Khan v Revenue and Customs

The complaint under this head has had a confused procedural history, and varying formulations. The Notice of Appeal to the High Court, which was filed in April 2003 in the name of Mr Khan in person, contained no criticism of the hearing as such. There was an indication that, on the grant of legal aid, he hoped to instruct counsel, and that the grounds would be “more fully particularised” thereafter. Although Mr Curley was authorised to instruct Mr Young under the BarDIRECT scheme in January 2004, there seems not to have been any formal application to amend or expand the grounds before the hearing of the appeal in April 2005.

Hart J (para [14]) noted that Mr Young’s skeleton argument before him had included the following contention:

“(a)

(the tribunal) ought to have considered the gravity of the charges against Mr Khan and made inquiry as to whether Mr Khan’s rights to a fair hearing would be infringed”

I infer that this was treated without objection as an additional ground of appeal.

In his discussion of this issue, Hart J summarised Mr Young’s arguments under this head as follows:

“Mr Young’s submission was, in essence, that the appellant had been incompetently represented before the tribunal by Mr Arifeen, that the tribunal ought to have been alert to his incompetence, and that it ought to have ensured that Mr Khan was aware of his right to be legally represented if he so chose. ”

Mr Young relied on three specific points, which he said should have alerted the tribunal to Mr Arifeen’s inadequacy. First was Mr Arifeen’s use of the description “Statement of Case” to describe the document submitted by him, rather than “Defence”, which is the term used by the rules. Second was the fact that he was willing to represent Mr Khan, in spite of being a potential witness himself. Third was Mr Arifeen’s failure to call Mr Khan as a witness.

Mr Young had also apparently raised another new point, not reflected in the notice of appeal, relating to legal aid; as noted by the judge, he submitted that the tribunal should have taken action -

“[to tell] Mr Khan that if he were unable to afford legal representation, the Legal Services Commission did make aid available for the provision of legal representation at penalty appeals before the Tribunal. Only after providing this information for Mr Khan’s consideration should the tribunal have determined to carry on with hearing the appeal.”

Unfortunately, this procedural and conceptual confusion is reflected in the state of the evidence before us. Indeed, the case is a good illustration of how things can go wrong if the grounds of appeal are not precisely formulated at the outset. For guidance in future cases, it may be helpful first to explain what should happen, and then to compare it with what did happen, before attempting to summarise the factual basis on which we have to consider the issue.

In an appeal confined (as in this case) to issues of law, new evidence is not normally relevant or admissible, since the alleged error of law should be apparent from the terms of the decision. However, where the basis of the appeal is misconduct or unfairness at the hearing, further evidence may be necessary to show the relevant circumstances. It may also be necessary to refer to a transcript of the hearing (if there is one), or to the judge’s notes. The relevant Practice Direction (CPR52PD para 5.15-16) provides:

“When the evidence is relevant to the appeal an official transcript of the relevant evidence must be obtained…

If evidence relevant to the appeal was not officially recorded, a typed version of the judge’s notes of evidence must be obtained.”

Those provisions are primarily directed to grounds of appeal, which require review of the actual evidence before the lower court or tribunal. In principle they may also be relevant to allegations relating to the conduct of the proceedings, in so far as the procedural steps have been recorded or noted. In either case, the tribunal is only required to provide its notes so far as they are relevant to a ground of appeal.

If the relevant circumstances do not sufficiently appear from the transcript or notes, there may also need to be direct evidence from witnesses who were present at the hearing to show what happened. This should be strictly limited to what is required to establish the alleged unfairness. If possible, the facts of what happened should be agreed, so that the issue before the appeal court is limited to their legal interpretation. In any event, where the complaint is of actions or omissions by the tribunal itself, it is essential that the complaint be precisely formulated in the notice of appeal, or as soon as possible thereafter. That is necessary, not only as a matter of ordinary fairness to the tribunal and the other parties, but also to ensure that they are able to provide the court with the material necessary to deal with the issue, while keeping any new evidence within tight limits.

In his skeleton argument before the judge, Mr Young asserted that requests for the tribunal’s notes “had met with a refusal on the part of the tribunal”. The judge did not find it necessary to explore this complaint. From information supplied to us since the appeal hearing, it seems that in January 2004, when Mr Curley was first involved, a letter was sent to the tribunal in Mr Khan’s name indicating that he was “currently in the process of appealing… to the High Court”, and requesting “a copy of the Chairman’s notes made during the hearing…”. The letter gave no particulars of the grounds to which the notes might be relevant. The tribunal replied that “in accordance with the normal practice”, the notes would not be released “at this stage”; but that a copy of the notes could be sent “once a notice of appeal has been lodged in the High Court.” A further letter from Mr Khan, written by return, informed the tribunal that the appeal had in fact been lodged in April 2003, and repeated the request. It seems that the tribunal failed to respond to this letter, and to three further letters, the last being dated 26^th May 2004, by which time the appeal was in the warned list.

On its face, the tribunal’s failure to respond to the later letters seems surprising and unfortunate, and the reasons should be investigated. In the context of the appeal I would make two comments. First, although a notice of appeal had been lodged, it did not at this stage contain any complaint about the conduct of the hearing. That emerged later in Mr Young’s skeleton. In the absence of any other indication of the purpose of seeking the notes, the tribunal would have been fully entitled to refuse to supply them on the ground that they were not relevant to the appeal. Secondly, nothing seems to have been done on Mr Khan’s side between the sending of the letter at the end of May 2004, and the hearing before Hart J almost a year later. If the notes were still thought relevant, once the grounds of appeal had been finalised, and the tribunal still failed to respond, an application could and should have been made to the court for an order requiring their disclosure.

Before Hart J, Mr Young relied partly on that refusal to justify the introduction of fresh evidence, in the form of witness statements from Mr Arifeen (dated May 2004), and Mr Khan (dated February 2005), both of whom had been present at the hearing; and also a statement from Mr Curley (also dated February 2005), who had not been present at the hearing, but was by this time advising Mr Khan. Mr Curley’s statement contains a detailed criticism of Customs’ case as presented to and accepted by the tribunal. Hart J accepted it as “a convenient encapsulation of submissions” to be made by Mr Young. That was perhaps a generous description of what was largely an attempt to re-argue the case on the facts. As to the other statements he commented:

“… they went partly to the question of the fairness of the hearing before the Tribunal and partly sought to introduce evidence which could have been, but was not, adduced by the appellant below. I admitted those statements so far as they related to the former question and allowed them to be read in relation to the latter. This was on the footing that they could not be relied on as evidence in this appeal so as directly to contradict the Tribunal’s findings of fact. My purpose in allowing them to be read at all was to enable me to form a view as to whether, if persuaded that there was any question of the appellant’s Article 6 rights having been infringed, the outcome of the proceedings before the Tribunal might have been materially affected thereby.”

Again, that was a generous, but (in the absence of any sustained objection by Customs) understandably pragmatic, approach. Strictly, the bulk of the evidence was inadmissible.

The only points arguably relevant to the question of unfairness seem to me to be the following. Of the decision not to call him as a witness, Mr Khan says:

“I did not give evidence at the appeal, although I would have been willing to do so. Mr Arifeen decided that it was not necessary to call me. He based his case on the analysis he carried out. If his analysis was accepted, this would have meant that the takings for the period concerned, would have been under the threshold for registration, and ended the matter.”

On the question of representation, he says:

“I did not know that I could have been granted legal aid for my appeal in the tribunal. If I had known I could have received legal aid then I would have wanted a lawyer or specialist to represent me in the Tribunal.”

Mr Arifeen himself does not comment on either point, nor make any complaint about the hearing as such. Nor does he admit to any lack of understanding of the issues or the procedure before the tribunal. He mentions certain “quite significant” points which he put to the tribunal, but which “have not been mentioned in the decision”. There is, however, no challenge to the adequacy of the tribunal’s reasoning.

Mr Curley outlines his own experience of penalty appeals, including the fact that he is authorised by the Legal Services Commission to represent legally aided appellants in such proceedings. He contrasts Mr Arifeen’s lack of experience:

“I have spoken to Mr Arifeen and he confirmed to me that he had not previously represented anyone in an appeal before the tribunal. He also said that he had never previously represented a taxpayer at a tape-recorded interview under the Notice 730 procedures.

I note that Mr Arifeen does not appear to have understood the rules of evidence in relation to Tribunal appeals as he did not call any evidence at the hearing.”

He does not explain further what evidence should have been called.

On the question of legal aid, it was common ground before the judge that legal aid was in principle available for such proceedings at the relevant time. This policy had been foreshadowed by an announcement by the Lord Chancellor in February 2001 (apparently in response to the tribunal’s decision in the Han case); and was given effect by a direction made on 2^nd April 2001. It also seems to have been assumed that Mr Khan would have qualified for legal aid, although as the judge noted there was no specific evidence to that effect.

Mr Khan’s statement that he was not aware of his right to legal aid was not challenged by Customs. This seems to have been an oversight. Mr Vajda told us, on instructions, that the practice was and is for the tribunal to write to prospective appellants in civil penalty cases, drawing their attention to the availability of legal aid. We were shown the form of letter. We were also told that the tribunal’s records showed that such a letter had been sent to Mr Arifeen, although this was not conceded by Mr Young. Mr Vajda did not offer any explanation as to why this point had not been taken up before the judge, nor did he ask for permission to rectify the omission by adducing formal evidence of the sending of the letter. Again, it is unfortunate that the significance of this point was not highlighted in the grounds of appeal to the High Court. If it had been, either the tribunal or Customs might have been alerted to the point at an earlier stage, and a point might have been taken on the letter, so that Mr Arifeen could have responded to it.

As it is, we seem to have no choice but to proceed on the probably artificial basis that the letter was either not sent, or at least was not passed on to Mr Khan; and that he was not made aware of his right to legal aid, either in advance of or at the hearing. Apart from that, we have no direct evidence of what took place at the hearing, In particular, we have no useful evidence of how Mr Arifeen conducted the case on the day, or of what if anything the tribunal did to redress any perceived imbalance between the parties. Nor, apart from Mr Curley’s later inferences, and what we can discern from the written submissions, do we have any direct evidence to support the allegations of Mr Arifeen’s alleged incompetence.

Confusion as to the precise nature of the issue has persisted into this court. In the notice of appeal, the complaint was put as follows:

“The learned judge erred in law in that … although a lawyer at the hearing of the VAT tribunal did not represent me when Counsel represented Customs and Excise, I nevertheless had a fair hearing notwithstanding my rights under Article 6 of the convention on human rights.”

However, in granting permission to appeal, following an oral hearing at which Mr Young appeared, Waller LJ summarised the issue as being –

“… the extent to which Article 6 should have obliged the Tribunal to take an active role in scrutinising the quality of the representation that Mr Khan had.”

They are distinct points. The first is a general point about equality of arms, and the lack of legal representation. The second is a specific point about the relative incompetence of Mr Arifeen. I shall attempt to deal with both.

Article 6 of the Convention confirms a right to a “fair” hearing in both civil and criminal proceedings (Art 6(1)). In addition, it contains special protections for those subject to proceedings deemed criminal under the Convention. They include the presumption of innocence (6(2)), the right to be informed “in detail of the nature and cause of the accusation” (6(3)(a)) and the right:

“to defend himself in person or through legal assistance of his own choosing or, if he has not sufficient means to pay for legal assistance, to be given it free when the interests of justice so require.” (6(3)(c))

In applying Article 6, the fairness of the proceedings must be judged in context. The circumstances of the present case were unusual. The exchange of statements under the rules took place in the first part of 2000. There was then a delay of more than two years before the hearing. By that time there had been an important development in the law, in that it was established that the penalty aspect of the proceedings was to be regarded for Convention purposes as criminal in nature. The significance of this, particularly in relation to the different aspects of the appeals, might not have been obvious to a non-specialist. So much was acknowledged by the Lord Chancellor in early 2001, when the legal aid rules were altered to extend to such proceedings. The form of standard letter sensibly adopted by the tribunal implicitly recognised the importance of the change.

Lack of legal representation as such is not the real issue in the present case, in my view. This was not a case where deprivation of liberty was at stake (as in Benham v UK (1996) 22 EHRR 293). It is common for taxpayers to be represented by accountants before the tribunal. In most cases, there is no need for particular legal skills. I note that Mr Curley, who is an Associate of the Institute of Indirect Taxes, but not (as I understand) a lawyer, is himself approved by the Legal Services Commission as competent to represent legally aided appellants in penalty proceedings. Mr Khan’s own statement refers to his wish for a lawyer “or specialist”, in which term I assume he intended to include a non-lawyer such as Mr Curley who has particular expertise in this field.

We were referred to one comparable case (Dula Miah v HMRC (2004) VDTR 19084) in which the tribunal, of its own motion, directed that legal assistance should be sought by the appellant. However, there were special considerations. One of Customs’ witnesses was a former employee of the appellant’s take-away business, who according to her evidence had been instructed by the appellant to write spurious “meal bills” to match figures provided by him. The tribunal was understandably concerned that this statement, in effect admitting to being party to a criminal conspiracy, had been taken from her without any caution and without any adviser present, and that the advice of a lawyer was needed. There was no complication of that kind in the present case.

Accordingly, the mere fact that Mr Khan was represented by an accountant, rather than a lawyer, was not enough in itself to put the tribunal on notice that the representation might not be competent or effective. Similarly, although it was unfortunate that (as we must assume) the legal aid letter had not been sent, or was not drawn to Mr Khan’s attention, that is not the issue. Unless the tribunal had some other reason to doubt Mr Arifeen’s competence, they would have had no business to inquire into the background of his choice of representative, or his knowledge of the availability of legal aid.

As to consequences of Mr Arifeen’s alleged failings, Mr Young relied on Kamasinski v. Austria A/76 (1991) 13 EHRR 36. That case concerned complaints made by the applicant about the conduct of criminal proceedings against him, including the performance of the lawyer appointed by the court to act for him. At paragraph 65 the Court said:

“Certainly, in itself the appointment of legal aid defence counsel does not necessarily settle the issue of compliance with the requirements of Article 6(3)(c). As the Court stated in its ARTICO judgment:

‘The Convention is intended to guarantee not rights that are theoretical or illusory but rights that are practical and effective . . . . [M]ere nomination does not ensure effective assistance since the lawyer appointed for legal aid purposes may die, fall seriously ill, be prevented for a protracted period from acting or shirk his duties. If they are notified of the situation, the authorities must either replace him or cause him to fulfil his obligations.’

Nevertheless, ‘a State cannot be held responsible for every shortcoming on the part of a lawyer appointed for legal aid purposes.’ It follows from the independence of the legal profession of the State that the conduct of the defence is essentially a matter between the defendant and his counsel, whether counsel be appointed under a legal aid scheme or be privately financed. The Court agrees with the Commission that the competent national authorities are required under Article 6(3)(c) to intervene only if a failure by legal aid counsel to provide effective representation is manifest or sufficiently brought to their attention in some other way.” (emphasis added)

Mr Young submits that it should have been “manifest” to the tribunal that the appellant was not being effectively represented by Mr Arifeen, and that it should have taken steps to ensure that he was able to defend himself effectively.

As already noted, he relied on three specific points, which might have put the tribunal on notice. The first two points (the title of the submission, and a possible conflict with Mr Arifeen’s position as a potential witness) seem to me trivial in themselves, except possibly as symptomatic of a lack of familiarity with the procedure in general. As I think Mr Young accepted, the main focus of his argument was on the third: Mr Arifeen’s failure to call Mr Khan to give evidence in his defence.

The judge rejected the complaint under Article 6. Following Kamasinski, he asked himself whether it should have been “manifest to, or otherwise brought to the attention of, the tribunal” that Mr Khan was being inadequately represented. He thought not. He inferred that Mr Arifeen’s “strategy” had been to rely on “such favourable inferences as he could persuade the tribunal to draw” from the 1999 records:

“Provided that the analysis for the 1999 period could be got before the Tribunal, that strategy could be implemented without having to call the appellant himself, and exposing him to cross-examination. The appellant’s difficulty was that, apart from his own DGT records, there was no accounting material on which he could rely in respect of the relevant period apart from that being relied on by Customs. His further difficulty was that he had given inconsistent accounts of the numbers of books used by him in the relevant period, and had been unable to provide an explanation for the discrepancy adverted to in Officer Heuston’s letter of 18th January 1999 (referred to at paragraphs 37 and 38 of the Tribunal Decision). Mr Arifeen may have taken the view (and may have had good reason to take it) that exposing the appellant to cross-examination was unlikely to improve his position.”

That strategy had been partly successful in securing a reduction of the assessment and the penalty. In any event there was nothing in this point, which should have warned the tribunal that “some egregious mistake” was being made in the appellant’s representation (para [37]-[38]).

With hindsight, I would need some persuasion that Mr Arifeen’s strategic thinking was as sophisticated as the judge felt able to infer. There is certainly no mention in his witness statement, nor in that of Mr Khan, of a concern to protect Mr Khan from cross-examination. Both proceed on the basis of his innocence. However, that is not the question. What matters is how his decision would have been perceived by the tribunal, which had no knowledge of the exchanges between Mr Arifeen and his client, and was in no position to assess Mr Khan’s likely vulnerability in the witness box.

Instead of taking a rather technical point about the title of Mr Arifeen’s pre-hearing submission, Mr Young might have drawn attention to the contents of the submission, which arguably showed limited understanding of how the issues would be addressed by the tribunal. The document (dated May 2000 - over two years before the hearing) correctly identified the subject-matter of the appeal as being the penalty notice, the assessment and the compulsory registration. Having set out various criticisms of Customs’ procedures and calculations, and after reference to several pages of tables and calculations, taking account of the additional 1999 books of tickets, the submission concluded that:

“… given the inconclusive evidence (Customs) for the numbers of ticket books used per year and the inadequate method used to derive the average ticket price, the case against him by (Customs) has not been proved.”

Standing by itself, this might be said to demonstrate a striking lack of appreciation of the two distinct elements of the case. First, on the appeal against registration and the VAT assessment, he was quite wrong to imply that “the case against him… (had to be) proved”; it was for Mr Khan to show that the assessment was wrong. Secondly, on the penalty appeal, the burden was indeed on Customs; but, given that his client was faced with a serious charge of dishonesty, one would have expected to find at least an express assertion of his innocence. In fairness to Mr`Arifeen, I note that Customs’ Statement of Case (at least in the version before us, dated 26^th January 2000) did not contain an express allegation of dishonesty, in spite of the requirement of the rules that it should include “full particulars of the alleged dishonesty”.

Although these points were not in fact relied on by Mr Young, they give me some concern - and might have given an alert tribunal some concern - about the quality of the advice being given to Mr Khan. In order to make an informed decision as to whether or not to give evidence, he needed to understand its potential significance to the different issues in the case. In relation to the figures, as the person running the business he was in the best position to explain the practical working of the cleaning ticket system, and to rebut Customs’ interpretation. If he failed on that, then his only hope in practice was to satisfy the tribunal that any shortfall was the result of inadequate procedures, rather than deliberate dishonesty. There may, as the judge inferred, have been good reasons for not exposing him to cross-examination, but he needed to be aware that on each of these issues, for different reasons, silence was a high risk strategy, if he genuinely believed in his case.

However, such concerns fall far short of a case under Article 6. As the Convention case-law recognises, the conduct of the case is essentially a matter between a party and his chosen representative, and the tribunal must respect that choice. The tribunal might have been alerted to the need for special care in explaining the issues to the parties, possibly to the extent of warning Mr Khan of the risks of not giving evidence. Unfortunately, we have no specific evidence as to whether that was done or not. I am certainly not prepared to assume without evidence that an experienced tribunal ignored its duty to ensure, as far as possible, that the playing field was level and that the parties understood the issues. I would add that any uncertainty about the burden of proof should have been resolved by Miss Shaw’s skeleton argument, which I assume was produced at or shortly before the hearing, and which contained a succinct and accurate summary of the position:

“The burden of proof is on the Appellant to show that his turnover did not exceed the threshold and that the assessment was not made to best judgment. The burden of proof is upon the Respondents to show that the Appellant dishonestly evaded tax.”

On that basis, although I acknowledge the need for special care bearing in mind that this is a criminal matter for Convention purposes, I conclude that this ground of appeal has not been made out.

Before Hart J, there was no dispute that the tribunal had correctly placed on Customs the burden of proving (under section 60(1)(a) and (b)) that the appellant had acted or omitted to act “for the purpose of evading VAT”, and that his conduct involved “dishonesty”. However, Mr Young submitted that the tribunal failed to appreciate that the burden was also on Customs to show both that the VAT threshold had been exceeded and, for the purposes of the penalty calculation, that the best of judgment assessment (by reference to which the penalty was calculated) was correct.

Hart J accepted that the burden lay on Customs to show that the VAT threshold had been exceeded. However, he regarded the point as academic. He said:

“That analysis may, in some other case, present the Tribunal with a difficulty where the probabilities on the evidence are seen as at all finely balanced. In the present case, however, where the appellant chose not to adduce evidence himself, the analysis is entirely academic. In practice Customs both assumed and discharged the burden of showing that the appellant had been trading above the threshold during the relevant period. The Tribunal did not approach this question simply by asking themselves whether the decision by Customs to register the appellant compulsorily had been made to Customs’ best judgment on the material before it at the time, but approached the issue as one of fact on the evidence before it.” (para [69])

He found more difficult the question whether the burden is also on Customs to show the amount of the VAT evaded, for the purposes of establishing the amount of the penalty; but again he regarded the point as academic:

“The tribunal had to consider whether the section 73(1) assessment had been made to the best judgment of Customs and correctly approached that task in the light of the guidance given by the authorities to which it was referred. It then proceeded, again in accordance with those authorities, to focus on whether the amount of the assessment should be sustained in the light of the material available before it. It therefore had directly to consider for itself what the amount of the assessment should be. Given the nature of the material before it, I find it difficult to see how the potentially differing burdens of proof on the questions of the amount of the assessment on the one hand and the question of the amount of VAT evaded on the other could as a practical matter produce different results.” (para [70])

In submissions to us, Mr Young relied on the presumption of innocence under Article 6(2) of the European Convention, which he rightly said was applicable to what, in Convention law, was to be treated as a criminal proceeding. The effect of that, he submitted, was that the burden was on Customs to prove both that Mr Khan’s taxable supplies exceeded the threshold, and that the assessment was correct. This was particularly important where the assessed amount was used, as here, to support an inference that a person must have been dishonest. Absurd consequences might otherwise follow:

“For instance, an Appellant charged with a civil penalty as a named officer under s61 would be unable to challenge the quantum of the assessment against his company without his company agreeing to enter an appeal against the assessment. It should be noted that s61 is often used where a company is insolvent and there is little or no possibility of appeal.”

Furthermore, in suggesting that the point was academic on the facts of this case, the judge had failed to take into account that there was more than one plausible approach to the assessments of the amount of tax, and that Mr Khan’s approach was supported by the original observations of the Customs officers.

Counsel for Customs conceded that the burden of proof lay on them, not only to show that the Appellant had exceeded the VAT registration threshold, but also to establish the quantum of tax evaded; but they submitted that, for the reasons given by the judge, they had discharged the burden in respect of both. They also agreed with Hart J (para 70) that –

“… in a case such as this, where the tribunal is also considering the quantum of the assessment to which the penalty is referable, the effect of that burden is likely to be academic.”

In spite of the common ground, which thus emerges from the judgment below and the submissions of the parties, I find some difficulty with this analysis. In view of the potential importance of this issue for other cases, I am reluctant to allow this judgment to rest simply on concessions, although I acknowledge that understandably the issues may not have been fully explored in argument. I will summarise my own understanding of the principles derived from the relevant statutory provisions and case-law.

There is no problem so far as concerns the appeal against the VAT assessment. The position on an appeal against a “best of judgment” assessment is well-established. The burden lies on the taxpayer to establish the correct amount of tax due:

"The element of guess-work and the almost unavoidable inaccuracy in a properly made best of judgment assessment, as the cases have established, do not serve to displace the validity of the assessments, which are prima facie right and remain right until the taxpayer shows that they are wrong and also shows positively what corrections should be made in order to make the assessments right or more nearly right." (Bi-Flex Caribbean Ltd v Board of Inland Revenue (1990) 63 TC 515, 522-3 PC per Lord Lowry).

That was confirmed by this court, after a detailed review of the authorities, in Customs and Excise Commissioners v Pegasus Birds Ltd [2004] STC 1509; [2004] EWCA Civ 1015. We also cautioned against allowing such an appeal routinely to become an investigation of the bona fides or rationality of the “best of judgment” assessment made by Customs:

“The tribunal should remember that its primary task is to find the correct amount of tax, so far as possible on the material properly available to it, the burden resting on the taxpayer. In all but very exceptional cases, that should be the focus of the hearing, and the Tribunal should not allow it to be diverted into an attack on the Commissioners' exercise of judgment at the time of the assessment.” (para 38(i))

It should be noted that this burden of proof does not change merely because allegations of fraud may be involved (see e.g. Brady v Group Lotus Car Companies plc [1987] STC 635, 642 per Mustill LJ).

The other rights of appeal under section 83 have not been given such detailed examination by the courts. However, the general principle, in my view, is that, where a statute gives a right of appeal against enforcement action taken by a public authority, the burden of establishing the grounds of appeal lies on the person appealing.

That principle is well-established in other statutory contexts, particularly where the relevant facts are peculiarly within the knowledge of the person appealing. For example, a local planning authority may serve an enforcement notice if it “appears” that there has been a breach of planning control. The owner can appeal against the notice on various grounds, which may, for example, include a denial of the acts complained of, or a claim that permission is not required. It has long been clear law that the burden of proof rests on the appellant. That was confirmed recently in this court in Hill v Secretary of State for Transport [2003] EWCA Civ 1904. Buxton LJ said:

“The appellant accepted that there is a longstanding decision in planning law, Nelsovil Ltd v Minister of Housing and Local Government [1962] 1 WLR 404, which has been generally regarded as placing the burden of proof on the appellant in an enforcement notice appeal. That view was developed in the leading judgment of Widgery J and pungently summarised by Slade J at page 409 of the report:

"It is a novel proposition to me that an appellant does not have to prove his case."

… The general principle that the appellant must prove his case seems to be unassailable…” (paras 43-44)

It is true that both Nelsovil and Hill were planning cases, but the statements in the former were expressed quite generally. There may of course be something in the nature of the appeal, or the statutory context, which requires a different approach. For example, under the jurisdiction of the Transport Tribunal, it was held that, whereas on appeal against refusal of a licence the burden lay on the appellant, that was reversed on an appeal against revocation of a licence (see Muck It Ltd v Secretary of State [2005] EWCA Civ 1124). That decision turned on the construction of the particular regulations and the European Directive on which they were based.

The ordinary presumption, therefore, is that it is for the appellant to prove his case. That approach seems to me to be the correct starting-point in relation to the other categories of appeals with which we are concerned under section 83, including the appeal against a civil penalty. The burden rests with the appellant except where the statute has expressly or impliedly provided otherwise. Thus, the burden of proof clearly rests on Customs to prove intention to evade VAT and dishonesty. In addition, in most cases proof of intention to evade is likely to depend partly on proof of the fact of evasion, and for that purpose Customs will need to satisfy at least the tribunal that the threshold has been exceeded. But, as to the precise calculation of the amount of tax due, in my view, the burden rests on the appellant for all purposes.

This view is reinforced by a number of considerations:

We were referred in this connection to Hindle v Customs and Excise Commissioners [2004] STC 412; [2003] EWHC 1665(Ch), a decision of Neuberger J given shortly after the tribunal decision in this case. That case also concerned a small trader who had failed to make VAT returns, and was subject to compulsory registration, followed by a “best of judgment” assessment and an assessment to a civil penalty, all of which were upheld on appeal to the tribunal. The appeal to the High Court failed on the facts (para [34]). However, Neuberger J had earlier made some observations on the statutory criteria. It had been argued on behalf of the trader that different approaches were required in considering, on the one hand whether the statutory threshold for registration was exceeded, and, on the other, whether the “best of judgment” assessment should be upheld. The judge agreed:

“[29] … As a matter of ordinary language, it seems clear to me that Section 73(1) involves two issues where they are both being fought, as here. The first is to determine whether the person concerned has failed to make any returns required under this Act, which in this case involves the Tribunal satisfying itself on the evidence before it whether or not the trader's turnover would or was reasonably expected to exceed £55,000. If so satisfied, the Tribunal would then go on to consider the assessment by reference to determining whether the Commissioners had indeed made the assessment to the best of their judgment.

[30] The point is reinforced when one considers a case where the Commissioners have simply registered a trader for VAT and he appeals against that decision, without there being any assessments against which he has appealed. In those circumstances, Miss Shaw, I think realistically, concedes that the Tribunal would make its own assessment, based on the evidence before it and the balance of probabilities, as to whether or not there has been a failure to make returns "as required under this Act", i.e. in a case such as this, whether, on the evidence before it, the Tribunal considers that the trader's turnover exceeds or is reasonably likely to exceed £55,000. It would be very odd if the proper approach to determining whether or not there has been a failure to make returns required under this Act depended on whether or not there happened to be a challenged assessment at the same time.

[31] Miss Shaw makes the point that, in a case such as this, if the argument which I favour is correct, then there is a slightly odd double requirement of the Tribunal: first, to decide on the evidence before it and the balance of probabilities whether, in this case, the turnover of the appellant exceeded or is likely to exceed £55,000; secondly, on a more familiar reviewing Wednesbury type approach, whether the Commissioners' assessment was to the best of their judgment.

[32] I think there is something in that point, but I do not find it particularly powerful. In each case the tribunal is being asked to look at different things. The first is whether the turnover exceeds, or is likely to exceed, a particular figure on the evidence before it. The second is whether, on the evidence before them, the actual figure for turnover, which resulted in the VAT assessment of the Commissioners, was one arrived at to the best of their judgment. If slightly different questions involve slightly different approaches to the burden of proof or other matters, it is not that surprising. Certainly there is nothing so surprising in the result that it justifies what seems to be to be a re-wording of Section 73(1), which is what the Commissioners' argument involves.”

I make two comments on that passage. First, it was concerned with a different issue from the present: that is, the basis of calculation for the appeal against compulsory registration. No argument appears to have been addressed to the question of calculation for the purposes of the penalty assessment. Secondly, I think the judge was presented with a false dichotomy. As has now, I hope, been made clear by this court in Pegasus Birds, a “Wednesbury type approach” to a VAT assessment is the exception not the norm. In an ordinary case there is no reason for different approaches to the two forms of appeal. Whenever an appeal raises an issue of the correct calculation of turnover for the purposes of VAT, the primary task of the tribunal is, as we said in Pegasus, “to find the correct amount of tax, so far as possible on the material properly available to it”, and, in the absence of any provision to the contrary, the burden of proof lies on the appellant. (In fairness to Miss Shaw, I note as already mentioned that she had summarised the position accurately in her skeleton argument before the tribunal in the present case, a few months before Hindle.)

If this is the correct approach, I agree with the judge that the tribunal’s decision is unimpeachable. There was ample material to support a prima facie case that there had been evasion of tax, and that this had been intentional and dishonest. In the absence of evidence from Mr Khan to the contrary, the tribunal was clearly entitled to reach its conclusion. As to the precise amount of tax evaded, I do not see how it was possible in the absence of better records for Customs to do more than they did. Whether or not this would have been sufficient if the burden of proof had truly been on them, on the view I take of the law it was enough to support the tribunal’s conclusion. For these reasons I would dismiss this ground of appeal.

Mr Young had a separate point on the standard of proof, the practical effect of which was not entirely clear to me, and which I can deal with shortly. As I understood him, he accepted that the correct standard was the civil standard of proof “on the balance of probabilities”, rather than the criminal standard of proof “beyond reasonable doubt”. He submitted, however, that the tribunal had failed to direct itself that, in applying the civil standard to a charge of dishonesty, a high degree of probability was required.

It has long been accepted that, even where the civil standard of proof is applicable, special care is needed before finding someone guilty of fraud or dishonesty. This concept has been expressed in different ways at different times in the authorities. As Hart J correctly observed, the most recent statement of high authority is that of Lord Nicholls in Re H [1996] AC 563 at 586-587. He made clear that in applying the civil standard of proof account must be taken of the seriousness of the allegation:

“… When assessing the probabilities the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability. Fraud is usually less likely than negligence…

Although the result is much the same, this does not mean that where a serious allegation is in issue the standard of proof required is higher. It means only that the inherent improbability of an event is itself a matter to be taken into account when weighing the probabilities and deciding whether, on balance, the event occurred. The more improbable the event, the stronger must be the evidence that it did occur before, on the balance of probability, its occurrence will be established…” (p 586E-H).

Mr Young resisted the application of H on the intriguing ground that “it could never be said that it was an improbable event that a cash business would have undeclared sales”. I am afraid I cannot accept that that there is one law for cash businesses, and another for everyone else. In any event, such subtle distinctions are academic in this case. Although the tribunal did not refer in terms to the authorities, they clearly did not regard this as a finely balanced case. They found that Mr Khan’s actions were “obviously dishonest” and that he must have been aware of that. However the precise test is formulated, I can see no error of law in that conclusion.

Before us, the irrationality argument came down to one point, which Hart J described as follows:

“This was that (the tribunal’s) reduction of the assessment to take account of the average price of £5.99 indicated by Mr Arifeen’s analysis proceeded on a methodologically unsound basis. That £5.99 figure had been based on a total of 8,500 tickets whereas (or so the submission assumed) the £8.23 and the £7.70 averages had each been based on books of 500 tickets. To find the true average one should divide the total turnover by the total number of tickets. If one did that then the average price was closer to £6.16 than the £6.84 arrived at by the Tribunal. The Tribunal had made the mistake of averaging the averages without taking account of the number of tickets involved in each calculation.”

Hart J accepted the force of this point as a matter of strict logic, but did not see it as a sufficient reason to interfere with the decision. In the absence of detailed records, the tribunal was merely seeking to make some allowance for the possibility that the two books used by Customs were “out of kilter with the norm” for the period in question:

“Using the £5.99 figure to take account of that possibility was not wholly irrational. For want of anything more solid, it was one way of acknowledging the possibly untypical nature of the two random samples. To have accorded it the weight given to it by Mr Young’s submission would, however, have tended towards the irrational in light of the Tribunal’s other findings, since it would have treated the 1999 figures as a whole as being typical of those likely to have applied for the period in question. The tribunal plainly did not think that they were.”

I agree with the judge. In the absence of proper records, and in the absence of direct evidence from Mr Khan, the tribunal had to do its best, in a rough and ready way, to take account of the limited material available. The result is not open to challenge on legal grounds.

For these reasons, I would dismiss the appeal.