Andrew Howard Parnham & Anor v The Commissioners for HMRC

In essence the ground is that the FTT did not deal with the fair trial issue.

This ground exemplifies the situation, not uncommon in appeals, where a point that lay in the shadows before the first-instance tribunal and was dealt with accordingly is advanced as the centrepiece of the appeal. The primary case the appellants argued before the FTT was argued within the frame of reference of fault, in particular HMRC’s fault. The appellant wanted HMRC barred and for their part HMRC wanted the appellant struck out. It is true both parties had said that a fair trial was not possible, but neither was arguing as strenuously as one might expect in such circumstances for the tribunal to resolve that in any way other than striking or barring the other. The parties’ agreement did not for instance extend to putting forward any kind of consent order explaining how the proceedings before the FTT might be compromised to the satisfaction of both parties in the light of that joint view.

Having said that, we consider, looking at the FTT decision in the round, that the FTT did take account of the parties’ respective positions but despite that, concluded that it did not agree a fair hearing was impossible. It had the parties’ positions before it. It specifically referred to the notice of objection, and grounds of appeal (at [69] and [72(1)] see [23]) and must have been aware from that that the fair trial issue was one of the issues requiring resolution. In concluding its discussion at [161] that HMRC were not at fault the FTT stated it referred explicitly to:

Its ultimate decision refusing the barring order, and refusing the strike out resulted in the appellants’ FTT proceedings remaining on foot and awaiting determination at a substantive hearing. That result cannot be reconciled with the FTT endorsing any position that it was impossible to hold a fair hearing. The FTT, instead, acknowledged a hearing would be difficult ([156] – see [38] above). Again, that language is inconsistent with the FTT considering a fair hearing was impossible. Similarly, the 2020 FTT’s reasoning at [158] where it rejected HMRC’s argument that the case did not entail dishonesty and it noting that the 2018 FTT did not regard it as unfair to proceed to a hearing then (see [38]) is consistent with the 2020 FTT recognising that it would, despite the challenges, not be impossible to continue with a fair hearing of the appellants’ appeals.

There was also no error in the FTT’s sufficiency of reasons on the point. The appellants’ case was run primarily on the basis of HMRC’s fault, framed as it was by the appellants’ reliance on Foulser as described above and the FTT therefore rightly focussed its reasoning on addressing that issue. That there was no especially detailed reasoning on why the FTT was determining a fair hearing as not impossible, despite the parties’ position, reflected that the issue was not put to the FTT in such clear and stark terms. The FTT’s reasoning fairly dealt with how the issues put in contention by the parties before it. We therefore reject this ground of appeal.

This ground, in essence, is that even if FTT did deal with issue (which we have concluded above it did), its determination that hearing could go ahead was wrong. This is on the basis the parties had agreed it was unfair and for other reasons.

We did not understand either party (rightly in our view) to take the position that simply because the parties agreed a hearing would be unfair it must follow that holding a hearing would be unfair. The parties’ agreement would obviously be a factor to consider but it would not be conclusive. The FTT could clearly reach its own view on that issue. The appellants’ submission must therefore be that it not open to the FTT, in the circumstances of this case, to reach any finding other than that a fair hearing was impossible.

Like the FTT we did not receive any developed submissions on the FTT’s power to stay indefinitely and neither party was able to show us authority for a stay (beyond the appellant referring to the criminal stay instance referred to in the authorities referred to in Foulser. (See below at [59]).

Ms McArdle submitted there was no indefinite power to stay under the FTT’s Rules, because it would never be appropriate and would be inconsistent with the objective of dealing with matters without delay. For the reasons we explain below, we do not consider it necessary to decide this issue (in summary because on the facts of this case, we consider the FTT was well entitled to come to the view that a fair hearing was not impossible, despite the parties’ view to the contrary).

We acknowledge that the procedural history in this case puts this case regrettably at the extreme end of delay. There are undoubtedly difficulties in the witnesses recollecting events from such a long time ago, and not only that but in relation to individual journeys that were said to be undertaken as a matter of routine. But these difficulties must be put in the context of the litigation in these appeals. Both witnesses prepared witness statements in 2008 that were already some time after the events in 2006 and the answers Mr Parnham gave in cross-examination, even in 2010, some four years after the relevant events would have inevitably needed to take account of the difficulties of making recollections in such circumstances. There was no suggestion the difficulty of recollection rendered the hearings in 2010, and 2015 unfair, or that when Judge Poole refused HMRC’s strike out application in 2018 a fair hearing would be impossible at that stage.

Judge Bishopp in UT2 in 2015 noted these difficulties even in relation to the FTT1 proceedings explaining at [162]:

In any case, that there are difficulties in recollection (that would already have been an issue in FTT1) in 2011, and in UT2 in 2015, would not mean there was no value in the appellants’ oral evidence. The Court of Appeal in Kogan v Martin [2020] EMLR 4 (at [88]) explained there was “line of distinguished judicial observations that emphasise the fallibility of human memory and the need to assess witness evidence in its proper place alongside contemporaneous documentary evidence and evidence upon which undoubted or probable reliance can be placed”. However, the Court emphasised that such fallibility “did not relieve judges of the task of making findings of fact based upon all of the evidence” (emphasis added). The Court of Appeal’s judgment was there putting in context the well-known dicta of Leggatt J as he then was in a High Court decision in Gestmin SGPS S.A. v Credit Suisse (UK) Limited, Credit Suisse Securities 20 (Europe) Limited [2013] EWHC 3560 (Comm) to the effect that there was no general principle on the assessment of evidence such that little reliance should be placed on witness recollection. Leggatt J’s observations in any case explained that difficulties in recollection did not mean oral testimony served no useful purpose, its value as he saw it lay “in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events.”

Thus the difficulties in recollection were always going to be an issue in the circumstances of this case where even when Mr Parnham’s evidence was heard in 2010 recollection would be challenging. Those difficulties will have increased by some increment over time but in the circumstances of this case they are not such that they would require the FTT to have held that it was impossible to hold a fair hearing.

The other points regarding the appellants’ concerns that disclosure they would otherwise have sought having been curtailed though the passage of time also did not require the FTT hold that a fair hearing would be impossible. The difficulties about getting evidence through international cooperation would apply just as much to a hearing that had occurred closer to the events. The appellants had the opportunity to seek the evidence earlier. Their position is that the adverse result in SDM was not conclusive of their appeals. That being the case, they would have needed to be alert to the risk that a time might come when they would need to fight their own appeals and therefore take steps to obtain whatever evidence they considered necessary to do that. If for instance they were concerned relevant CCTV or other surveillance evidence that would corroborate the drivers’ account of the journeys would not be preserved, it was open to them to raise those concerns at the appropriate time and seek disclosure then. There was of course a tension between the efficiency and cost reasons the appellants say had led to them agreeing to the stay in the first place on the one hand, and the incurring of costs in a stayed appeal on the other. But it was for the appellants to balance the cost benefits of maintaining the stay of their appeals and not expending resource as against taking active steps in the appeal so as to preserve their position should it become necessary to fight their appeals. The fact they did not take such steps would not have compelled the FTT to view a fair hearing as being impossible.

The appellants raised Article 6 ECHR (as it did before the FTT) arguing that Article 6 requires that the hearing is held within a reasonable time and 16 years is not reasonable, and that the party is allowed representation and provided with all relevant information. This is not a point the appellant were granted permission to appeal to the Upper Tribunal on and we do not therefore address it.

There was therefore no error of law in FTT not accepting a fair hearing was impossible. It reached a decision that was clearly entitled to in the circumstances. We dismiss this ground of appeal.

It is convenient to deal with these grounds together. In essence the grounds are that the Tribunal erred in law by misinterpreting the decision in the case of Foulser and in the other cited authorities so as to assume that fault was required before a stay order could be made. Mr Bridge argues that the binding decision in Foulser (which is reflected in any case in the tribunal rules) confirms that the Tribunal had the authority to stay proceedings where it is not possible to have a fair trial.

We reject this ground of appeal. As outlined above at [30] to [39] the FTT considered Foulser in detail. It correctly identified that the case was concerned with types of abuse which fell within or outside the FTT’s jurisdiction and the FTT’s powers in relation to debarment of a party. To the extent Foulser mentioned stays of proceedings in Foulser this arose in Morgan J’s discussion of appeals in relation to magistrates’ court decisions concerning stays of prosecution arising out of issues with the prosecuting authority’s conduct, so were fault based. So, in discussing R v Horseferry Road Magistrates’ Court, ex p Bennett [1994] AC 42, where the defendant’s complaint was that he had been kidnapped rather properly extradited from South Africa, Morgan J explained how the High Court might stay the prosecution as an abuse of process if there had been a disregard of extradition procedures. As already discussed above no authority was cited by either party, for the proposition a case could be indefinitely stayed in cases of delay irrespective of fault.

The appellants’ notice of objection and oral submissions before us also referred to the Court of Appeal’s decision in Shiner and another v HMRC [2018] EWCA Civ 31 but that decision simply confirmed that Rule 8(3)(c) could accommodate a strike out by one party on the basis that it lacked reasonable prospects of success because the other was arguing it was an abuse of process. It was not inconsistent with the FTT holding that for a party to be struck out or in this case barred – the party must have done something wrong, a conclusion we agree must be right. In fact, the discussion in Shiner on the FTT’s statutory jurisdiction runs contrary to the appellants’ position that a stay should have been ordered, given the Court of Appeal’s view that the 2009 Rules enabled appeals to be handled quickly and efficiently - see [21]). Making an order which effectively left the appeal pending indefinitely might be difficult to reconcile with that.

The appellants’ argument that the FTT wrongly assumed that no stay of proceedings could be ordered because the rules did not provide for that, except in cases of fault, is also incorrect. The FTT made no such assumption because, on its analysis of the facts of the case, it did not need to. As discussed above, the FTT disagreed, as it was entitled to, with the contention that a fair hearing was impossible. The issue of the powers under the FTT rules it could or should exercise if a fair hearing was impossible did not arise.

HMRC’s cross-appeal is against the 2020 FTT’s decision to refuse HMRC’s application which had sought to strike out Mr Parnham’s and Mr Wild’s appeals.

That application was brought on the basis that HMRC considered the appeals were an abuse of process because the appellants were seeking to relitigate the facts which had been determined for the purposes of their case by UT2 in SDM. In support, HMRC relied on a Court of Appeal authority Ashmore v British Coal Corporation [1990] 2 QB 338 which concerned a large group of applicants who had brought equal pay claims and where the industrial tribunal had ordered that the results in a sample of those claims would be persuasive in relation to the claims stood behind the sample claims. The Court of Appeal agreed that where findings had been made on the evidence in the sample claim cases it was contrary to the interests of justice and public policy to allow those same issues to be litigated again unless there was fresh evidence which justified re-opening the issue. HMRC argued that the appellants here were not presenting any new evidence. The appellants objected to the 2020 FTT hearing the strike-out application given the late stage it was made and argued in any case that was an identical application to the one made before in September 2018 which Judge Poole had dismissed in the 2018 FTT Decision.

The 2020 FTT rejected both those points. It permitted HMRC to make the strike-out application and it noted (at [171]) that HMRC’s grounds were not the same as the grounds put forward in 2018 where HMRC argued the appellants had no reasonable prospects of success whereas now HMRC were arguing that re-litigation of the facts would be an abuse of process.

The FTT declined nevertheless to strike out the appellants’ appeals explaining:

The FTT referred back to its previous reasoning at [67] where it had set out Judge Poole’s reasoning for why he had rejected HMRC’s submission in the strike out application before him that the findings of fact in UT2 SDM meant the appellants’ appeals had no reasonable prospect of success ([see [24] above) and [103] where the FTT had noted:

Although the FTT did not specifically refer back to these paragraphs, the explanation for why the core issues in SDM and the appellants’ appeals were different was in the preceding paragraphs [94] to [102] where the FTT stated it adopted Judge Poole’s reasoning in the earlier strike out refusal as to why Judge Bishopp’s finding that the goods did not arrive was not determinative in the present appeals. The FTT preceded that analysis with the following reasoning:

As for Ashmore the FTT considered that was not applicable:

HMRC’s case, in its cross-appeal, is that the FTT made a material error of law in finding that HMRC’s case against the appellants was one of dishonesty. Ms McArdle underscores the fact the legislation (Regulation 7) underpinning the assessment liability on the appellants is strict and that it does not require any fault or dishonesty to be established. She submits it has never been HMRC’s position that the appellants were dishonest and thus necessarily conspired to commit the fraud which led to the alcohol in question disappeared. A finding that the goods did not arrive at the Aldi warehouse in Belgium did not require that the appellants were dishonest in their evidence. The evidence could be inaccurate for any number of reasons not entailing dishonesty such as the witness misremembering, being confused or misled. Even assuming HMRC’s case entailed dishonesty then there was no unfairness in that the cross-examination of Mr Parnham before FTT1 had put to him the journeys could not have happened. It was irrelevant that Mr Wild was not cross-examined; he had the opportunity to attend (having served a witness statement and having been called for cross-examination) and that was sufficient to satisfy any fairness obligations.

In response to HMRC’s cross-appeal the appellants say the FTT was correct to strike out HMRC’s application for the reasons it did and that HMRC’s application was itself an abuse of process given Judge Poole’s decision that the facts in the Upper Tribunal’s decision in SDM were not determinative, a decision HMRC had not appealed and which was therefore final. As for HMRC’s suggestion their case did not entail dishonesty, Mr Bridge argues it is absurd to suggest the appellants were mistaken; the substantial loads of excise goods could not have been unloaded by mistake or without the dishonest consent or connivance of the appellants.

Logically, the appellants’ point that HMRC’s application to strike-out was itself an abuse of process (because it sought to re-litigate the same issue that had been finally determined by Judge Poole in the 2018 FTT decision) precedes the question of whether the FTT erred in considering HMRC’s case entailed dishonesty. That is because if HMRC’s application was an abuse of process, there would have been no need for the FTT to address the merits of that application. We will therefore address the appellants’ submission first.

While that submission did not go into detail into the precise legal basis for the alleged abuse, we consider it is plainly capable of falling within the Henderson v Henderson type of abuse of process which, as explained by Lord Bingham in Johnson v Gore Wood & Co [2002] 2 AC 1, reflected the underlying public interest “that there should be finality in litigation”. Alternatively, as we canvassed with the parties at the hearing, abuse could lie in a form of issue estoppel, the common issue being the determinative nature of the factual findings in SDM on the proceedings in the appellant’s appeals. That determination was made in the very same proceedings involving the same parties. The Upper Tribunal’s recent decision in British Telecommunications Plc v HMRC [2023] UKUT 00122 helpfully sets out the legal bases for the various instances of res judicata (see [58] to [62]) including an extract Diplock LJ’s judgment in Fidelitas Shipping v V/O Exportchleb [1966] 1 QB 630 which made the point that issue estoppel “…operates in subsequent suits between the same parties in which the same issue arises. A fortiori it operates in any subsequent proceedings in the same suit in which the issue has been determined”. (As to the diminished role of issue estoppel in tax proceedings because of the Cafoor principle mentioned in BT that would not be a concern as the issue did not concern tax liability in different periods but precisely the same excise duty assessment in proceedings between the same parties.)

Ms McArdle’s response relied on contrasting the different bases of the two applications. HMRC’s 2018 strike-out application was put on the basis that the findings in SDM meant that the appellants’ appeals stood no reasonable prospect of success, whereas the current strike-out application turned, she argued, on the different basis of whether the appellants’ case represented an Ashmore style abuse (that re-litigation of factual issue should not take place without fresh evidence to suggest the answer might be different). The FTT’s conclusion in 2018 was thus based on different test that the FTT was not satisfied that the appellants’ appeals stood no reasonable prospect of success; a high threshold for the strike-out applicant to show.

Judge Poole’s finding at [28] of the 2018 FTT Decision was clear. He held that the findings of fact in UT 2 SDM (where Judge Bishopp used his casting vote) could not be regarded as determinative for the purpose of the present appeals. It is true the applications were put by HMRC on different bases (the FTT too noted “HMRC’s grounds...[were] not quite the same as the grounds put forward in 2018” ([172]). However that does not detract from the fact that the issue that lay at the heart of the 2018 application - whether the factual finding the goods did not arrive in UT2 SDM was determinative of that issue in the appellant’s appeals (such that the appellants’ appeals stood no reasonable prospect of success) - was identical to the central issue in HMRC’s application, namely whether the appellants were seeking to relitigate a matter that had already been determined. The different test involved in a “no reasonable prospect of success” was irrelevant because the key issue in the 2018 application was the binary one of whether the factual finding in UT2 SDM was determinative. On that the FTT made a decisive, and final (given there was no appeal) finding that the factual finding in UT2 SDM was not determinative. (We also note in any case that the reasoning in the Court of Appeal’s decision in Shiner (at [19] would suggest that an abuse of process argument would be accommodated under Rule 8(3)(c) (no reasonable prospect of success) in any case, so the ultimate test would not be different).

Ms McArdle also sought to distinguish Judge Poole’s reasoning in the 2018 FTT decision in order to argue that such finding (that UT2 SDM was not determinative) did not prevent the 2020 FTT from dealing with HMRC’s second strike out application. She argued that insofar as his reasoning relied on HMRC’s case involving dishonesty, HMRC were clear their case involved no such allegations.

That submission’s recourse to the reasoning for the finding which is said to be re-litigated is however misconceived as a matter of principle. If, as here, the same issue in the same proceedings between the same parties has already been finally determined, it undermines the whole point of giving that litigation finality if the reasoning for the finding then needs to be reanalysed.

Even if the FTT’s reasoning was relevant, and it was correct to see HMRC’s position on dishonesty has having changed, that would not address the second basis for the 2018 FTT’s conclusion that the UT2 SDM findings were not determinative. That second basis was that UT2 had been asked by SDM to remake the decision without hearing the drivers again whereas the appellants here had not indicated they were content to proceed on the same basis.

We therefore agree with the appellants that HMRC’s second strike-out application before the 2020 FTT was an abuse of process in that it sought to re-litigate the same issue which had already been determined finally in the same proceedings before the 2018 FTT.

It follows that the FTT was correct to refuse HMRC’s strike out application but not for the reasons it gave. The FTT ought, as a prior matter, to have declined the strike out on the basis that it sought to re-litigate an issue that had already been finally determined. As regards the error of law HMRC allege, we agree the FTT was wrong to base its rejection of the strike-out on a view that HMRC’s case necessarily involved dishonesty However, that was because the FTT’s reliance on that point entailed revisiting the reasoning of the 2018 FTT (and agreeing with it) when it was the 2018 FTT’s conclusion on the issue of the determinacy of the UT2 SDM findings which meant HMRC’s second strike out application had to be rejected.

It is not therefore necessary for us to reach a concluded view on whether the FTT was wrong to rely on a point that HMRC’s case necessarily involved dishonesty on the basis of the arguments HMRC raised.

In conclusion the FTT was correct to dismiss HMRC’s strike out application. It ought to have rejected it on the basis HMRC’s second strike out was an abuse of process.

We can accordingly deal briefly with the appellants’ argument that we had no jurisdiction to consider HMRC’s cross-appeal, because no strike out application was before the FTT. While we agree with the appellants it is open to us to consider this argument despite permission having been granted for HMRC to proceed with their cross-appeal (see CF Booth Limited v HMRC [2022] UKUT 00217) at [73]), it is clear the appellants’ argument must be rejected on its merits. There was an application to strike out, or certainly an application the FTT was entitled to treat as an application, before the FTT. The FTT Decision recorded (at [7]) there was an application to strike out contained the Preliminary Issues Statement of Case of 6 January 2020 (at [52] to [58] of that document) which HMRC had been directed to file by Judge Poole’s directions leading up to the preliminary issues hearing. The FTT explained (at [8]) why it rejected the appellants’ objection based on no formal application having been served (in short because the appellants had had adequate notice, their objection was very late, and the overlap with the other issues in the hearing). That was an exercise of case management discretion which was plainly open to the FTT and in relation to which the appellants’ argument have not identified any error of law.

The appellants’ appeals against the 2020 FTT decision’s refusal to bar HMRC are dismissed. So too, HMRC’s cross-appeal against the 2020 FTT decision’s refusal to strike out the appellants’ case is dismissed.

The result is that Mr Parnham’s and Mr Wild’s appeals must proceed before the FTT. The further case management is a matter for the FTT, but we would strongly encourage the parties to cooperate with the FTT in agreeing directions which now get the matter set down swiftly for a substantive hearing.