‘Unless the Appellant serves on the Respondents and confirms to the Tribunal that it has done so on or before4 April 2017 the witness statements of those witnesses on whose evidence he intends to rely in this appeal then he shall be debarred from adducing any evidence save with the permission of the Tribunal.’
‘… we have had continuing difficulties with the Legal Aid funding. The Legal Aid Agency only provided us with conformation of the additional funding required for preparation and attendance at the hearing on1 May 2018 and we were only then able to confirm Counsel’s instructions.’
‘In the intervening period Officer Barry Rush has retired. I have therefore read his statement dated 23 rd April 2009 (together with the exhibits) and agree with it.’
‘It has been reported to the Commissioners of Customs and Excise that BSL Auto Services (South) Limited has failed to account for the full amount of Value Added Tax which was due for the period from1 June 2004 to31 January 2007 . This has resulted from the deliberate suppression of sales from your business leading to an under declaration of tax on your VAT returns amounting to£78,127.00 . The Commissioners consider that in respect of this matter, [BSL] has rendered itself liable to a penalty underSection 60(1) of the VAT Act 1994 for an evasion, through dishonesty, of Value Added Tax in the sum of£78,127 …’
‘The Commissioners also consider that the conduct of [BSL] is attributable in whole to the dishonesty of Karl Byers (Director). In accordance withSection 61(2) of the VAT Act 1994 , the Commissioners intend to recover 100% of the penalty from Karl Byers.’
‘In 2005 the Company suffered acute cash flow problems due to a 125% increase in the cost of kerosene. … Late 2006 brought more pressures on the Company due to the VW Group changing vehicle protection systems from wax to plastic. … On30 January 2007 the directors instructed Mazars LLP … The directors attribute the failure of the Company to the following:- 1 Loss of Vauxhall Motor Contract … 2. Dramatic increase in cost of raw materials 3. Loss of business in mid 2006 resulted in a dramatic drop in turnover 4. Poor cash flow 5. Ill health of Mr Byers in 2 nd half of 2006’ (3) Under ‘Reporting Accountants Comments’: ‘1. I [ie the liquidator Robert Adamson] was first consulted on this matter on11 January 2007 . Paul Charlton has previously acted for the directors of the Company when he was appointed as Joint Liquidator of BSL Automotive Services Limited on7 November 2001 . […] 3. The Company banked with HSBC Bank plc in Hartlepool. …’
‘I K Byers of [address] make oath and say that the several pages exhibited hereto … are to the best of my knowledge and belief a full, true and complete statement as to the affairs of the above named company as at28 February 2007 the date of the resolution for winding up and that the said company carried on business as Automotive logistics services.’
‘Before swearing the affidavit the Solicitor or Commissioner is particularly requested to make sure that the full name, address and description of the Deponent are stated, and to initial any crossing-out or other alterations in the printed form. …’
‘The Registrar of Companies gives NOTICE that, unless cause is shown to the contrary, at the expiration of 3 months from the above date the name of Alpha Resources North East Ltd will be struck off the register and the company will be dissolved.’
‘4. A new company has been formed by the former directors named BSL Auto Services (South) Limited which has taken over the de-waxing operation only of the company now in Liquidation. I understand that there are no plans to revive the flooring side of that previous business. […] 12. The company’s wage records indicate that no remuneration was paid to either of the directors, K Byes and S Welsh, for any of the 7 months relating to the fiscal year 2002/03 up to the date of cessation of trading on31 October 2002 . …However, the company’s cash book suggests that payments were in fact made to the directors as ‘drawings’ and those transactions are being investigated.’
‘The directors of the company were Karl Byers who was the managing director and Stanley Welsh who was a non-executive director and due to ill health had only a small involvement in the company.’ (2) Flannagan was then asked if there was anything he wished to ‘reveal about irregularities in his client’s tax affairs’: ‘Mr Flannagan replied that there was nothing other than what we were already aware of and that it had been discussed at a previous meeting in which Sue Jacques the bookkeeper who was present at the meeting had advised that she had been instructed by Mr Byres to complete inaccurate VAT returns.’
‘1.2 What we mean by dishonesty Dishonesty is where a person does something or fails to do something that would be regarded as dishonest according to the ordinary standards of reasonable and honest people. 2. How does this affect me? If we identify irregularities due to conduct involving dishonesty, a civil evasion penalty may be charged. If we also identify irregularities due to deliberate behaviour during our check we will normally apply a deliberate penalty or a deliberate and concealed penalty.’
‘Byers confirmed that he now understood the notice.’
‘After agreeing the details can you please sign and return one copy. Any comments/ amendments should be listed on a separate sheet and attached to the notes.’
‘We refer to your letter 18 th April 2008 and the enclosed notes of meetings. We are able to confirm our agreement that each note forms a reasonable resume of what transpired at the meeting. However the notes are not verbatim.’
‘Mr KB refuted any involvement or awareness of VAT/tax problems. KB explained that he employed B/keeper on£30K per year and she was responsible for VAT/Tax matters. On regular occasions she [not eligible] for [not eligible] amounts of money to pay VAT etc. He had also put his own money into funding business. KB gave example of how S Jacques operated: he had found out that she had signed lease on property without informing him – only became aware of this when landlord sued. KB advised that Bank was solvent and he had no idea why VAT/Tax would not be paid. Adamant that he had no idea why VAT was underpaid; Sue Jacques was at fault.’
‘[4]. My recollection of matters has been assisted by the production of a Defence to Statement of Claim (“the Defence”) which I can see was signed by me on 23.02.09, and a facsimile of a statement from Mr Welsh (“the statement”). Clearly I cannot give a detailed recollection of the details of this case given the passage of time. Nor have I seen the contemporaneous DWF file in this matter. [5]. I sought factual instruction from Mr Byers and have particular reason to remember the unusual factual background involving his former fellow Director of BSL Auto Services Limited (“the Company”), Mr Stanley Welsh, and how Mr Welsh’ [sic] indiscretions with an employee Mrs Jacques had led to this woman falsifying VAT returns in the comfort that Mr Welsh’ [sic] vulnerable position would not have led to him exposing her conduct.’
‘In the course of July 2004, upon advice from the Company’s Accountants, it was discovered that Mrs Jacques had without permission, increased her wages by over 100%. The Appellant took the view that this amounted to dishonesty and theft, and informed Mr Welsh. In light of Mr Welsh’s previous indiscretions with Mrs Jacques, the latter requested that the discovery of misappropriated funds, should go no further. The Appellant duly contacted his Accountant for further advice. Upon being confronted by the Appellant, regarding the possibility of repaying the wages taken without authority, Mrs Jacques replied in a curt manner “No chance”.’
‘[8]. … I cannot say that I specifically saw the Statement. I am informed it was located some time later in the DWF file. I cannot comment on what happened following its receipt or why it’s [sic] attention [sic] was not brought to the attention of HMRC (if it was indeed the case). ...’
‘Prior to 2004, I had committed sexual indiscretions with Mrs S.S. Jacques, the Office Manager at BSL (The Company).’
‘In December 2006 I drove Mr Byers to his Doctors and then decided to make an “impromptu” visit to the Company Offices. Mrs Jacques was observed to generically producing false invoices from a Company called Portside Contractors, I said, “I hope you are not doing what I think you doing” she replied “caught red handed” I told her to destroy the false invoices immediately, she agreed.’
‘I had no knowledge of any wrong doing and I deny all allegations of wrong doing.’
‘I remember very vividly the signing of the lease; I sorted them both out.’
‘I was aware that Mr Welsh was the Managing Director of BSL and Mr Byers was the contracts Director. From my interaction, I was aware that Mr Byers did not take part in the day to day running of BSL and that it was Mr Welsh and Mrs Jacques who managed the administration affairs and it was Mr Byers who looked after the sales and Customer service in the field.’
‘the Draft [witness statement] was sent to me; emailed to me by Mr Byers; I didn’t know who wrote it; suggest that it was by a legal person but can’t be sure.’ (3) When asked whether it had been discussed what Byers wanted him to do at the hearing, Flannagan replied ‘No’
‘You are on oath, and you are a C.A.’, Flannagan then replied as follows: ‘What happened 14 years ago [pause]. From 1996 onwards, two people were heavily involved. Towards the end of BSL’s era, Mr Byers and Mr Welsh were ill. Mrs Jacques carried out all the duties which she would not be carrying out if she were an employee of mine. She was making decisions, doing things … my perception.’ (4) When asked if he had spoken to Mr Baig, Flannagan said he telephoned him three times, the last one got an answer phone, and Mr Baig called him back; that at 8:30am (on the second day of hearing when Flannagan gave evidence) he met with Mr Baig to discuss the case; they went for coffee. When asked how he discussed the case without talking through what was discussed at court the day before, Flannagan said by ‘looking through the papers’. (5) When asked when he discovered Mrs Jacques was a problem, he replied: ‘ it would be just a couple of months before the investigation: February / March 2006 .’
‘When did you discover there was a problem with Mrs Jacques?’
‘In 1996, she was not a good bookkeeper’
‘No, not at that stage.’ (6) On the role of Mrs Jacques, the sequence of Counsel’s questions and Flannagan’s replies continued as follows: Qt: When did you find out about Mrs Jacques’ wrongdoing? Ans: When doing year end account of31 March 2005 ; looked at the wages record. At that point it was clear Mrs Jacques paid herself a lot more money than was due; that was in September 2005 . Qt: That was prior to the meetings in 2006. Did you confront Mrs Jacques? Ans: No. I confided in the Director, Mr Byers. Qt: Had you spoken to Mrs Jacques about this? (7) Flannagan was directed to following paragraphs of his witness statement: ‘5. Having refreshed my memory, I am able to say that I was aware after the fact that Susan Jacques was prepared to be dishonest in her role as bookkeeper. 6. An instance, of her dishonesty was that she had inflated her wages and those of her co-worker. When I spoke to her about this matter , I gained the impression that she felt she had a right to inflate the remuneration. This matter was brought to the attention of Mr Byers who had invested large sums of money into BSL. I advised him to report to the Company solicitors, Messrs Smith and Graham.’
‘whoever made the note- can’t remember amending that sentence’; and on being challenged further, replied: ‘must have spoken to her then’; on being reminded that he had signed the witness statement as truthful, replied: ‘must have felt in April 2017 that I spoke to her.’ (9) Flannagan was taken to the Notes of meeting for: (a)18 October 2007 at paragraph 12 concerning ‘Petty Cash and Cash Book’, Officer Tilney asked Mrs Jacques for a ‘walk through of how things worked’; ‘Susan explained that really she just did what she was told’; ‘that she would be given a receipt from Karl Byers and he would explain what expenditure had been incurred and she would then appropriate this to petty cash’; Flannagan was present at this meeting and was asked if he disagreed with the discussion; he replied: ‘No.’ (b)2 April 2007 when Mrs Jacques explained how the VAT arrears arose, of the schedule for banking and the Sage print, of the two sets of records not agreeing and how VAT returns were made according to cash flow, yet Flannagan made no comments as to the truthfulness of the explanation. Flannagan replied: ‘I am not in a position to agree or disagree’; ‘that is the role I played in the meeting’; (c)13 March 2008 , when Flannagan was referred to the following entry in the Note of meeting, he replied he did positively affirm Jacques’ statement to HMRC: ‘that it had been discussed at a previous meeting in which Sue Jacques the bookkeeper who was present at the meeting had advised that she had been instructed by Mr Byers to complete inaccurate VAT returns.’ (10) When asked by the Tribunal ‘what was wrong with Mrs Jacques’ bookkeeping in your view back in 1996’, Flannagan replied: ‘sloppy’; ‘wrong data used to record keeping’; ‘apparent the whole page of transactions written in sentence’; ‘the keeping of invoices’; ‘when asked to see such invoices, could take a long time to find the invoices’
‘Actual work – she would be liaising with foremen organising the recruitments, the disposal of employees – Decisions of that nature attributable to a director – she was fulfilling them.’
‘In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.’ (3) In Morris and Others the Tribunal in deciding on the issue of delay in a penalty appeal emanating from VAT assessments held at [95] the following: ‘It seems to me that if the failure to hear an appeal within a reasonable time prevents a fair trial of an appeal involving a criminal charge for Convention purposes, perhaps through the death of a vital witness or the loss or destruction of crucial evidence, the Rules must if this is possible be interpreted and applied so as to give effect to an appellant’s rights under Article 6.1 and if appropriate to allow the appeal.’ (4) In the instant case, there has been an inordinate delay (more than 10 years), through no fault of Mr Byers in listing a hearing and that the appeal ought to be struck out on the grounds of delay. (5) There have been the deaths of vital witnesses and the loss and destruction of crucial evidence; hence the delay caused contravene Mr Byers’
‘… the need to comply with the “reasonable time” requirement inArticle 6(1) of the ECHR (27) (and Article 47 of the Charter of Fundamental Rights of the EU, which applies to the Member Stats when they are implementing EU law) does appear to be a clear and especially powerful justification for a rule such as that in the disputed provision. With regard to the requirements of legal certainty, 10 years seems a particularly long time for judicial proceedings to be pending, unless justified by the specific circumstances of the case. … I do not think that the EU law obligation to ensure effective collection of VAT can require maintaining for more than 10 or 14 years a situation of legal uncertainty as regards a disputed amount of tax in relation to which the taxable person has already received two favourable judgments.’
‘… whether or not there has been personal gain, fi the corporate body is in insolvency or suspected of incipient insolvency, you should apportion the penalty to the directors/managing officers/managing members for whom there is evidence of dishonesty. This applies even if it is suspected that it would be the imposition of the penalty that would cause the insolvency. You should obtain details of the insolvency or of the information which suggest that the corporate body is about to become insolvent. Where a penalty is attributable to more than one person, you should divide the penalty equally between them unless there is clear evidence that one dishonest named officer has gained more financially from the evasion than another. In this case you may apportion a greater percentage of the penalty to them.’
‘It is necessary to take account of the circumstances of each case in deciding whether there has been unreasonable delay, including the complexity of the case, the conduct of the parties and what is at stake. While an appellant is not required by Article 6 to co-operate actively with the judicial authorities (see Eckle, para 82), he is required “to show diligence in carrying out the procedural steps relevant to him, to refrain from using delaying tactics and to avail himself of the scope afforded by domestic law for shortening the proceedings (see Union Alimentaria 12 EHRR 24, at para 35). I accept the submission … that the Tribunal is only concerned with delays which are the responsibility of the authorities. Delays for which an appellant is responsible do not give rise to a breach of his right to a hearing within a reasonable time.’
‘In Attorney General’s Reference[2004] 2 AC 72 Lord Bingham pointed out at [23] that “the Strasbourg jurisprudence gives no support to the contention that there should be no hearing of a criminal charge once a reasonable time has passed”. … “The sole matter to be taken into consideration is thus the prejudice possibly entailed.”’
‘I … respectfully point the Tribunal’s attention to paragraphs 9-12 of … Janet Addo . I present this case for the Tribunal to consider in regards [sic] to the sequence in which the evidence was heard and the Appellant’s submissions in regards [sic] his Article 6 rights.’
‘… HMRC do not object to the principle of presenting their case first. … since ultimately one party has to open and, in circumstances where they both bear the burden of proof on different issues, the order in which cases are presented cannot be determined by reference to burden of proof alone.’
‘In my view, in the context of the civil penalty regime [contained in what was thens 60 of the Value Added Tax Act 1994 ] at least the test for dishonesty is that identified by Lord Nicholls in Tan as reconsidered in Barlow Clowes . The knowledge of the person alleged to be dishonest that has to be established if such an allegation is to be proved is knowledge of the transaction sufficient to render his participation dishonest according to normally acceptable standards of honest conduct. In essence the test is objective – it does not require the person alleged to be dishonest to have known what normally accepted standards of honest conduct were.’
‘Although a dishonest state of mind is a subjective mental state, the standard by which the law determines whether it is dishonest is objective. If by ordinary standards a defendant’s mental state would be characterised as dishonest, it is irrelevant that the defendant judges by different standards.’
‘Honesty, indeed, does have a strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated. Further, honesty and its counterpart, dishonesty, are mostly concerned with advertent conduct, not inadvertent conduct.’
‘Likewise, when called upon to decide whether a person was acting honestly, a court will look at all the circumstances known to the third party at the time. The court will also have regard to personal attributes of the third party such as his experience and intelligence, and the reason why he acted as he did.’
‘(1) (a) for the purpose of evading VAT, a person does any act or omit to take any action, and (b) his conduct involves dishonesty …’
‘Nor does an honest person in such a case deliberately close his eyes and ears, or deliberately not ask questions, lest he learn something he would rather not know, and then proceed regardless.’
‘The law operates a binary system in which the only values are 0 and 1. The fact either happened or it did not. If the tribunal is left in doubt, the doubt is resolved by a rule that one party or the other carries the burden of proof. If the party who bears the burden of proof fails to discharge it, a value of 0 is returned and the fact is treated as not having happened.’
‘[15] An obvious difficulty which affects allegations and oral evidence based on recollection of events which occurred several years ago is the unreliability of human memory.’
‘[19] The process of civil litigation itself subjects the memories of witnesses to powerful biases. The nature of litigation is such that witnesses often have a stake in a particular version of events. … [20] Considerable interference with memory is also introduced in civil litigation by the procedure of preparing for a trial. A witness is asked to make a statement … The statement is usually drafted for the witness by a lawyer who is inevitably conscious of the significance for the issues in the case …’
‘[22] … 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 …’
‘… Credibility covers the following problems. First, is the witness a truthful or untruthful person? Secondly, is he, though a truthful person, telling something less than the truth on this issue, or, though an untruthful person, telling the truth on this issue? Thirdly, though he is a truthful person telling the truth as he sees it, did he register the intentions of the conversation correctly and, if so, has his memory correctly retained them? … It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason, a witness, however honest, rarely persuades a Judge that his present recollection is preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance…. it is essential that the balance of probability is put correctly into the scales in weighing the credibility of a witness. And motive is one aspect of probability. All these problems compendiously are entailed when a Judge assesses the credibility of a witness: they are all part of one judicial process. And in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part.’
‘… it [is] essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to documents in the case, and also to pay particular regard to their motives and to the overall probabilities.’
‘ each note forms a reasonable resume of what transpired at the meeting ’
‘(6) In this section a “managing officer”, in relation to a body corporate, means any manager, secretary or other similar officer of the body corporate or any person purporting to act in any such capacity or as a director; and where the affairs of a body corporate are managed by its members, this section shall apply in relation to the conduct of a member in connection with his functions of management as if he were a director of the body corporate.’
‘(1) Where it appears to the Commissioners – (a) that a body corporate is liable to a penalty undersection 13 of the Finance Act 1985 … , and (b) that the conduct giving rise to that penalty is, in whole or in part, attributable to the dishonesty of a person who is, or at the material time was, a director or managing officer of the body corporate (a “named officer”), the Commissioners may serve a notice under this section on the body corporate and the named officer.’
‘its predicate was that the commissioners had not shown Mr Bassimeh to be any more to blame than the other directors’ (at 918). Sedley J stated at 920 the critical test of liability for acts of dishonesty in which more than one director has participated: ‘In applying s 14 of the 1986 Act, in my judgment, the proposition that the whole of a dishonest course of conduct agreed upon by two or more directors is prima facie attributable to the dishonesty of each of them is the correct starting point in law. If undisplaced and unqualified by evidence , it is sufficient to enable the commissioners to establish that an individual in Mr Bassimeh’s position has been wholly responsible for the company’s dishonest conduct.The tribunal (at 24, para 174) has in my respectful view erred, therefore, in testing relative culpability in this situation by asking whether the commissioners have shown that the appellant was any more to blame than the other directors; the right question was whether on the evidence the appellant was shown to be any less to blame than the other directors with whom he had colluded in bringing about the company’s dishonest conduct.’
‘(a) Where the directors have collaborated in procuring the company’s dishonest conduct, each is prima facie responsible for the whole. (b) There is no prior limitation of law on the grounds upon which a named officer may seek to establish that less than the whole of the basic penalty should be levied on him or her. (c) In the present case, there was no evidence to show that the appellant was any less to blame than his fellow directors.’