The High Court held that the court had no jurisdiction to award a money sum in judicial proceedings challenging a decision of Revenue and Customs to resile from an agreement relating to flat rate expense allowance.

Facts

An airline employed some 2,000 pilots and cabin crew. In 1991 the Revenue agreed in writing with the airline a ‘flat rate expense allowance’ (FREA) so that the pilots and cabin staff would be entitled to claim expenses (and hence deductions on that account from their taxable emoluments) at new agreed fixed levels without having to prove that such expenses had in truth been incurred and paid. There were then increases in the levels for pilots and cabin crew respectively by reference to inflation until, in 1997, the levels had reached £525 p.a. for each pilot and £140 p.a. for each member of the cabin crew. Between then and 2004 there were no further increases. In 2004, negotiations began to agree a new FREA. Following three months of negotiations, an agreement was reached with the Revenue in June 2004. The pilots were advised of the new agreed figures which represented a significant increase in the tools of the trade allowance. In November the Revenue informed the airline that the June agreement was so out of line with Revenue policy and practice that it could not stand by it. The taxpayer, who was one of the airline pilots and also represented the other pilots as the British Airline Pilots’ Association (BAPA) representative, applied to quash the November letter by which the Revenue resiled from the agreement. The High Court held ([2006] BTC 146) that it was not generally unfair for the Revenue to resile from an agreement whereby the employees of an airline were entitled to a flat rate expense allowance (FREA) under scheme by which the Revenue permitted fixed levels of expenses and hence deductions on that account from taxable emoluments. The Revenue's legitimate aim of recovering, in the public interest, tax that, strictly speaking, ought by statute to be recovered, outweighed any contrary argument that the agreement should generally be kept in force.

The taxpayer's particular case was adjourned with liberty to restore in order for the taxpayer to adduce further evidence of unfairness. His claim form stated that he was seeking a quashing order but, in the course of the hearing, the taxpayer stated that he was claiming a money sum to compensate him for the detriment he had suffered.

Issue

Whether the court had jurisdiction to award damages under s. 31(4) of the Supreme Court Act 1981 where the taxpayer was no longer seeking a quashing order; and whether, on the evidence, the taxpayer had suffered a detriment making it wrong for the Revenue to resile from the agreement.

Decision

Lindsay J (dismissing the application) said that the ability, by way of judicial review, to award a sum of money was far from unlimited. CPR, r. 54.3(2) provided that a claim for judicial review might include claim for damages, restitution or the recovery of a sum due but might not seek such a remedy alone. Section 31(4) of the Supreme Court Act 1981, as amended with effect from 1 May 2004, provided that, on an application for judicial review, the High Court might award to the applicant damages, restitution or the recovery of a sum due if (a) the application included a claim for such an award arising from any matter to which the application related; and (b) the court was satisfied that such an award would have been made if the claim had been made in an action begun by the claimant at the time of making the application.

Since the taxpayer's claim did not include a claim for an award of damages, restitution or the recovery of a sum due, s. 31(4)(a) was not satisfied. To that extent it was unnecessary to examine whether s. 31(4)(b) was satisfied but, were it necessary to look into that, then it could be seen that s. 31(4)(b) impaled the taxpayer on the horns of a dilemma. Even if the court was satisfied that an award would have been made in the taxpayer's favour if he had made a claim to recover a sum in proceedings begun in February 2005, that could only be so if he had a good claim available in private law against the Revenue. On that basis, s. 31(4)(b) would have been satisfied and, if s. 31(4)(a) been also satisfied, he would have been able to proceed towards a recovery of a sum by judicial review.

However, had the taxpayer had a good claim in private law for recovery of a sum, it would have been impossible for him also to assert that he had suffered any significant material detriment by relying upon the June agreement decision before it had been abrogated by the November decision. There would be no significant detrimental reliance by the taxpayer because he would have been left with a sound private law cause of action against the Revenue. His satisfying s. 31(4)(b), which he needed to show in order (leaving s. 31(4)(a) aside) to be able to recover a sum of money from the Revenue by judicial review thus totally undermined the very ground, detrimental reliance, on which he claimed, by judicial review, to recover from them. In the event, there was no route by which the taxpayer could be awarded the only relief which he indicated that he now sought, namely the payment of a sum of money. In case that was wrong, the court would consider his application on the evidence. Although detriment short of hardship could suffice, there was no evidence of difficulties incurred or sacrifices made in relation to his mortgage, the education of his children, the forsaking of any otherwise routine expenditure, the reduction of any contribution to his pension arrangements or anything otherwise detrimental that was said to have flowed from a reliance upon the June agreement before it was abrogated by the November decision.

There was a public interest in the Revenue not permitting and not being seen to have permitted an agreement, such as the June agreement, which was so out of accord with their general practice. There was thus a substantial public interest pointing towards the Revenue being entitled to resile from the June agreement. Where the Revenue had responsibly considered whether its actions were, in all the circumstances, fair, due weight was to be given to that evaluation. The court would not regard the detriment to the taxpayer personally such as flowed from the November decision and such as fairly could be laid at the Revenue's door as wholly insignificant but, if the court limited itself to looking only at the net detriment, then it was not truly significant. In any event, it was well short of being illogical, immoral or out rageously unfair on the Revenue's part to resile as they did. For the Revenue to have done as it had, although unattractive, was neither disproportionate to the problem which the June agreement led to in relation to the public interest nor an abuse of power.

Queen's Bench Division (Administrative Court).
Judgment delivered 4 April 2007.