Adrian Charles Hyde & Anor v Sukhwinder Todd

This is my reserved judgment on an appeal against an order of Chief Insolvency and Companies Court Judge Briggs (“the Judge”) made on 24^th November 2022. By that order (“the Order”) the Judge dismissed the application of the Appellants/Applicants for summary judgment on their claim against the Respondent pursuant to Section 214 of the Insolvency Act 1986 (“Section 214”). The Judge also awarded the Respondent his costs of the application, and directed that the claim be listed for a CCMC.

The Order was made pursuant to and for the reasons set out in an unreserved judgment (“the Judgment”) delivered by the Judge at the conclusion of the hearing of the application for summary judgment (“the Application”).

The Appellants/Applicants appeal against the Order pursuant to a permission to appeal which I granted, following an oral hearing of the permission application, by an order made on 18^th January 2024.

On the hearing of the appeal (“the Appeal”) the Appellants/Applicants were represented by Andrew Mace, counsel. The Respondent was represented by Maxwell Myers, also counsel. Both counsel also appeared at the hearing of the Application before the Judge. I am grateful to both counsel for their assistance at the hearing of the Appeal, by their written and oral submissions.

All references to Paragraphs in this judgment are, unless otherwise indicated, references to the paragraphs of the Judgment. Italics have been added to quotations.

The Appellants/Applicants, to whom I will refer as “the Appellants” in the remainder of this judgment, are the joint liquidators of a company called Radarbeam Limited (“the Company”).

The Respondent was the sole director of the Company, from its original incorporation. The Respondent and his wife, Mrs Hardip Todd, were the owners of the shares in the Company.

The Company was incorporated on 23^rd May 2002. The Company went into administration on 7^th April 2014, and was subsequently placed into creditors’ voluntary liquidation on 4^th December 2014. The Appellants were appointed as liquidators of the Company on the same date.

I believe that the only known creditor of the Company in the liquidation is His Majesty’s Revenue & Customs (“the Revenue”), which submitted a claim in the liquidation in the sum of £2,119,485.

The principal evidence of the Appellants in support of the claim under Section 214 (“the Section 214 Claim”) is a lengthy first witness statement of Mr Hyde, the First Appellant. This witness statement, which has been amended, is dated 9^th February 2021. Mr Mace confirmed to me, at the hearing of the Appeal, that the pleading of the Section 214 Claim is effectively to be found in this witness statement.

According to this witness statement the Company commenced trading in May 2002 and was involved in the sale of used cars until 19^th February 2003, when it notified the Revenue that the Company’s business was then to operate as a retail shop supplying mobile phones and accessories to the public. The Company was largely exporting to Europe and Dubai.

The Company appears to have traded successfully until June 2006 when the Revenue denied the Company’s entitlement to deduct input tax in relation to the Company’s VAT returns. The denial of input tax related to transactions carried out during the accounting periods 04/06, 05/06 and 06/06. The total sum denied by way of input tax was £4,963,525. The relevant VAT returns for these three accounting periods (“the Denied Returns”) were formally rejected by a notification by the Revenue issued on 16^th October 2007.

The Revenue’s ground for denying the Company’s input tax was that the input tax had been incurred in transactions connected with the fraudulent evasion of VAT, and that the Company knew or should have known of the connection. I understand that the type of fraud alleged by the Revenue is known as MTIC fraud.

In addition to this the Company submitted a VAT return for the accounting period 03/06 on 31^st March 2006, with a claim for repayment of input tax (“the March Return”). In relation to the March Return the Company was repaid the claimed input tax on 25^th May 2006. Subsequently however the Revenue notified the Company of its decision to deny this input tax. The notifications were given on 3^rd November 2008 and 31^st March 2009. Notifications of assessment were also issued on these two dates for the respective amounts denied, which were £937,125 and £593,075, amounting to a total sum of £1,530,200 (“the Demanded Sum”). The Revenue’s ground for these assessments was the same as its ground for rejecting the Denied Returns; namely that the relevant input tax had been incurred in transactions connected with the fraudulent evasion of VAT and that the Company knew or should have known of the connection.

The Company appealed against the decision of the Revenue to deny the deduction of input tax in relation to the Denied Returns. The appeal was made to the First-tier Tribunal Tax Chamber (“the FTT”) and was heard over a number of days in November 2009 and July 2010. The FTT handed down their decision (“the FTT Decision”) on 10^th September 2010. The FTT Decision is lengthy and detailed. For present purposes four matters are of particular relevance:

The outcome of the Company’s appeal to the FTT against the rejection of the Denied Returns is best summarised by quoting the final two paragraphs of the FTT Decision:

The Company applied to the FTT for permission to appeal against the FTT Decision. For reasons which it is not necessary to go into, the FTT did not issue its decision on this application until 13^th January 2011, when it refused permission to appeal. The Company then applied to the Upper Tribunal Tax and Chancery Chamber for an extension of time within which to make its application for permission to appeal, and for a stay of the application itself, if an extension of time was granted. By a decision released on 7^th March 2012, Upper Tribunal Judge Wallace granted the extension of time sought and stayed determination of the application for permission to appeal. For present purposes what is said by the Appellants to be most relevant in this decision is that Mr Ahmed, who appeared for the Company on the hearing of these applications, stated that there was no challenge to the FTT’s finding of fact that the Company had actual knowledge of the fraud. This statement is recorded in paragraph 13 of the decision of Judge Wallace.

The substantive application for permission to appeal came before Upper Tribunal Judge Bishopp for decision. By a decision dated 28^th June 2013 Judge Bishopp determined, on the papers, that there were no arguable grounds of appeal, and refused permission to appeal. The Company was entitled to renew the application for permission to appeal at an oral hearing. The Company exercised this right and also made an application to amend its grounds of appeal, so as to replace those grounds of appeal with what were described as new detailed grounds of appeal. The renewed application for permission to appeal was heard by Upper Tribunal Judge Herrington. By a decision dated 19^th May 2014 (released to the parties on 30^th May 2014) Judge Herrington refused permission to amend the grounds of appeal. This left the Company’s existing grounds of appeal, which the Company had decided not to pursue. In the result, and in the absence of any grounds of appeal which the Company could pursue, Judge Herrington refused permission to appeal.

The decision of Judge Herrington brought the proceedings in the FTT and the Upper Tribunal to an end. By the date on which Judge Herrington’s decision was released (30^th May 2015) the Company had already entered administration, on 7^th April 2014. As I have said, this was followed by a creditors’ voluntary liquidation on 4^th December 2014.

I will use the expression “the Tribunal Proceedings” to refer to the proceedings in the FTT and the Upper Tribunal which I have just summarised.

In an Officer’s Questionnaire completed by the Respondent at the request of the Appellants, which is dated 2^nd June 2015, the Respondent stated that the Company had not traded since 2007. In a Statement of Affairs in the administration of the Company, which was signed by the Respondent on 6^th May 2014 (“the Statement of Affairs”), the Respondent stated that the Company had estimated total assets available for preferential creditors in the sum of £4,975,000 (accompanied by a manuscript note which reads “Un Certain”). The Respondent also stated that unsecured preferential claims against the Company amounted to £937,125 plus £1,961,992.

The Appellant’s case is that the Company was insolvent throughout the period from 2006 to 2014, when the Company went into liquidation. So far as the position in 2006 is concerned, Mr Hyde says this, at paragraph 34 of his first witness statement:

In their proof of debt in the liquidation the Revenue, as I have said, claimed the sum of £2,119,485. As I understand the position, this sum comprised (i) the Demanded Sum, (ii) interest and penalties, and (iii) costs awarded to the Revenue in the Tribunal Proceedings. By way of reminder, the Demanded Sum comprised the two sums which were the subject of the notifications of assessment which were issued by the Revenue to the Company on 3^rd November 2008 and 31^st March 2009. The two sums were, respectively, £937,125 and £593,075, amounting to a total sum of £1,530,200.

As at 3^rd December 2019 the Company had received the total sum of £339,385.27 into the Company’s estate in the liquidation.

The Appellants’ case, as I understand it, is that the Company was already insolvent in 2006 because it made a claim for input tax in respect of the 03 06 accounting period on 31^st March 2006, which was paid by the Revenue on 25^th May 2006. This created a debt to the Revenue, in the form of the Demanded Sum (£1,530,200), because the Company had no right to claim this input tax. The Company had no means of paying the Demanded Sum. Repayment of the Demanded Sum was duly demanded by the Revenue by the notices which it served on the Company in 2008 and 2009.

Before coming to the Section 214 Claim, it is necessary to set out the relevant parts of Section 214. The key subsections are (1) to (5), which provide as follows:

As I have noted, the effective pleading of the Section 214 Claim is to be found in the first witness statement of Mr Hyde, as amended. While this renders it rather difficult to pin down the elements of the Section 214 Claim, my understanding of the way in which the Appellants put their case, based on my reading of Mr Hyde’s first witness statement, is as follows:

In seeking summary judgment against the Respondent, the Appellants case was and remains that the test for summary judgment in CPR 24.3 can be satisfied in the present case on the basis of the documents in the case. The case for summary judgment was set out and explained by Mr Hyde in his fourth witness statement, dated 12^th October 2021.

The principal document relied upon by the Appellants is the FTT Decision. As I understand the Appellants’ case in the Application, it can be summarised as follows:

The amount sought, in the Application, by way of contribution pursuant to Section 214 was £1,880,292.50. The discrepancy between this figure and the figure of £2,119,485 is explained by Mr Hyde in his fourth witness statement, at paragraphs 38-43. The Appellants did manage to recover the sum of £338,070.70 on 13^th March 2015, pursuant to a global settlement with First Curacao International Bank, which was closed in or around September 2006, during an Anglo-Dutch investigation into carousel fraud. Following this recovery an interim dividend of £104,000 was paid to the Revenue. In addition to this, the sum of £219,693.50 was paid to the Appellants on account of their fees. For the reasons explained by Mr Hyde, the Appellants have accepted that a part of these fees, in the sum of £135,192.50, should be credited to the Section 214 Claim as money which would otherwise have been made available to the liquidation estate of the Company. Once the figures of £104,000 and £135,192.50 are credited to the Section 214 Claim, the amount sought by way of contribution from the Respondent drops to £1,880,292.50.

So far as the evidence in the Application was concerned the Application was formally supported by the fourth witness statement of Mr Hyde, dated 12^th October 2021. As I understand the position the evidence before the Judge also included the various other witness statements filed in the Section 214 Claim. This evidence comprised the first witness statement of Mr Hyde, which I have already mentioned, which (in its amended form) was dated 9^th February 2021. The Respondent filed a first witness statement of his own, in response to the Section 214 Claim, which replied to various parts of Mr Hyde’s first witness statement. This first witness statement of the Respondent is undated, but I believe that it was filed on 18^th March 2021.

There were also second and third witness statements of Mr Hyde, dated respectively 28^th January 2021 and 22^nd April 2021. In the third witness statement Mr Hyde responded to the Respondent’s first witness statement.

The Respondent filed two further witness statements. The first of these further witness statements was a witness statement of Mr Ahmed, who acted for the Company in relation to the proceedings in the FTT and the Upper Tribunal. Mr Ahmed is a director of CTM Tax Litigation (“CTM”) and described himself, in his witness statement, as a tax litigator. The second of these further witness statements was a second witness statement of the Respondent dated 14^th March 2022, which was expressed to be made specifically in opposition to the Application.

The evidence was completed by a fifth witness statement of Mr Hyde, dated 28^th March 2022, made in response to the witness statement of Mr Ahmed and the second witness statement of the Respondent.

In his first witness statement, which was made in response to the Section 214 Claim and to Mr Hyde’s first witness statement, the Respondent replies to various paragraphs in Mr Hyde’s first witness statement. The principal points made by the Respondent are that he actively pursued the Tribunal Proceedings, including the payment of substantial sums to CTM for its services and, subsequently, to Smith & Williamson. The Respondent asserts that it was in the best interests of the Company to pursue the Tribunal Proceedings. The Respondent says that he received advice from CTM that the appeal to the FTT had good prospects of success. The Respondent says that he invested his own money in an attempt to recover the money which he says was due from the Revenue pursuant to the Denied Returns, and did everything possible, including re-mortgaging his own property, to try to keep the Company afloat.

In the final part of his first witness statement, which is headed “Points in opposition to the Liquidator’s case”, the Respondent makes a series of points in support of his position that the Appellants had failed to demonstrate either that the Company was insolvent at a given point in time or that, as a result of trading continuing after that point, the deficit to creditors increased.

After making reference to the case of Brooks v Armstrong [2016] EWHC 2893 (Ch), the Respondent states his case on the question of whether he made the position of the Company worse, in the following terms, at paragraphs 33-39 of his first witness statement:

This evidence is answered by Mr Hyde in his third witness statement. For present purposes it is not necessary to provide a detailed summary of this evidence. The relevant point is that Mr Hyde gives evidence disputing the bulk of what is said by the Respondent in his first witness statement, for the reasons set out in Mr Hyde’s third witness statement. Mr Hyde summarises his evidence in response in the following terms, at paragraphs 28 and 29 of his third witness statement:

In his fourth witness statement made specifically in support of the Application, Mr Hyde goes through the arguments raised by the Respondent in a systematic fashion, giving his reasons for disputing each argument. Mr Hyde summarises what he says in response to the case advanced by the Respondent in paragraphs 20-28 of his fourth witness statement:

There is then Mr Ahmed’s witness statement. In this witness statement, which is short, Mr Ahmed maintains that the Company did receive advice that there was a realistic prospect of success in the Tribunal Proceedings, in which he was involved as a director of CTM.

There is also the Respondent’s second witness statement, made specifically in response to the Application. This witness statement is also short. The Respondent summarises the position, on his case, in paragraphs 4-8 of this witness statement:

Mr Hyde responds to the witness statement of Mr Ahmed and the second witness statement of the Respondent in his fifth witness statement. Mr Hyde disputes the evidence of the Respondent and Mr Liban, for the reasons set out in the fifth witness statement. Mr Hyde summarises the position, on the Appellants’ case, in paragraph 29 of his fifth witness statement:

The Judge began the Judgment with a summary of the principles of law relevant to an application for summary judgment. The Judge then proceeded to set out a summary of the history of the Company’s trading and the appeal to the FTT. The Judge summarised the Appellants’ case on the Application in the following terms, at Paragraph 7:

The Judge then set out the relevant subsections of Section 214, and gave a further summary of the Appellants’ case on the Application, in the following terms at Paragraphs 10 and 11.

The Judge then set out the extract from paragraph 13 of the decision of Upper Tribunal Judge Wallace, to which I have made reference above. The Judge also quoted paragraphs 120-122 of the FTT Decision.

The Judge then summarised the case of the Respondent, at Paragraphs 16-19. At Paragraph 20 the Judge explained that he had been referred to the rule in Hollington v Hewthorn [1943] KB 587:

The Judge then proceeded to make reference to two further authorities. The first of these authorities was the decision of the Court of Appeal in Ward v Savill [2021] EWCA Civ 1378. The second of these authorities was Hoyle v Rogers [2014] EWCA Civ 257. In relation to Hoyle v Rogers the Judge made reference both to the first instance decision of Leggatt J, as he then was, which has the neutral citation number [2013] EWHC 1409 (QB), and to the decision of the Court of Appeal. The Judge analysed these authorities in the following terms, at Paragraphs 21-25:

The Judge then came to his actual decision on the Application, which is set out in Paragraphs 26-30. Starting with Paragraph 26, the Judge was not persuaded, for the purposes of the Application, that it was appropriate to rely on the findings in the FTT Decision:

So far as the position of the Respondent was concerned, the Judge considered that the arguments advanced on behalf of the Respondent were more than merely fanciful. As the Judge explained, at Paragraph 27:

The Judge then considered questions of causation and loss, at Paragraph 28:

The Judge then said this, at Paragraph 29:

The Judge’s overall conclusions on the Application were set out in the following terms, at Paragraph 30:

In the result, the Application was dismissed.

The grounds of appeal attached the Appellant’s Notice filed by the Appellants identify five grounds of appeal. These grounds of appeal, which I shall refer to as “Ground 1” and so on, are, in summary, as follows:

I find it helpful, before coming to my analysis of the Appeal, to remind myself both of the terms of the relevant provision of the CPR, and of the guidance to be found in the authorities.

So far as the CPR are concerned, CPR 24.3 provides as follows:

So far as guidance in the authorities is concerned, it seems to me that it is only necessary to make specific reference, in common with the Judge at Paragraph 3, to the judgment of Lewison J, as he then was, in Easyair Limited v Opal Telecom Ltd [2009] EWHC 339 (Ch). In his judgment, at [15], Lewison J provided the following invaluable guidance on the correct approach to an application for summary judgment:

Easyair involved an application by the defendant in that case for an order to strike out the claim made against the defendant or, in the alternative, for summary judgment against the claimant. Lewison J expressed his guidance as a statement of the correct approach on applications for summary judgment made by defendants. It seems to me however that the guidance is also applicable to applications for summary judgment made by claimants, subject to the obvious point that, in such cases, the question becomes whether the defendant has a realistic, as opposed to a fanciful prospect of a successful defence to the relevant claim.

In terms of the burden of proof on an application for summary judgment, Mr Myers drew my attention to the following note in Volume 1 of the White Book (2024 Edition), at 24.3.3:

It will be noted that although the overall burden of proof rests upon the applicant, the evidential burden may shift to the respondent, in two important respects. First, if an applicant for summary judgment adduces credible evidence in support of the application, the respondent then comes under an evidential burden to prove some real prospect of success or other reason for having a trial. Second, if a respondent to a summary judgment application claims that further evidence will be available at trial, as contemplated by Lewison J in sub-paragraph (v) of the guidance set out above, the respondent must serve evidence substantiating that claim. The respondent must, at least in general terms, describe the nature of the further evidence, its source and its relevance to the issues before the court. Vague references to evidence which may turn up at trial are not sufficient.

I have come to the clear conclusion that the Judge was right to refuse the Application. It seems to me that the Section 214 Claim was not suitable for summary determination. In these circumstances it follows that the Appeal must be dismissed.

I say this at the outset of my analysis of the Appeal because it follows, from the conclusions which I have just expressed, that the Section 214 Claim will have to go to trial. In these circumstances it seems to me that it is not appropriate for me to engage in detailed analysis of the issues raised by the Section 214 Claim. The analysis and determination of those issues is for the trial of the Section 214 Claim. I am not, in my analysis of the Appeal, deciding any issues in the Section 214 Claim which are for trial. I am only deciding whether the Judge was right to decide that the Section 214 Claim was not suitable for summary judgment. For this reason my analysis of the Appeal is kept fairly short.

With these preliminary points in place, I turn to my analysis of the Appeal and my reasons for concluding that the Judge was right to refuse the Application.

In broad terms, there are two related reasons for my conclusion that the Judge was right to refuse the Application. I will explain those reasons before coming, briefly, to the individual Grounds.

My first reason goes back to the terms of Section 214. In the present case the Appellants must demonstrate, if the Section 214 Claim is to succeed, that, at some time before the commencement of the winding up of the Company, the Respondent knew or ought to have concluded that there was no reasonable prospect that the Company would avoid going into insolvent liquidation or entering insolvent administration. If the Appellants can demonstrate that the Respondent had this knowledge or ought to have had this knowledge at a particular date, the Appellants must then demonstrate that the Company suffered loss as a result of the failure of the Respondent to put the Company into insolvent liquidation at the point when he knew or ought to have known that there was no reasonable prospect of avoiding this result. On the Respondent’s side, there is a defence to the Section 214 Claim if the Respondent can demonstrate that he took every step with a view to minimising the potential loss to the Company’s creditors as he ought to have taken on the assumption that he was aware that there was no reasonable prospect that the Company would avoid going into insolvent liquidation.

The matters identified in my previous paragraph are acutely fact sensitive. I accept that this does not mean that an application for summary judgment cannot be made in proceedings where a claim is made pursuant to Section 214. What it does mean is that an application for summary judgment in a Section 214 claim is at risk of running into a factual issue or factual issues which are not suitable for determination on a summary basis.

The present case is such a case. I have provided a summary, earlier in this judgment, of the evidence which has so far been filed by the parties in the Section 214 Claim. In his evidence the Respondent has put in issue (i) what the financial position of the Company was in and after 2006, (ii) the knowledge which he had or should have had concerning the prospect of insolvent liquidation, and (iii) the question of whether he acted in the best interests of the Company in his pursuit of the Tribunal Proceedings. In relation to the last of these questions, the Respondent and Mr Ahmed have given evidence that advice was given that the Company had at least a reasonable chance of success in the Tribunal Proceedings.

Despite the best efforts of Mr Mace, in his submissions in support of the Appeal, and notwithstanding the evidence of Mr Hyde in response to the Respondent’s evidence, I am simply not persuaded that the matters which the Respondent has put in issue in relation to the Section 214 Claim are suitable for summary determination. Whatever doubts one may entertain as to the merits of the Respondent’s case, I do not think that it is possible to say, on the evidence, that the Respondent has no realistic prospect of a successful defence to the Section 214 Claim.

I give one example of matters raised by Mr Mace which did not strike me as suitable for determination on a summary judgment application. In his oral submissions Mr Mace referred me to the decision of Zacaroli J in Hunt v Singh [2023] EWHC 1784 (Ch). The case was heard as an appeal against the dismissal of a claim made against Mr Singh, a former director of a company which had engaged in a tax avoidance scheme which was successfully challenged by the Revenue. The liquidator of the company brought claims against the former directors which included claims for breach of fiduciary duty. All these claims failed at first instance. The liquidator appealed against the dismissal of one of the claims against Mr Singh. Zacaroli J described the principal issue raised by the appeal in the following terms, at [2]:

Mr Mace drew my attention to the following statement of the judge, at [47]:

Mr Mace’s submission, on the basis of this statement, was that the Company was still indebted to the Revenue, notwithstanding its challenge, in the Tribunal Proceedings, to the Revenue’s denial of the Company’s claims to recover input tax by the Denied Returns.

Mr Mace also drew my attention to a further statement of the judge, at [51]:

Mr Mace’s submission, on the basis of this statement, was that the Respondent’s position was effectively the same as the position of the directors described in [51]. As such, it was clearly not open to the Respondent to claim that he was entitled to act as he did on the basis of an alleged belief that the Company had some chance of a successful challenge, in the Tribunal Proceedings, to the Revenue’s denial of the claims to input tax made in the Denied Returns.

The difficulty which seemed to me to confront Mr Mace, in seeking to rely upon these statements of the law in a summary judgment application, was that these statements have to be applied to the facts of the present case, in the context of the Section 214 Claim. This exercise is a fact sensitive exercise which requires the court, in the present case, to review all the evidence and make findings on that evidence, by reference to the provisions of Section 214 and the issues raised by those provisions. I do not say that such an exercise is impossible on a summary judgment application. It does seem to me that this exercise, having regard to the evidence and issues in the present case, is not an exercise which can safely be carried out at the summary judgment stage.

I do not regard it as appropriate to go further into my first reason for upholding the decision of the Judge to refuse the Application. Further analysis of the issues in the Section 214 Claim and, in particular, further analysis of the matters raised by the Respondent, by way of defence to the Section 214 Claim, is for trial.

My second reason concerns the status of the FTT Decision in relation to the Section 214 Claim. The Appellants’ case in support of the Section 214 Claim relies heavily upon the findings made by the FTT in the FTT Decision. In particular, the Appellants rely heavily upon the findings of the FTT as to the Respondent’s knowledge, going back to 2006, that the transactions in which the Company was engaged were connected with the fraudulent evasion of VAT. Indeed, this is the basis for what I understood to be Mr Mace’s argument that the Respondent, given his knowledge of this fraud (as found by the FTT), could not possibly have thought it reasonable to continue to allow the Company to trade when such continued trading would have perpetuated the Company’s involvement in the fraud to which the Company’s transactions were connected. Equally, as I understood Mr Mace’s arguments, the Respondent must, given his knowledge of the fraud (as found by the FTT), have known that the Company had no right to submit the March Return or the Denied Returns.

All this assumes that the Appellants are entitled to rely upon the findings in the FTT Decision, in the Section 214 Claim, notwithstanding that the Respondent was not himself a party to the Tribunal Proceedings. It was not argued by the Appellants that the Respondent qualified as a person privy to the Company, as a party to the FTT Decision, and thus formally bound by the FTT Decision.

At first sight, the Appellants’ reliance upon the FTT Decision would appear to be precluded by the rule in Hollington v Hewthorn. In Hollington v Hewthorn the plaintiff sought to rely in civil proceedings upon the defendant driver’s criminal conviction for careless driving as evidence of his negligence. The Court of Appeal held that evidence of the conviction was inadmissible. Goddard LJ stated the relevant principle in the following terms, at pages 596-597 of the report of the case:

The actual result in Hollington v Hewthorn was reversed by Section 11 of the Civil Evidence Act 1968, so that the fact that a person has been convicted of an offence in a court is admissible in evidence in subsequent proceedings, in order to prove that the person committed the relevant offence. The principle or rule stated in the case remains in place however in respect of judgments in previous civil proceedings. A judgment of a previous court or tribunal is not admissible evidence to prove a fact in issue or a fact relevant to that issue in other civil proceedings between different parties.

The rule in Hollington v Hewthorn was considered by the Court of Appeal in Ward v Savill [2021] EWCA Civ 1378. The issue considered by the Court of Appeal was whether the appellants could rely upon a declaratory judgment granted to them in earlier proceedings, as against the respondent, who had not been a party to those proceedings. The Court of Appeal decided that they could not, for the reasons stated by Sir Julian Flaux C, with whose judgment Laing and Warby LJJ agreed. So far as the rule in Hollington v Hewthorn was concerned, the Chancellor confirmed the existence of the rule, and described its scope in the following terms, at [81]:

The Chancellor went on to say this, at [85]-[86]:

Mr Mace’s answer to Hollington v Hewthorn was that it is not open to a party in the position of the Respondent to relitigate with the Appellants, as liquidators of the Company, issues which had already been decided against the Respondent in the FTT Decision. In considering this answer it is necessary to make reference to only two of the authorities cited by Mr Mace.

The first of these authorities was Secretary of State for Business Innovation and Skills v Potiwal [2012] EWHC 3723 (Ch). The case was concerned with proceedings brought by the Secretary of State to disqualify Mr Potiwal from acting as a director. In the proceedings Mr Potiwal filed an affidavit in which he denied that he had been aware that the company, of which he had been the sole director, had participated in transactions connected with the fraudulent evasion of VAT. The Secretary of State applied to strike out this evidence on the basis that it was an abuse of the process of the court. The denial was said to be an abuse because the VAT Tribunal (as it then was) had previously concluded, in a decision made on the company’s appeal against the Revenue’s disallowance of its VAT claims for the relevant period, that Mr Potiwal had known that the company was participating in the fraudulent evasion of VAT.

In his judgment on the application Briggs J, as he then was, concluded that it would be an abuse to permit Mr Potiwal to relitigate the same issue of knowledge which had been determined by the VAT Tribunal. As Briggs J explained, at [28] and [29]:

Briggs J concluded his judgment in the following terms, at [30]-[32]:

The second of these authorities was the decision of the Judge himself in Mark John Wilson (in his capacity as Liquidator of E-Tel (UK) Limited (In Liquidation)) v Nemish Mehta [2023] EWHC 1214 (Ch). The case was concerned with a claim by the liquidator of E-Tel (UK) Limited for compensation against Mr Mehta, the sole director of the company. The claim for compensation was made on the basis of alleged fraudulent trading and alleged fraudulent breach of fiduciary duties, arising out of the company’s involvement in an MTIC fraud, for which Mr Mehta, the respondent to the claim, was said to be responsible. The respondent did not attend the trial of the claim but, as the Judge noted at the outset of his judgment, the liquidator still had to prove the claim.

As in Potiwal the liquidator relied heavily upon the findings of the FTT made in a decision on the company’s appeal against the decision of the Revenue to deny its claim for the recovery of input tax. As in the present case, and as in Potiwal, the FTT made findings that the respondent had had knowledge of the MTIC fraud. The liquidator argued that he was entitled to rely upon the findings of the FTT on two bases. The first basis was that the respondent, as the sole director of the company and the person who had instigated and overseen the appeal to the FTT against the denial of input tax, should be treated as a privy of the company and thereby bound by the findings of the FTT. The second basis was that it would be an abuse of process to allow the respondent to relitigate the findings of the FTT as to his knowledge of the MTIC fraud.

The Judge considered that he was bound, by authority (including Potiwal), to reject the argument that the respondent was a privy of the company and thus formally bound by the findings of the FTT; see the judgment at [15]. The Judge did however accept the argument, on the basis of Potiwal, that it would be an abuse of process to allow the respondent to relitigate the issue of his knowledge, when findings had already been made by the FTT as to the state of that knowledge. As the Judge explained, at [16] and [17]:

Mr Mace contended that the present case was on all fours with both Potiwal and Mehta. Just as it would have been an abuse in those cases to permit the respondent to relitigate the issue of his knowledge of the relevant VAT fraud, so it would be an abuse for the Respondent to relitigate the issue of his knowledge of the VAT fraud in the present case, in circumstances where that issue had already been the subject of thorough investigation and detailed findings by the FTT in the FTT Decision, and where the Company had made it clear, in its attempt to appeal to the Upper Tribunal, that it was not challenging the findings of fact made in the FTT Decision.

There may be very considerable merit in this argument. It may be, at trial, that the Appellants will be able to establish that they are entitled to rely upon the FTT Decision. For the purposes of the Application however it seems to me that there are two problems with making a summary determination of the question of whether the Appellants can rely upon the findings of fact in the FTT Decision or whether the Appellants can rely upon the decision of the Company not to seek to challenge those findings by an appeal.

The first of these problems goes back to my first reason for refusing the Application. I agree with Mr Myers that the Section 214 Claim raises issues, in relation to the Respondent’s state of mind, which were not before the FTT. The FTT were not called upon to decide what the Respondent knew or ought to have known as to the prospects of the Company going into insolvent liquidation or insolvent administration, for the purposes of Section 214(2)(b). The FTT were not called upon to decide whether the Respondent took every step with a view to minimising the potential loss to the Company’s creditors as he ought to have taken, bearing in mind what he ought to have known of the Company’s financial position. I can see that the findings made by the FTT may be said to provide or substantially to provide the answers to those questions, but arguments of that kind seem to me to be for the trial of the Section 214 Claim, not for a summary judgment application.

In summary, the first problem seems to me to be that even if the Appellants are entitled to rely upon the findings of the FTT as to the Respondent’s state of knowledge, I do not consider that those findings can be treated as decisive, at summary judgment stage, of the issues which I have identified in explaining my first reason for concluding that the Judge was right to refuse the Application. At trial, the court may conclude that the findings of the FTT can be treated as decisive of those issues, but that is a question for trial. The position seems to me to be much the same in relation to the Company’s decision not to challenge the findings of fact made by the FTT.

The second problem is the more fundamental question of whether the Appellants can rely upon the findings in the FTT Decision. At first sight the facts and circumstances of the present case appear to be indistinguishable from those before the court in Potiwal and Mehta. I am not however persuaded that it is appropriate to decide whether the Appellants can rely upon the findings in the FTT Decision on a summary basis.

It is true that there are cases where points of law or construction can and should be determined on a summary basis; see sub-paragraph (vii) of the guidance given by Lewison J in Easyair. If the court has all the relevant evidence before it, and if the relevant point of law or construction raises no issues of fact unsuitable for determination on a summary basis, there is unlikely to be any merit in allowing the relevant point of law or construction to go to trial. The court should grasp the nettle and decide the point.

I am not convinced that the question of whether the Appellants can rely upon the findings in the FTT Decision falls into this category. As I understand the Appellants’ case, the argument that the Appellants are entitled to rely upon the findings in the FTT Decision is put, as it was put in Potiwal and Mehta, on the basis that it would be an abuse of process for the Respondent to be permitted to relitigate the findings as to this knowledge made by the FTT.

This assumes however that what the Respondent is seeking to do in this case, in his defence to the Section 214 Claim, does involve relitigating the findings in the FTT Decision and does constitute an abuse of process. In this context I repeat, for ease of reference, what Briggs J said in his judgment in Potiwal, at [30] and [31]:

As can be seen, the question of whether, in cases of this kind, there is an abuse of process involves a fact sensitive inquiry, requiring an intense focus on the facts of the particular case and, turning specifically to the present case, a focus upon the thoroughness and fairness of the way in which the issue as to the Respondent’s knowledge of the underlying VAT fraud was conducted by the FTT. I would add to this, in the present case, the requirement for an intense focus upon the overlap or lack of overlap between (i) the findings made by the FTT as to the Respondent’s knowledge of the VAT fraud and (ii) the issues as to the Respondent’s knowledge and state of mind which are relevant in the Section 214 Claim. The Appellants say that the position is clear, and can be seen to be clear at this stage. I do not accept this. In my view the question of whether there is an abuse of process or unfairness or the bringing of the administration of justice into disrepute in the present case, of a kind which was found in Potiwal and Mehta, is for trial. There may be other cases, involving an issue of this kind, where the position is clear and can be seen to be clear at the summary judgment stage. In my view, and by reference to the arguments and evidence in the present case, the present case is not such a case. I add that the position seems to me to be much the same in relation to the Company’s decision not to challenge the findings of fact made by the FTT.

If, as I have concluded, the question of whether the Appellants can rely upon the findings in the FTT Decision needs to go to trial, it seems to me to follow that the Section 214 Claim cannot succeed at this stage, independent of my first reason for concluding that the Judge was right to refuse the Application. For this second reason I also conclude that the Judge was right to refuse the Application.

What I have said above is sufficient to dispose of the Appeal. I will however, as I have said, deal briefly with the individual Grounds.

It seems to me that Ground 1 is only viable if the Judge was obliged, at the summary judgment stage, to treat the findings of fact made in the FTT Decision as findings which were both binding on the Respondent and decisive of the Section 214 Claim. For the reasons which I have explained, I do not think that the Judge was so obliged. In my view the status and effect of the findings made by the FTT in the FTT Decision are matters to be determined at trial. The same applies, in my view, to the Company’s acceptance of those findings in its attempts to appeal against the FTT Decision.

Given this position, it seems to me that the arguments as to the weight the Judge should have given to the findings of the FTT are misconceived. The weight to be given to the findings of the FTT is a matter for the trial judge to determine, once the status and effect of the FTT Decision in the Section 214 Claim have been determined.

If the correct reading of Paragraph 26 is that the Judge decided that the findings of the FTT were not binding upon the Respondent, then I would respectfully disagree with the Judge. It seems to me that this question remains to be determined at trial. This is not however my reading of Paragraph 26. It seems to me that what the Judge was doing, in Paragraph 26, was indicating that he was not willing to make a finding, at the summary judgment stage and based upon the findings of the FTT, that the Respondent had knowledge of the fraud. The reason for this unwillingness, on the basis of the Judge’s analysis of the law, was that the rule in Hollington v Hewthorn precluded reliance on the FTT Decision for this purpose. I do not think that the Judge was ruling out, or intended to rule out the possibility that the Appellants would establish, at trial, that the Respondent was, for some reason or other, bound by the findings of fact in the FTT Decision. Equally, I do not think that the Judge was ruling out, or intended to rule out the possibility that the trial judge would think it appropriate to attach weight to the findings made by the FTT. It is important to keep in mind that the Judge was deciding whether the Appellants had established their case for summary judgment. The Judge was not deciding the Section 214 Claim.

Ultimately, and in relation to all of the Grounds, it seems to me that it is important to keep in mind what the Judge said in Paragraph 26, which I repeat for ease of reference:

What was said by the Judge in Paragraph 26 seems to me to bring out the distinction between what the FTT had to decide in the Tribunal Proceedings and what has to be decided in the Section 214 Claim. In common with the Judge I regard this distinction as material to the question of whether the Section 214 Claim was suitable for summary determination. Whether the distinction is, in the final analysis, a material distinction, is a matter for trial.

Ground 2 proceeds on the footing that the Judge mistakenly assumed, in Paragraph 28, that the loss claimed by the Appellants in the Section 214 Claim was restricted to the statutory interest which accrued on the debt to the Revenue, and thereby misdirected himself. I do not think that the Judge misdirected himself. It seems to me that what the Judge was doing, in Paragraph 28, was considering further the question of causation of loss, and making the point that the Appellants had more to do in order to prove the loss to the Company for the purposes of the Section 214 claim. It is clear from other parts of the Judgment that the Judge had well in mind the fact that the debt owed to the Revenue and the loss alleged to have been caused to the Company comprised more than statutory interest. Indeed, in Paragraph 1, the Judge identified the loss for which summary judgment was claimed, as £1,880,292.50. It is obvious that the Judge was not under the misconception that this sum was made up entirely of statutory interest.

Ground 3 reiterates the Appellants’ argument that it was clear that the Respondent caused loss to the Company by not putting the Company into insolvent liquidation until 8 years after the March Return and the Denied Returns were filed by the Company, all of which made invalid claims for VAT. The Judge was not satisfied that this and other parts of the Appellants’ case were established to the standard required for summary judgment purposes. In my view the Judge was right not to be so satisfied because, in this and other respects, there were fact sensitive issues raised which were not suitable for determination on an application for summary judgment.

In my view Ground 4 is misconceived. In making reference to the assessment by the Revenue it seems to me that the Judge was making the point that the fact of the assessment and any absence of challenge to the assessment did not, in and of themselves, establish the required elements of the Section 214 Claim. It seems to me that this was a legitimate and relevant point for the Judge to have made.

So far as Ground 5 is concerned, I do not think that the Judge misdirected himself as to the rule in Hollington v Hewthorn. The question of whether and, if so, to what extent that rule, which clearly still exists, prevents or affects the ability of the Appellants to rely upon the findings made in the FTT Decision is a question, as I have said, for trial. As I read Paragraph 30, this was essentially what the Judge was saying, in relation to the rule in Hollington v Hewthorn.

Beyond this, it seems to me that what the Judge was saying, in Paragraph 30, was that while the case might seem obvious to the Appellants, there were issues in the Section 214 Claim which required a “fuller investigation into the facts of the case”. For the reasons which I have set out in my analysis of the Appeal, I think that the Judge was right to take this view.

I note, in particular, that Ground 5, as set out in the grounds of appeal, includes the following assertions:

It seems to me that there are at least three misconceptions in these assertions. First, I do not consider that the Judge did misdirect himself with respect to the rule in Hollington v Hewthorn, for the reasons which I have already explained. Second, I can see the argument that the present case was not one which fell into the category of cases, identified in sub-paragraph (v) of the guidance given by Lewison J in Easyair, where it could reasonably be expected that there would be further evidence at trial. This however seems to me to miss the essential point being made by the Judge, which was that there were fact sensitive issues in the Section 214 Claim which were not suitable for summary determination and required fuller investigation at trial. Third, it was in the FTT Decision that the Respondent had been found to have knowledge that the Company was involved in transactions connected with fraud. Whether and, if so, to which extent the Appellants could rely on those findings in the Section 214 Claim is a question which, in my view, should be left for trial. As I read Paragraph 30, the Judge was saying essentially the same thing, in relation to the findings made by the FTT in the FTT Decision.

In summary, I do not consider the Grounds, whether taken individually or collectively, disclose any good reason for setting aside the Judge’s decision to refuse the Application.

For the sake of completeness, and although the point is academic in the light of my decision on the Appeal, there is an additional point with which I should deal.

At the conclusion of his oral submissions in support of the Appeal Mr Mace identified what it was he was seeking, by way of the order to be made on the Appeal. Mr Mace confirmed that he was asking for the Order to be set aside, and went on to say that he was asking the appeal court either to grant summary judgment on the Section 214 Claim or to direct a rehearing of the Application.

In his oral submissions in response Mr Myers objected to the Appellants seeking to substitute an order for summary judgment on the Section 214 Claim, if the Order was set aside. Mr Myers’ complaint was that it had only come out in Mr Mace’s oral submissions that the Appellants were seeking the substitution of an order for summary judgment, if the dismissal of the Application by the Judge was set aside. Mr Myers complained that this was unfair. In the absence of prior notice that this was what the Appellants intended to do, so Mr Myers submitted, the appeal court did not have before it all of the evidence which had been before the Judge, and the Respondent was not ready to argue the question of whether, on the totality of the evidence before the Judge, summary judgment should be granted on the Application (assuming the setting aside of the Order).

Given my decision on the Appeal this point does not arise but, as I have said, I will deal with the point for the sake of completeness.

The starting point is the Appellant’s Notice, by which the Appeal was commenced. Section 9 of the Appellant’s Notice identifies the order sought by the Appellants in the Appeal. What the Appellants did was to tick the box confirming that they were seeking an order setting aside the order which was the subject of the Appeal; that is to say the Order. The Appellants did not state that they were seeking any different or substituted order on the Appeal.

Turning to the grounds of appeal, they conclude in the following terms:

The skeleton argument in support of the Appeal, which was filed before permission to appeal had been granted, concluded with a request for the appeal court to allow the Appeal and “make an Order in the terms of the draft order in the bundle.”. The only draft order which I have been able to find in the appeal bundle is a draft order granting permission to appeal. So far as I can see there was no draft order in the appeal bundle which set out the relief sought by the Appellants in the Appeal itself.

It seems to clear to me that the Appellants should have made it clear, in section 9 of the Appellant’s Notice and in their grounds of appeal and in their skeleton argument in support of the Appeal, what it was they were seeking on the Appeal. It is essential that any appellant makes clear the full terms of the relief sought on an appeal.

I did however find it difficult to see why there was a problem in the present case in this respect, notwithstanding the failure of the Appellants to state in terms that they were seeking summary judgment in the Appeal. The Appeal was not an appeal against a decision made at a trial, after the hearing of oral evidence. The Judge was asked to grant summary judgment on the Section 214 Claim. The order sought before the Judge was an order that the Respondent pay the sum of £1,880,292.50 to the Appellants, with interest thereon. The order was sought on the basis of the evidence before the Judge. Essentially, the Appellants’ case was that it was clear on the evidence before the Judge, without the necessity for a trial and without the necessity for oral evidence or cross examination of witnesses, that the Respondent had no real prospect of a successful defence to the Section 214 Claim.

If I had been persuaded by the Appellants’ case it seems to me that this would necessarily have been because I would have been persuaded that the position was sufficiently clear for the Judge to have granted summary judgment on the Section 214 Claim. It also follows that I would have had to have been persuaded that this was the position, on the basis of the evidence before me in the Appeal.

On the hypothesis set out in my previous paragraph I find it difficult to understand the logic of requiring any kind of rehearing of the Application. If I had been persuaded that the Judge should have granted summary judgment on the Section 214 Claim, I find it difficult to see why I could not, on that hypothesis, have set aside the Order and substituted an order for summary judgment. The substituted order would have followed, logically, from my decision to set aside the Order, which would itself have been a decision reached on the evidence before me in the Appeal.

My conclusions on this additional point, had it been a live point, are as follows. I accept Mr Myers’ complaint that the Appellants should have made it clear that they sought an order for summary judgment in the Appeal, assuming that the Order was set aside. If however I had been persuaded to set aside the Order, I do not think that it would have been right for me to stop there and leave the Application undecided. On that hypothesis it seems to me that the correct and appropriate course would have been for me to make a substituted order for summary judgment on the Section 214 Claim. The making of such an order would inevitably have followed from my decision to set aside the Order. Equally, I cannot see that this course would have caused any prejudice to the Respondent, given that the Respondent would have had the opportunity, on the hearing of the Appeal and in his defence of the Judge’s decision, to put all the arguments as to why summary judgment should not have been granted and should not be granted.

For the reasons set out in this judgment the Appeal fails, and falls to be dismissed. I will hear counsel, as necessary, on any matters arising consequential upon my dismissal of the Appeal. In the usual way the parties are encouraged to agree, subject to my approval, as much as they can in terms of the order to be made consequential upon the dismissal of the Appeal.