant could obtain after a successful judicial review claim with the practical advantages arising from the alternative review process, it was clear that utility lay with the latter. For example, the Court may quash the charging notice and remit the exercise to be re-performed, but it would not seek to determine on a substantive basis whether tax was payable and, if so, the quantum.

All in all, the Court considered that the FA 2015 provided a comprehensive dispute resolution mechanism that encouraged negotiation and then allowed appeal to a specialist tribunal. The alternative remedies were in substance adequate and appropriate. It accordingly refused permission. The Judge made it clear that he would also refuse permission exercising ordinary discretion, in circumstances where HMRC had in any event embarked on a review and reconsideration of the matter, as well as under section 31(3C) of the Senior Courts Act 1981, on the basis that the outcome for Glencore of a judicial review would not be substantially different if the conduct of which it complained had not occurred.

Comment

This decision is a further example of the Court's reluctance to grant permission to apply for judicial review where an alternative statutory procedure is in place, even where that alternative is inconvenient for the claimant and does not involve an independent judicial process. The decision provides useful guidance as to the test the courts will apply in determining whether (1) an alternative process exists and (2) whether that alternative is effective and appropriate, relative to judicial review. In particular, the Court placed emphasis on the practical value of proceeding with statutory processes insofar as they provide a more comprehensive and outcome-focused solution to a dispute between the parties, especially where a successful judicial review would not be conclusive of the issues at stake. It is, however, a further example of a case begging the question as to when, exceptionally, judicial review should be permitted notwithstanding the existence of an alternative remedy and what role the Court's impression of the prospects of a case has on whether to grant permission, where (as here) it is not deciding the question of permission based on whether the grounds are arguable.