© 2024 by Michael Firth KC, Gray's Inn Tax Chambers
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Procedure.Tax
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N8: Tribunal's role
(facts)
Preliminary facts (those necessary to determine applications)
"[100] In the present case the allegations of torture were relevant in two different ways. One was in assessing the likelihood or otherwise that the confessions were reliable and hence whether it was proved as a fact that a bribe had been paid. The other was in order to determine whether the confession evidence was admissible. Whilst the core purpose for which evidence is admissible in legal proceedings is that of proving or disproving facts in issue at a trial, it is also often necessary for a court to decide factual questions for the purpose of applying procedural and evidential rules. Facts which must be proved for such purposes have been called “preliminary facts”: see R Pattenden, “The proof rules of pre-verdict judicial fact-finding in criminal trials by jury” (2009) 125 LQR 79.
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[103] In civil proceedings, at least in cases where both functions are performed by the same decision-maker in the course of a single hearing, it seems to us that - unlike at a jury trial - there is a requirement of consistency in performing these functions. A judge could not rationally reach one factual conclusion for the preliminary purpose of deciding whether evidence is admissible and then, on the same evidence, reach a different factual conclusion for the purpose of deciding a fact in issue in proceedings. That would be illogical. But there is no inconsistency in finding that a factual allegation may well be true but has not been established on the balance of probabilities. Nor is there any reason why the fact that such a finding results in the admission of evidence (by reason of the burden and standard of proof governing its admissibility) should require the finding to be ignored when assessing the weight to be given to the evidence in deciding a fact in issue in proceedings. That would also be illogical." (Shagang Shipping Company Ltd v. HNA Group Company Ltd [2020] UKSC 34)
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Findings of fact must be based on evidence
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“the Court should [set aside a finding of fact] if it appears that the Commissioners have acted without any evidence or upon a view of the facts which could not reasonably be entertained” (Edwards v. Bairstow 36 TC 207 at 224, Viscount Simonds);
“[The question on appeal is whether] there evidence before the Tribunal which was sufficient to support the findings which it made…Clearly, if there was no evidence, or the evidence was to the contrary effect, the tribunal was [not entitled to make the finding]” (Georgiou v. CEC [1996] STC 463, 476, Evans LJ);
“Even if it is wrong to take judicial notice of the fact that services between parents and subsidiaries are often provided for no consideration, I am certainly entitled to reject, and do reject, the contrary proposition (namely, that services between a parent and subsidiaries are never (or even hardly ever) provided for no consideration) without evidence to establish it.” (Norseman Gold Plc v. HMRC [2016] UKUT 69 (TCC), §106, Warren J).
“However, without any evidence to support that assertion, and without any evidence that the Revenue took the same view, there was no material before the Commissioners which could support a conclusion that a settled practice existed, let alone a settled practice which could properly be described as “the practice generally prevailing at the time”.” (HMRC v. Household Estate Agents Ltd [2007] EWHC 1684 (Ch), §58).
“As Mrs Green did not give evidence at the hearing, I have not included as facts any points which were simply asserted in correspondence from her representatives to HMRC, unless supported by other documents, such as the Booking Forms or the Brochures.” (Green v. HMRC [2015] UKFTT 236 (TC), §28).
“Before the first FTT, [Counsel for the taxpayer] produced a rough calculation of the amount chargeable to tax that included some but not all of the cash withdrawals. As the calculation was not adopted by [the taxpayer], we have ignored it.” (Rangos v. HMRC [2015] UKFTT 262 (TC), §66).
“The difficulty for HMRC is that in the present case, there is no evidence as to the basis for the figures in the HMRC best judgment assessment. The Tribunal was told that the HMRC figures were based on a survey of 1,157 self-assessment returns for 2007-08. However, this survey was not in evidence before the Tribunal, and no explanation could be provided at the hearing for why it was not in evidence…On its consideration of the evidence as a whole, the Tribunal finds that the basis of calculation of the figures in the Appellant’s 2007-08 tax return is more reliable than the basis of calculation of the figures in the HMRC closure notice. Whatever the shortcomings of the former, in this appeal there was effectively no evidence at all before the Tribunal of the latter.” (Weernasinghe v. HMRC [2013] UKFTT 144 (TC), §§49…51).
Not for the Tribunal to speculate on questions of fact
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“It does not seem to me that this stance relieved HMRC of the need to put forward an intermediate case as to what the Respondent’s charge would have been, in case it were unable to make good a case that the rate would have been 15%...[The Tribunal] had no material on which to come to a conclusion on that, above all because no evidence had been adduced relevant to this issue, and no questions were addressed to Mr Cochrane on the point.” (Baines & Ernst Ltd v. HMRC [2006] EWCA Civ 1040, §68…69).
“If the Appellants had given evidence that they checked the position with Mr Weissbraun before their returns were submitted, that they provided Mr Weissbraun with all the necessary factual background and that Mr Weissbraun had told them that, in his opinion, they were entitled to relief for the losses, we are prepared to accept that it was likely the FTT would accept that evidence. However, the FTT was not obliged to speculate on what the Appellants’ evidence would have been. It had to deal with the case on the basis of the evidence that was actually before it.” (Weisenfeld v. HMRC [2019] UKUT 301 (TCC), §65, Judge Jonathan Richards and Judge Greenbank).
“The lack of a proper evidential basis for [deciding a matter not raised by the parties] appears from para 28 of his decision. He relies in part on an assumption made by himself and concludes with an inference where, if the matter had been in issue, he would have had the benefit of direct evidence” (HMRC v. Barclays [2006] EWHC 2118 (Ch), §24).
“it is not for the Tribunal to speculate. The role of the Tribunal is to reach a decision on the respective cases put by the parties, on the basis of such material as has been presented, applying the applicable burden and standard of proof” (Kelly v. HMRC [2014] UKFTT 1012 (TC), §63, Judge Staker);
Importance of pleadings: parties identify issues
Parties define the issues on which the court is invited to adjudicate
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"[33] Rule 25 of the Tribunal Procedure (First Tier Tribunal) (Tax Chamber) Rules 2009 requires HMRC to deliver a statement of case. The statement of case must, in accordance with Rule 25(2)(b) “set out the respondent’s position in relation to the case”. HMRC set out its case on the basis that there was a missing trader because the supply chain had been traced to “hi-jacked traders and to fraudulent tax losses”. In contrast UMR in its witness statements made it clear that it did not accept any part of HMRC’s case and specifically indicated that HMRC had incorrectly traced the supply chains.
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[35] Thus pleadings, by enabling a party to know the case he has to meet play a central role in ensuring a fair trial." (Ulster Metal Refiners Ltd v. HMRC [2017] NICA 26, McBride J)
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"[20] Although the underlying claims depend on EU law, procedural questions are (at least in general) governed by national law. Our procedural system is and remains an adversarial one. It is for the parties (subject to the control of the court) to define the issues on which the court is invited to adjudicate. This function is the purpose of statements of case. The setting out of a party's case in a statement of case enables the other party to know what points are in issue, what documents to disclose, what evidence to call and how to prepare for trial. It is inimical to a fair hearing that a party should be exposed to issues and arguments of which he has had no fair warning. If a party wishes to raise a new point, he should do so by amending a statement of case. We were told that by the time that skeleton arguments for trial were served each party would know what points were in issue. We do not regard that as sufficient. In this case, for example, HMRC's skeleton argument was served about 10 days before the trial started. If (as in fact happened in this case) HMRC wished to argue that the evidence proposed to be called by Prudential was directed at the wrong issue (being an issue that had not been raised before) 10 days' prior notice was manifestly inadequate.
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[24] There are a number of reasons for this. First, parties to litigation are entitled to know where they stand and to tailor their expenditure and efforts in dealing with (and only with) what is known to be in dispute: Jones v MBNA International Bank [2000] EWCA Civ 514..." (The Prudential Assurance Company Limited v. HMRC [2016] EWCA Civ 376, Lewison LJ)
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Proceedings are adversarial
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Adversarial proceedings in general
“In a contest purely between one litigant and another…the task of the court is to do, and be seen to be doing, justice between the parties... There is no higher or additional duty to ascertain some independent truth…It often happens, from the imperfection of evidence, or the withholding of it, sometimes by the party in whose favour it would tell if presented, that an adjudication has to be made which is not, and is known not to be, the whole truth of the matter; yet, if the decision has been in accordance with the available evidence and with the law, justice will have been fairly done. It is in aid of justice in this sense that discovery may be ordered, and it is so ordered on the application of one of the parties who must make out his case for it. If he is not able to do so, that is an end of the matter. There is no independent power in the court to say that, nevertheless, it would like to inspect the documents, with a view to possible production, for its own assistance.” (Air Canada v. Secretary of State for Trade (No.2) [1983] 1 All ER 910 at 919, Lord Wilberforce).
"[119] The adversarial system applying in the civil courts strongly discourages a court from conceiving and deciding an issue not raised by the parties. In the Court of Appeal’s judgment in Satyam Enterprises v Barton [2021] EWCA Civ 287 Nugee LJ set out the position as follows:
36. The present case however is not one of a party seeking to depart from his pleaded case, but one where the parties addressed in their evidence and submissions the cases that had been pleaded, but the Judge decided the case on a basis that had neither been pleaded nor canvassed before him. In our system of civil litigation that is impermissible, and a misunderstanding of the judge's function which is to try the issues the parties have raised before him. The relevant principles were stated by this Court in Al-Medenni v Mars UK Ltd [2005] EWCA Civ 1041…:
“…It is fundamental to our adversarial system of justice that the parties should clearly identify the issues that arise in the litigation, so that each has the opportunity of responding to the points made by the other. The function of the judge is to adjudicate on those issues alone. The parties may have their own reasons for limiting the issues or presenting them in a certain way. The judge can invite, and even encourage, the parties to recast or modify the issues. But if they refuse to do so, the judge must respect that decision. One consequence of this may be that the judge is compelled to reject a claim on the basis on which it is advanced, although he or she is of the opinion that it would have succeeded if it had been advanced on a different basis. Such an outcome may be unattractive, but any other approach leads to uncertainty and potentially real unfairness."
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38. In the present case, the possibility that the Croydon Properties were held on trust for Mr V Sharma does not appear to have been even canvassed by the Judge during the hearing, but, as far as we know, first emerged fully-formed in the Judgment. That, for the reasons given by Dyson LJ in Al-Medenni, was not a course that was open to him. Judges may sometimes think - and may even sometimes be right - that their own theory better fits the facts than that of either party, but if it is wholly outside the scope of the pleaded issues, that is nothing to the point, and to decide a case on a basis that has not been explored in evidence or addressed in submissions is likely to leave at least one, if not both, parties with a profound and justified sense of unfairness."" (Shinelock Limited v. HMRC [2023] UKUT 107 (TCC), Judge Thomas Scott and Judge Greenbank)
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“In the system of trial which we have evolved in this country, the judge sits to hear and determine the issues raised by the parties, not to conduct an investigation or examination on behalf of society at large, as happens, we believe, in some foreign countries.” (Jones v. National Coal Board [1957] 2 QB 55 at 63).
“It is for the parties and their advisers to decide the ground upon which their battle is to be fought. The trial is not an inquisition into the content of relevant foreign law any more than it is an inquisition into other factual issues that the parties tender for decision by the court.” (Neilson v. Overseas Projects Corp of Victoria Ltd [2005] HCA 54, §118);
“Each [party] is free to decide the ground on which it or he will contest the issue, the evidence which it or he will call, and what questions whether in chief or in cross-examination shall be asked; always, of course, subject to the rules of evidence, fairness and admissibility. The judge is to take no part in that contest, having his own role to perform in ensuring the propriety and fairness of the trial….” (Ratten v. R [1974] HCA 35, §18).
Tribunal proceedings as adversarial/not inquisitorial
“We are persuaded of the correctness of the view of Carnwath J in Elias Gale (at p.76d) where he observed that the rules that govern appeals envisage an adversarial procedure, with the running made by the two parties (a view that he has maintained in the Supreme Court – see Volkswagen Financial Services (UK) Ltd v HMRC [2017] UKSC 26 at [7]). They do not provide for the tribunal to raise or investigate issues of its own motion, a feature that argues “strongly against the tribunal having a free-standing power to increase the assessment entirely of its own initiative”.” (HMRC v. C Jenkin & Son Limited [2017] UKUT 239 (TCC), §36, Norris J and Judge Sinfield)
“…the Tribunal does not function as a detective with a duty to fix a figure – even a minimum figure – for input tax paid but not recovered, regardless of the quality of the evidence placed before it by the claimant.” (Lothian NHS Health Board v. HMRC [2015] UKUT 264 (TCC), §19, Lord Tyre – although see Paya Ltd and Tim Wilcox Ltd v. HMRC [2016] UKFTT 660 (TC) where an analogy with employment tribunals was rejected).
“The proceedings are not inquisitorial, as this tribunal seemed to think. A broad view of the rules demonstrates that immediately: to start a case it is necessary to make a claim and say sufficient about it in an originating application. It is that to which the Respondent will respond. If an amendment to the claim is needed, permission has to be asked for and obtained. These are matters of some formality. They need not be overcomplicated, but they indicate that the process is designed to identify what is the real dispute between the parties so that a tribunal, acting as an umpire and not as a participant in a courtroom battle, can fairly resolve it.” (East of England Ambulance Service NHS Trust v. Sanders UKEAT/0217/14/RN, §28).
“Given that the Appellant was not in attendance and was unrepresented during the witness evidence [of HMRC], the Tribunal sought to explore certain areas of their evidence that were relevant to the Appellant’s case as the Tribunal understood it, but the Tribunal did not see it as its role to cross-examine the witnesses.” (Aleena Electronics Ltd v. HMRC [2015] UKFTT 0061 (TC), §28).
Possible distinction between inquisitiorial jurisdiction and inquisitorial approach
“As can be seen from HK v SSHD cited above, there is a difference between an inquisitorial approach and an inquisitorial jurisdiction. The latter, as described at §§84-85, gives the court or tribunal the power to seek out its own evidence and to accept evidence tendered by persons who do not become parties to the case...An inquisitorial approach to the evidence means that the Tribunal can ask questions of witnesses based on the evidence put to it…The fact that the Tax Chamber may adopt an inquisitorial approach when asking questions of the witnesses called by the parties does not mean that it has an inquisitorial jurisdiction.” (Paya Ltd and Tim Wilcox Ltd v. HMRC [2016] UKFTT 660 (TC), §§128…129…131(9)).
“We acknowledge that in a case such as this the hearing involves what is primarily an adversarial process. However as a specialist tribunal we are also well able to take on an inquisitorial role and in practice the tribunal often does so where the appellant is a litigant in person. That is not to say that it can or should effectively prepare the case for an appellant. However it can and often does assist an appellant to identify and fully present all relevant evidence and arguments.” (Outkey Trading Ltd v. HMRC [2014] UKFTT 156 (TC), §93, Judge Cannan).
More inquisitorial role where case involves a litigant in person
“In my view, this issue does not require examination of general questions about the tribunal’s role. One of the strengths of the new tribunal system is the flexibility of its procedures, which need to be and can be adapted to a wide range of types of case and of litigant. In some areas, particularly those involving litigants in person, a more inquisitorial role may be appropriate. However, when the tribunal as here is dealing with substantial litigants, represented by experienced counsel, it is entitled to assume that the parties will have identified with some care what they regard as relevant issues for decision.” (Volkswagen Financial Services (UK) Ltd v HMRC [2017] UKSC 26, §7).
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"[120] In the tribunals, including the FTT, there is room in appropriate circumstances for a more inquisitorial approach, particularly where the taxpayer is a litigant in person. However, the FTT must still exercise restraint. In HMRC v Liam Hill [2018] UKUT 45 (TCC), the Tribunal said this in relation to a series of arguments raised by the FTT of its own volition in an application by HMRC to strike out the taxpayer’s appeal:
55. While it is appropriate for the FTT to adopt a more inquisitorial role in relation to a striking out application against an unrepresented appellant, care must be taken in identifying and objectively evaluating grounds of appeal not raised by the appellant. Any such grounds should be based on or derived from facts discernible from the evidence before the tribunal, including at the hearing, and should be arguments which, as a matter of law, the tribunal considers to have a reasonable prospect of success.
[121] The possibility of the FTT adopting a more inquisitorial role is consistent with section 50 TMA, which gives the FTT wide powers on an appeal to reduce or increase assessments and adjust claims. As we have discussed above, that is confirmed by Tower MCashback and Fidex. It is also consistent with the more informal character of the tribunal system, and with the FTT’s obligations to have regard to the overriding objective in the FTT Rules.
He [Henderson J] also observed (again, in my view, entirely correctly), at paras 115–116:
“115…There is a venerable principle of tax law to the general effect that there is a public interest in taxpayers paying the correct amount of tax, and it is one of the duties of the commissioners in exercise of their statutory functions to have regard to that public interest… For present purposes, however, it is enough to say that the principle still has at least some residual vitality in the context of section 50, and if the commissioners are to fulfil their statutory duty under that section they must in my judgment be free in principle to entertain legal arguments which played no part in reaching the conclusions set out in the closure notice. Subject always to the requirements of fairness and proper case management, such fresh arguments may be advanced by either side, or may be introduced by the commissioners on their own initiative.”" (Shinelock Limited v. HMRC [2023] UKUT 107 (TCC), Judge Thomas Scott and Judge Greenbank)
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“While it is appropriate for the FTT to adopt a more inquisitorial role in relation to a striking out application against an unrepresented appellant, care must be taken in identifying and objectively evaluating grounds of appeal not raised by the appellant. Any such grounds should be based on or derived from facts discernible from the evidence before the tribunal, including at the hearing, and should be arguments which, as a matter of law, the tribunal considers to have a reasonable prospect of success. There is no standard “checklist” of arguments which the tribunal should be raising and considering in that exercise.” (Liam Hill v. HMRC [2018] UKUT 45 (TCC), §55, Judge Sinfield and Judge Thomas Scott, approved in HMRC v. Munir [2019] UKUT 280 (TCC), §20)
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Cases regarding tribunal proceedings as inquisitorial
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Despite the above, cases can be found where the Tribunal appears to have taken on a more inquisitorial role.
“As we have explained, the role of the FTT is in some respects an inquisitorial one, and it is not merely a passive umpire in a dispute between the taxpayer and HMRC. This more active role reflects the interest of the general body of taxpayers in ensuring that the correct amount of tax is paid.” (HMRC v. General Motors (UK) Limited [2015] UKUT 605 (TCC), §110, Henderson J and Judge Sinfield).
“Effectively, at every stage although having the benefit of experienced Counsel and those instructing Counsel, we treated him as unrepresented and gave him the opportunity of commenting himself…Accordingly, although the appellant had the benefit of representation, the Tribunal ensured that it fulfilled its inquisitorial role, enabled the appellant to participate as fully as Mr Talafair wished and carefully considered all of the evidence before us both with, and without, reference to Counsel’s arguments and concessions.” (Connections GB Ltd v. HMRC [2015] UKFTT 320 (TC), §§10…12, Judge Anne Scott).
“after we retired to consider our decision it became apparent that we did not have sufficient information about the work which had been carried out to the building…to enable us to reach a conclusion. Accordingly we arranged a second hearing, which took place on 19 April 2013, when additional plans and photographs were provided to us, and we heard further explanations from the appellant.” (Pearson v. HMRC [2013] UKFTT 332 (TC), §6, Judge Bishopp).
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Tribunal not to actively seek fresh evidence on behalf of a party
“The tribunal may, in an appropriate case, ask the parties whether they have thought about particular evidence or even, possibly, whether in an appropriate case the parties or one of them would wish an adjournment in order to obtain it. But it is not, as the Judge appeared to think, for the tribunal itself to investigate the evidence and rely upon its own investigations. The tribunal is, as we said at the start of this Judgment, to act as the adjudicator not as advocate. Actively seeking fresh evidence on one or other party's behalf is inevitably likely to lead towards the latter…[I]t is not the role of the Employment Tribunal to find evidence to support one party's case or the other. Adjudicating upon the evidence put before it is not producing the evidence for it to consider.” (East of England Ambulance Service NHS Trust v. Sanders UKEAT/0217/14/RN, §32).
Judicial intervention to assist a party in giving the evidence they want to give not to obtain the evidence the Tribunal wants to hear
“…it is quite likely that there will be a degree of intervention in proceedings before a tribunal which might raise some eyebrows in civil courts. But the purposes, as we have identified them, should be kept clear. When a Judge does under r 41 ask questions to elicit the evidence – that is, not the evidence which the tribunal wishes to hear but the evidence which the witness wants to give, as best the tribunal can understand it – it is advisable that the tribunal asks those questions in a non-leading form. That is not because form should triumph over substance. It is because non-leading questions give rise to the most reliable answers. If a Judge suggests an answer to witnesses, they are much more likely to agree with it than they would if asked an open question about the same point, and the tribunal should be careful to avoid making a case for either party.” (East of England Ambulance Service NHS Trust v. Sanders UKEAT/0217/14/RN, §31 – note that the FTT Rules have no equivalent reference to the Tribunal asking questions).
Tribunal carrying out its own research might just be remediable if immediately brought to the parties’ attention
“…this, in our view, was at the outset a procedural irregularity which might have been retrievable. The trial might not have had to be re-run if the matter had simply been reported, fully, time given for submissions and consideration if further evidence was needed. I would not wish in the least to encourage a tribunal in other cases to proceed, thinking the matter could be retrieved: if it thinks it has not been informed of important evidence it should ask the parties about it. However, the resolution of this case depends to a large extent on what happened after the tribunal revealed the irregularity…[I]n assuming the truth of that which the tribunal had discovered for itself from the Internet, as the comments and Judgment suggest it did, and in raising further questions for the Claimant to answer as if the material were true, the tribunal fell into the error of demonstrating that it would place improper weight upon the material it had obtained.” (East of England Ambulance Service NHS Trust v. Sanders UKEAT/0217/14/RN, §§35…36).
But see also Apparent Bias.
Tribunal must decide case according to the facts as it believes them to be
"[27] Thirdly, there was no appeal by either side against the conclusions of the FTT on the important question of how the assets comprising the five key facilities should be identified. This issue was discussed by Judge Cannan in the FTT Decision, at [65] to [72]. As he was fully entitled to do, he reached conclusions which did not coincide with either side's submissions and were in various respects intermediate between the "piecemeal" approach advocated by Urenco and the "single entity" approach preferred by HMRC..." (Urenco Chemplants Limited v. HMRC [2022] EWCA Civ 1587, Henderson, Thirlwall, Arnold LJJJ)
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“I should say something about the proper approach for a judge to adopt when he is proposing to decide a case on the basis of a point which was not argued, or in a way, or to an extent, which is more favourable to a party than the case which that party advanced in court…The first point to make is that, at least as a matter of principle, a judge is entitled to take such a course. After all, a judge must decide a case according to the facts and the law as he believes them to be. Accordingly, subject to any particular reason to the contrary in the particular case, there is no reason for objecting in principle to a judge taking such a course.” (Murphy v. Wyatt [2011] EWCA Civ 408, §§13…14).
“The teaching of experience is that in an adversarial contest neither side necessarily has a monopoly of the whole truth. An impartial tribunal may discern from the evidence, as it unfolds in the course of the hearing, that the truth on a particular issue probably lies somewhere between the positions of the parties. The adversarial nature of the proceedings tends to polarise the positions taken up by the parties in a way that may distort or disguise the truth.” (Woodhouse School v. Webster [2009] EWCA Civ 91, §36, Mummery LJ).
Tribunal entitled to raise alternative factual possibilities where there is evidence before the Tribunal to support it
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"[39] The appellant, relying on the authority of Al-Medenni v Mars UK Ltd [2005] EWCA Civ 1041 submitted that the FTT could not find against UMR on a basis which HMRC had not made out in its original pleadings. Dyson LJ stated at paragraph 21:
“In my view the judge was not entitled to find for the claimant on the basis of the third man theory. It is fundamental to our adversarial system of justice that the parties should clearly identify the issues that arise in litigation, so that each has the opportunity of responding to the points made by the other. The function of the judge is to adjudicate on those issues alone. The parties may have their own reasons for limiting the issues or presenting them in a certain way. The judge can invite, and even encourage, the parties to recast or modify the issues. But if they refuse to do so, the judge must respect that decision.”
[40] As appears from the factual circumstances of Mars there was no hint of a “third man theory” in the witness statements or in the way in which the case was opened or in the evidence of the claimant’s witnesses. In such circumstances we accept that it would not be open to a tribunal to pursue a “third man theory”, as there would be no evidential basis for such a theory.
[41] We do not however, find that Mars lays down a general principle that a tribunal can never find for a claimant on the basis of a “third man theory”. Rather we are satisfied that it is open to a tribunal or court to raise a “third man theory” when there is evidence or material before it to support such a theory.
[42] In this case we are satisfied there was evidence before the FTT which entitled it to raise a “third man theory”. In particular there was evidence of fraudulent transactions on the basis of the supply chains as set out by UMR." (Ulster Metal Refiners Ltd v. HMRC [2017] NICA 26, McBride J)
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Within limits
“…however, there may be particular reasons why such a course is not open to the judge in a particular case. For instance, the course he wishes to take may not be open on the pleadings, or it may be precluded by virtue of a concession which has not been, or cannot be, withdrawn. Equally, a finding of primary fact, or even a finding of secondary fact or an assessment of a witness or expert evidence, may simply not, on analysis, be open to the judge on the evidence before him.” (Murphy v. Wyatt [2011] EWCA Civ 408, §15).
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Tribunal raising alternative factual analysis during the course of the hearing – procedure to follow
Parties must have a fair opportunity to deal with the point
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"[123] So, in principle the FTT may raise a new argument of its own volition, or permit either party to raise a new argument, in reaching its decision. However, there is a critical overarching restriction on those powers. The requirements of procedural fairness include the avoidance of ambushes and the rights of all parties to know the case which they face. In determining whether to take into account a new argument in reaching its decision, the FTT must always consider what might be appropriate in the particular circumstances to ensure procedural fairness. The FTT has wide case management powers, and there is no set procedure or course of action which would be appropriate in every case. In some situations, it may be sufficient in terms of fairness for the parties to be offered the right to make submissions on the new argument following the hearing. In other cases, particularly where the new argument not only raises issues of law but might also impact on the evidence adduced by one or both parties in response to the argument, the FTT may decide to seek the views of the parties on whether an adjournment might be needed. Where it is one of the parties which seeks to raise a new argument, the FTT might decide that fairness requires that it is not admitted at all. A helpful discussion of these issues is contained in HMRC v William and Hazel Ritchie [2019] UKUT 71 (TCC) at [34]-[43]." (Shinelock Limited v. HMRC [2023] UKUT 107 (TCC), Judge Thomas Scott and Judge Greenbank)
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"[74] Finally under Ground 3(a) Mr Boch pointed out that at [84] (set out at paragraph 27 above) the FTT referred to planning law, and speculated that it would be “difficult to imagine” that clearance of the woodland would constitute a material change of use for the purposes of the Town and Country Planning Act 1990, and stated that there was no suggestion that the woodland could be subject to a non-domestic rateable valuation. Mr Boch argued that neither of these points was pleaded or argued before the FTT, leading to procedural unfairness to the Appellant.
[75] We suspect that these were in the nature of additional “throwaway” observations by the FTT, rather than operative reasons for its decision, but the difficulty is that there is nothing in the Decision to indicate clearly that this was the case. Since establishing the position in relation to planning consent and rateable valuation as regards the woodland could have likely required the Appellant to have produced factual evidence, there was a procedural unfairness on this issue, because the Appellant has been deprived of that right.
[76] Accordingly, we allow the appeal only in relation to the issues raised regarding [84] and otherwise dismiss the appeal in respect of Ground 3(a). We deal below with the disposition of the appeal." (The How Development 1 Ltd v. HMRC [2023] UKUT 84 (TCC), Judge Thomas Scott and Judge Brannan)
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“In our view, having decided to embark on an exercise of analysing the “split 15 deals”, the FTT should have written to the parties giving them the opportunity of dealing with the findings they were proposing to make in written submissions. The FTT did not take that course and in our view as a result the making of the findings on the “split deals” amounted to a procedural irregularity which was an error of law on the part of the FTT. As is clear from Murphy v Wyatt, the failure to give the parties 20 the opportunity of making representations on the point is unfair in circumstances where that point is determinative of the case. Even if it is not and represents a further reason to those on which the FTT based the Decision it would still have been fair to give the parties an opportunity to deal with it.” (BTS Specialised Equipment Limited v. HMRC [2017] UKUT 159 (TCC), §105, Warren J and Judge Herrington).
“If the ET inclines to an interpretation of the evidence that differs from that contended for by either side, it is normally good practice for the ET to raise that with the parties at, or even after, the hearing in case the parties wish to consider calling further evidence or making further submissions…There is, in general, no procedural unfairness or injustice in the ET making findings based on evidence before the ET, if the parties have had a fair opportunity to address submissions to the tribunal on the substance of the evidence and if there is no real possibility that further submissions would have made any difference to the outcome.” (Woodhouse School v. Webster [2009] EWCA Civ 91, §§37…38, Mummery LJ).
Must clearly inform parties of possibility under consideration and give parties opportunity to respond
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"[43] As noted in Three Rivers a defendant is entitled to know the case he has to meet. In a fraud case this includes knowing the primary facts upon which fraud is alleged. When a tribunal wishes to find for a claimant on the basis of a “third man theory” there are a number of steps that it must take to ensure that the defendant is afforded a fair trial. In particular it must inform the parties clearly of the “third man theory” and then afford to the parties sufficient opportunity to respond to the new case and if necessary permit an adjournment to allow the parties time to make decisions about what further investigations they should carry out, what further evidence or disclosure they should seek, what further witnesses they should call and what further submissions they should make. These steps are essential and central to meeting the requirement of a fair hearing as they ensure the party has an opportunity to know exactly the case he has to meet and an opportunity to meet it.
[44] We have considered the exchanges between Judge Cannan and UMR’s counsel as set out in the transcript. We are not satisfied that Judge Cannan clearly indicated to UMR’s counsel that the tribunal was considering finding for the claimant on a different factual basis to that advanced by HMRC. This view is corroborated by the fact that HMRC never at any stage indicated it wished to rely on an alternative factual basis to find fraud and it never applied to amend its pleadings. Further, even though all the parties were given the opportunity to make further written submissions to the FTT after the hearing, no party made submissions in respect of the new alternative factual basis for a finding of fraud.
[45] As a result we are satisfied UMR was taken by surprise. It was not afforded an opportunity to meet the new case which was now being made against it. If it had been properly alerted to this by the tribunal, UMR would have had the opportunity to consider whether to apply for an adjournment and to consider whether it now wished to seek further disclosure, whether to call further witnesses (which it seems it could have done), or whether to make further submissions. The failure of the tribunal to permit this meant UMR was denied a fair hearing." (Ulster Metal Refiners Ltd v. HMRC [2017] NICA 26, McBride J)​
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Witness having the opportunity to deal with the issue in general, if not the Tribunal’s specific analysis
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“Matters are not, however, quite as stark as Mr Pickup’s submissions might suggest. Mr Tomlinson was cross-examined generally about the deals which the Appellants entered into and the percentage mark-ups. Thus, he was cross-examined in relation to details of the profit margins in respect of all the deals which were the subject of the appeals. He was asked about the difference between the percentage and absolute mark-ups on the disputed transactions and accepted that there was a striking difference between the range of absolute mark-ups and the percentage mark-ups, although he did deny working on percentage mark-ups. He was also cross-examined on the issue of negotiation generally in relation to all the deals which the Appellants entered into. He therefore had the opportunity to say in the course of this crossexamination if there was something different about the split deals. We find it inconceivable that if there was something different about these deals which would assist in defeating the claim of contrivance and orchestration he would not have mentioned it. However, Mr Tomlinson admitted that, in retrospect, he could see that he was being duped and that there was in reality a contrived scheme, a scheme in which he claims to have no knowledge…Therefore, we consider that the error of law in relation to the manner in which the FTT made its findings on the “split deals” is not on its own significant in relation to the outcome of the appeals.” (BTS Specialised Equipment Limited v. HMRC [2017] UKUT 159 (TCC), §§106 – 107 Warren J and Judge Herrington).
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Not acceptable to identify new point when writing decision and rely on it without giving parties opportunity for submissions
"[125] It will generally not be acceptable for the FTT to identify a new argument for the first time when writing its decision, and then base that decision in whole or part on that new argument, without having given the parties any opportunity to make further submissions. While it may be tempting to see such a course as simply an example of the “venerable principle”, it is in principle procedurally unfair for a party to learn that one of the reasons it has lost its case is a reason which is identified for the first time in the FTT’s decision and which that party has not had a fair opportunity to address." (Shinelock Limited v. HMRC [2023] UKUT 107 (TCC), Judge Thomas Scott and Judge Greenbank)
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Failure to Tribunal to follow procedure leading to remission to different constitution of Tribunal
"[48] This court has not heard nor been asked to reconsider the evidence in this case and therefore we are satisfied we should not remake the decision. Taking account of all the circumstances, we are satisfied that it is in the interests of justice that the case should be remitted to a differently constituted FTT for a re hearing and we order accordingly." (Ulster Metal Refiners Ltd v. HMRC [2017] NICA 26, McBride J)
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Failing to run an alternative factual case leading to defeat
"[68] As the judge said at paragraph 100, the Respondent ran the case on the basis that it would have charged 17.625%, and it did not have an alternative position that it would or might have charged some other rate between 15% and 17.625%. It does not seem to me that this stance relieved HMRC of the need to put forward an intermediate case as to what the Respondent's charge would have been, in case it were unable to make good a case that the rate would have been 15%.
[69] In my judgment, that was a fundamental defect in HMRC's case, and more so than the judge thought it...It may have been possible to infer that the Respondent would have charged less than 17.625% but more than 15%, in order to endeavour to cover its input tax, but the Tribunal would then have needed to come to a conclusion as to what that level of charge would have been. It had no material on which to come to a conclusion on that, above all because no evidence had been adduced relevant to this issue, and no questions were addressed to Mr Cochrane on the point. I therefore disagree with the judge in his conclusion that it was or could remain open to the Tribunal to find that all of the burden of the tax was passed on, because that would be inconsistent with the Tribunal's paragraph 31, or that part of it was passed on, because it would have been unable to draw any proper inference as to how much that part would have been.
[70] For that reason, while I agree that the Tribunal's finding that the whole of the tax was passed on must be set aside, I do not agree with him that the case should be remitted to the Tribunal for it to reconsider the matter. In my judgment the defence of unjust enrichment to the repayment claim cannot be made out in full or in part, and HMRC should not be allowed another opportunity to seek to persuade the Tribunal that the defence was made out in part. It could not do so without additional evidence being adduced, and I see no reason for that to be allowed." (Baines & Ernest Ltd v. HMRC [2006] EWCA Civ 1040, Lloyd LJ)
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See also P1: Nature of Tribunal's decision and L10: Statement of case
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Admissions cannot be overridden
“The judge is not entitled to have regard to inadmissible evidence, nor can he properly reach a decision which is contrary to an admission which is made on the pleadings.” (Loveridge v. Healey [2004] EWCA Civ 173, §22).
"[33] In short, the parties’ common position throughout was that supplies of the alcohol had taken place. Accordingly, that fact was established without any need for proof. No proof being needed, there was no “burden of proof” to be allocated on this issue. The proceedings before the FTT were adversarial and accordingly it was for the parties to decide which issues of fact and law they wished to contest. It was for the tribunal to decide the contested issues, not the agreed ones. Where the parties to adversarial proceedings agree an issue it is not the function of the tribunal to go behind that agreement and undertake its own investigation or reach its own independent determination about the issue. The FTT should not place an onus on one or other party to prove an agreed fact." (HMRC v. Donnelly [2021] UKUT 296 (TCC), Miles J and Judge Richards)
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“it would not be right for us to go behind the agreed basis upon which both parties have presented this appeal” (Stephen Kitching v. HMRC [2013] UKFTT 384 (TC), §59, in respect of factual concession by HMRC);
Circumstances where the Tribunal does not have to choose between the parties respective overall factual contentions
Valuation
“[H]ad the master asked himself not ‘which of the two valuations should I accept?’ but ‘what, in the light of the evidence of the two valuers, was the probable value of the property’ and had he then not merely noted some of the specific differences between the valuers but sought to adjudicate in relation to them, he might well, I believe, have been able to answer [the question of valuation]” (Stephens v. Cannon [2005] EWCA Civ 222, §49, Wilson J).
Amount of overpaid VAT
“The FTT were not, however, confined to choosing whether to accept or reject Mr Robinson’s model in its entirety. So far as they could properly do so, it was their duty (applying their own expertise as a specialist tribunal) to ascertain the true amount of VAT (if any) which GMUK had overpaid. This result could be achieved either by the FTT performing the appropriate calculations itself, or by stating the principles by reference to which they considered the calculation should be made. In performing this task, the FTT had to act with procedural fairness, and there had to be a proper evidential foundation both for their findings of fact and for their conclusions. But their preferred solution did not have to be one for which either side had specifically contended, either before or in the course of the hearing.” (HMRC v. General Motors (UK) Limited [2015] UKUT 605 (TCC), §68, Henderson J and Judge Sinfield).
Circumstantial evidence
First, look at each alleged circumstance individually
“When dealing with a case based on circumstantial evidence, a fact finding tribunal has to do two things. First, it must make its findings as to what the circumstances actually were. Secondly, having determined what the circumstances were, it has to determine what inference to draw from all such circumstances taken together. In the first part of this exercise, the tribunal necessarily will look at the alleged circumstances individually; for the second part of this exercise, the tribunal must look at the circumstances in combination.” (HMRC v. CCA Distribution (in administration) Ltd [2015] UKUT 513 (TCC), §91).
Second, look at all the circumstances as a whole
“It is, however, the essence of a successful case of circumstantial evidence that the whole is stronger than individual parts. It becomes a net from which there is no escape.” (JSC BTA Bank v. Ablyazov (No.8) [2012] EWCA Civ 1411, §52).
“It is also clear that when one considers the impact of circumstantial evidence, it is important to consider the evidence as a whole and not to restrict oneself to considering the impact of each circumstance taken alone and in isolation from the others.” (HMRC v. CCA Distribution (in administration) Ltd [2015] UKUT 513 (TCC), §91).
“As it is, it is not much. By itself it would be insufficient, but there are other circumstances in the case, and especially the fact that the watch was found upon him before midday, on the morning after the burglary. Thus it is that all the circumstances must be considered together. It has been said that circumstantial evidence is to be considered as a chain, and each piece of evidence as a link in the chain, but that is not so, for then, if any one link broke, the chain would fall. It is more like the case of a rope composed of several cords. One strand of the cord might be insufficient to sustain the weight, but three stranded together may be quite of sufficient strength. Thus it may be in circumstantial evidence—there may be a combination of circumstances, no one of which would raise a reasonable conviction, or more than a mere suspicion; but the whole, taken together, may create a strong conclusion of guilt, that is, with as much certainty as human affairs can require or admit of.” (R v. Exall (1866) 4 F&F 922, Pollock CB).