London Cellular Communications Ltd v Revenue & Customs [2014] UKFTT 272 (TC)
FTT-Tax
London Cellular Communications Ltd v Revenue & Customs
[2014] UKFTT 272 (TC) · 2014-03-17
[3]“[3] Any evidence, to be admissible, must be relevant. Contested trials last long enough as it is without spending time on evidence which is irrelevant and cannot affect the outcome. Relevance must, and can only, be judged by reference to the issue which the court (whether judge or jury) is called upon to decide. As Lord Simon of Glaisdale observed in Director of Public Prosecutions v Kilbourne [1973] AC 729, 756, ‘Evidence is relevant if it is logically probative or disprobative of some matter which requires proof … relevant (ie. logically probative or disprobative) evidence is evidence which makes the matter which requires proof more or less probable’. … [5] The second stage of the enquiry requires the case management judge or the trial judge to make what will often be a very difficult and sometimes a finely balanced judgment: whether evidence or some of it (and if so which parts of it), which ex hypothesi is legally admissible, should be admitted. For the party seeking admission, the argument will always be that justice requires the evidence to be admitted; if it is excluded, a wrong result may be reached. In some cases, as in the present, the argument will be fortified by reference to wider considerations: the public interest in exposing official misfeasance and protecting the integrity of the criminal trial process; vindication of reputation; the public righting of public wrongs. These are important considerations to which weight must be given. But even without them, the importance of doing justice in the particular case is a factor the judge will always respect. The strength of the argument for admitting the evidence will always depend primarily on the judge's assessment of the potential significance of the evidence, assuming it to be true, in the context of the case as a whole. [6] While the argument against admitting evidence found to be legally admissible will necessarily depend on the particular case, some objections are likely to recur. First, it is likely to be said that admission of the evidence will distort the trial and distract the attention of the decision-maker by focusing attention on issues collateral to the issue to be decided. This is an argument which has long exercised the courts … and it is often a potent argument, particularly where trial is by jury. Secondly, and again particularly when the trial is by jury, it will be necessary to weigh the potential probative value of the evidence against its potential for causing unfair prejudice: unless the former is judged to outweigh the latter by a considerable margin, the evidence is likely to be excluded. Thirdly, stress will be laid on the burden which admission would lay on the resisting party: the burden in time, cost and personnel resources, very considerable in a case such as this, of giving disclosure; the lengthening of the trial, with the increased cost and stress inevitably involved; the potential prejudice to witnesses called upon to recall matters long closed, or thought to be closed; the loss of documentation; the fading of recollections. It is, I think, recognition of these problems which has prompted courts in the past to resist the admission of such evidence … In deciding whether evidence in a given case should be admitted the judge's overriding purpose will be to promote the ends of justice. But the judge must always bear in mind that justice requires not only that the right answer be given but also that it be achieved by a trial process which is fair to all parties.”18. Lord Phillips said at [11] of O’Brien that it was a consideration of general application that “evidence should not be admitted if its probative weight is insufficient to justify the complexity that it will add to the trial.” At [43] he said, “In each case, there is a need to exert disciplinary control to avoid unbalancing the proceedings by the adducing of evidence of only marginal relevance.”19. I accept that the jurisdiction of the Tribunal in an appeal against a refusal by HMRC to exercise their discretion is supervisory. I also accept that the Tribunal’s jurisdiction must be exercised in relation to materials that were before HMRC when the decision that is the subject of the appeal was made rather than in relation to later material (see the discussion of the point in Taygroup Ltd v HMRC [2013] UKFTT 336 (TC) at [27] – [30] and the cases cited therein). That does not necessarily mean that the evidence that LCC now seeks to adduce is irrelevant. The decision that is appealed is not the initial decision of 18 July 2011 but the decision in the letter dated 28 February 2012. There are two elements to that decision: first, that the simplified retail invoices issued by Apple UK for the iPhones were invalid and thus LCC was not entitled to deduct the VAT incurred on buying the iPhones; and, secondly, that LCC had not demonstrated that the individuals who purchased the iPhones were employees of LCC at the time and, for that reason, HMRC refused to exercise their discretion and accept the Apple UK invoices as alternative evidence. The first issue is a question of law and in relation to it, the Tribunal has full appellate jurisdiction. In relation to the second issue, the Tribunal’s jurisdiction is supervisory and is confined to consideration of the information that was available to HMRC at the time. The further evidence of Chandrakant and Saryu that LCC now seeks to adduce relates to the second issue and, specifically, whether they were employees of LCC when they purchased the iPhones. The further evidence of Gitesh and Neeta does not relate to their employment status as there does not appear to be any dispute that they were employees of LCC at the relevant time. Their evidence, if accepted by the Tribunal, shows that Gitesh and Neeta bought iPhones from Apple UK using their credit or debit cards.20. The review decision of 28 February 2012 was made in the light of further submissions and evidence provided on behalf of LCC. Specifically, the email of 25 May 2011 from Neeta to Ms Ndoinjeh stated that Chandrakant and Saryu were employees of LCC. A letter dated 28 October 2011 from Veracis to Ms Ndoinjeh stated that the employees used their own credit cards to purchase the iPhones. The letter dated 19 December 2012 from Veracis to HMRC asking for a review stated that the employees who were family members used their own credit cards to purchase the phones. Although the evidence of Chandrakant and Saryu and the credit card and bank statements that Gitesh, Neeta and Chandrakant have produced were not before Ms Ndoinjeh or Mr Lamb at the time of their decisions, there was material that showed that Chandrakant and Saryu were employees and that they, with Neeta and Gitesh, used their own cards to purchase iPhones. HMRC did not accept that evidence. It appears to me, without deciding the point, that the further evidence, which LCC now seeks to adduce, could corroborate the evidence that it provided for the purposes of the review. The further evidence may be relevant to the issue of whether HMRC’s decision not to exercise their discretion to accept alternative evidence of input tax was exercised reasonably. I consider that, having in mind the overriding objective and specifically the need to avoid delay so far as compatible with proper consideration of the issues, it is clearly more appropriate for the Tribunal that will hear the appeal to determine whether the further evidence is relevant. As I have concluded that the further evidence may be relevant and that it is appropriate for the Tribunal that will hear the appeal to determine the issue of relevance, I consider that the further evidence should be admitted, subject to the matters discussed below. Late service and effect of delay21. In McCarthy & Stone , HMRC applied, after a time limit had already expired, for an extension of time to serve a notice of appeal on the Upper Tribunal. I considered the guidance given by the Court of Appeal in Andrew Mitchell MP v News Group Newspapers Ltd [2013] EWCA Civ 1537 on how the courts should approach applications for relief from the consequences of a failure to comply with rules, practice directions and court orders following the coming into force of the new version of rule 3.9 of the Civil Procedure Rules (“CPR”) on 1 April 2013. I decided that, although the CPR do not apply to tribunals, the Upper Tribunal should adopt the same approach to compliance with rules, directions and orders as the courts that are subject to the CPR. That approach meant that, while having regard to all the circumstances of the case and the need to deal justly with the application, the Upper Tribunal should give greater weight to the need for litigation to be conducted efficiently and the need to enforce compliance with the UT Rules, directions and orders than to the other factors. I apply the same approach to the application to admit further evidence in this case.22. I accept that Chandrakant and Saryu did not provide their witness statements in March 2013 because of a combination of Chandrakant’s ill health and family circumstances. I regard those factors as a good reason for the witness statements not being provided at that time. I also find that the situation changed at some point between March and early December 2013 although I do not know when. Having decided that Chandrakant and Saryu should provide witness statements and having attended a meeting at the offices of Bark & Co on 6 December 2013, I am not satisfied that there was any good reason why the statements were not finalised before the end of January 2014 or why an application to admit the evidence of Chandrakant and Saryu was not made before end of February. It appears to me that the application was not made promptly.23. In the case of the further evidence produced by Gitesh and Neeta, Mr Warner frankly acknowledged that it was not produced earlier because of an oversight. No excuse was offered for this failure to produce relevant evidence at the required time. Once LCC’s solicitors became aware that there might be further evidence that had not been disclosed, Gitesh and Neeta located it within a month and the application to adduce the evidence was made promptly thereafter. In the circumstances, I accept that a period of a month to find the bank and credit card statements was reasonable but this does not excuse the earlier failure to produce evidence within the time limit directed by the Tribunal.24. Notwithstanding the matters described in the previous two paragraphs, I do not consider that it would be right to refuse to grant LCC permission to admit the further witness statements and their exhibits. The circumstances of this case are very different to those considered by the Court of Appeal in Mitchell and, more relevantly, in Durrant v Chief Constable of Avon & Somerset Constabulary [2013] EWCA Civ 1624 where the sanctions for failure to comply were clearly stated. In Mitchell , the sanction for failure to file a costs budget on time was clearly set out in the CPR. Durrant was an appeal against a decision to grant relief from a sanction for non-compliance with an order requiring service of witness statements by a specified date. The order in Durrant was as follows:
“Defendant do file and serve any witness statements by 4 pm on 12 March 2013. The Defendant may not rely on any witness evidence other than that of witnesses whose statements have been so served.”
That order was made in the context of repeated failure to file witness statements on time. The defendant served two witness statements a day late, four two months late and two a few days before trial, when it applied for relief. The Court of Appeal acknowledged that posting the first two witness statements just before the service deadline might be characterised as a trivial non-compliance (and thus excusable under Mitchell ). However, this had to be weighed against the facts that: (1) The defendant had failed to comply with the original deadline for service; (2) The order had specified a sanction for non-compliance; and (3) The defendant's explanations came nowhere near providing a good reason for non-compliance which was not the result of any unforeseeable event but of incompetence. 25. In this case, the directions dated 28 January 2013 did not state what consequences would follow from a failure to serve witness statements by the specified date. That factor distinguishes this case from Durrant . Where case management directions provide for a sanction for failure to serve witness statements on time, as was the case in Durrant , then I would expect that sanction to apply if there is a default that is not trivial and there is no good explanation for it. Further, LCC failed to comply with the original deadline of 22 March and the deadline for HMRC to serve their witness statements was extended on several occasions by application (including one after expiry of deadline and two on the due date). The HMRC witness statements were eventually served some five months after the original due date. As the directions in this case did not specify any sanction for failing to serve witness statements by the due date and as the specified date for service in the case of HMRC was repeatedly extended without sanction or condition being imposed, I consider that it would be neither just nor fair to refuse LCC’s application to serve and rely on the further evidence. In reaching this conclusion, I take account of the need for litigation to be conducted efficiently and the need to enforce compliance with the UT directions but conclude that, in all the circumstances of the case, it would be just to allow LCC to be able to rely on the further evidence. 26. I take note of Ms Nathan’s concerns that admitting the additional evidence creates a risk that the hearing of the appeal will require more than the three days allotted. Ms Nathan freely admitted that the concern did not relate to the additional evidence of Gitesh and Neeta, which could be dealt with quickly in the course of cross-examination, but the new evidence of Chandrakant and Saryu. I was told that the parties had not agreed a timetable for the hearing, which is understandable in relation to a relatively short case. In view of the introduction of new evidence, however, I consider that it would be useful for the parties to agree a timetable to try to ensure that the submissions and evidence can be heard in three days. Accordingly, I direct that the parties should try to agree such a timetable appeal or should submit separate timetables to assist the Tribunal in managing the hearing. Costs 27. I can deal with LCC’s application in relation to the sharing of the costs of preparing the bundles for hearing quite shortly. The effect of rule 10 of the FTT rules is that the FTT cannot direct that one party shares the costs of another party in complying with a case management direction except in Complex cases where the taxpayer has not opted out, where a party or their representative has acted unreasonably, or a wasted costs order is appropriate. That was the conclusion reached by the Upper Tribunal in HMRC v Eclipse Film Partners No 35 LLP [2013] UKUT 141 (TCC) , which has recently been upheld by the Court of Appeal [2014] EWCA Civ 184 . Accordingly and as anticipated by Mr Warner, I refuse to make any direction as to the sharing of costs because the Tribunal has no power to do so. Even if I had the power to make such an order, it appears to me that the application is made rather late in the day and it would not be appropriate to direct costs sharing where the appellant is professionally represented and, presumably, able to bear the costs of such representation. Further, I decline to express any view on whether HMRC should voluntarily contribute to LCC’s costs of preparing the bundles. That is a matter for HMRC. Conclusion 28. For the reasons set out above, I make the following directions: DIRECTIONS The Tribunal hereby DIRECTS pursuant to rules 5(2), 5(3)(d), 6 and 15(2) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 that: (1) The time limit for the Appellant to serve upon the Respondents the statements of all witnesses on whose evidence they intend to rely in compliance with Direction 2 of the Directions released on 28 January 2013, as amended, is extended until 5:00 pm on 24 February 2014; (2) By no later than 5:00 pm on Monday 17 March 2014, the Appellant is directed to provide the Respondents with a draft timetable for the three day substantive hearing in this matter listed between 24 and 26 March 2014 (“the Substantive Hearing”). (3) By no later than 5:00 pm on Tuesday 18 March 2014, the Respondents are directed to provide their comments on the draft timetable provided by the Appellant. (4) In the event that the parties are able to agree a timetable for the Substantive Hearing, the Appellants are directed to provide a copy of that joint agreed timetable to the Tribunal by 12:00 on Wednesday 19 March 2014. (5) In the event that the parties are unable to agree a joint timetable by the time listed at direction 3 above, each party is directed to provide the Tribunal with its proposed draft timetable for the Substantive Hearing by no later than 5:00 pm on Thursday 20 March 2014. (6) In the event that the parties are unable to agree a joint timetable for the Substantive Hearing by the time stated at direction 4, either party has liberty to apply to the Tribunal for an adjournment of the Substantive Hearing. GREG SINFIELD TRIBUNAL JUDGE RELEASE DATE: 17 March 2014