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Emblin & Ors, R (On the Application Of) v Revenue And Customs

[2018] EWHC 626 (Admin)

Neutral Citation Number: [2018] EWHC 626 (Admin)
Case No. CO/3117/2017
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
THE ADMINISTRATIVE COURT

Royal Courts of Justice

Date: Friday, 23 March 2018

Before:

MRS JUSTICE WHIPPLE

B E T W E E N :

THE QUEEN

ON THE APPLICATION OF

EMBLIN Claimants

- and -

HM REVENUE AND CUSTOMS Defendant

MR J RAMSDEN QC and MR R DUNLOP (instructed by Reynolds Porter Chamberlain) appeared on behalf of the Claimants.

MS C MICHALOS and MR R VALLAT QC (instructed by HMRC) appeared on behalf of the Defendant.

J U D G M E N T ON THE CLAIMANT’S APPLICATION TO AMEND AND COSTS

MRS JUSTICE WHIPPLE:

1.

I propose giving judgment on the application for amendment.

Background

2.

During the course of the hearing, I asked Ms Michalos whether HMRC published or held any guidance about how whistle blowers were to be treated by HMRC. The phrase "whistle blower" plainly covers a range of situations. I thought that Mr Hunt's actions could fairly be said to fall within that range.

3.

In response, Ms Michalos produced an "aide-memoire" for officers dealing with human intelligence, known within HMRC as "HUMINT". I shall call this "the guidance". While noting its status as an internal document, which I am told and accept, it is intended to guide non-specialist HMRC staff as to what action to take if they are in receipt of any information, however obtained, from a person which information alleges non-compliance or a criminal offence.

4.

When the guidance was produced, Mr Ramsden QC, counsel for the Claimants, asked for time to consider it. I directed HMRC to file further evidence to explain whether Mr Hunt was subject to this guidance and if not, why not, and then gave the Claimants time to make any further application they wished to.

5.

Since the conclusion of the hearing and in line with my directions, HMRC have filed further evidence in the form of a statement from an officer of HMRC dated 23 February 2018. That officer, who we have referred to as Officer F, says that Mr Hunt was not subject to this guidance. He then explains why, even if Mr Hunt was subject to the guidance, the guidance was not on the facts breached.

6.

In response, by application dated 28 February 2018, the Claimants applied to amend their grounds to advance a new ground of challenge. They rely on further submissions of the same date in support of that amendment.

7.

HMRC responded to that application by submissions dated 16 March 2018 in which they resisted permission being granted to amend. A further witness statement from Officer F was served, that statement dated 15 March 2018, in which Officer F answered some of the points made by the Claimants in their application to amend.

8.

I have today handed down judgment in the judicial review which forms the backdrop to the Claimants’ application. I shall refer to this as "the main judgment". Subject to the present application, I have dismissed the Claimants' application for judicial review.

The Claimants' application to amend

9.

The claimants' application to amend is on the basis that the guidance does apply to informants like Mr Hunt and that HMRC departed from their own policy guidance or practice without proportionate justification for doing so. They say that Mr Hunt was HUMINT and that thus, on its face, the guidance applies.

10.

In written and oral submissions, they focus on the last page of the guidance, which sets out some dos and don'ts. Amongst those, it says this:

"Don't... ask them [the HUMINT] to find out further information."

11.

The Claimants argue that HMRC acted in breach of this guidance when Mr Hunt was asked to provide information, for example, in the letter dated 8 July 2015. They also place reliance on the meeting of 30 June 2015 as another example of when Mr Hunt was asked to provide information.

12.

The Claimants rely on Nadarajah Abdi v Secretary of State for the Home Department [2005] EWCA Civ 1363 at para.68 for the principle that public authorities such as HMRC should ordinarily act in accordance with their stated policies and practices, as a matter of good administration.

HMRC's grounds of resistance

13.

HMRC resists this application to amend. In written submissions, HMRC made three main points in resistance to the application:

(1)

that the application is made very late, so the principles set out in Quah Su-Ling v Goldman Sachs International [2015] EWHC 759 at 38 prevail and there is a very heavy burden on the claimants to demonstrate that the amendment should be permitted.

(2)

that I should in any event refuse this application to amend because I should be satisfied that the proposed amendment has no real prospects of success: see Quah at 36 to 37.

(3)

Those rules and that authority apply even though this is a public law matter. For that proposition, see San Vicente v Secretary of State for Communities and Local Government [2014] 1 WLR 966 at para.58.

14.

Further, HMRC submits that permission for judicial review should be refused even if I were willing to grant the adjournment. Ms Michalos has expanded those propositions before me orally today.

Discussion

15.

I take HMRC’s three arguments in turn. On the lateness argument, (1), the Claimants make much of the fact that HMRC produced the guidance during the course of the hearing and then subsequent to the hearing produced two witness statements explaining the guidance and its application. They say that the application to amend was made at the first possible moment bearing in mind that they were not in possession of the guidance until the hearing itself.

16.

It is in this context important to recall that the guidance was produced at the hearing because I asked to see it. Ms Michalos confirmed that the Claimants had not asked HMRC to disclose any guidance or policy statements relating to the way that HMRC treated whistle blowers in advance of the hearing; that was why those documents had not been disclosed before I asked for them.

17.

Mr Ramsden in submissions today has argued that HMRC should have disclosed the policy documents including the guidance at an earlier stage and that this would have been consistent with HMRC's duty of candour.

18.

I cannot agree with that broad proposition. I have already recorded in the main judgment that the case as originally presented to HMRC, and indeed to this court, had a number of strands, many of which have in fact fallen away. At its heart, the case was brought by the Claimants alleging inducement of Mr Hunt to breach his contractual duty of confidentiality.

19.

None of the strands as they were originally alleged or as they developed, as I understand them, alleged a failure of internal governance or indeed a failure to follow internal policies. That was so even though there was some evidence in an email dated 3 October 2016, which was disclosed prior to the hearing, about potential concerns within HMRC as to how Mr Hunt had been handled and whether he was a covert source known as a "CHIS" or not.

20.

It seems to me that questions about internal policy could have been asked at an earlier stage. I am thus not persuaded that the fault for late disclosure lies on HMRC. It seems to me that this material, if it was thought to be relevant, could have been obtained earlier than it was, which means that the point which the Claimants now seek to rely on could have been included in the case at an earlier point.

21.

I am therefore satisfied that the ordinary rule applies and that I should approach this application on the basis that there is a very heavy burden on the Claimants to demonstrate that this amendment should be permitted at this late stage.

22.

I turn then to (2), which is whether there is a realistic prospect of success for the Claimants in this new line of argument (it was not suggested that the point made in (3) was incorrect, and I accept that the case law on amendments applies even in public law matters). In summary, I conclude that the new argument does not have a reasonable prospect of success. I accept the various points made by HMRC, in particular in paras 9 to 11 of HMRC’s written submissions.

23.

Assuming for present purposes without deciding the point that the guidance was at least capable of applying to Mr Hunt, who was a HUMINT source, albeit a willing one, the guidance suggests that HMRC should not ask such a person to "find out further information". What does that mean? The interpretation and construction of those words would ultimately, if this case was to proceed on the amended ground, be a matter for the court to determine.

24.

I am as well placed to take a view on that issue of construction as would be any judge hearing this case substantively in due course. I have considered the words carefully and I have considered the rival submissions as to what they might mean. I am satisfied that there really is only one possible meaning of those words, which is the ordinary meaning to take from them. These words seek to prevent HMRC officers asking human intelligence sources to "find out" "further" information. In other words, such sources should not be asked to go looking for information which is not already in their possession.

25.

I return then to the main judgment. I have already concluded on the facts that HMRC did nothing more than in its dealings with Mr Hunt than to accept information which was offered by Mr Hunt, which information was already in Mr Hunt's possession. On the facts, therefore, HMRC did not ask Mr Hunt to find out any further information and I conclude that the policy did not even arguably apply to what occurred.

26.

That seems to me to be determinative of the present application against the Claimants. The facts as I have found them mean that the position advised against in the guidance was simply not reached because HMRC did not ask for Mr Hunt for “further” information. HMRC just accepted the information which was already in Mr Hunt's possession.

27.

Thus regardless of lateness, I would conclude that this is an application which must be refused. If, however, I was wrong in that conclusion and if it was the case that the policy was capable arguably of extending to the facts as I have found them, I would then be faced with having to consider the justice of the case overall consistently with Quah and noting that the Claimants would in that circumstance be under a very heavy burden to persuade me that the amendment should be permitted.

28.

I would still not be persuaded that it would be appropriate to allow the amendment were that to be the case which faced me. This amendment is brought, quite simply, too late. The Claimants have had their day in court and I conclude that the interests of finality of litigation must prevail here and would lead to the justice of the case requiring me to refuse this application.

29.

For those reasons, I dismiss the application to amend.

MRS JUSTICE WHIPPLE: Yes, Ms Michalos.

MS MICHALOS: Your Ladyship, that leaves the question of costs----

MRS JUSTICE WHIPPLE: Yes.

MS MICHALOS: -- both in respect of the application to amend and the main action.

MRS JUSTICE WHIPPLE: Yes.

MS MICHALOS: The defendant applies for an order of costs in its favour. As regards the application to amend, that has been dismissed. As regards the main action, the defendant was successful.

It is accepted that three documents were returned; the two opinions and the instructions. The latter one was raised late by the claimant. However, that was done without admission of liability and the whole case was inducement, which failed.

On behalf of the defendant, I ask for a costs order for costs in favour of the defendant in respect of the whole of the claim.

MRS JUSTICE WHIPPLE: Yes, Mr Ramsden.

MR RAMSDEN: My Lady, in relation to the application to amend, there is no contest that costs follow the event.

In relation to the main claim and your judgment, we do say that an order apportioning or discounting costs is justified on the premise that throughout the pre-action protocol process and at the stage HMRC served its summary grounds of resistance, it disputed any obligation to return any documents to my clients. It was only the detailed grounds of resistance - for my Lady's note at bundle 1, tab 7, p.240 - that for the first time HMRC conceded that it must return three documents.

They are not just three documents. They are three critical documents. They are the detailed note of advice given in confidence by leading counsel Michael Sherry and by leading Jonathan Gilman and the associated instructions for those conferences.

HMRC not only conceded in its detailed grounds of resistance that it should return them, but that it should not in any way benefit from the work product it derived from them, so precisely the relief we had asked for.

My Lady, those were right at the heart of our complaint. The disclosure to HMRC of those documents was a real concern and a real source of damage to my clients. Although they were three documents in a panoply of documents, they were significant.

We don't overstate their significance in terms of costs, but we do say that the court ought to reflect that very late concession by HMRC in disallowing a portion of its costs. Again, without overstating the significance of those documents or their ambit, we say a fair discount on those costs should be between 30 and 40 per cent.

My Lady, subject to that issue, there is one further one my Lady might reflect on in the general exercise of her discretion on costs and the extent to which that discount is reasonable. There were a large number of issues raised by HMRC, including, for example, alternative remedies, no confidence in inequity, on which they were not successful. Now, whilst they were successful on the decisive issue, the court was nevertheless constrained to address those issues, which my Lady did in her judgment.

We say their failure to succeed on a number of the points they raise makes apportionment fair in all the circumstances, but I place principal reliance on the concession.

MRS JUSTICE WHIPPLE: Thank you very much indeed.

Do you want to say anything, Ms Michalos?

MS MICHALOS: In respect of the point about concession, it is emphasised in the detailed grounds, which is p.240. I don't ask your Ladyship to turn it up. But the introduction to that section begins, "Without admission of liability and still maintaining that it's confidence law for the reasons set out below".

In the draft judgment, your Ladyship did note in respect of the legal professional privilege argument that the letter was seeking to sell the scheme and it was resisted that the return of -- the legal professional privilege argument resisted initially on the basis that it's common in these kind of schemes for legal advice to be disclosed.

But the key point is that it was an inducement case. Your Ladyship is familiar with the principles that public bodies shouldn't be deterred from changing their minds and revisiting decisions by penal costs actions. The claimant ultimately pursued an unsuccessful claim.

As regards the second point that the claimant succeeded in -- well, that HMRC failed on some of the points, the substantive submissions, as your Ladyship will recall, were very much directed at the inducement and looking at documents that demonstrated that Mr Hunt had acted voluntarily. That was the substantive time that the court was taken.

Insofar as the court is minded to engage in any apportionment, it would be submitted that an appropriate amount would be 10 per cent in favour of the claimant because the substantive matters, including legal professional privilege, were ones, in terms of court time, upon which HMRC succeeded.

MRS JUSTICE WHIPPLE: Thank you very much.

Ruling on Costs

1.

I have before me an application by HMRC for their costs. Let me deal first of all with the costs of the application to amend. Mr Ramsden for the claimants does not resist an order for costs in relation to that application. I agree with him that there can be no proper resistance to the application. The costs of the application shall be paid by the claimants to HMRC, to be quantified by detailed assessment if they cannot be agreed.

2.

I turn then to the costs of the main action. Ms Michalos for HMRC seeks her costs and Mr Ramsden for the Claimants resists, advancing two arguments, one relating to the LPP situation and the other relating to a number of issues that were raised by HMRC which ended up not finding favour with this court.

3.

So far as that goes, it is plainly right for the Claimants in principle to meet HMRC's costs because HMRC has been the successful party on this judicial review. However, I am going to discount the recovery by 10 per cent and order the claimants to pay 90 per cent of HMRC's costs. I do so in relation to the arguments on LPP.

4.

HMRC was in possession of documents which, in my judgment, were plainly covered by legal professional privilege. HMRC declined to return those documents or even to acknowledge their special status until December of last year when those documents, being two counsel's opinions and one set of instructions, were belatedly returned to the claimants.

5.

In relation to that, it seems to me appropriate that there should be a modest discounting of HMRC's costs. I make no larger discount because although I do accept that in the end there were some points raised by HMRC which did not find favour with this court, on the other hand, both parties to this application for judicial review ran a number of points which ended up not being important when it came to the substantive hearing.

6.

In any event, I would think it inappropriate to penalise a defendant to a judicial review for taking points in its defence that for one reason or another do not find favour with the court, when those points are really part and parcel of the litigation in which the defendant has succeeded.

Thank you.

MR RAMSDEN: My Lady, may I raise briefly one further matter----

MRS JUSTICE WHIPPLE: Yes.

MR RAMSDEN: -- which is at its heart administrative? Although there is one claimant in this case, there are a large number of people who I think I can quite properly describe as stakeholders in it, if you like, because of the information.

MRS JUSTICE WHIPPLE: Is that the other claimants or----

MR RAMSDEN: Indeed, but those whose information was affected by what happened.

MRS JUSTICE WHIPPLE: Yes.

MR RAMSDEN: I have no instructions in relation to any applications to apply for permission to appeal, but as my Lady will appreciate, there are two different time limits which now confront us, one of seven days in relation to the application for permission and the conventional time limit from a final judgment of twenty-one days.

May I ask my Lady to grant us an extension so that they run together? Given the impending Easter break, I know a number of people are away. Sadly not me, but others who are perhaps much more important to the decision making process. Could I ask that those two time limits expire on twenty-eight days from today? That will give my principal client and all those interested in this adequate time to make a considered decision whether they would wish to challenge my Lady's decisions.

MRS JUSTICE WHIPPLE: Ms Michalos, you don't have any----

MS MICHALOS: No observation.

MRS JUSTICE WHIPPLE: The only thing I would say to you, Mr Ramsden, I think how it goes -- I think you're still meant to ask permission of me, aren't you? So do you want to ask me?

MR RAMSDEN: Yes, I think----

MRS JUSTICE WHIPPLE: So we can go through that and then it's open to you to do whatever you want to do.

MR RAMSDEN: Indeed. My Lady, I ask by simply repeating the substance of what I have been submitting to my Lady without regurgitating that once again. Yes, it would be helpful if my Lady gave that decision and then our time limits apply.

MRS JUSTICE WHIPPLE: Well, in response to your application for permission, the two sorts of permission to appeal my judgment and to appeal my conclusion on the amendment, I refuse permission to appeal. I will complete the relevant form for you.

MR RAMSDEN: Thank you.

MRS JUSTICE WHIPPLE: I'm certainly willing to extend the time for any application for either sort of permission to twenty-eight days from today.

MR RAMSDEN: Thank you very much.

MRS JUSTICE WHIPPLE: I'll do that. Mr Ramsden, would you be kind enough to draw up an order for me?

MR RAMSDEN: I will. Of course.

MRS JUSTICE WHIPPLE: Well, in fact it will be Mr Dunlop.

MR RAMSDEN: We will.

MRS JUSTICE WHIPPLE: He knows what's coming.

MR RAMSDEN: I think he's busier than I am today, so I will probably do it.

MRS JUSTICE WHIPPLE: I would be very grateful if you would. Get it to the court staff and it will come to me and I'll sign it as soon as it arrives.

MR RAMSDEN: Thank you very much.

MRS JUSTICE WHIPPLE: I am extremely grateful to all counsel for their help and for everybody who has behind the scenes helped as well.

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This transcript has been approved by the Judge.

Emblin & Ors, R (On the Application Of) v Revenue And Customs

[2018] EWHC 626 (Admin)

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