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Importance of documentary evidence

"[7] The appellant has deliberately disclosed only limited documents potentially relevant to this appeal and has not disclosed, for three reasons. First, he did not want to advertise the profits made. Second, the documents associated with the project were commercially sensitive and subject to confidentiality obligations. Third, there were some 56 documents executed at financial close on the project and it would, in the appellant’s view, have been unnecessary to produce all of them as the issues could be illustrated by a single, sample contract. The appellant has therefore only produced one contract, the feedstock agreement and even then, the name of the counterparty and other aspects have been redacted.  

[8] The central issue in this appeal is the nature of the activities carried out by the LLP and the burden of proof in this appeal is on the appellant to show on the balance of probabilities those activities amounted to trading. The appellant clearly has detailed knowledge of the arrangements but, nevertheless, as I set out further below, with the exception of one contract limited himself to general assertions and so did not substantiate his oral evidence with documents which in my view he could have done. I have found the appellant an honest witness, but the burden of proof in an appeal is a different matter. In complex matters such as the present an appellant cannot assume oral evidence is sufficient." (Wardle v. HMRC [2022] UKFTT 158 (TC), Judge Hyde)

Of particular importance where passage of time may make witness’s memories unreliable


“In Grace Shipping Lord Goff noted that his earlier observation was, in their Lordships' opinion “equally apposite in a case where the evidence of the witnesses is likely to be unreliable; and it is to be remembered that in commercial cases, such as the present, there is usually a substantial body of contemporary documentary evidence.” We were reminded too that in “The Business of Judging”, Oxford, 2000, Lord Bingham of Cornhill observed that:-
“In many cases, letters or minutes written well before there was any breath of dispute between parties may throw a very clear light on their knowledge and intentions at a particular time.”
The essential thrust of this learning is the unsurprising proposition that when assessing the evidence of witnesses about what they said, or what was said to them, or what they saw or heard, it is essential to test their veracity or reliability by reference to the objective facts proved independently of their testimony, in particular by reference to contemporary documentary evidence.” (Synclair v. East Lancashire Hospitals NHS Trust, [2015] EWCA Civ 1283, §10, Tomlinson LJ).


“Lord Goff said [in Grace Shipping] that when a judge is faced with the task of assessing evidence of witnesses about conversations taking place many years previously “it is of crucial importance for the judge to have regard to the contemporary documents and to the overall probabilities.” (The Libyan Investment Authority v. Goldman Sachs International [2016] EWHC 2530 (Ch), §53, Rose J)

"[22] In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth." (Gestmin SGPS SA v Credit Suisse (UK) Limited & Anor [2013] EWHC 3560 Leggatt J)

Essential where fraud is alleged


“Speaking from my own experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses' motives, and to the overall probabilities, can be of very great assistance to a Judge in ascertaining the truth.” (Armagas Ltd v Mundogas SA (The Ocean Frost) [1985] 1 Lloyd's Rep 1 at 57, per Lord Goff)

Importance of documentary evidence

Realistic approach to what documentary evidence should exist


“… tribunals need to “get real”. Empirical evidence demonstrates the heterogeneity of the many different forms of self-employment …. Self-employed working tax credit claimants (typically) are not putting together business proposals of sufficient rigour to pass muster on a Masters of Business Administration course or to withstand scrutiny in an episode of Dragons’ Den. Usually they are much more modest enterprises, as in the present case, and expectations about the documentary paper trail should be adjusted accordingly.” (JF v HMRC [2017] UKUT 334 (AAC), §31, Judge Wikeley applied in Beacon v. HMRC [2018] UKFTT 104 (TC), §45, Judge Brooks).

Realistic approach to what documentary evidence should exist

Documents must generally be adduced and explained by a witness


“But HMRC must prove the facts on which their submission relies.  Here, the appellant does not accept the reliability of what HMRC said in the various letters in evidence before me; I had no written or oral evidence from the officers, (despite some of them being present in the hearing room). So I have no evidence on which I can conclude that the disputed factual position is as HMRC represent it to be…I have therefore not been satisfied in the absence of evidence that HMRC’s three year delay in asking for the relevant documents/information was justified; and it seems to me that unless the delay is justified, the closure application ought to be granted.” (Martin v. HMRC [2017] UKFTT 488 (TC), §§44 - 45, Judge Mosedale).


“Taking what the Upper Tribunal actually said in stages, they said, and were clearly right to say, that HMRC could, theoretically, in a case where they have the burden of proof, rely on the documents alone, without calling any witness evidence, to establish a prima facie case.  I would perhaps add the caveat that HMRC could only do that to the extent that the authenticity of the documents was not in dispute:  if authenticity was in dispute, HMRC would have to call a witness to give evidence of authenticity.” (Hilden Park LLP v. HMRC [2017] UKFTT 217 (TC), Judge Mosedale).


“Without the benefit of argument, our initial view would have been that in these particular appeals it would not be appropriate to admit documents in evidence without a witness adducing those documents and explaining the reliance placed on them.  These are penalty appeals and in our view the appellants are entitled to put the respondents to strict proof.  They are also entitled to know and question what significance is placed on particular documents in support of the allegation of negligence.  The respondents were on notice as to the appellants’ position and chose not to adduce the witness evidence…In the absence of evidence to support the respondents’ case on negligence we have concluded that they have failed to satisfy the burden of establishing a prima facie case of negligence.” (Gardiner v. HMRC [2014] UKFTT 421 (TC), §§32 – 33).


Similarly in the civil trial context


“If the word “authenticated” governs both the original and any copy, there is no difficulty. The judge may allow proof of the original in any manner he thinks appropriate. However, I do not think that the subsection has that meaning. It seems to me that “production” refers, not to counsel handing the document to the court, but to a witness who is qualified to do so in accordance with the rules of evidence producing the document and saying what it is. Authentication is concerned only with the issue whether the copy is a true copy of the absent original, and not with what the original was.” (Ventouris v Mountain (No.2) [1992] 3 All E.R. 414 at 427A).


But note what Phipson on Evidence says:


“There is authority under the 1968 Act that ‘‘production’’ means production not by an advocate to the court but by a witness who is qualified to do so in accordance with the rules of evidence producing the document and saying what it is.45 It would be surprising if the word was intended to have a similar meaning under s.8(1) of the Act,46 as such a restrictive interpretation is not consistent with the broad pro-admissibility approach of the Act.47 On the other hand, if ‘‘production’’ simply means ‘‘production by an advocate to the court’’ it is hard to see the purpose of s.9 relating to business records; it would be largely unnecessary.” (§29-11)

Party required to specify in detail in advance what evidence it requires the other party to support by witness evidence

“Further, if a party to Tribunal proceedings proposes to challenge evidence in this way, I consider that such party is under an obligation to specify in detail the particular evidence which it requires the other party to support by witness evidence. It is entirely inappropriate to make a sweeping challenge to the totality of the evidence without showing what elements of that evidence are questioned.” (Munford v. HMRC [2017] UKFTT 19 (TC), §56).


Documents must generally be adduced and explained by a witness

Rejection of disputed, unsupported documentary evidence


"[45] The Tribunal is aware of the provisions in the Tribunal Procedure Rules which permit the admission of evidence that would not be admitted under the civil procedure rules.  However, Mr Padgham’s assessments, being discovery assessments, are predicated on the basis that the inaccuracies in the corporation tax returns arose as a consequence of deliberate behaviour, and that must be proven, on the balance of probabilities, by HMRC.  It would, in the Tribunal’s view, be contrary to the overriding objective to admit, what can only be described as sloppily, and potentially arrogantly, prepared “evidence”, in that context.    Further, as Ms Stevelinge was not made available for cross examination it would be entirely inappropriate to permit HMRC to rely on her note.  For that reason the Tribunal takes no account of Mr Padgham’s evidence as to the test purchase or its alleged omission from the daily takings from either 25 or 26 August 2016 and similarly for the note of test purchase provided by Ms Stevelinge." (Yummy Yummy Takeaway Limited v. HMRC [2022] UKFTT 326 (TC), Judge Amanda Brown QC)

Rejection of disputed, unsupported documentary evidence

Documents alone may be sufficient if there is no dispute as to authenticity

“the FTT, correctly in our view, stated that documents on their own without a supporting witness statement may be sufficient to prove relevant facts." (Edwards v. HMRC [2019] UKUT 131 (TCC), §50, Nugee J and Judge Herrington)​

[47] Of course, Officer Sole could not speak to the audit logs. However, although Mr Davison did not refer us to the case, we are bound by the Upper Tribunal in Edwards v HMRC [2019] UKUT 131 (TCC) where at paragraph 50 et seq the Tribunal approved the principle that “documents on their own without a supporting witness statement may be sufficient to prove relevant facts”.

[48] We can see from the audit logs that the “SES” reference number is identified and the claim submitted when the appellant was on the Declaration pages. That is consistent with the information held elsewhere and which has not been challenged such as the two documents headed “Check claim status”. On the balance of probability, the screenshots must have been part of the claim process since the claim had to be submitted online. We accept the assertion in the review conclusion letter that there had been no technical issues at the time the claims were made. It is difficult to see how the claims could have been made without being on the Declaration page since the virtual “button” to submit is on that page." (Taylor v. HMRC [2022] UKFTT 304 (TC), Judge Anne Scott)

“We do not regard Judge Cannan’s decision [in Gardiner, above] as authority that it would necessarily be inappropriate in all circumstances for the tribunal to accept documentary evidence of a discovery.  It is clear that Judge Cannan considered that approach as justified in those “particular appeals” which were penalty appeals concerning alleged negligence.  Whilst the current case similarly relates to alleged careless behaviour, we are here looking only at the initial question of whether HMRC has satisfied the burden of proving that an officer made a discovery of an insufficiency of capital gains tax. There is a further separate issue of what suffices as regards proving carelessness on the part of the appellant should HMRC be taken to have satisfied that burden, which in our view, they have.  That is not to say that documentary evidence alone would suffice in all cases but here we consider that there was a discovery to be clear from what has been provided.  Moreover we note that there is no challenge by the appellant to the validity of the relevant correspondence provided in the bundle.” (Anderson v. HMRC [2016] UKFTT 335 (TC), §112).

“HMRC prepared a helpful hearing bundle containing documentary evidence. The authenticity of the documents it contained was not in dispute and, therefore, even where documents were not exhibited to a witness statement I was prepared to treat them as evidence of the matters set out in them.” (Lithuanian Beer Ltd v. HMRC [2015] UKFTT 441 (TC), §7 – the dispute concerned when information was provided to HMRC, hence the relevance of the timing and content of the letters).


Records of a business or public authority


“(1) A document which is shown to form part of the records of a business or public authority may be received in evidence in civil proceedings without further proof.” (Civil Evidence Act 1995, s.9(1) subject to the Court deciding otherwise under s.9(5))

“Documents (if admitted or proved) are also admissible. Such documents will often contain evidence, but often from a source of unknown or unspecified provenance. In those circumstances, that is not, strictly speaking, hearsay evidence. It is admitted under the “business records” provision where the court proceed on the basis that where information is input into a business record or business computer system by somebody acting in the course of his/her employment, for a business record making purpose, it is inherently likely that such information will be reliable (or that there was no proper reason to falsify it) such that it can properly be admitted into evidence.” (Galiara v. HMRC [2018] UKFTT 190 (TC), §9, Judge Geraint Jones).

Deemed acceptance of authenticity of disclosed documents


“(1) A party shall be deemed to admit the authenticity of a document disclosed to him under Part 31 (disclosure and inspection of documents) unless he serves notice that he wishes the document to be proved at trial.
(2) A notice to prove a document must be served –
(a) by the latest date for serving witness statements; or
(b) within 7 days of disclosure of the document, whichever is later.” (CPR 32.19).


Documents alone may be sufficient if there is no dispute as to authenticity

Proving authenticity


Sampling exercise where volume large


“We agree with the approach taken by Judge Poole in relation to sampling; it would not be reasonable to require the (purported) suppliers to authenticate all 1,399 receipts.  The result of the first sample was that, for good reasons clearly stated by both Tesco and Argos, all were forgeries.  Iqra was then given the opportunity to nominate a second sample for verification by the suppliers.  The receipts selected by Iqra were not from the population of challenged receipts.  For that reason we no attach no importance to the second sample.  The first sample were clearly forgeries.  The obvious and reasonable inference (as Judge Poole noted) is that all the receipts identified by HMRC as suspicious are similarly forged.  Iqra had the opportunity to rebut that in the form of the second sample but (for whatever reason, on which we do not speculate) chose receipts outside those under challenge of authenticity and so has failed to rebut the inference from the first sample.” (Iqra Associates UK Ltd v. HMRC [2017] UKFTT 528 (TC), §52, Judge Kempster).

Challenges regarding authenticity of signatures require expert evidence

As in Vowles v. HMRC [2017] UKFTT 704 (TC), §§39 – 45, Judge Mosedale.

Proving authenticity

Secondary evidence of the contents of a document


To be admitted unless no reasonable explanation for non-production, but weight is for the Judge


“…the best evidence rule, long on its deathbed, has finally expired. In every case where a party seeks to adduce secondary evidence of the contents of a document, it is a matter for the court to decide, in the light of all the circumstances of the case, what (if any) weight to attach to that evidence. Where the party seeking to adduce the secondary evidence could readily produce the document, it may be expected that (absent some special circumstance) the court will decline to admit the secondary evidence on the ground that it is worthless. At the other extreme, where the party seeking to adduce the secondary evidence genuinely cannot produce the document, it may be expected that (absent some special circumstances) the court will admit the secondary evidence and attach such weight to it as it considers appropriate in all the circumstances…I accept that…further steps could have been taken…to locate the company minute books, but, for reasons already explained, there was no obligation on the respondent to make an exhaustive search, or indeed any search at all. The only requirement was for him to provide a reasonable explanation for his non-production of the minutes, in the sense that unless he did so the court would almost certainly decline to admit the secondary evidence. Given that there was no allegation by the appellants of impropriety or bad faith against Mr Springsteen or his advisers, and that there was nothing in the evidence to suggest that such attempts as were made on Mr Springsteen’s behalf to find the assignments were other than wholly genuine attempts, the judge was entitled to take as the appropriate yardstick the ‘without any difficulty’ test…” (Masquerade Music Ltd v. Bruce Springsteen [2001] EWCA Civ 513, §§85…87; see also Chadda v. HMRC [2014] UKFTT 1061 (TC)).


“The modern tendency in civil proceedings is to admit all relevant evidence, and the judge should be trusted to give only proper weight to evidence which is not the best evidence.” (Ventouris v. Mountain (No 2) [1992] 1 WLR 887 at 899).

Secondary evidence of the contents of a document

Missing documents


Absence of a document does not prevent FTT finding it would have supported the party who had it


“CCA, through Mr Trees, was contending that there were documents which had not been disclosed by it which would help its case. It was for the F-tT to decide whether to accept that evidence or whether to hold that because CCA had not produced the documents, it could not advance its case by asserting that 20 the unproduced documents were helpful to it. As we read the Decision, the F-tT was not prepared to find that the absent documents, which CCA could have produced, contained material which was helpful to CCA. Conversely, the F-tT seems to have been ready to hold in CCA’s favour that there were other documents which did exist at one time but which no longer existed which would have revealed more due 25 diligence. We consider that those findings were open to it.” (HMRC v. CCA Distribution Ltd (in administration) [2015] UKUT 513, §69, Morgan J and Judge Herrington – UT also noted that FTT were right to point out that HMRC could have pursued the missing documents if they thought that they were relevant.).

Adverse inference

"[14] In my judgment, contemporaneous written documentation is of the very greatest importance in assessing credibility. Moreover, it can be significant not only where it is present and the oral evidence can then be checked against it. It can also be significant if written documentation is absent. For instance, if the judge is satisfied that certain contemporaneous documentation is likely to have existed were the oral evidence correct, and that the party adducing oral evidence is responsible for its non-production, then the documentation may be conspicuous by its absence and the judge may be able to draw inferences from its absence." (Wetton v. Ahmed [2011] EWCA Civ 610, Arden LJ)

"The complete absence of any contemporaneous documentation to evidence any deal (or deals) having been set up is not just a lacuna in the body of evidence adduced for the appellant, but represents a gaping hole in the edifice of factual matrix upon which the appellant is trying to construct its case of innocence. As Arden LJ observed, the documentation is conspicuous by its absence and the judge may be able to draw references by its absence."(Beigebell Limited (No.2) v. HMRC [2023] UKFTT 363 (TC), Judge Poon)

Missing documents

Admission of other judicial decisions


See M9: Evidence


Admission of other judicial decisions

Evidence that the party is aware may be unreliable


Health warning should be given with disclosure


“In the light of the decisions in R v. Sandhu, R v. Uddin and Aircall, it is clear beyond doubt that HMRC was well aware, at least by 2006 if not before, that the evidence obtained from Hawk was inherently unreliable. In Aircall HMRC expressly acknowledged this unreliability (albeit late in the day) by providing material from Hawk to the defendant for the purposes of cross-examination. Yet, in the present proceedings HMRC did not disclose any of this information to the Defendants, instead apparently proposing to tender the Hawk Documentation and rely on it to show supplies by Sunico. At the very least, Mr Lakha suggested, the Hawk Documentation should have been disclosed with some sort of health warning in view of its treatment by the courts…the disclosable material in this instance directly casts doubt upon the credibility of HMRC's own evidence, which, indeed, HMRC appeared to recognise in Aircall. Therefore, having been reprimanded in the Crown Court, the Court of Appeal and the VAT Tribunal about its approach to documents taken from Hawk, it is surprising that HMRC did not at least caveat the Hawk Documentation when they disclosed it by reference to these decisions, leaving it to the Defendants to excavate.” (HMRC v. Sunico A/S [2013] EWHC 941 (Ch), §§51…54).


Evidence that the party is aware may be unreliable

Backdated documents 

Intention for others to believe document was executed at an earlier date than it was is dishonest


“I start from the premise that an honest solicitor, finding a client of his or a person with whom he was associated in business wishing to backdate a document (a fortiori if the document was one to which he, the solicitor, was himself to be a party) would remonstrate and refuse to join in the document and, failing that deterring the person, would take particular pains to find out why it was that the person wished to do as he proposed and would then seek to dissuade the person from completing his plan.” (Daniels v. Deville [2008] EWHC 1810 (Ch), §29, Lindsay J).


Document that identifies its backdating may be valid as between the parties to the document


“He states that as between Vinexsa and the other parties to the Nominee Agreement, Bahamian law would generally not operate to prevent the Nominee Agreement from taking effect from 11 June 2003 where this was expressed to be the intention of the parties, even if the agreement was actually executed after that date.  I would also say that the same result would be obtained under English law – assuming that there was no intention to deceive anyone as to the actual date of execution. As the Nominee Agreement was expressed to be dated “as of” 11 June 2003, I find that there was no such intention.  Whether the Nominee Agreement would have effect as regards third parties from 11 June rather than the actual date of execution is of course another question.” (Schechter v. HMRC [2017] UKFTT 189 (TC), §113, Judge Aleksander).


Backdating only has effect as between parties to document/ no re-writing history


“When people enter into a deed of partnership and say that they are to be partners as from some date which is prior to the date of the deed, that does not have the effect that they were partners from the beginning of the deed. You cannot alter the past in that way. What it means is that they begin to be partners at the date of the deed, but then they are to take the accounts back to the date that they mention as from which the deed provides that they shall be partners. There is no sort of doubt at all that that is the only effect which such a deed can have. No deed can alter the past…” (Waddington v. O’Callaghan 16 TC 187 at 197, Rowlatt J).

“I prefer Ms Nathan’s submissions as I do not consider that the Bank of New Zealand case supports the proposition that a deed can be amended so that the amendments take effect from the date the deed was originally executed. Rather, the Bank of New Zealand authority was concerned with a different kind of “retrospective” amendment. The Bank of New Zealand concerned amendments to the rules of an unincorporated association which had a surplus of assets…the amendments had the effect of altering entitlements to share in a surplus from what had been supposed. However, the amendments did not seek to “re-write history”: they were not, for example, expressed to be backdated to a date before the amendments were made…It follows that I consider that the law is as stated in Waddington v O’Callaghan and I have concluded that the amendments made in the Deeds of Amendment and Rectification did not take effect from the date of execution of the original trust deeds.” (Always Sheet Metal Ltd v. HMRC [2017] UKFTT 198 (TC), §§152…153, Judge Jonathan Richards, emphasis original).

Backdated documents 

Unstamped evidence 


“(1) Upon the production of an instrument chargeable with any duty as evidence in any court of civil judicature in any part of the United Kingdom, or before any arbitrator or referee, notice shall be taken by the judge, arbitrator, or referee of any omission or insufficiency of the stamp thereon, and the instrument may, on payment to the officer of the court whose duty it is to read the instrument, or to the arbitrator or referee, of the amount of the unpaid duty, and any interest or penalty payable on stamping the same, and of a further sum of one pound, be received in evidence, saving all just exceptions on other grounds.
(2) The officer, or arbitrator, or referee receiving the duty and any interest or penalty shall give a receipt for the same, and make an entry in a book kept for that purpose of the payment and of the amount thereof, and shall communicate to the Commissioners the name or title of the proceeding in which, and of the party from whom, he received the duty and any interest or penalty and the date and description of the instrument, and shall pay over to such person as the Commissioners may appoint the money received by him for the duty and any interest or penalty.
(3) On production to the Commissioners of any instrument in respect of which any duty, interest or penalty has been paid, together with the receipt, the payment of the duty, interest and penalty shall be denoted on the instrument.
(4) Save as aforesaid, an instrument executed in any part of the United Kingdom, or relating, wheresoever executed, to any property situate, or to any matter or thing done or to be done, in any part of the United Kingdom, shall not, except in criminal proceedings, be given in evidence, or be available for any purpose whatever, unless it is duly stamped in accordance with the law in force at the time when it was executed.” (Stamp Act 1891, s.14).


Declarations of trust prior to 13 March 2008 


“It would however be liable to £5 fixed duty as a declaration of trust if it was executed before 13 March 2008.” (Schechter v. HMRC [2017] UKFTT 189 (TC), §85, Judge Aleksander).


Inadmissible unless stamped


“The Declaration of Trust and the Nominee Agreement are both liable to fixed stamp duty as declarations of trust. Neither instrument was impressed with any stamp duty, and accordingly, neither instrument is admissible in evidence.” (Schechter v. HMRC [2017] UKFTT 189 (TC), §159, Judge Aleksander).

Unstamped evidence 

Construction of documentary evidence


Objective approach


“In our view, the correct approach to determining the meaning and effect of documents such as the Penalty Notices is well established – see HMRC v Bristol and West Plc [2016] EWCA Civ 397, [2016] STC per Briggs LJ at [26] which applied Lord Steyn’s dictum in Mannai Investment Co Ltd v Eagle Star Life Assurance Ltd [1997] AC 749 at page 767G to the interpretation of closure notices. The Penalty Notices must be approached objectively. The issue is how would a reasonable recipient in the position of the intended recipient, namely Spring Capital, have understood the Penalty Notices. In considering this question, the Penalty Notices must be viewed in their proper context, bearing in mind the recipient’s, that is Spring Capital’s, knowledge of any relevant context.” (Spring Capital Ltd v. HMRC [2017] UKUT 215 (TCC), §25, Judges Sinfield and Walters QC)


Not to be construed as a statute / using statutory principles of interpretation


“First, the Penalty Notices are not legislation and, just as the Court of Appeal observed in Fidex Ltd v HMRC [2016] STC 1920, at [51], that “it is not appropriate to construe a closure notice as if it is a statute”, we consider that it is not appropriate to use the principles of statutory interpretation to construe a penalty notice even though it is issued pursuant to a statutory power.” (Spring Capital Ltd v. HMRC [2017] UKUT 215 (TCC), §33, Judges Sinfield and Walters QC)


Not bound by the parties’ labels in clear cases


“In construing the EPS Agreements, we apply the approach stated by Dillon LJ in Welsh Development Agency v Export Finance Co Ltd [1992] BCLC 148 at 160 that: “… in determining the legal categorisation of an agreement and its legal consequence the court looks at the substance of the transactions and not at the labels which the parties have chosen to put on it.” (Aspect Capital Limited v. HMRC [2014] UKUT 81 (TCC), §25, Warren J and Judge Sinfield)


But labels are relevant in ambiguous cases


“It follows that the terms used by the parties to describe their legal relationship may be useful in determining the legal nature of a relationship or agreement in cases where the agreements are capable of different interpretations but the terms used by the parties cannot affect the legal categorisation of what they have agreed in cases where there is no doubt or ambiguity (see Street v Mountford [1985] A.C. 809 at 826H - 827B).” (Aspect Capital Limited v. HMRC [2014] UKUT 81 (TCC), §26, Warren J and Judge Sinfield)

Construction of documentary evidence

Redaction of a document the court must construe

"[89] ...There is in my judgment a clear distinction between the rules which apply when a party is giving disclosure of documents, in the ordinary course of litigation, and the process of construction which a court has to embark upon when considering the meaning or legal effect of a document. Since the process of construction requires the document as a whole to be considered, the starting point must always be that the entire document should be made available to the court, and any redactions to it on grounds of irrelevance should either be forbidden or, if permitted at all, convincingly justified and kept to an absolute minimum. Except in the clearest of cases, the question of relevance to the process of construction is one that the court should be left to decide for itself. Certification by a solicitor provides an important safeguard, but where the question is one of the correct interpretation of a written document, it is not normally appropriate for a solicitor, however experienced, to pre-judge which parts of the document the court may find useful in performing its task, except perhaps in relation to material that on no reasonable view could have any bearing on the exercise. In all normal cases, the entire document should be placed before the court; and if, exceptionally, any redactions are made, they should be fully explained and justified by the party making the redaction, with sufficient particularity for the court to be able to rule on the need for the redaction if it is challenged." (Hancock v. Promontoria (Chestnut) Ltd [2020] EWCA Civ 907, Henderson LJ)

Irrelevance not a proper ground for redaction

"[74] Redactions to the body of the Deed, however, are more problematical. I have much sympathy with the general thrust of the submission, which I take to be that where the court is called upon to resolve a question of construction of a contractual document, the document must in all normal circumstances be placed before the court as a whole, and it is not for the parties or their solicitors to make a pre-emptive judgment about what parts of the document are irrelevant. Sometimes, as with the details of third party transactions contained in the Schedule to the Deed of Assignment, it may be obvious that they can properly be omitted or blanked out; but even then a clear explanation must in my view be provided of the nature and extent of the omissions, and the reasons for making them. In general, irrelevance alone cannot be a proper ground for redaction of part of a document which the court is asked to construe, and there must be some additional feature (such as protection of privacy or confidentiality, but no doubt there are others too) which can be relied upon to justify the redaction." (Hancock v. Promontoria (Chestnut) Ltd [2020] EWCA Civ 907, Henderson LJ)

Confidentiality not a general ground for redaction

"[75] Considerations of confidentiality, by contrast, give rise to very different considerations. Seldom, if ever, can it be appropriate for one party unilaterally to redact provisions in a contractual document which the court is being asked to construe, merely on grounds of confidentiality. If it is obvious that the provisions in question would on any reasonable view be completely irrelevant to the issue of construction, and if the reasons for taking that view can be clearly and fully articulated by the solicitor acting for the party seeking the redaction, I am inclined to accept that the redaction may be defensible. But the reason why it would be defensible is that the provisions are clearly irrelevant, not that they are confidential. Confidentiality alone cannot be a good reason for redacting an otherwise relevant provision in a contractual document which the court has to construe, and there are other ways in which problems of that nature can be addressed. I have already given the example of a confidentiality ring. Another solution, if the parties all agree, could be for the judge alone to see the document in its unredacted form." (Hancock v. Promontoria (Chestnut) Ltd [2020] EWCA Civ 907, Henderson LJ)


But not a problem if the redactions are insignificant

"[78] Viewed in that context, the redactions to the Deed of Assignment seem to me to fade into relative insignificance. For the reasons which I have already given, the unredacted parts of the Deed are in my judgment sufficient to show that title to Mr Hancock's debts was indeed assigned by the Bank to Promontoria Chestnut. In a case of the present type, it would therefore be wrong to lay down any overriding principle based on the redactions to the Deed. I have little doubt that the redactions were far more extensive than they needed to be, and Mr Cooper's evidence would have been of greater assistance to the court if he had condescended to greater detail about the specific reasons for particular redactions. He could, for example, have explained, without revealing any confidential information, why the second limb of the definition of "Specified Loan Asset" was redacted, and why it had no impact on the generality of the first limb of the definition. Similarly, he could, and in my view should, have provided a general explanation of the contents of clauses 3 to 6 of the Deed, explaining why they were considered confidential, and why they were on any view irrelevant to the question of title to Mr Hancock's loans. Furthermore, Mr Cooper should clearly in my view have disclosed the relevant parts of the SPA which were incorporated by reference. In a different context, these criticisms, and others of a similar nature, might arguably have precluded Promontoria Chestnut from placing reliance on the Deed of Assignment in the redacted form which we have seen. In the present context, however, I am satisfied that the redactions have not caused any injustice to Mr Hancock, and the doubts which he has sought to raise about Promontoria Chestnut's title to demand payment from him are unfounded." (Hancock v. Promontoria (Chestnut) Ltd [2020] EWCA Civ 907, Henderson LJ)

Redaction of a document the court must construe

Redaction of other documents

Entitled to redact irrelevant information

"[85] It has been settled law in this jurisdiction for well over a century that a litigant giving disclosure of documents is entitled to redact parts of a document which are irrelevant, and in all normal circumstances a certificate to that effect by the party's solicitor will be treated as conclusive. As Hoffmann LJ explained in G.E. Capital Group Ltd v Bankers Trust Co [1995] 1 WLR 172 at 174B:

"It has long been the practice that a party is entitled to seal up or cover up part of a document which he claims to be irrelevant. Bray's Digest of the Law of Discovery, 2nd ed. (1910), pp.55-56 puts the matter succinctly:
"Generally speaking, any part of a document may be sealed up or otherwise concealed under the same conditions as a whole document may be withheld from production; the party's oath for this purpose is as valid in the one case as in the other. The practice is either to schedule to the affidavit of documents those parts only which are relevant, or to schedule the whole document and to seal up those parts which are sworn to be irrelevant; …"
The oath of the party giving discovery is conclusive, "unless the court can be satisfied – not on a conflict of affidavits, but either from the documents produced or from anything in the affidavit made by the defendant, or by any admission by him in the pleadings, or necessarily from the circumstances of the case – that the affidavit does not truly state that which it ought to state:" per Cotton LJ in Jones v Andrews (1888) 58 L.T. 601, 604."

[86] To similar effect, Leggatt LJ said in the same case, at 176H:

"The plaintiffs are obliged to disclose the relevant parts of documents, but not the irrelevant… For over a century litigants have been permitted to cover up or blank out irrelevant parts of documents. The court will not ordinarily disregard the oath of the party that the parts concealed do not relate to the matters in question."" (Hancock v. Promontoria (Chestnut) Ltd [2020] EWCA Civ 907, Henderson LJ)

Redaction of other documents​

Transcript from previous hearing of the same appeal


"[215] The parties have lodged the transcript of the 2019 hearing as a supplemental bundle of evidence for the re-hearing. There is no application from either party that any part of the transcript should be expunged for the purposes of the re-hearing. Specific excerpts of the transcript have been referred to in cross-examination at the re-hearing, while other excerpts are referred to in parties’ closing submissions without the particular excerpts having been put to a witness in cross-examination.

[216] [The taxpayer] has raised objection to [HMRC's] reference in closing submissions to the passages of Orton’s 2019 replies when being cross-examined on the Public Notice 735 on Reverse Charge. I understand [the taxpayer's] objection to be that paragraph 1.1 of Public Notice read out at the 2019 hearing had not been specifically put to Orton in cross-examination at this hearing, and the Commissioners are not entitled to draw on Orton’s replies at the 2019 hearing as indicative of his state of knowledge on MTIC fraud.

[217] We accept [the taxpayer's] objection that Mr Orton’s 2019 replies on the Public Notice 735 cannot be held as indicative of Orton’s state of knowledge, which is the substantive issue for which the Commissioners bear the burden of proof. However, we also acknowledge [HMRC's] rebuttal that his reference in closing submissions to Orton’s 2019 replies is for the purpose of highlighting the inconsistency in Orton’s oral evidence between the two hearings, and that there was evidence of actual knowledge in that regard.

[218] The Tribunal is mindful of [the taxpayer's] valid objection, and has taken [HMRC's] submissions on this point as no more than a contrast to highlight what Mr Orton stated in 2019 and at this hearing.  On one level, the transcript is no different from other documentary evidence lodged for the re-hearing, and is a record of what was stated in witness evidence in 2019. The hearing in 2019 took place four years after the transactions in question, and the re-hearing was six and a half years after those transactions in August/September 2015. The witness evidence at the 2019 hearing was undoubtedly closer in time to the actual transactions, and is a fact that we bear in mind when evaluating Mr Orton’s evidence." (Beigebell Limited (No.2) v. HMRC [2023] UKFTT 363 (TC), Judge Poon)

Transcript from previous hearing of the same appeal



"[120]...Ms Brown’s submission is that what Ms McCarthy put to Mr Northwood was that the documents were artificial, which is not the same as putting that it is a sham or dishonest, referring to Hitch v Stone (Inspector of Taxes) [2001] EWCA Civ 63 at [67] where Arden LJ said:

“the fact that the act or document is uncommercial, or even artificial, does not mean that it is a sham. A distinction is to be drawn between the situation where parties make an agreement which is unfavourable to one of them, or artificial, and a situation where they intend some other arrangement to bind them. In the former situation, they intend the agreement to take effect according to its tenor. In the latter situation, the agreement is not to bind their relationship.”

[121] Both parties referred to the decision in Hockin. With regard to the issue of sham in that case, the UT stated: 

“24. We agree with Mr Prosser that the FTT's finding of sham is a finding of fact and that we may interfere with it only on Edwards v Bairstow grounds (see Edwards v Bairstow [1956] AC 14 itself and the long line of authority following it). We are, however, conscious that a finding of sham, even if it does not imply dishonesty in the ordinary sense, necessarily requires the fact-finding tribunal to be satisfied of an intention to deceive or, at least, to make things appear other than as they are. This is a point to which we shall need to return; for the moment we merely observe that, because of this consideration, we have examined the detail of the FTT's findings with particular care.

29. Mr Bremner is correct to say that the FTT did not make any finding of dishonesty; on the contrary, it described Mr Hardy, at [34], as "basically honest". We do not, however, and despite the note of caution we have sounded, consider that a finding of sham necessarily implies dishonesty. The pretence here was that 96 or 99 might have been spent on research, but the parties did not go further by pretending that it had in fact been spent on research. This was a tax avoidance, or deferral, scheme, and not evasion, and there was no attempt, as there would be in the case of evasion, to conceal what actually happened, however the parties chose to dress it up. One might disapprove of what was done; but we do not consider it could be said to have crossed the threshold into dishonesty.”

[122] Ms Brown expressed great difficulty with the distinction between an intention to deceive and an intention to make things appear other than as they are. Ms Brown’s submission is that what was alleged and found in Hockin was that the document was drafted with an intention to make things appear other than as they were, namely that one of two things might happen when it was really only possible that one thing might happen, which is far from what is being alleged in this case. Ms Brown submits that Hockin found there to be two sorts of sham, an intention to deceive, which must require dishonesty, or an intention to make things appear other than they are and that can be described as not requiring dishonesty in the ordinary sense. Ms Brown contends that HMRC's case is clearly one of dishonesty. It is not a case of half concealment, which was the case in Hockin. Ms Brown submits that HMRC make  a number of statements as to what the alleged real purpose of Mr Northwood's arrangements were, such as that the whole thing was a work of fiction, the only purpose of the arrangements was tax avoidance, the only person who was intended to benefit was Mr Northwood, contrary to the appearances of various documents such as the trust deed, Mr Northwood retained control of the funds at all relevant times and that the funds were never subject to the trust, were never held or intended to be held by anyone in a fiduciary capacity and remained Mr Northwood's property and in his control. This therefore is not an allegation that Mr Northwood said “well, we might do this or we might do that” when Mr Northwood clearly only intended to do one thing. The allegation, Ms Brown submits, is that Mr Northwood created documents to give one appearance and then did something completely different. Ms Brown contends that is an allegation of dishonesty and it is not open to the Tribunal to make a finding of dishonesty, because those allegations of dishonesty have neither been properly pleaded nor properly put to Mr Northwood in cross-examination.

[123] I have considered Ms Brown’s arguments regarding pleading sham at [42] to [49] above. I do not accept Ms Brown’s submission that the way in which HMRC have put their case requires proof of dishonesty. It is clear that HMRC do not consider Mr Northwood to have been honest. However, in my view, this case falls within the category described in Hockin as a pretence that does not cross the threshold into dishonesty. My finding is that the RT documentation was dressed up to achieve a tax benefit but this was “not evasion, and there was no attempt, as there would be in the case of evasion, to conceal what actually happened, however the parties chose to dress it up”.

[124] I also do not agree that HMRC did not put the sham allegation to Mr Northwood in cross-examination. The questions put to Mr Northwood did not simply suggest the situation where parties made an agreement which was unfavourable to one of them, or artificial. The questions were put in the context of a situation where the parties intended some other arrangement. I therefore find that the allegations were put fairly and squarely to Mr Northwood and that he was given an opportunity to rebut them." (Northwood v. HMRC [2023] UKFTT 351 (TC), Judge Sukul)



- Not a sham even though some obligations undischarged


"[74] Whilst we understand the Respondents’ scepticism in this regard, given the events which have occurred, we do not agree that the documents give rise to rights and obligations in law which differ from their terms.

[75] We have found as a fact that the parties did intend the scheme documents to have the effects which they purported to have.  We say that notwithstanding the fact that there are various obligations under the scheme documents which still remain undischarged or the fact that the events which have occurred are inconsistent with those obligations.  As we have already said, we do not attribute those matters to any intention on the part of the parties that the documents should not have the effects which they purported to have.  Moreover, no allegation of sham has been made.

[76] As such, we have concluded that the true legal effect of the scheme documents was in accordance with their form and that they gave rise to the rights and obligations set out in them.

[77] For instance, we think that it is incorrect to say that the position in relation to ownership of the Property was unaffected by the execution of the Sale Agreement. Mrs Elborne’s executors, when they received the sale proceeds of the Property from Mr and Mrs Machin, did not hold the sale proceeds for the Children as beneficiaries under the will.  Instead, for reasons which we will rehearse in the section of this decision which follows, we believe that the sale proceeds, when they were received, were impressed with a constructive trust and held by the executors for the trustees of the Life Settlement.  The Sale Agreement therefore had a meaningful and lasting legal effect." (Executors of Elborne v. HMRC [2023 UKFTT 626 (TC), Judge Beare)

- Not a sham even though some obligations undischarged
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