“I wish to inform the Tribunal that I am in the process of finalising an Individual Voluntary Arrangement (IVA) proposal, which will shortly be issued to my creditors, including HMRC. This process is being advanced with my advisers and is intended to provide a structured resolution to my financial affairs. In light of the IVA proposal being actively prepared, I respectfully suggest that these Tribunal proceedings may be premature and risk unnecessary duplication of process and cost for all parties. I therefore ask that the Tribunal consider whether an adjournment or stay of proceedings would be appropriate, pending the outcome of the IVA proposal. I also confirm, as previously communicated, that my witness, Mr Martin Chambers, is unwilling to attend the hearing.”
“At the hearing any party seeking to rely on a witness statement may call that witness to answer supplemental questions (but the statement shall be taken as read) and must call that witness to be available for cross-examination by the other party (unless notified in advance by the other party that the evidence of the witness is not in dispute).”
“[13] Reddrock served statements from five witnesses: Richard Galvin, Michael Galvin, Anthony Galvin, Mr Donnelly and Philip Harris. Mr Harris is a chartered accountant who has acted for some time for Richard Galvin and his wife and their companies. Three of these witnesses gave oral evidence and were cross-examined: Richard Galvin, Anthony Galvin and Mr Donnelly. [14] As regards the evidence of Michael Galvin and Mr Harris, the FTT at [9] stated that they had not been called by Reddrock to give evidence and that therefore counsel for HMRC had no opportunity to cross-examine them. The FTT continued, ‘In all the circumstances of the case we afforded little weight to their written evidence.’ [15] We do not consider that there can be any valid criticism of this approach. The witness statement of Mr Harris in fact contained no evidence which went directly to whether the relevant supplies had been made and whether the invoices were valid. The three-page statement of Michael Galvin contained in one paragraph (para 15) evidence which concerned the supplies and the invoices. He there stated that Richard Galvin had supplied him with copies of the 21 invoices in which Fowler was named and that ‘I can confirm that all of the materials were supplied’ to Reddrock’s yard at an address which is given. HMRC do not accept that Reddrock had a yard at the address given by Michael Galvin and they would for that and other reasons have wished to cross-examine Michael Galvin on this brief evidence. Michael Galvin was available to give evidence and indeed was present for two out of the three days of the hearing. No explanation has been given as to why he was not tendered for cross-examination. In a case which turns almost exclusively on the evidence of the witnesses, the FTT was in these circumstances right to afford ‘little weight’ to Michael Galvin’s written evidence.”
“[41] The question whether an adverse inference may be drawn from the absence of a witness is sometimes treated as a matter governed by legal criteria, for which the decision of the Court of Appeal in Wisniewski v Central Manchester Health Authority [1998] PIQR P324,[1998] Lloyd’s Rep Med 223 is often cited as authority. Without intending to disparage the sensible statements made in that case, I think there is a risk of making overly legal and technical what really is or ought to be just a matter of ordinary rationality. So far as possible, tribunals should be free to draw, or to decline to draw, inferences from the facts of the case before them using their common sense without the need to consult law books when doing so. Whether any positive significance should be attached to the fact that a person has not given evidence depends entirely on the context and particular circumstances. Relevant considerations will naturally include such matters as whether the witness was available to give evidence, what relevant evidence it is reasonable to expect that the witness would have been able to give, what other relevant evidence there was bearing on the point(s) on which the witness could potentially have given relevant evidence, and the significance of those points in the context of the case as a whole. All these matters are inter-related and how these and any other relevant considerations should be assessed cannot be encapsulated in a set of legal rules.”
“[91] [HMRC’s counsel] began by referring me to the familiar four principles summarised by Brooke LJ in Wisniewski v Central Manchester Health Authority ([1998] PIQR 324, at p 340: “(1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action. (2) If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness. (3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue. (4) If the reason for the witness’s absence or silence satisfies the court then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.” [92] These principles are especially applicable in cases which raise serious allegations of wrongdoing against a Defendant. In such circumstances, there is authority to suggest that a failure to give evidence is likely to lead to an adverse inference. In Crawford v Financial Institutions Services Ltd[2005] UKPC 40 , (citing the well-known decision of the House of Lords in Herrington v British Railways Board[1972] AC 877 ,[1972] 1 All ER 749 ,[1972] 2 WLR 537 ) there were proceedings against the Defendant for misapplication of the funds of a bank which formed part of a group of companies of which the Defendant was the ultimate controller. The Privy Council said at 7: “Despite the variety of serious allegations made in the pleadings against Mr Crawford, and the matters deposed to by the investigating accountants as calling for explanation, neither Mr Crawford nor any member of his family gave evidence before the Chief Justice. It is well settled that in civil proceedings the court may draw adverse inferences from a Defendant’s decision not to give or call evidence as to matters within the knowledge of himself or his employees.” [93] Commenting on such decisions not to give or call evidence, Lord Walker observed at 12: “The weight to be attached to a Defendant’s failure to testify varies with the circumstances of the case. It is plain that in this case the Chief Justice and the Court of Appeal attached a good deal of weight to Mr Crawford’s silence, and their Lordships are satisfied that they were right to do so. Mr Crawford was the chairman and chief executive of the Bank, the Building Society and the Merchant Bank. It is an irresistible inference that he was the directing mind behind Regardless, Holdings and the rest of the group. The consolidated proceedings raised many grave issues as to his stewardship of the whole group of companies. His failure to testify was a strong indication that he had no satisfactory answer to what was alleged against him.” [94] The effect of the drawing of an adverse inference from a party’s failure to adduce materially relevant evidence was usefully summarised by Brown LJ (as he was then) in Benham Ltd v Kythira Investments Ltd[2003] EWCA Civ 1794 , [2004] NLJR 21 in the following terms at 30: “The point is worth making too even in those cases where the Defendant elects to call no evidence. True, as Mance LJ made plain in [Miller (t/a Waterloo Plant) v Margaret Cawley[2002] EWCA Civ 1100 ], the only issue then is whether the Claimant has established his claim on the balance of probabilities. But it must be recognised that he may have done so by establishing no more than a weak prima facie case which has then been strengthened to the necessary standard of proof by the adverse inferences to be drawn from the Defendant’s election. Such adverse inferences can in other words tip the balance of probability in the Claimant’s favour”.” “(1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action. (2) If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness. (3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue. (4) If the reason for the witness’s absence or silence satisfies the court then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.” “Despite the variety of serious allegations made in the pleadings against Mr Crawford, and the matters deposed to by the investigating accountants as calling for explanation, neither Mr Crawford nor any member of his family gave evidence before the Chief Justice. It is well settled that in civil proceedings the court may draw adverse inferences from a Defendant’s decision not to give or call evidence as to matters within the knowledge of himself or his employees.” “The weight to be attached to a Defendant’s failure to testify varies with the circumstances of the case. It is plain that in this case the Chief Justice and the Court of Appeal attached a good deal of weight to Mr Crawford’s silence, and their Lordships are satisfied that they were right to do so. Mr Crawford was the chairman and chief executive of the Bank, the Building Society and the Merchant Bank. It is an irresistible inference that he was the directing mind behind Regardless, Holdings and the rest of the group. The consolidated proceedings raised many grave issues as to his stewardship of the whole group of companies. His failure to testify was a strong indication that he had no satisfactory answer to what was alleged against him.” “The point is worth making too even in those cases where the Defendant elects to call no evidence. True, as Mance LJ made plain in [Miller (t/a Waterloo Plant) v Margaret Cawley[2002] EWCA Civ 1100 ], the only issue then is whether the Claimant has established his claim on the balance of probabilities. But it must be recognised that he may have done so by establishing no more than a weak prima facie case which has then been strengthened to the necessary standard of proof by the adverse inferences to be drawn from the Defendant’s election. Such adverse inferences can in other words tip the balance of probability in the Claimant’s favour”.”
“[12] There are many situations in which the court is asked to assess the credibility of witnesses from their oral evidence, that is to say, to weigh up their evidence to see whether it is reliable. Witness choice is an essential part of the function of a trial judge and he or she has to decide whose evidence, and how much evidence, to accept. This task is not to be carried out merely by reference to the impression that a witness made giving evidence in the witness box. It is not solely a matter of body language or the tone of voice or other factors that might generally be called the ‘demeanour’ of a witness. The judge should consider what other independent evidence would be available to support the witness. Such evidence would generally be documentary but it could be other oral evidence, … [14] In my judgment, contemporaneous written documentation is of the very greatest importance in assessing credibility. Moreover, it can be significant not only where it is present and the oral evidence can then be checked against it. It can also be significant if written documentation is absent. For instance, if the judge is satisfied that certain contemporaneous documentation is likely to have existed were the oral evidence correct, and that the party adducing oral evidence is responsible for its non-production, then the documentation may be conspicuous by its absence and the judge may be able to draw inferences from its absence.”
“[95] In recent years there have been a number of first instance judgments which have helpfully crystallised and advanced learning in respect of the approach to evidence. Three decisions in particular require citation. These are: •Gestmin SGPS SA v Credit Suisse (UK) Limited - Leggatt J (as he then was) •Lachaux v Lachaux - Mostyn J •Carmarthenshire County Council v Y - Mostyn J [96] Rather than cite the relevant paragraphs from these judgments in full, I shall attempt to summarise the most important points: i) Gestmin: •We believe memories to be more faithful than they are. Two common errors are to suppose (1) that the stronger and more vivid the recollection, the more likely it is to be accurate; (2) the more confident another person is in their recollection, the more likely it is to be accurate. •Memories are fluid and malleable, being constantly rewritten whenever they are retrieved. This is even true of “flash bulb” memories (a misleading term), i.e. memories of experiencing or learning of a particularly shocking or traumatic event. •Events can come to be recalled as memories which did not happen at all or which happened to somebody else. •The process of civil litigation itself subjects the memories of witnesses to powerful biases. •Considerable interference with memory is introduced in civil litigation by the procedure of preparing for trial. Statements are often taken a long time after relevant events and drafted by a lawyer who is conscious of the significance for the issues in the case of what the witness does or does not say. •The best approach from a judge is to base factual findings on inferences drawn from documentary evidence and known or probable facts. “This does not mean that oral testimony serves no useful purpose… But its value lies largely… 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. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth”. ii) Lachaux: •Mostyn J cited extensively from Gestmin and referred to two passages in earlier authorities. I extract from those citations, and from Mostyn J’s judgment, the following: “Witnesses, especially those who are emotional, who think they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. 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 incident occurred. Therefore, contemporary documents are always of the utmost importance…” “…I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective fact proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities…” •Mostyn J said of the latter quotation, “these wise words are surely of general application and are not confined to fraud cases… it is certainly often difficult to tell whether a witness is telling the truth and I agree with the view of Bingham J that the demeanour of a witness is not a reliable pointer to his or her honesty.” iii) Carmarthenshire County Council: •The general rule is that oral evidence given under cross-examination is the gold standard because it reflects the long-established common law consensus that the best way of assessing the reliability of evidence is by confronting the witness. •However, oral evidence under cross-examination is far from the be all and end all of forensic proof. Referring to paragraph 22 of Gestmin, Mostyn J said: “…this approach applies equally to all fact- finding exercises, especially where the facts in issue are in the distant past. This approach does not dilute the importance that the law places on cross-examination as a vital component of due process, but it does place it in its correct context.” “Witnesses, especially those who are emotional, who think they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. 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 incident occurred. Therefore, contemporary documents are always of the utmost importance…” “…I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective fact proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities…” “…this approach applies equally to all fact- finding exercises, especially where the facts in issue are in the distant past. This approach does not dilute the importance that the law places on cross-examination as a vital component of due process, but it does place it in its correct context.”
“(2) A closure notice must either– (a) state that in the officer’s opinion no amendment of the return is required, or (b) make the amendments of the return required to give effect to his conclusions.” (a) state that in the officer’s opinion no amendment of the return is required, or (b) make the amendments of the return required to give effect to his conclusions.”
“(1) This section explains what is meant by “earnings” in the employment income Parts. (2) In those Parts “earnings” , in relation to an employment, means— (a) any salary, wages or fee, (b) any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money’s worth, or (c) anything else that constitutes an emolument of the employment. (3) For the purposes of subsection (2) “money’s worth” means something that is— (a) of direct monetary value to the employee, or (b) capable of being converted into money or something of direct monetary value to the employee.” (a) any salary, wages or fee, (b) any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money’s worth, or (c) anything else that constitutes an emolument of the employment. (a) of direct monetary value to the employee, or (b) capable of being converted into money or something of direct monetary value to the employee.”
“(1) Subject to the provisions of this Part, it shall be for an officer of the Board – … (c) to decide whether a person is or was liable to pay contributions of any particular class and, if so, the amount that he is or was liable to pay.”
“(1) As respects any employed earner’s employment— (a) where there has been a failure to pay any primary contribution which a secondary contributor is, or but for the provisions of this regulation would be, liable to pay on behalf of the earner and – … (ii) it is shown to the satisfaction of an officer of the Board that the earner knows that the secondary contributor has wilfully failed to pay the primary contribution which the secondary contributor was liable to pay on behalf of the earner and has not recovered that primary contribution from the earner; … the provisions of paragraph 3(1) of Schedule 1 to the Act (method of paying Class 1 contributions) shall not apply in relation to that contribution.”
“(1) Where a penalty under paragraph 1 is payable by a company for a deliberate inaccuracy which was attributable to an officer of the company, the officer is liable to pay such portion of the penalty (which may be 100%) as HMRC may specify by written notice to the officer. (2) Sub-paragraph (1) does not allow HMRC to recover more than 100% of a penalty. (3) In the application of sub-paragraph (1) to a body corporate other than a limited liability partnership “officer” means– (a) a director (including a shadow director within the meaning ofsection 251 of the Companies Act 2006 (c. 46) ) …” (a) a director (including a shadow director within the meaning ofsection 251 of the Companies Act 2006 (c. 46) ) …”
“(2) Adequate accounting records means records that are sufficient– (a) to show and explain the company’s transactions, (b) to disclose with reasonable accuracy, at any time, the financial position of the company at that time, and (c) to enable the directors to ensure that any accounts required to be prepared comply with the requirements of this Act.”
“Your auditors have sent to our client a copy of an undated document that they advise us was sent to them by you. For convenience we attach a copy of the document to this letter. As you will see Bridgepoint logos appear at the top right and bottom right. The company number at the bottom of the page is that of a genuine Bridgepoint company, but the VAT number is not. We understand that the VAT number is that of a company called Capital Accumulation Services Limited. Our client was asked whether this is a genuine Bridgepoint document. They have confirmed to your auditors that it is not. Our client has never heard of Skelwith Leisure, Flaxby or Capital Accumulation. Our client is extremely concerned that, on the face of it, it appears that you have used our client’s logo and company number to give legitimacy to an invoice, and is at a loss to understand why you should have done so. Please provide to us, by return, a full explanation of why you have wrongfully have forwarded the invoice to you which you have sent to us. The invoice is not on our accounts system at all … I find it very disturbing that a fictitious invoice has been produced in the name of our company.”
"Darren and Paul also need to realise that unless we are paid the fund raising suffers which is has done from the start (again not your fault) but I cannot keep having my business suffer"
“The problem here is not delays at our end but the quality and timing of the information and records we are getting. The standard of this seems to be getting worse and for each job we are now having to completely re-create your bookkeeping virtually from scratch as the post things that presented are a total shambles. … The problems are being exacerbated on Properties and Group as there have been even more posting errors than normal In terms i going forward I am convinced that you need a good full-time financial controller to oversee the bookkeeping function and ensure that it is prepared on a timely basis. I did suggest a candidate to you and Darren and propose that we pursue this matter as soon as possible – I am happy to sit in on interviews for you to ensure we get the right result.”
“We understand that your client on a number of occasions has made slanderous comments in respect to Mr Broadbent, Mr Ellis and Skelwith. In particular, we understand that on5 May 2012 your client was in Linton with some of her friends and made slanderous comments to various third parties relating to Skelwith, Mr Broadbent and also in respect of Mr Ellis. We understand that Mrs Broadbent went to Linton and made several accusations in various public houses in the village. These accusations were made to various people including business associates of Mr Broadbent and Mr Ellis. Allegations of financially impropriety were made against our clients including allegations of corporate and VAT fraud … Further, we understand that your client has slandered Mr Broadbent by alleging to an officer of HMRC that he is defaulting HMRC. Mrs Broadbent has also made allegations of financial impropriety to Mr Broadbent’s bank manager at Coutts.”
"Can you do the following now please: A copy of May return. Copy of invoices for May. Then copy invoices from Rouse from previous months to get close to the total figure. Do a spreadsheet to cover the return figures."
“A few issues have arisen recently unexpectedly! We have been hit with a VAT assessment on two of the SPV’s and have issues with a couple of large creditors. We are unable to settle these, prior to closing the companies. Can we transfer these with the ‘sale’ and transfer of the assets? We also have other HMRC VAT inspections, that we really could do without. We would like to get the companies closed and de-registered ASAP. Can you provide any advice on this?”
“Honestly - I’m struggling mate. Without Ewan and the office providing the info, there is little we can do, other than stall them. I thought if we could provide the last 2 months folders and the accounts, they might be OK and actually release the money we are owed. She’s back in the office today, so will wait for her response, after she has read my updates and spoken with David. We also have the Keep inspection planned for Thursday, which we can’t do, the info is not good enough. I will speak to the local guy today about it and see where we end up. I havent slept for weeks now, I am so worried about everything and feel like I’m going to have another breakdown. I wouldn’t say this lightly mate or to just get attention. I can’t tell you everything that is going on, but it’s horrible. I’ve been diagnosed with something else recently (not life threatening) which is difficult, I have so many health issues it’s getting me down. I have the house which is just a disaster waiting to happen, then I have the biggest problem of money. I could only take£25k last week, as Artur had paid loads of people I had no idea about. Rebecca will leave me w/c 11th August for sure, if I don’t get the£600k back. The house completes that week and I have taken£600k from Coutts and forged her signature. She is expecting us to be able to finish the house and actually have some money in the bank, but that isn’t going to happen. I just wish I had discussed it with her now, but I believed it would be back in time. I’m not being a drama queen, just trying to be honest.xx”
"... some of the invoices ... have Nominal codes on, shall I copy all of this folder now and mark off the [nominal codes] of it also as done with May? Or ... I could copy only those few invoices (around 20) and leave rest as originals?"
"David [from BDO] says he has dealt with lost files before. We say they went to roman house and have been skipped by the demolition contractors which is what we told BDO. We were moving there office wise but now have an offer on it and are moving elsewhere. Demolition contractors are total idiots! Any other discrepancies we blame Artur and say BDO are instructed to sort us out?!?! Xx"
“.. it is correct that the Skelwith accounting records in paper form were removed by a contractor. However the electronic records were clearly not destroyed ... I do not know if Darren Broadbent was behind this and if he was I do not know how. When I found out about this I was furious. I obtained a letter from the contractors.”
"One of the creditors, secured or non secured, submits a winding up order. We can blame the non vat refund on this. We agree a deal with new co, that they pay all secured creditors and pay the balance to an offshore Company. Our 33% shares in the new co, are held in trust off shore. If this can work, it closes the HMRC door and deals with any tax implications. 2. We close Keep instantly. 3. Cottages and Raithwaite – Discussed with David and he agrees with me, so we work on that. Although, all the officers are talking to each other, so this could be an issue. We can provide a few years of RWH accounts, as they are okay. We can say these [were] stored at the hotel. The urgent one is Leisure at the moment."
“"The draft accounts I prepared were taken from your Sage trial balance ... which I presume is a summary of all the transactions ...If this is the case, and the VAT returns have been prepared using the same records, then surely the two should be the same ??" Mr Broadbent replies “We haven’t used Sage for the VAT returns for over 6 years, on any Company. We need to show the correct accounts, to show our potential buyers the true position of our input.”
“Artur Can you please try arrange the following, with the assistance of Ewan and us: Draft accounts - as per my email to Ewan, these need to match the VAT returns. Missing Invoices for each month - Can we all meet up ASAP, to discuss, I have a plan for this. Bank Statements - This will tie in with the missing invoices. Sales Invoices/Credits - Need to match the returns. VAT registration Certificate - Copy required.”
“Please see attached, is this what you require, or shall I take off monthly submission and just give him totals? Ewan had our Sage backup back in November I think, when Bev has send it to him on your request, it included big invoices from Depa, Youzoom, Evolve etc, as those are on our Sage, so not sure if it will give him correct figures, it will also show huge vat liability due to some invoices missing? Please advise, should I print off what we have on sage and show you first?”
“Can you remove draft from these on that new software? X”
“I have looked at the sage to30/11/2012 . VAT underclaimed to31/10/2012 was 928.72. For period1/11/2012 to31/1/2013 I am missing invoices to the amount of£100,000 . Do you want me to send the Sage back up and the missing invoices later”
“Fee has text me, he says your doing your own thing, thanks, that’s great timing mate. Not sure I deserve that, given none of the Companies would be in business without me. But, that’s your call and I have no intention of finding out why. Citygate – You need o repay Debs, you and I personally guaranteed she would be paid and it won’t go away. I’m not seeing her suffer because of the lies and deceit that go on. She’s on the list to be paid and will be paid. I’m not being your scapegoat in this, it might be say for you to blame me, but you and I know the real truth.”
“(a) any salary, wages or fee, (b) any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money's worth, or (c) anything else that constitutes an emolument of the employment.”
“Indeed, so far as the words 'wilful failure to deduct' are concerned, once it is acknowledged on the applicant's behalf that there was not a deduction, from which in turn it follows that he by his solicitors and accountants acknowledged that he received his emoluments without the deduction of tax, it is at least prima facie the case that the payment was a deliberate and intentional payment, and unless there be some material to suggest that it was a careless mistake or a negligent rather than a deliberate and intentional way of dealing with the matter, I would have thought that it was really unarguable that the failure to deduct was other than wilful. I bear in mind that this was not an isolated payment of a single week or for a short period. The sum in question of {21,000 is a sum which was payable over a period from e a date in 1972 to the end of June 1974. Did the applicant know? I must start on the basis that he was receiving his full emoluments without deduction. It is difficult to conceive of a man receiving his emoluments in that way without knowing that that was precisely what was happening.”