“1. Cost of sales I am still taking specialist advice concerning the Transfer Pricing report. I have opened compliance checks for accounting periods ended31 December 2015 and31 December 2016 , in case HMRC wishes to look into the company’s transfer pricing methodology. I must stress, at this point, that these checks are merely to protect HMRC’s right to enquire into these periods and I do not need any information from you at present. I will keep you advised on progress.”
“1. Cost of sales (Transfer Pricing) I will now be conducting a transfer pricing enquiry due to the significant changes in the company’s net profit margin, which appears to coincide with the production of the Transfer Pricing Planning Analysis prepared by BKD.”
“LPE’s reduction in NPM was due to corrective actions taken with the Company’s transfer pricing policy in 2014. A new CFO joined Eurark in late 2013, who soon discovered that the original transfer pricing policy provided LPE with excess profits, while Eurark incurred losses.”
“Next Steps … I am grateful for your client’s efforts in providing information and documents throughout this enquiry and I am currently in the process of reviewing the emails provided in May and July 2021. I do not anticipate issuing any further large requests for information and documents, although I may request further information in relation to specific items identified within the emails provided, if necessary. I am sure you will appreciate that the email review is a significant and time-consuming piece of work, acknowledging that it took almost 11 months for the emails to be provided, and we are continuing to review the emails as quickly as possible. … Action Plan To ensure momentum is maintained, I have enclosed an action plan for progressing the enquiry to closure. You will note that this plan includes a submission to HMRC’s Internal governance immediately after the email review. This should give your client the reassurance that any further actions by the case team have support from HMRC’s governance. The plan has been drafted based on indicative dates to reach a settled position as quickly as possible, however, the dates and actions in the plan are subject to change pending the outcome of the governance submission. I would welcome your input / comments regarding the enclosed plan. I hope that the information outlined above, and enclosed action plan, allay your client’s concerns, however, I acknowledge your client’s right to seek closure from the tribunal if they feel it’s appropriate.”
“HMRC would state that by excluding items from the Statement of Facts, it does not believe that dishonest and/or inaccurate statements have been made... HMRC will consider all information it is provided with, to reach an appropriately evidenced conclusion to the enquiry. In this case, this information will include job adverts, because it is a way to define a particular role, and marketing videos, because they will provide evidence on the marketing function. The staff objectives and appraisals show the criteria that individuals are expected to do as part of their job, be judged against, and is evidence of the functions performed. … Next Steps HMRC would welcome your comments in relation to this letter and if further information is provided, it will be considered to reach a reliable, evidence-based conclusion. If you would like additional evidence to be considered, please provide it by30 November 2022 . If HMRC do not receive anything by this date, HMRC will consider the position final, using the CUP methodology put forward.”
“1. We need all Eurark LLC group consolidated financial statements that coincide with, or partly coincided with, account periods of Lifeplus Europe Limited (LPE) ended31 December 2014 to31 December 2022 inclusive. [Item 1] 2. All Eurark LLC entity level financial statements that coincide with, or partly coincided with, account periods of LPE ended31 December 2014 to31 December 2022 inclusive. [Item 2] 3. Global group structure diagrams at 31 December each year, from 2013 to 2022 inclusive, in standard notation if available, which should include […] [Item 3] 4. The organisational structure diagrams at 31 December each year, from 2013 to 2022 inclusive, which should include […] [Item 4] 5. All agreements or contracts Eurark LLC held with associated entities during the period1 January 2014 to31 December 2022 inclusive. [Item 5]”
“Notice of enquiry (1) an officer of Revenue and Customs may enquire into a company tax return if they give notice to the company of their intention to do so (“notice of enquiry”) within the time allowed. (2) If the return was delivered on or before the filing date, notice of enquiry may be given at any time up to twelve months from the day on which the return was delivered (subject to sub-paragraph (6)). (3) If the return was delivered after the filing date, notice of enquiry may be given at any time up to and including the 31st January, 30th April, 31st July or 31st October next following the first anniversary of the day on which the return was delivered. (4) If the company amends its return, notice of enquiry may be given at any time up to and including the 31st January, 30th April, 31st July or 31st October next following the first anniversary of the day on which the amendment was made. (5) A return which has been the subject of one notice of enquiry may not be the subject of another, except one given in consequence of an amendment (or another amendment) by the company of its return. (6) In the case of a company which is a member of a group other than a small group, the 12-month period in sub-paragraph (2) shall start not from the day on which the return was delivered but from the filing date. (7) In sub-paragraph (6) “group” and “small group” have the same meaning as in sections 474(1) and 383 of theCompanies Act 2006 .”
“Part 4Restrictions on powers Documents not in person's possession or power 94. 18 An information notice only requires a person to produce a document if it is in the person's possession or power.”
“(2) Where a person has made a tax return in respect of a chargeable period under paragraph 3 of Schedule 18 to FA 1998 (company tax returns), a taxpayer notice may not be given for the purpose of checking that person’s corporation tax position in relation to the chargeable period. (3) Sub-paragraphs (1) and (2) do not apply where, or to the extent that, any of conditions A to E is met … (8) Condition D is that the notice is given for the purpose of obtaining any information or document that is required (or also required) for the purpose of checking the person’s position as regards any deductions or repayments referred to in paragraph 64(2) (PAYE etc).”
“64(1) In this Schedule, except as otherwise provided, “tax position”, in relation to a person, means the person’s position as regards any tax, including the person’s position as regards – (a) past, present and future liability to pay any tax, (b) penalties and other amounts that have been paid, or are or may be payable, by or to the person in connection with any tax, and (c) claims, elections, applications and notices that have been or may be made or given in connection with the person’s liability to pay any tax, and references to a person’s position as regards a particular tax (however expressed) are to be interpreted accordingly. […]” (a) past, present and future liability to pay any tax, (b) penalties and other amounts that have been paid, or are or may be payable, by or to the person in connection with any tax, and (c) claims, elections, applications and notices that have been or may be made or given in connection with the person’s liability to pay any tax, and references to a person’s position as regards a particular tax (however expressed) are to be interpreted accordingly. […]”
“In respect of the Respondent’s application to direct the Appellant to amend his evidence, I have decided that this part of the application should be refused. The Tribunal panel hearing this appeal will be able to see for itself whether certain paragraphs of the Appellant’s evidence constitute evidence of fact or case submissions. The Respondent can seek directions from that panel as to the parts of Mr Sayers’ witness statement that will be struck out as not constituting evidence of fact.”
“82. I should explain in more detail why I take this view. Without attempting to lay down any exhaustive rules, it seems to me that in general the proper function of factual witnesses, even of those involved in a case in a professional capacity…, is to give evidence of facts relevant to the issues in the case of which they can speak from their own knowledge (including in appropriate circumstances evidence of hearsay statements). Save insofar as they are able to give relevant evidence of their own, it is not the proper function of a witness’s evidence to comment on documents, or on other witnesses’ evidence, or to speculate on other persons’ motives or intentions; far less is it the proper function of a witness’s evidence to raise points of law, or to argue a party’s case.”
“i) whether the proposed skilled evidence will assist the court in its task (ii) whether the witness has the necessary knowledge and experience iii) whether the witness is impartial in his or her presentation and assessment of the evidence; and iv) whether there is a reliable body of knowledge and experience to underpin the expert’s evidence.”
“14. … Tribunals will be astute to the difference between the factual evidence contained in a witness statement and inferences and conclusions that may be contained within it. The latter are not properly part of the evidence of a witness of fact; to the extent they are contained in a witness statement they should be disregarded and it is not necessary for the witness to be cross-examined in those respects.”
“... It is not the proper function of cross-examination to argue the case, or debate issues of law, or seek to get the witness to agree with factual propositions of which they cannot themselves give relevant evidence. In practice counsel is often allowed considerable latitude to stray into these areas, but strictly speaking evidence in cross-examination is no more admissible if it is not evidence of facts of which the witness can speak of his own knowledge than it is in chief.”
“7.24 I can confirm that the inclusion of such documents in the notice under review was approved in advance by an Authorised Officer, and it is evident that that officer was provided with all the relevant facts and gave due consideration to them.”
“56. The Respondents accept that the Information Notice requires the Appellant to produce documents which originates more than six years before the date of the Notice. However, the Respondents assert that this does not invalidate the Notice, because it was given by and/or with the agreement of an authorised officer on2 October 2023 , in compliance with paragraph 20 of Schedule 36 to theFinance Act 2008 .”
“Daragh I have considered your request for approval to use the powers listed in your submission of29/09/2023 . I approve the proposed action. The attached document sets out my reasoning and confirms my decision. The document and this email should be saved in caseflow for audit trail purposes.”
“all relevant evidence should be admitted unless there were compelling reasons to the contrary.”
“There are several reasons why OECD member countries and other jurisdictions have adopted the arm’s length principle. A major reason is that the arm’s length principle provides broad parity of tax treatment for members of MNE groups and independent enterprises. Because the arm’s length principle puts associated and independent enterprises on a more equal footing for tax purposes, it avoids the creation of tax advantages or disadvantages that would otherwise distort the relative competitive positions of either type of entity. In so removing these tax considerations from economic decisions, the arm’s length principle promotes the growth of international trade and investment.”
“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...”
“… given that the scheme is directed at an early investigatory stage and in any investigation some lines of enquiry may prove more fruitful than others but nevertheless may need to be pursued. …A broadly drafted request will not be valid if in reality HMRC are saying ‘can we have all available documents because they form so large a class of documents that we are bound to find something useful’. What is required is that the request is genuinely directed to the purpose for which the notice may be given, namely to secure the production of documents reasonably required for carrying out an investigation or enquiry of any kind into another taxpayerʼs tax position.” … Finally, HMRC may not use their Sch 36 powers for a fishing expedition – whether for their own or the purposes of another revenue authority...”
“Simler J in the High Court came at this from the angle of requiring that there be a genuine exercise of checking the taxpayer’s tax position through an investigation or enquiry of any kind – when she used the term ‘fishing expedition’, she meant a case where HMRC’s request was not genuinely directed to that purpose.”
“68. … I have also taken account of the caselaw that provides that HMRC’s request must be “genuinely directed to the purpose for which the notice may be given” (Simler J in Derrin at [20]). A request for information or documents “cannot be unreasonable, or entirely without foundation” and while “that does not rule out an element of uncertainty or speculation on HMRC’s part” (…), it does not allow mere speculation or allow HMRC to use Schedule 36 “to “fish” for possible issues” (…).”
“We would also like to reiterate here that in line with the Transfer Pricing Studies provided to HMRC, the most appropriate transfer pricing method was thoroughly considered, and it was deemed that the RPM was not appropriate in this situation as clearly set out in the reports. In contrast, we do not believe HMRC has provided any such support for their choice of method, and the rationale behind rejecting the other methods, and have chosen a method that is self-serving to HMRC.”
“10. …HMRC is entitled to know the full facts related to a person’s tax position so that they can make an informed decision whether and what toassess. It is clearly inappropriate and a waste of everybody’s time if HMRC areforced to make assessments without knowledge of the full facts. The statutoryscheme is that HMRC are entitled to full disclosure of the relevant facts: this is whythey have a right to issue (and seek the issue of) information notices seekingdocuments and information reasonably required for the purpose of checking a taxreturn (see Schedule 36 ofFinance Act 2008 ).”
“HMRC did not trust the appellant’s self- certification.”
“Whilst self certification is not, per se, objectionable and indeed is commonplace in high value commercial litigation, its efficacy in any particular circumstance depends on the relevance of the material. The greater the relevance, the less satisfactory self certification becomes.”
“64. I agree that, as identified in those cases, HMRC can only reasonably require information which relates to identified tax issues. That principle recognises that, as stated, HMRC cannot go on fishing expeditions. Furthermore, it is consistent with the principles set out by Simler J in R (Kotton) v First-tier Tribunal (Tax Chamber)[2019] EWHC 1327 (Admin) (at [59-62]) and approved by the Court of Appeal in Kandore (at [73]). … 70. Accordingly, I consider that HMRC must identify a tax issue to which the information sought relates and I must be satisfied that HMRC’s investigation is genuine and legitimate and not in bad faith. Beyond that it is not for me to reach any conclusion regarding the tax issues or issues identified by HMRC; and, in particular, it is not necessary for it to be shown that a liability to tax will arise on conclusion of the investigation as a valid investigation may lead to the conclusion there is no liability.”
“Next Steps … I am grateful for your client’s efforts in providing information and documents throughout this enquiry and I am currently in the process of reviewing the emails provided in May and July 2021. I do not anticipate issuing any further large requests for information and documents...”
“a. Business model … In general, the business model of LPE contains a number of aspects along with the compensation system that rewards business builders (i.e. the third party Associates) in keeping with the business model. This Business model has many components which were all designed by the founders and owners of Lifeplus... … III. Conclusion As shown above, LPE does not bear the economically significant risks in relation to the business, nor any of the costs in relation to the ERP and MRP [Material Requirements Planning] systems, even though it benefits from both. All control and costs are borne by Eurark, along with those relating to any legal or product liability claims (although these risks have never materialised), In relation to returns and refunds, the Associates bear and manage this risk through LPE reclaiming commissions paid in relation to products returned by customers, as this forces the Associates to correctly build, manage and police their downline.”
“…, our client’s business and business model is an extremely simple one... For the avoidance of doubt, we reiterate the explanation provided by Mr Vincent at the start of the February 2019 meeting detailing the business model: (1) LPE receives orders from customers, (2) orders are shipped to the consumers and (3) in return our client pays commission to the Associates. The vast majority of the products being sold by our client are developed and manufactured by Eurark, with significant amounts of time and costs being incurred in the US relating to the development of unique product formulations. Eurark is also responsible for developing and maintaining the key intangibles within the Group; being the compensation and referral model; the ERP and MRP systems; and the product formulations themselves. As has been mentioned many times, overseas based third party Associates are responsible for generating sales orders from customers and referring them, not the call centre in the UK. We would also like to emphasise again that the UK marketing department is a support function only and it is not responsible for selling products or attracting customers.”
“Much of the growth in this period may be explained by increased consumer demand and Eurark's ability to position the Company to meet this demand. … Under the Eurark- designed referral marketing model, the associates were able to successfully establish and grow their direct sales networks, resulting in increased sales. The strategies, tools, and rewards provided through Eurark's business model encouraged associates to join and become successful sales people.”
“…Tax administrations are encouraged to take into account the taxpayer’s commercial judgement about the application of the arm’s length principle in their examination practices and to undertake their analyses of transfer pricing from that perspective.”
“Where the most appropriate transfer pricing method in the circumstances of the case, determined following the guidance at paragraphs 2.1 to 2.11, is a one-sided method, financial information on the tested party is needed in addition to the information referred to in paragraph 3.20 – irrespective of whether the tested party is a domestic or foreign entity…On the other hand, once a particular one-sided method is chosen as the most appropriate method and the tested party is the domestic taxpayer, the tax administration generally has no reason to further ask for financial data of the foreign associated enterprise.”
“As soon as a case team identifies a transfer pricing issue that may necessitate an enquiry, it should contact the Transfer Pricing Unit…A Transfer Pricing Specialist will then be assigned to the case… A transfer pricing enquiry must not be opened (or any approach made to a customer that might be construed as the opening of a transfer pricing enquiry) without the approval of the Transfer Pricing Panel or Board”
“Conducting an effective case A clear strategy from the outset is essential. Case teams should bear in mind at all times that the purpose of a transfer pricing enquiry is to test controlled transactions against the arm’s length principle.”
“Make a plan - and agree it with the business …Creating the plan should be a collaborative process involving where possible the business and its advisers. Gather information Frequently, the most effective ways of understanding the business and placing its approach to transfer pricing in context can be to have a meeting with the business’s officers. Assess the evidence Case teams should examine the evidence.”
“Next Steps As discussed at the meeting, HMRC will review their CUP analysis, to include relevant adjustments where appropriate. Mazars / Lifeplus have offered to refer back to Forvis to review the TNMM analysis / comparables used, which HMRC have also agreed to consider in the hope of reaching an agreed settlement. It has been agreed that when the appropriate work has been completed by all parties, a call will be arranged to discuss any updates or adjustments that have been made, which is currently expected to be late April or Early May 2023 based on the time Forvis expect the work to take.”
“Transfer Pricing Methodology … I believe the adoption of the internal CUP provides a more reliable comparable than applying a sales based TNMM methodology. I do not believe that TNMM sufficiently rewards the value of the marketing function, which appears to be a key value driver within the business. The OECD guidelines also provides a preference for the application of the CUP Methodology at Para 2.3, “Moreover, where, taking account of the criteria described in paragraph 2.2, the comparable uncontrolled price method (CUP) and another transfer pricing method can be applied in an equally reliable manner, the CUP method is to be preferred.”
“11. The focus of the Respondents enquiries shifted to the Transfer Pricing Policy (“TPP”) used to value goods and/or services transferred between the Parent Company in the USA and the Appellant. The new TPP was adopted in 2014, following which the Appellant’s taxable profit margins shrunk significantly. … 15. At the meeting held between the Respondents and Appellant, on14 March 2023 , it was agreed the Appellant would provide their proposed adjustments to the Respondents CUP. … Reasonably Required: 59. The Respondents reject the Appellants submission on this point and submit that the documents are reasonably required. The Respondents assert that without these documents they are unable to make an informed decision about the key facts that have had a significant impact on the Appellant’s tax position, as well as verify the Appellant’s£89,000,000 of proposed adjustment to the Respondents’ CUP. The Respondents will therefore be forced to make an assessment without full knowledge of the facts. More importantly, the Statutory scheme entitles the Respondents to full disclosure of the facts, to check the Appellant’s tax position.”
“12. Throughout the enquiry, the Respondents have repeatedly asked for copies of the Parent Company’s consolidated accounts to verify that it was loss making pre-2013. However, the Appellant repeatedly claimed that they could not provide these documents.”
“RESPONSE: We maintain that the financial statements of Eurark LLC comprise the activities and balances of foreign subsidiaries not relevant to your investigation. The role and contributions of Lifeplus Europe Limited to the consolidated group are explained and addressed in the transfer pricing study.”
“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 is often cited as authority... 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.”
“57. … it is not open to a party to call a witness to give evidence which that party will say is not only wrong but deliberately so. In this respect, the following passage in the judgment of Mustill LJ (as he then was) in The ‘Filiatra Legacy’ [1991] 2 Lloyd’s Rep. 337 at page 361 explains the position: “In one category are the situations where a party says that his own witness is giving mistaken albeit honest evidence and where he seeks to establish this either by calling direct evidence to contradict what his witness has said or by arguing that, when the evidence is regarded as a whole, a mistake is to be inferred. We believe that this is a common occurrence in civil litigation and unobjectionable in principle, provided that care is taken to avoid surprise and hence injustice. We adopt the reasoning of the British Columbia Court of Appeal in Cariboo v Carson Truck Lines 32 D.L.R. (2d) 36 (1961), and in the English cases there cited. From this must be distinguished the situations where a party wishes to assert that the evidence given in chief by a witness whom he has called is not only wrong, but is wrong on purpose. The most obvious instance is one where the witness has turned coat and has deliberately failed to come up to proof. Here the position seems clear. The party cannot cross-examine his own witness by reference to his proof of evidence or other previous statement unless and until the court has ruled that he is hostile. Nor may he call evidence to establish the general bad character of his witness. (See Ewer v Ambrose (1825) 3 B. & C. 246; The Criminal Procedure Act, 1865, s.3, applied by the Civil Evidence Act, 1968) ...” “In one category are the situations where a party says that his own witness is giving mistaken albeit honest evidence and where he seeks to establish this either by calling direct evidence to contradict what his witness has said or by arguing that, when the evidence is regarded as a whole, a mistake is to be inferred. We believe that this is a common occurrence in civil litigation and unobjectionable in principle, provided that care is taken to avoid surprise and hence injustice. We adopt the reasoning of the British Columbia Court of Appeal in Cariboo v Carson Truck Lines 32 D.L.R. (2d) 36 (1961), and in the English cases there cited. From this must be distinguished the situations where a party wishes to assert that the evidence given in chief by a witness whom he has called is not only wrong, but is wrong on purpose. The most obvious instance is one where the witness has turned coat and has deliberately failed to come up to proof. Here the position seems clear. The party cannot cross-examine his own witness by reference to his proof of evidence or other previous statement unless and until the court has ruled that he is hostile. Nor may he call evidence to establish the general bad character of his witness. (See Ewer v Ambrose (1825) 3 B. & C. 246; The Criminal Procedure Act, 1865, s.3, applied by the Civil Evidence Act, 1968) ...”
“An information notice only requires a person to produce a document if it is in the person’s possession or power.”
“HMRC accepted that, whilst they strictly have the burden of proof, in an issue of this type it is sufficient for HMRC to raise a prima facie case that the documents and information are in the Respondent’s possession or knowledge and then it is for the Respondent to show that they are not. As the FTT said in HMRC v Parissis[2011] SFTD 757 (“Parissis”) at [19] in relation to the predecessor legislation to Sch 36, which is in identical terms on this point: ‘It seems to us that it is HMRC’s application for a penalty and it is for them to satisfy us that the documents are in the respondents’ possession or power. We bear in mind it is hard to prove a negative. But, we think, although HMRC must raise a prima facie case that the documents are in the respondents’ possession or power then it is for the respondents to show that they are not.” ‘It seems to us that it is HMRC’s application for a penalty and it is for them to satisfy us that the documents are in the respondents’ possession or power. We bear in mind it is hard to prove a negative. But, we think, although HMRC must raise a prima facie case that the documents are in the respondents’ possession or power then it is for the respondents to show that they are not.”
“…make and serve on [the] other party a list of the documents which are or have been in his possession, custody or power relating to any matter in question between them in the action.”
“…in the context of the phrase ‘possession, custody or power’ the expression ‘power’ must, in my view, mean a presently enforceable legal right to obtain from whoever actually holds the document inspection of it without the need to obtain the consent of anyone else. Provided that the right is presently enforceable, the fact that for physical reasons it may not be possible for the person entitled to it to obtain immediate inspection would not prevent the document from being within his power; but in the absence of a presently enforceable right there is, in my view, nothing in Order 24 to compel a party to a cause or matter to take steps that will enable him to acquire one in the future... For the reasons already indicated Shell Mocambique’s documents are not in my opinion within the ‘power’ of either of Shell or BP within the meaning of RSC Ord 24. They could only be brought within their power either (1) by their taking steps to alter the articles of association of Consolidated and procuring Consolidated through its own board of directors to take steps to alter the articles of association of Shell Mocambique, which Order 24 does not require them to do; or (2) by obtaining the voluntary consent of the board of Shell Mocambique to let them take copies of the documents. It may well be that such consent could be obtained; but Shell and BP are not required by Order 24 to seek it, any more than a natural person is obliged to ask a close relative or anyone else who is a stranger to the suit to provide him with copies of documents in the ownership and possession of that other person, however likely he might be to comply voluntarily with the request if it were made.”
“Insofar as a document is in the physical possession of a third party, meaning a person who is not a party to the action, that document is in the control of a party to the action not only where the party has a legally enforceable right to obtain access to such a document, but also where there is a standing or continuing practical arrangement between the party and the third party whereby the third party allows the party access to the document, even if the party has no legally enforceable right of such access… However, in order to establish that there is such a standing or continuing arrangement or even a specific, time-limited arrangement, whereby a third party allows a party to the action access to the document which the third party has in its possession, it is not generally sufficient to demonstrate that there is a close legal or commercial relationship between the party and third party, such as parent and subsidiary companies or employer and employee relationships; something more is required; there must be more specific and compelling evidence of such an arrangement…”
“(b) he has or has had a right to possession of it.”
“[i]t would appear, however, that the “power” concerned had to be one vested in the person concerned in his personal capacity, and not for example as a company director or other fiduciary.”
“21. I accept that the mere fact that a party to a litigation may be able to obtain documents by seeking the consent of a third party will not on its own be sufficient to make that third party’s documents disclosable by the party to the litigation. They are not within his present or past control precisely because it is conceivable that the third party may refuse to give consent. But what happens where the evidence reveals that the party has already enjoyed, and continues to enjoy, the co-operation and consent of the third party to inspect his documents and take copies and has already produced a list of documents based on the consent that has been given and where there is no reason to suppose that that position may change? Because that is the factual situation with which I am confronted here. In my judgment, the evidence in this case sufficiently establishes that relevant documents are and have been within the control of the claimant. I should emphasise that my decision does not turn in any way on the existence of a common corporate structure. My decision depends on the fact that it appears from the evidence that a general consent has in fact been given to the claimant to search for documents properly disclosable in this litigation, subject only to the caveats contained in paragraph 4 of Mr. Griffin’s witness statement concerning corporate acquisition documents and unreasonably onerous requests.”
“10. It is apparent that what is required is an existing arrangement or understanding, the effect of which is that the party to the litigation from whom disclosure is sought has in practice free access to the documents of the third party, in that case the trustees. It appears that that does not need to be an arrangement which is legally binding. If it did, then there would be a legal right to possession of the documents, but it must nevertheless be an existing arrangement which, in practice, has the effect of conferring such access … 13. The position can, therefore, be summarised for present purposes in this way. First, it remains the position that a parent company does not merely by virtue of being a 100 parent have control over the documents of its subsidiaries. Second, an expectation that the subsidiary will in practice comply with requests made by the parent is not enough to amount to control. Third, in such circumstances, as Lord Diplock said in Lonrho, there is no obligation even to make the request, although it may, in some circumstances, be legitimate to draw inferences if the party to the litigation declines to make sensible requests. But that is a separate point. 14. Fourth, however, a party may have sufficient practical control in the sense which the Schlumberger and North Shore cases [North Shore Ventures Ltd v Anstead Holdings Inc[2012] EWCA Civ 11 ] indicate, if there is evidence of the parent already having had unfettered access to the subsidiary’s documents or if there is material from which the court can conclude that there is some understanding or arrangement by which the parent has the right to achieve such access.”
“21. …It is merely the evidence of the normal relationship that one would expect between a parent and subsidiary without the particular features of the Schlumberger or North Shore cases. Such co-operation as there may have been in the past as to compliance with specific requests, for example production of certain of the licences in issue, does not, in my judgment, amount to evidence that ENRC has the necessary control in the sense which the cases show is necessary over Bamin’s documents. It does not indicate that ENRC would be entitled to send its solicitors into Bamin’s premises and to insist on searching Bamin’s computers, applying the kind of word search terms and insisting on production of the computers of various individuals which would be necessary in order to enable that to be done. There is no evidence as far as I can see that that has happened so far, as distinct from specific documents being provided in response to a specific request.”
“we have undertaken discussions, as recently as25 June 2024 with representatives of our client’s USA parent whom we understand do have power of the documents that are subject to the request. … a) Eurark is a privately held Company, and under the laws of the US, its accounts are not required to be publicly available. Indeed, the documents subject to the request are considered extremely confidential, and no one outside of the owners of Eurark, except a select few Eurark executives on a limited basis, are permitted access to these. … d) they have no intention of providing those documents to our client.”
“42. …I discussed the matter with the Eurark Manager/CEO, and we agreed that the combined and consolidated financial statements of the group controlled by Eurark should not be shared. … 44. The decision was made by our Manager/CEO and me not to provide the financials of Eurark or the combined and consolidated financials of the group controlled by Eurark…”
“78. De facto or practical power did not arise in Lonrho as the defendants in that case had asked the owners of the documents sought for their production and been refused. The documents were not in Shell's de facto power. In any event, the Lords in Lonrho did not consider that being able in practice to obtain a document, perhaps by influence, was enough for it to be within the person's 'power'. Not only did the Lords require a presently enforceable legal right to the documents to exist but they said it must be exercisable without another person's consent. HMRC are asking us to find that a document may be within a person's power for s 20 purposes even if they do need the consent of another person... 79. …We consider, in the context of information notices where the emphasis is on the present and future, and contrary to the conclusion reached in Lonrho in the context of disclosure for litigation where the emphasis was on the present and past, that documents are within a person's power if they can obtain them, by influence or otherwise, and without great expense, from another person even where that person has the legal right to refuse to produce them. 80. So the question is then is it for HMRC to show that the trustees certainly would hand over the documents if asked or for the respondents to demonstrate they have asked the trustees and been refused? 81. HMRC have raised a prima facie case that the respondents would be given the documents by the trustees: they are both settlors and beneficiaries. The respondents, we find, transferred some of their wealth to the trustee on trust for themselves. We find they were unlikely to do this if they did not believe that the trustee would act on their instructions. The trustee is a professional trust company and will have a reputation to maintain…Even if not obliged in the absence of a court order to provide documents …, we find it is likely a trustee would choose, in the spirit of trusteeship, to provide copies of them to the settlors and beneficiaries. 82. HMRC have raised a prima facie case that the documents are within the power of the respondents and we therefore think it is for the respondents to show that they have asked the trustee for the documents and been refused. They have not done this. They are therefore liable to a penalty.”
“14. It appears to me that, as Founders and Protectors, the Appellants must have power to influence the behaviour of the Trustee in relation to such things as the provision of documents or information... The fact that the Appellants were able to ask for and obtain substantial loans from the Trustee in March 2010 shows that the Trustee does accede to the Appellants’ requests... I conclude that the Appellants can influence and, in practice, require the Trustees to comply with their lawful and reasonable requests. Nothing that I have seen in the Trust Deed or the letter from the Trustees shows that the provision of the documents and information would be unlawful or that it would be unreasonable to expect the Trustee to comply with the request. 15. On the basis of the evidence provided, I find that the Appellants’ only asked the Trustee to provide the information and documents specified in the information notice in the letter dated11 October 2012 which, if it was received, the Trustee ignored. The Appellants made no attempt to obtain a reply to their letter until the email of16 October 2013 . Having received the Trustee’s reply, the Appellants do not appear to have made any effort to persuade the Trustee to reconsider its refusal to provide the documents and information. From the language of the letter and the fact that no attempt was made to follow it up for more than a year (and then only in response to my earlier decision) and the passive acceptance of the Trustee’s refusal to provide the documents and information, I conclude that the Appellants have not made any serious attempt to obtain the relevant information and documents from the Trustee. 16. In conclusion, I am not satisfied, on the balance of probabilities, that the information and documents specified in the information notice are not in the Appellants’ possession or power.”
“The departmental expenses of Eurark were provided through our advisors Mazars without involvement of our personnel in the UK in order to allow a conversation to move forward towards a settlement and solely for that purpose.”
“The company is at law a different person altogether from the subscribers to the Memorandum and, although it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands receive the profits, the company is not in law the agent of the subscribers or trustee for them. Nor are subscribers as members liable, in any shape or form, except to the extent and in the manner provided by the Act. That is, I think, the declared intention of the enactment.”
“My Lords, the reason why English statutory law, and that of all other trading countries, has long permitted the creation of corporations as artificial persons distinct from their individual shareholders and from that of any other corporation even though the shareholders of both corporations are identical, is to enable business to be undertaken with limited financial liability in the event of the business proving to be a failure. The ‘corporate veil’ in the case of companies incorporated under the Companies Act is drawn by statute and it can be pierced by some other statute if such other statute so provides: but in view of its raison d’être and its consistent recognition by the courts since Salomon v Salomon & Co Ltd[1897] AC 22 , HL, one would expect that any parliamentary intention to pierce the corporate veil would be expressed in clear and unequivocal language…”
“The ‘single economic unit’ argument There is no general principle that all companies in a group of companies are to be regarded as one. On the contrary, the fundamental principle is that "each company in a group of companies (a relatively modern concept) is a separate legal entity possessed of separate legal rights and liabilities:" The Albazero [1977] A.C. 774, Ml, per Roskill L.J. …Mr. Morison did not go so far as to submit that the very fact of the parent-subsidiary relationship existing between Cape and N.A.A.C. rendered Cape or Capasco present in Illinois. Nevertheless, he submitted that the court will, in appropriate circumstances, ignore the distinction in law between members of a group of companies treating them as one, and that broadly speaking, it will do so whenever it considers that justice so demands. In support of this submission, he referred us to a number of authorities.”