Golding, R (on the application of) v General Commissioners of Income Tax & Anor [2011] EWHC 2435 (Admin)

Case No CO/238/2009[2011] EWHC 2435 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
ADMINISTRATIVE COURT
Venue Leeds Combined Court
1 Oxford Row
Venue LeedsDate Wednesday, 4 May 2011
West Yorkshire
LS1 3BG
Before
HIS HONOUR JUDGE BEHRENS
Between
THE QUEEN on the application of GOLDINGClaimantGENERAL COMMISSIONERS OF INCOME TAXDefendantsHER MAJESTY’S REVENUE AND CUSTOMSInterested Party
(DAR Transcript ofWordWave International LimitedA Merrill Communications Company165 Fleet Street, London EC4A 2DYTel No: 020 7404 1400 Fax No: 020 7404 1424Official Shorthand Writers to the Court)
Mr Golding appeared in person for in personMr Sachdeva (instructed by the Treasury Solicitor) appeared for Defendant.Mr Serr (instructed by HMRC) appeared for Interested Party
JudgmentHHJ Behrens:
[1]This is an application by Mr Golding for judicial review of a decision made by the General Commissioners of Income Tax on 3 December 2008 when they refused to close an enquiry that had been commenced by an Inspector, Mr Guy, in respect of issues arising out of Mr Golding's return for 2006/2007. The basis of the application is that the hearing was unfair on a number of grounds to which I shall refer later in this judgment, that the chairman refused to admit certain documents and that the chairman did not in fact conduct a fair hearing and/or was biased.[2]Before I come to the hearing of the General Commissioners, it is necessary to mention the considerable background to this case. The story starts in, I think, 2005 or 2006 with a business venture carried out by a company, West Yorkshire Live Events Limited (referred to in some of the documents as WYEL ("the company"). That business venture involved the performance of well-known singers, Jose Carreras and Katherine Jenkins, at various football stadia around the country. On any view that business venture was a failure and there were no performances. Subsequently the company went into liquidation. There were five directors of the company. Two of those are relevant for present proceedings. One was Mr Agus and the other was Mr Golding. Mr Golding was a self-employed builder and this particular venture was outside his normal range of activities.[3]Both Mr Agus and Mr Golding employed Dr Milton as their tax adviser. Dr Milton is the principal of a company called Milton & Co and although he has no formal accountancy qualifications, he has an NVQ in Accountancy and Public Practice and other qualifications. He also has considerable experience in representing clients in various tax tribunals. As I have indicated, he represented both Mr Golding and Mr Agus.[4]On 10 July 2007 the Revenue received Mr Golding's tax return for 2006 and 2007. That tax return showed modest profits, I think of some £17,000, then sought to offset against those losses which had been incurred, so it is said by Mr Golding, in the concert venture to which I have referred. In paragraph 3.88 and 3.89 of that tax return the suggested losses were, I think, of the order of £28,000.[5]One of the points made by Mr Golding is that, following the submission of that tax return, nothing happened so far as Mr Golding is concerned until July 2008. However, Mr Agus had also submitted a tax return in which he had claimed losses of £100,000 out of the venture, and that provoked an enquiry into Mr Agus's tax return, that enquiry being carried out by an inspector, Mr Guy. That enquiry commenced in October 2007.[6]There was correspondence between Mr Guy and Milton & Co between October 2007 and at least January 2008. One of the documents relied on heavily by Mr Golding and indeed Mr Milton is a letter dated 17 January 2008, which makes a number of points about the claim. There are, however, three paragraphs to which my attention has been drawn:
"I am not sure what you expect me to say [this is Mr Guy talking] further about the loss claim. [That of course is the claim to which I have referred]. My letter of 6 December complained I have not seen any documentary evidence that the loss was incurred by Mr Agus on a personal basis. The documents I hold indicate the loss was in fact suffered by West Riding Live Events Limited. [It should have been West Yorkshire Live Events, but nothing turns on that.] No accounts have been submitted for the company which went into liquidation on 25 April 2007. The claim for losses will, in the absence of any further documentary evidence in support of the claim that the loss was incurred by your client personally, be formally refused when my enquiry is closed. In order that there is no doubt in your mind, I confirmed that I do not accept the loss claim of £100,000 in its entirety. I do not accept any loss claim for either 2005 and 2006/2007."
[7]Pausing there, the £100,000 had been divided between two tax years. It is said that those three paragraphs demonstrate bias against Mr Agus, though the demonstration of bias is said to be that he was expressing a view as to the merits of the loss claim. But it is to be noted that he has drawn to the attention of Dr Milton the lack of documentary evidence. It is drawn to Dr Milton’s attention the fact that he requires further documentary evidence in support of the claim that it was incurred personally.[8]The final paragraph, to which Dr Milton drew my attention during the course of cross-examination, is to my mind not an indication that Mr Guy's mind was closed as to the result. He was expressing, as in my view he was entitled to do at that stage of the enquiry, a provisional view in relation to his attitude.[9]In fact, as I have been told, further evidence was submitted to Mr Guy in the form of 50 pages of witness statements, all of which were said to support the view that Mr Agus was acting in a personal capacity. Mr Guy did not accept that they had so demonstrated. Mr Guy's view was subsequently upheld, albeit not until 9 October 2010 when an appeal against an assessment by Mr Guy was dismissed, and the tribunal indicated that they also attached no weight to the 50 pages of witness statements in support of the claim that Mr Agus was acting personally. To my mind that passage lends no support to an allegation that Mr Guy was biased against Mr Agus. Far less does it indicate that Mr Guy is biased against Mr Golding,but I will come to that later.[10]At some stage during 2008 Dr Milton wrote to Mr Guy requiring him to close the enquiry in relation to Mr Agus. I am told, although I do not think I have seen documents, that an application was made to the General Commissioners to obtain closure of that enquiry. In any event, that enquiry was closed and on 31 August 2008 Mr Guy made an assessment on Mr Agus which in effect rejected the claim for losses. As I have noted an appeal against that assessment failed on 9 October 2010.[11]Meanwhile, on 31 July 2008 Mr Guy instituted an enquiry against Mr Golding. The letter of 31 July stated that the enquiry would cover the whole of the return and was accompanied by a formal notice under section 9A of the Taxes Management Act 1970 requiring “the following information or information to be supplied by 15 September 2008”.[12]The requested information was divided into ten sub-paragraphs and asked for a number of records which are referred to in the enquiry. It is not necessary to go through the first four of those. No 5 asks for full details of the loss of £28,000. And No 6 asks for details of bank statements relating to the withdrawals amounting to the £28,000 and asked for copies of the contracts and full details of Mr Golding's involvement in the venture. Thus, at least part of the enquiry relates to the £28,000.[13]Dr Milton declined to answer the questions and on 8 August invited the General Commissioners to list the enquiry for a hearing for a closure notice on the grounds that the enquiry was an attempt to pervert the course of justice by virtue of witness intimidation. It is to be noted of course that attempt was only eight days after the enquiry had been opened. The witness intimidation was, it is said, an attempt to intimidate Mr Golding because of the ongoing proceedings in relation to Mr Agus. At that time of course there had not been an assessment, but there was the closure and plainly there were ongoing proceedings. It is said that Mr Golding was to be a witness in the ongoing proceedings and this enquiry might intimidate him.[14]The Inspector wrote back on 14 August stating that he failed to understand the allegation of witness intimidation, but he then set out the reasons for the enquiry, which were two:
"(1) Your client allegedly appears to have returned less income than he should have according to the CIS returns HMRC holds; and (2) There is a loss claim, which at face value seems a little out of your client's normal trading activities. HMRC are duty bound to ask for reasonable evidence to substantiate the claim."
[15]That provoked a longer letter from Dr Milton. It is not necessary for me to go through it in detail, but he refers in it to a Backhouse (not sure citation of this) case (to which reference had been made in some detail today) where the HMRC are alleged deliberately to have abused its authority. Dr Milton asserted that it was wholly unjust that a key witness was to be put to enquiry by an individual who had already expressed a clear bias and who represented a body that had a policy of unlawful intimidation of taxpayers and witnesses. I have already indicated my view that he has not expressed a clear bias and, as has appeared, he had in my view provided a reason for the enquiry.[16]The hearing, which before the General Commissioners, took place on 3 December 2008. There is a conflict of evidence as to precisely what happened at that hearing. To some extent that conflict of evidence is rather less than I had perhaps anticipated, because there is before the court a detailed note made by the clerk of the hearing as to what happened at that hearing and in many respects Dr Milton agreed with the evidence in that document. He had points that he wished to make about timings. For example, according to this note, the opening submission of Dr Milton lasted about an hour and Dr Milton told me that in fact his opening submission lasted 20 minutes, but he then accepted he was allowed another 40 minutes to present his case. He submitted that he was interrupted in the course of his submissions.[17]It is not right, however, to say that there is no dispute as to what happened. Following the hearing, the application for a closure notice was dismissed and the reasons that were given were sent by letter on 4 December, that:
"1. To request a hearing for a Closure Notice within one week of the enquiry being opened is highly unusual and inappropriate in this case. 2. None of information requested by HM Revenue and Customs in their letter dated 31 July 2008 has been officially provided. 3. There has been no undue delay on the part of the Revenue in opening the enquiry. 4. The Commissioners did not accept on the evidence before them that the Enquiry inspector was acting in bad faith or had any ulterior motive."
[18]Pausing there, the first three of the reasons given by the Commissioners seem to me to be wholly uncontroversial. It is highly unusual, I would imagine, for a closure notice to be issued within a week of an enquiry being opened when none of the information requested had been formally supplied. The period of time from the submission of the return, that is to say July 2007 to July 2008, does not seem to me to be an undue delay. So the first three reasons appear to me to be perfectly sound reasons, so that the only possible challenge can be to the fourth reason. That challenge is made mainly in a letter dated 6 December 2008 by Dr Milton and that contains a number of allegations about the conduct of the hearing and including:(1) that there was hostility from the chairman;(2) that Dr Milton had written to the defendant expressing concerns at the suitability of the Wakefield bench having been commissioners who had heard another case in which he had been involved;(3) that the chairman had accepted that Mr Guy had expressed a clear bias;(4) that the claimant was due to appear as a witness in the Agus appeal;(5) that the defendant knew that he had sent Dr Milton 44 pages of documents from the Agus case. This showed completely unreasonable conduct on the part of Mr Guy and clear bias by Mr Guy against Mr Agus, whose case turned on identical facts, which confirmed that the same bias must extend to the claimant.(6) that the bias was accepted by the chairman;(7) that his opening address was most abruptly curtailed so he could not explain all the facts of the appeal;(8) that he intended to make various statements when he was required to move on;(9) that he was not permitted to introduce 44 pages of evidence in relation to the Agus case and 25 pages of evidence or more relating to the Backhouse case;(10) that he became confused;(11) that he exchanged looks with the clerk when Dr Milton was making his submissions;(12) that the Inspector of Taxes conducting the case on behalf of the Revenue was permitted to adduce a skeleton argument which Dr Milton had not seen before;(13) that the inspector, Mr Smith, was permitted to make submissions about the Agus case; that he was prevented from adducing evidence of bad faith.[19]The allegations which related to the conduct of the enquiry promoted a number of witness statements on behalf of the defendant and/or interested party. In particular, I have evidence from Mr Thornton, the chairman. I have evidence from Mr Ernshaw(?), one of the other members of the tribunal. The third member was written to but expressed a view that it would be better for her not to provide a witness statement because of the lapse of time. There was evidence from Mr Smith, coupled with a relatively contemporaneous note that he made after receipt of the letter from Dr Milton to which I have referred.[20]None of the contemporaneous other documents support the allegations that are being made by Dr Milton in relation to the conduct of the enquiry. Dr Milton's response to that is that “They would say that, wouldn’t they?” It is, however, clear that Dr Milton was permitted to address the tribunal for a period of approximately an hour. Whether that is properly regarded as an opening submission or regarded as the detailed submissions in support of the application perhaps does not matter, but he was permitted to address the court for approximately an hour. The whole hearing only took two and a half hours.[21]It is equally right to say that the 44 pages of documents relating to the Agus matter, including the letter of 17 January, were sent in advance to the tribunal and, according to the chairman, were read by the tribunal. It is right that the chairman would not listen to evidence in relation to the Backhouse appeal, but a number of points can be made about the Backhouse matter. Mr Backhouse had no connection with Mr Golding. His case is completely different. There was a different inspector and the allegations in that case bore no relation to the allegations in this case. It has not been established before me that the Revenue behaved in the Backhouse case in the way that Dr Milton alleges that they did. But, even if that were established, it was of no relevance to the application for a closure notice. Otherwise that could happen in every other case. It simply cannot have been relevant and if, as seems to have been the case, the chairman invited Dr Milton to move on that was a correct decision by the chairman. The documents were simply not relevant to the issue that they had to decide.[22]The allegations that the chairman was biased, therefore, it seems to me, really to boil down to the fact that the decision went against Dr Milton. As I have indicated, when one looks closely at the allegations that were being made against Mr Guy there was no foundation to them. Dr Milton says that they are fairly founded on the timing of the enquiry, which is to say that Mr Golding was to be a witness in the Agus enquiry.[23]However there are a number of relevant points that can be made against these submissions. First, that Mr Golding’s claim to deduct losses of £28,000 arose out of the same transactions as those that gave rise to Mr Agus’s claim. To my mind, it is by no means surprising that the Revenue should wish to enquire into both of the claims so that there is a perfectly reasonable explanation for the enquiry. ,[24]Second the allegation that Mr Guy had a closed mind seem to me to be wholly unfounded. My view, therefore, is that, looked at objectively, all four of the reasons given by the General Commissioners were perfectly sound and valid reasons.[25]As is pointed out to me very helpfully by Mr Sachdeva in his skeleton argument, the law in relation to bias is summarised in the decision of Lawal v Northern Spirit [2003] UKHL 35. The court must first ascertain all of the circumstances which have a bearing on the suggestion the judge was biased. It must ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility or a real danger, the two being the same, that the tribunal was biased. That test has been applied in the context of an allegation of apparent bias against the General Commissioners of Income Tax.[26]There is no suggestion of course that the General Commissioners had any interest in this particular case and therefore no reason to be biased. The only suggestion is that they conducted the hearing in a way, which, according to Dr Milton, was unfair. It has to be borne in mind that it was an application that was extremely unlikely to succeed for the reasons given in paragraph 1 of the decision and that Dr Milton was attempting to adduce evidence which was inadmissible or was irrelevant.[27]In my view, there is no substance to the claim of bias in this case. There is no substance in the claim that there was not a fair hearing before the General Commissioners.[28]In those circumstances, it is not necessary for me to go on to consider the two other grounds which are relied on by the defendants. They are that, in any event, the claim that the hearing was unfair has been waived. And, secondly, that there is an alternative remedy. That is to say the decision could and should have been appealed.[29]I prefer to consider this case, as I have done, on the merits. I am quite satisfied that there is no substance to the application. It is dismissed. MR SACHDEVA: My Lord, would you give me half a minute to take instructions? (Pause) MR SERR: Your Honour, whatever my learned friend is contemplating (inaudible) does not certain the interested party or my clients. Can we be discharged? JUDGE BEHRENS: You are content for me to deal with what may well be an application for permission to appeal in your absence? I would not be in the least surprised if there was one. MR SERR: My Lord, before I make any -- JUDGE BEHRENS: As far as I am concerned you may be released immediately. If you have no application you wish to make, you may go. MR SERR: I have no application to make and I am not sure as an interested party I would have any say on an application for permission to appeal. JUDGE BEHRENS: You have my permission to leave. MR SERR: Thank you. (Counsel left court) (Pause) MR SACHDEVA: My Lord, I have an application for costs in three parts. The first is the simplest part, which is our costs in principle for the claimant. The second aspect to it is that we are here on an indemnity basis. And the third aspect of it is that we ask for the joinder of Dr Milton as party to this litigation because we intend to make an application for a costs order under section 51 of the Supreme Courts Act which we will undertake to issue relatively shortly, which we hope will lead to an half hour telephone hearing by which the trial judge, your Lordship, can quickly (inaudible) fairly shortly determined rather than with (inaudible) but the essence of that will be that -- JUDGE BEHRENS: I can assure you that there will not be a telephone hearing in relation to that. MR SACHDEVA: My Lord, be that as it may -- JUDGE BEHRENS: An application under section 51 is to my mind quite an important application. I am not going to stop you from making -- MR SACHDEVA: My current instructions are -- I mean, there is a proportionality issue here given I think -- the costs schedule that I will be handing up I think comes to about £12,000 in total, but that is the third aspect. I am not sure I need to deal with it right now. The only thing I am going to ask your Lordship for was an order joining Dr Milton to the proceedings so that we may make that application. That is all I was going to ask you. JUDGE BEHRENS: You have to set out in writing the grounds on which -- MR SACHDEVA: Yes. I need to set out the grounds and file witness evidence. JUDGE BEHRENS: Yes. MR SACHDEVA: And refer to case law because it is a highly unusual -- JUDGE BEHRENS: I know. I am well aware of all that. MR SACHDEVA: Indeed, my Lord. JUDGE BEHRENS: The only question is, you need my permission, do you? MR SACHDEVA: To join Dr Milton, yes. JUDGE BEHRENS: Yes, thank you very much. MR SACHDEVA: Anyway, that is the third aspect. The costs in principle is the first point and in support of that there is a letter in the bundle where we wrote on. JUDGE BEHRENS: You succeeded. MR SACHDEVA: Indeed. There it is. Those are the points I wish to make. JUDGE BEHRENS: Anything you wish to say about costs, Mr Golding? MR GOLDING: Sir, I cannot afford it. JUDGE BEHRENS: You cannot afford it? MR GOLDING: No. JUDGE BEHRENS: Thank you very much. In my view, this is a case where the defendant has succeeded. There should be an order for costs. It is also a case where Judge Grenfell granted permission. In those circumstances I do not myself think it is an appropriate case for costs on the indemnity basis. There will be an order for costs on the standard basis. MR SACHDEVA: My Lord, yes. There is the third aspect joining Dr Milton for our application for section 51 (inaudible). JUDGE BEHRENS: I am prepared to include a fourth element, which might involve in saving money, which is to say that if there were an application before me for a modest interim payment I might be willing to make an order for a modest interim payment, then you can decide whether you wish to go to the trouble of a formal assessment for the balance. MR SACHDEVA: My Lord, yes. JUDGE BEHRENS: That is my normal practice. Your letter says your costs are £7,000, so you have gone up £5,000 since your letter. MR SACHDEVA: I think they say £8,000. JUDGE BEHRENS: Do they? I read it very fast. It is a letter, attending and the skeleton arguments, is it not? MR SACHDEVA: This is prior to the skeleton being drafted. JUDGE BEHRENS: The only letter I’ve seen. Let me just have a look at it. MR SACHDEVA: My Lord, yes. JUDGE BEHRENS: No, it is not. I did say a letter I thought was £7,000. MR SACHDEVA: It is £7,000. JUDGE BEHRENS: You show me the letter; I am more than happy to believe I have misremembered it. MR SACHDEVA: No, no... (Pause) page 65, £7,000. JUDGE BEHRENS: That is what I thought. MR SACHDEVA:
“Incurred to date are in the region of £7,000”
. JUDGE BEHRENS: So what is "to date"? What is the date of that letter? MR SACHDEVA: That is 15 April. JUDGE BEHRENS: What are we today? MR SACHDEVA: We are now 4 May. Can I hand up an updated schedule. (Handed) JUDGE BEHRENS: Yes. MR SACHDEVA: My Lord, and the difference essentially is skeletons were not in, the bundle was not done and the hearings had not been attended, so costs have increased substantially since that estimate was put in, but that is only to be expected. And I think we would rather have a summary assessment of these costs rather than it going to detailed assessment and we will ask for that payment. If that is acceptable to the court, otherwise – JUDGE BEHRENS: When did you serve the schedule? MR SACHDEVA: Lunchtime today. My Lord, I think the fact is that these costs for a judicial review are extremely modest… JUDGE BEHRENS: Yes. MR SACHDEVA: … compared to what they could be had private parties been acting. JUDGE BEHRENS: I agree with all that. MR SACHDEVA: I should say that we are quite keen to avoid the expenditure of the costs of a detailed assessment, for instance should it come to that given the real possibility that (inaudible) -- JUDGE BEHRENS: That is why I propose to make an interim payment.. MR SACHDEVA: Indeed. If my Lord is -- JUDGE BEHRENS: … which will have the same effect. MR SACHDEVA: Indeed, -- to go down that route, I would ask for payment on account of I think £6,000 because there is no realistic prospect that we will -- unless there are some serious flaws in the schedule and we suggest there are not. JUDGE BEHRENS: Thank you. I take the view, Mr Golding, there is no possibility of the costs that you being ordered to pay be less than £6,000. I hesitate to say this because of embarrassment to (inaudible) but I think they will rather more than £6,000. I propose to order a detailed assessment of the defendant's costs, but to order under I think 44.3(8) that there be an interim payment of £6,000, payable within 14 days. MR SACHDEVA: I am most grateful, my Lord. JUDGE BEHRENS: I also propose -- Do you want to say anything, Dr Milton, before I decide whether to -- the effect of joining you raises the possibility that there will be an application against you for an order for costs of these proceedings. DR MILTON: I am saying it should not take place, my Lord. I have worked on this case without charge at all. I have not charged Mr Golding a single penny. I have merely done this to assist him at his request. I have not acted unreasonably. I am simply Mr Golding's friend and accountant. To make me responsible for the cost in the case, I suggest, would be extremely unfair given that I have simply been helping Mr Golding as a friend and, as I have said, have not charged one penny for anything that has been done, even the Commissioners hearing. In the conduct of the investigation I have acted completely voluntarily. JUDGE BEHRENS: Anything you want to say about that, Mr Sachdeva? MR SACHDEVA: My Lord, all I seek is an order enabling us to make the application. The merits of the application are not before the court at the moment, unless it is clearly unfounded. The basis on which the application will be made, if it is made, is that Dr Milton went beyond merely the role of an adviser and in some sense, in his own words, entered into this litigation as a joint enterprise. It was not simply the legal adviser leaving it down to the claimant to decide what to do at each stage. The only evidence in support of this case came from Dr Milton, not the claimant. Dr Milton was the only person who attended in December and for various other reasons we say that it is certainly not unarguable that (inaudible) should be made in this case. That is all we ask. JUDGE BEHRENS: Thank you very much. I take the view that it is not unarguable and I, therefore, will give you permission to join Dr Milton. I, however, propose to direct that any application for costs against Dr Milton be made within 28 days and that any evidence in support be filed within 28 days and that Dr Milton, if he wishes to answer it, will answer it within 28 days thereafter and the matter will then be re-listed before me for a further hearing, not by telephone. MR SACHDEVA: Thank you very much, my Lord. JUDGE BEHRENS: When you have seen Dr Milton’s (inaudible) I would like you to give the court an estimate of the time. Mr Golding, the only other matter is the question of an appeal. I do not know how far you have had any advice about appeals. The position is that to appeal my order you require permission. That permission has to come either from me or the Court of Appeal. You are not obliged to ask me for permission to appeal, but if you were to ask me and I were to give it you would not need to ask the Court of Appeal. But if you are going to ask, now is the time to ask. Mr Golding: I would ask for permission to appeal. JUDGE BEHRENS: I refuse permission to appeal, so you now have to go to the Court of Appeal. Thank you very much. I take the view that my own decision was within my discretion. And I do not think -- well, for the reasons I give in my judgment I do not think the Court of Appeal would interfere. Thank you very much. You need to appeal by 25 May and make your appeal to the Court of Appeal.