“(a) HMRC’s applications for FTT approval of third party information notices to be served on [the Individuals] (“HMRC’s Applications”) should not be heard in private to the exclusion of [Companies and the Individuals] . (b) The [Companies] and/or the [Individuals] should be given notice of where and when the hearing of HMRC’s Applications will take place. (c) The [Companies] and/or the [Individuals] should be given a summary of the representations that HMRC propose to make to the FTT at the hearing of HMRC’s Applications and copies of any documents supplied by HMRC to the Tribunal. This information and documents should be provided no less than 3 working days before the date of the hearing. (d) The [Companies] and/or the [Individuals] should be given the opportunity to make representations to the FTT in respect of HMRC’s Applications and the question of whether the FTT can or should approve the information notices.”
“12 There is no general exception to open justice where privacy or confidentiality is in issue. Applications will only be heard in private if and to the extent that the court is satisfied that by nothing short of the exclusion of the public can justice be done. Exclusions must be no more than the minimum strictly necessary to ensure justice is done and parties are expected to consider before applying for such an exclusion whether something short of exclusion can meet their concerns, as will normally be the case: Ambrosiadou v Coward [2011] EMLR 419, paras 50–54. Anonymity will only be granted where it is strictly necessary, and then only to that extent. 13. The burden of establishing any derogation from the general principle lies on the person seeking it. It must be established by clear and cogent evidence…”
“34 … In my opinion any taxpayer has a reasonable expectation of privacy in relation to his or her financial and fiscal affairs, and it is important that this basic principle should not be whittled away. However, the principle of public justice is a very potent one, for reasons which are too obvious to need recitation, and in my judgment it will only be in truly exceptional circumstances that a taxpayer's rights to privacy and confidentiality could properly prevail in the balancing exercise that the court has to perform. 35 t is relevant to bear in mind, I think, that taxation always has been, and probably always will be, a subject of particular sensitivity both for the citizen and for the executive arm of government. It is an area where public and private interests intersect, if not collide; and for that reason there is nearly always a wider public interest potentially involved in even the most mundane-seeming tax dispute. Nowhere is that more true, in my judgment, than in relation to the rules governing the deductibility of expenses for income tax. Those rules directly affect the vast majority of taxpayers, and any High Court judgment on the subject is likely to be of wide significance, quite possibly in ways which may not be immediately apparent when it is delivered. These considerations serve to reinforce the point that in tax cases the public interest generally requires the precise facts relevant to the decision to be a matter of public record, and not to be more or less heavily veiled by a process of redaction or anonymisation. The inevitable degree of intrusion into the taxpayer's privacy which this involves is, in all normal circumstances, the price which has to be paid for the resolution of tax disputes through a system of open justice rather than by administrative fiat.”
“Furthermore, that the principle of open justice applies in its full rigour at the interlocutory stage and not just at trial, is clear from the statement of the law by Lord Neuberger MR in the Practice Guidance (Interim Non-disclosure Orders)[2012] 1 WLR 1003 .”
“ Taking account of the comments of Toulson LJ in Guardian News and the provisions of the UT Rules, I have concluded that the UT has an inherent power to grant a third party access to any documents relating to proceedings that are held in the UT records and has a duty under common law to do so in response to a request by an applicant unless the UT considers, on its own motion or on application by one or more of the parties, that any documents or information in them should not be disclosed to other persons. … It is clear from [85] of Guardian News , quoted above, that I must conduct a balancing exercise in which I evaluate the competing interests at issue in the application in the context of the facts of this appeal. I must weigh the purpose of the principle of open justice and the potential value of the material in advancing it against the need to deal with the appeal fairly and justly which is the overriding objective of the UT Rules and includes consideration of any risk of harm which access to the documents may cause ATL and others.”
“To my mind, applying fundamental principles and the Rules of the First-tier Tribunal (including the overriding objective), it is at least arguable that in cases where a precursor letter has been sent the points that the First-tier Tribunal is carrying out a monitoring role and the taxpayer and third parties do not have a right to an inter partes hearing do not mean that the First-tier Tribunal, as the monitor charged with ensuring that arbitrary conduct by the executive is avoided and making a decision that removes rights of appeal and founds penal consequences, cannot or should not do any of the following: (i) call for further explanation from the Revenue, (ii) insist that the taxpayer be given a copy of the summary of his representations that the Revenue propose giving to the First-tier Tribunal, (iii) call for further explanation or comment in writing from a taxpayer on his position or that summary, (iv) hold the hearing in public or direct that the taxpayer can attend to observe and make public what is said and done, (v) direct that a full record on what is said and done at any hearing and all documents put before the First-tier Tribunal are provided to the taxpayer, and (vi) permit the taxpayer to take part in the hearing.”
“2. The application originally came before me on19 September 2012 . The day before that, HMRC received certain representations from solicitors acting for a number of taxpayers whose affairs are the subject of the relevant enquiries. Those representations were settled by UK tax counsel. HMRC provided a copy of the representations to the Tribunal, and sought an adjournment of the application so that they could be fully considered by HMRC. 3. Although there is no provision of Schedule 36 for the consideration of representations by the taxpayer as opposed to the third party to whom the notice is to be addressed, the representations raised a number of fundamental issues as to the Tribunal’s jurisdiction. I therefore considered it right that consideration should be given to them, and I granted the adjournment.”
“68. The purpose of the statutory scheme is to assist HMRC at the investigatory stage to obtain documents and information without providing an opportunity for those involved in potentially fraudulent or otherwise unlawful arrangements to delay or frustrate the investigation by lengthy or complex adversarial proceedings or otherwise. It is inevitable in many cases, particularly where there are complex arrangements designed to evade tax, that at the investigatory stage it will be difficult, if not impossible, for HMRC to be definitive as to the precise way in which particular documents will establish tax liability. It is also clear that in many cases disclosure of HMRC's emerging analysis and strategy and of sources of information to the taxpayer or those associated with the taxpayer may endanger the investigation by forewarning them. 69. Those considerations explain the principal features of schedule 36 relating to the service of third party notices. In the first place, Parliament has deliberately chosen a judicial monitoring scheme rather than a system of adversarial appeals from third party notices, which could take years to resolve. Secondly, paragraphs 2 and 3 of schedule 36 make a clear distinction between the rights and obligations of (1) the taxpayer whose tax position HMRC wish to check, (2) the third party, and (3) any entity ("the non-taxpayer entity") whose documents or copies of whose documents are required to be produced by the third party or about whom information is sought from the third party. Common to the statutory treatment of all of them, however, is the very limited scope for objection by them to the request for production of the documents and information specified in the third party notice. 70. Paragraph 3(3)(e) of schedule 36 requires that the taxpayer has been given a summary of the reasons why HMRC's officer requires the information and documents. In contrast to the position of the third party, schedule 36 does not, however, require the taxpayer to be given any opportunity to make representations to HMRC opposing the request in the third party notice. 71. Consistently with the legislative objectives I have described, the giving of summary reasons to the taxpayer is not for the purpose of enabling the taxpayer to make representations directly or indirectly to the FTT. It was already established in RvA Special Commissioner ex parte Morgan Grenfell & Co Ltd [2002] TC 74 TC 511 in relation to the former scheme under section 20 of the TMA that, in the case of a notice to the taxpayer for production of documents, the fact the notice came at the investigatory stage as well as the need to avoid frustrating the intention of the legislation led to the conclusion that the taxpayer had no right to demand an inter partes oral hearing. 72. The reason for the giving of summary reasons to the taxpayer under schedule 36 is purely to guard against arbitrary conduct by the tax authority and to provide the context for any application to the FTT for approval of the third party notice, approval which cannot be given unless the FTT is satisfied pursuant to paragraph 3(3)(b) that the officer giving the notice is justified in so doing. … 116. Judicial review enables an independent and impartial tribunal to review compliance with the statutory pre-conditions for judicial approval of third party notices under schedule 36, both in relation to law and fact. 117. That is disputed by the appellants on the ground that the only written judgment released by Judge Berner did not explain why he was satisfied that Mr Pandolfo reasonably required the appellants' documents for the purpose of checking the tax position of the taxpayers. They say that the combination of the absence of such an explanation, the ex parte nature of the hearing before Judge Berner and the presumption of regularity, which according to T.C. Coombs applies to the decision of Judge Berner, means that neither the appellants nor the court on judicial review have been able to investigate whether the central requirement in paragraphs 1(1) and 2(1) of schedule 36 has been satisfied. Indeed, at one point in her submissions Miss McCarthy appeared to be suggesting that the procedure is unfair if neither the taxpayer, nor the third party nor the non-taxpayer entities are able to challenge whether tax is due from the taxpayer. 118. Those submissions, however, are simply an attack on the whole model of a judicial monitoring scheme rather than one based on inter partes adversarial litigation. The judicial monitoring model was approved by the House of Lords in both T.C. Coombs and Morgan Grenfell , and there has been no decision of the ECtHR, including Ravon , which has held that such a scheme is inherently inconsistent with the Convention. Miss McCarthy said that it was no part of the appellants' case that there was no opportunity for the appellants to participate in an oral hearing. She also said that the appellants do not challenge the decision to hear the application ex parte . Those concessions disguise, but do not detract from, the fact that what the appellants advance is something more akin to adversarial litigation than a judicial monitoring model in which applications are normally made ex parte and heard in private, with very limited rights of participation by those to whom information notices under schedule 36 are sent or who are affected by them.”
“47. The submission that a taxpayer or adviser at risk of compulsory disclosure of confidential documents ought to have an opportunity of deflecting the application is at first sight attractive. To see why, one need go no further than Lord Loreburn LC's celebrated remark in Board of Education v Rice[1911] AC 179 that acting in good faith and listening fairly to both sides "is a duty lying upon everyone who decides anything". But in the same passage Lord Loreburn made clear, as other judges of high authority have done many times since, that how this is done is in principle a matter for each decision-maker: natural justice does not generally demand orality. And there is a further, small, group of cases, of which Mr Brennan submits this is one, in which the exigencies of the legislative scheme make an inter partes procedure impossible. 48. What is said here by Mr Beloff is that although the disclosure procedure is in one sense a first step which in itself determines nobody's rights or liabilities, in another and more important sense it is conclusive of the Revenue's right to invade somebody's privacy and (given our conclusions so far) to disrupt a relationship of professional confidentiality. His position, he contends, is if anything stronger than that of the applicant in Georgiou v United Kingdom[2001] STC 80 , in whose favour the European Court of Human Rights accepted that fine lines should not be drawn, for Article 6 purposes, between the civil and criminal aspects of an assessment to a tax penalty. Here, where it is respect for private life and correspondence under Article 8 which in issue, the impugned decision constitutes a completed invasion of the Convention right. If the court is to sanction it, as we have done, then Mr Beloff contends that it should only be by including at least a power (he no longer says a duty) in the Special Commissioner to hear oral submissions if he thinks they may help him to reach a sound conclusion. In this way the common law will be doing what it can and should to prevent procedural unfairness from being heaped on substantive injustice. 49. It will be recalled that in the present case the Special Commissioner accepted written submissions from the applicants without demur. But he held that he had no power whatever to entertain oral submissions. Mr Brennan has tenaciously, and in our ultimate view successfully, defended this entrenched and in many ways unpromising position against Mr Beloff's assault. His argument is that, both on principle and on authority, the self-evident risk of compromising the investigation shuts out any possibility of an oral procedure. 50. It has to be remembered that a right to be heard is axiomatically worth little without knowledge of the case that has to be met. Either, therefore, the inspector's hand has in some measure to be shown, or the taxpayer must be content to make submissions in the dark. The former, it is plain, is destructive of the whole purpose of the procedure; the latter, while some taxpayers may consider it better than nothing, will create a sustained pressure for disclosure. There are only two logical outcomes if these two imperatives clash in a face-to-face hearing: one is that the taxpayer will duly learn nothing, in which case it is not easy to see what will have been achieved on his behalf that could not have been achieved in writing; the other is that the Special Commissioner's opportunity (in Mr Beloff's happy phrase) to "enjoy the benefit of advocacy" will lead to accidental disclosure by him or (more probably) the inspector of material to which Mr Beloff does not contend that the taxpayer is entitled and the disclosure of which at this stage will run counter to Parliament's purpose. That purpose, we apprehend, is in lieu of any inter partes procedure to instal the General or Special Commissioner as monitor of the exercise of the Inland Revenue's intrusive powers and to require an inspector to put everything known to him, favourable and unfavourable, before the Commissioner when seeking his consent ( R v IRC, ex parte T.C.Coombs & Co[1991] 2 AC 283 ). We accept Mr Brennan's contention, therefore, that the possibility of an oral hearing is excluded by the nature of the process in question. We do not accept his further ground that to establish a discretion to hold a hearing is to invite judicial review of every decision not to do so and of every failure to extract information from the inspector or to obtain reasons from the Commissioner. It is not legitimate, as Lord Bridge said in Leech v Deputy Governor of Parkhurst Prison[1988] AC 533 , 566, to draw jurisdictional lines on a purely defensive basis. If the power exists, the possibility of judicial review comes with it. But, for the reasons we have given, we are satisfied that the Special Commissioner was right to conclude that he possessed no such power.”