Grzegorz Sczcepaniak t/a Phu Greg-Car v The Director of Border Revenue: [2019] UKUT 0295 (TCC) [2019] UKUT 0295 (TCC)
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
[2019] UKUT 0295 (TCC)Case No UT/2018/0163
Between
GRZEGORZ SCZCEPANIAK T/A PHU GREG-CARAppellantTHE DIRECTOR OF BORDER REVENUERespondent
Before
JUDGE TIM HERRINGTONJUDGE JONATHAN RICHARDSMichael Wiencek of Euro Lex Partners LLP for the Appellant Michael Newbold for RespondentDate 1 October 2019Category: Tax
[94]The relevant law makes it clear that the decision as to whether or not to restore a forfeited vehicle is a matter for HMRC [throughout the decision the FTT mistakenly referred to the Respondent as “HMRC”] to determine at their discretion and that this Tribunal can disturb that decision only if it is unreasonable in the sense described in the leading case of Associated Provincial Picture Houses, Limited v Wednesbury Corporation [1948] 1 KB 223 (Wednesbury). The Tribunal 8 is not permitted to consider the relevant facts afresh and determine whether or not the Tribunal agrees with the conclusion that HMRC has reached.[95]Instead, the Tribunal needs to consider whether, in reaching that conclusion, HMRC have taken into account matters that they ought not to have taken into account or disregarded matters that they ought to have taken into account. We are entitled to consider whether HMRC have applied their general policy and whether that general policy is reasonable in the Wednesbury sense but, as long as both of those are the case, HMRC’s decision cannot be impugned simply because this Tribunal or some other person might have reached a different conclusion on the same facts. Mr Newbold invited us to read the final sentence of [94] as emphasising that the FTT did not have power to interfere with the Respondent’s decision simply because it disagreed with it. Therefore, in Mr Newbold’s submission, the FTT realised that it had the power to find facts afresh but that, having done so, it needed to consider whether the Respondent’s decision was unreasonable in the light of those fresh facts, and not merely whether the FTT agreed with the decision. Mr Newbold supported this submission by reference to [81] where the FTT recorded submissions of the Respondent as follows:[81]It was submitted that the appellant has not shown that the decision in the review letter was unreasonable. The driver’s responsibility does not mean that the appellant cannot also be responsible. It was submitted that the standard of proof is the balance of probabilities taking into account all relevant facts... That, Mr Newbold submitted, demonstrated that the FTT realised that it had a fact-finding power and duty and that it should find disputed facts on a balance of probabilities. We do not, however, accept Mr Newbold’s interpretation of [94]. The FTT stated that it was “not permitted to consider the relevant facts afresh”. It did not refer to Gora to which both parties had referred in their skeleton arguments. If the FTT had realised that it had the power to “find facts afresh”, it might be expected to have sought to exercise that power. However, as will be seen, the FTT did not make reasoned findings on disputed facts, although it did provide a lengthy summary of the parties’ evidence and submissions on that evidence. Those factors indicate to us that the FTT did not appreciate the full scope of its fact-finding power, or indeed, its fact-finding duty. That conclusion is not altered by [81]. First, in that paragraph, the FTT was recording submissions that the Respondent had made, and was not setting its own conclusions on the law. More fundamentally, [81] deals only the standard of proof. It does not deal with the entire process that the FTT should follow in deciding whether the Respondent’s decision was unreasonable or acknowledge that it was open to the FTT to decide that, having considered the facts afresh, the Respondent’s decision was unreasonable in the light of those facts. 9 Having directed itself as to approach to follow, the FTT concluded that the Respondent’s review decision was reasonable for reasons given at [98] to [104]. At [98], the FTT alluded to the issue of the Appellant’s involvement or otherwise in the smuggling attempt in the following terms:[98]It is not sufficient for the appellant to state that it had no reason to believe that the load might have been a smuggling attempt: the burden of proof is on the appellant to show that it took reasonable steps to establish that this was the case. At [99], the FTT concluded that it was reasonable for the Respondent to require operators to take “reasonable steps to prevent smuggling”. At [100] the FTT concluded that Officer Hodge had taken into account relevant factors. It gave particular mention to two factors in the following terms:[100]We consider that the factors which the Review Officer took into account, set out in evidence, are relevant factors, and note particularly:(1) the appellant’s statement that it had no internal procedures in relation to smuggling because it did not believe that anyone would use them for smuggling purposes. Although this is an explanation, it is not a reasonable excuse or in any sense a matter which was relevant to the application of HMRC’s policy. HMRC were entitled and (given their policy) obliged to have regard to the aspects in which there was a failure to carry out basic reasonable checks in the process of reaching their decisions – these were plainly relevant matters; and(2) it is clear that the driver was involved with the smuggling attempt and it is clear from the tachograph evidence that the driver made no attempt to collect the load at the address on the CMR documentation. The appellant gave no explanation as to how the driver knew that the load should be picked up from a different location and has confirmed in evidence today that the freight forwarder would not have known which driver was assigned to the delivery. It is not straightforward to see how the FTT’s observations on “reasonable checks” in [98], [99] and [100(1)] fitted with Officer Hodge’s review decision. In deciding that paragraph C of the policy applied, Officer Hodge was not simply saying that the Appellant had failed to complete “reasonable checks”. Rather, the conclusion was much tougher: namely that the Appellant was responsible for, or complicit in, the smuggling attempt. Mr Newbold invited us to read [100(1)] as a finding that the Appellant’s failure to perform “basic reasonable checks” had led the FTT to conclude that the Appellant was complicit in the smuggling (because, an operator knowing that a load contains smuggled goods would have an obvious incentive to perform no checks). We do not, however, read [100(1)] in that way. A failure to perform reasonable checks does not, of itself, demonstrate complicity in a smuggling attempt: conceptually such a failure could be explained by incompetence, inexperience, ignorance, laziness, lack of time or many other factors. If the FTT had wanted to say that the Appellant’s failure to perform 10 checks supported a conclusion that it was responsible for, or complicit in, the smuggling attempt, it would have needed to explain why it had reached that conclusion. Mr Newbold invited us to read [100(2)] as containing a positive conclusion that, since (on the Appellant’s evidence) the smugglers did not know who was the driver allocated to the load, the Appellant must have told the driver to go to Poznan, rather than the premises of AB Foods (the stated consignor), for loading. Clearly such a finding would have been of central significance. However, we do not read [100(2)] as containing the positive conclusion for which Mr Newbold argued. In [100], the FTT was not expressing its own conclusions on disputed matters of fact; it was referring to matters that Officer Hodge had taken into account in the review decision. Moreover, before making a factual finding adverse to the Appellant on such a contentious issue, the FTT would have needed to weigh up the evidence and explain why it was rejecting the Appellant’s version of events. The fact that paragraph [100(2)] contains no such weighing of the evidence reinforces the conclusion that the FTT was intending to recite considerations that Officer Hodge took into account, rather than to make factual findings of its own. At [102] to [103], the FTT concluded that the Respondent had not failed to take into account any relevant factors and at [104], the FTT rejected criticisms that the Appellant had made of the Respondent’s failure to publish the full text of its policy on restoration. At [105] and [106] the FTT concluded that a refusal to restore the vehicle was proportionate in the circumstances saying:[106]In this case, we have found that it is reasonable for HMRC to have concluded that the appellant was implicated in the attempted smuggling attempt and so the refusal to restore is not disproportionate. The FTT’s overall conclusion at [107] was that the Respondent’s decision was reasonable in all the circumstances and so the appeal was dismissed. The Grounds of Appeal and overview of the parties’ positions The Appellant’s grounds of appeal against the Decision are as follows:(1) The FTT erred in law by not applying the relevant law, or by applying it incorrectly, or by not having any adequate or sufficient evidence.(2) The FTT failed to give appropriate reasons for its decision and that decision was irrational. Ground 1, in particular, is quite general. However, in the Appellant’s written and oral submissions, it was made clear that the core of the Appellant’s complaint was that the FTT had not engaged with the scope of its fact-finding power as set out in Gora and subsequent cases and, as a result, had made no factual finding on the central question of whether the Appellant (as distinct from the driver) was responsible for, or complicit in, the smuggling attempt. To the extent that the FTT had made a factual finding that the Appellant was responsible for, or complicit in, the smuggling, the Appellant argues that that conclusion was inadequately reasoned, irrational and not supported by the evidence. 11 As well as his core complaint set out at [28], the Appellant made other points in his written and oral submissions: (1) He argued that the fact that the driver was convicted of an offence in connection with the smuggling necessarily obliged the Respondent to apply paragraph B of its policy, not paragraph C. (2) He criticised the Respondent’s failure to publicise its policy on the restoration of vehicles that are seized. That policy sets out a level of checks that the Respondent expects hauliers to make to reduce the risk of smuggling. However, many hauliers are based overseas with little smuggling of excise goods in their domestic markets. Such hauliers are entitled to know what the Respondent expects.(3) He argued that the Respondent’s policy as a whole was unreasonable, and contrary to Article 1 Protocol 1 of the European Convention on Human Rights (“A1P1”) because it did not take adequate account of whether a haulier was to blame for a smuggling attempt.(4) He criticised the Respondent’s review decision (made under s15 of FA 1994) for relying on factors not mentioned in the original refusal to restore the vehicle (made under s152 of CEMA). Mr Newbold agreed that the crucial question in this appeal is whether the FTT properly appreciated, or exercised, its fact-finding power (and duty) explained in Gora and confirmed in both Jones and Behzad Fuels. If the FTT did not do so, he realistically accepted that the Decision would contain a material error of law. However, he argued that, once the Decision is read as a whole, it is clear that the FTT appreciated that it had power to find facts afresh and exercised that power to make findings that were available to it on the evidence. Discussion From our analysis of the Decision in the section above, and in particular paragraphs [17] to [24] above, it is clear to us that the FTT did not properly appreciate that it needed to try to establish whether the Respondent’s central allegation, that the Appellant was responsible for or complicit in the smuggling attempt, was true or not. Findings on that crucial issue would almost certainly have determined the appeal. If the Respondent’s central allegation was true then the Respondent would plainly have been acting in accordance with its policy in refusing to restore the vehicle. Moreover, if the Appellant had been responsible for, or complicit in, an attempt to smuggle over 2.6m cigarettes, it is highly unlikely that the FTT would have concluded that a refusal to restore the vehicle was disproportionate. If the FTT had concluded that the Respondent’s central allegation was not true, then the Respondent’s review decision would have been unreasonable since it would have taken into account an irrelevant, and indeed incorrect, consideration (that the Appellant was responsible for, or complicit in, the smuggling attempt) or conversely would have failed to take into account a relevant consideration (that the Appellant was not so responsible or complicit). 12 Since the FTT did not appreciate the scope of its fact-finding power and duty it did not find the necessary facts. The vast majority of the Decision (some 78 out of 108 paragraphs) is taken up with a recitation of evidence and submissions. We would remind First-tier Tribunals that while it is perfectly acceptable to summarise evidence and submissions, a finding of fact is made only when a conclusion, appropriately reasoned, is expressed on the evidence in the light of the submissions made. As we have explained, the Decision did not reach a clear conclusion on the accuracy or otherwise of the Respondent’s central allegation. In arguing against the conclusion at [32] above, Mr Newbold understandably emphasised that, at [106] of the Decision, the FTT said that “it is reasonable for [the Respondent] to have concluded that the Appellant was implicated in the smuggling attempt”. However, as we have explained the FTT did not appreciate the scope of its fact-finding power or duty. Moreover, it did not explain what conclusions it had reached on hotly contested matters of primary fact. In those circumstances, we consider that the conclusion expressed at [106] is inadequately reasoned applying the following approach of Patten LJ in Weymont v Place [2015] EWCA Civ 289: 4.But the relative immunity of the trial judge's findings of fact to interference on appeal depends upon the trial process having been conducted in a way which confirms that the trial judge has properly considered and understood the evidence; has taken into account the criticisms of the evidence advanced by the parties' legal representatives; and has reached a balanced and objective conclusion about points on which differing or inconsistent evidence has been given in making the factual findings which form the basis of his decision. 5.An important aspect of this process is the production of a properly reasoned judgment which explains to the parties and to any wider readership why the judge has reached the decision he has made. This includes making a reference to the issues in the case; the legal principles or test which have to be applied; and to why, in cases of conflicting factual evidence, the judge came to accept the evidence of particular witnesses in preference to that of others. 6.The judge is not, of course, required to deal with every point raised in argument, however peripheral, or with every part of the evidence. The process of adjudication involves the identification and determination of relevant issues. But within those bounds the parties are entitled to have explained to them how the judge has determined their substantive rights and, for that purpose, the judge is required to produce a fully reasoned judgment which does so: see English v Emery Reimbold & Strick Ltd. [2002] EWCA Civ 605. The production of such a judgment not only satisfies the court's duty to the parties but also imposes upon the judge the discipline of considering the detail of the evidence and the legal argument. It follows, therefore, that in our judgment, the Decision contains the following errors of law: 13 (1) It does not appreciate the full scope of the FTT’s power, and duty in appropriate cases, to find facts afresh and judge the reasonableness or otherwise of the Respondent’s decision in the light of those facts. (2) Because of the error at [(1)] it contains insufficient factual findings on matters that were central to the dispute between the parties. (3) Insofar as the FTT did express a factual conclusion, at [106], that the Respondent’s decision was reasonable, that conclusion was insufficiently reasoned and vitiated by the errors of law at [(1)] and [(2)] above. In those circumstances, s12 of the Tribunals, Courts and Enforcement Act 2007 provides that: (1) We may (but need not) set aside the Decision. (2) If we do set aside the Decision we may either (i) remit the case back to the FTT with directions for its reconsideration or (ii) re-make the Decision. Since the Decision contains errors of law on matters of central importance, we are in no doubt that it should be set aside. We share Mr Wiencek’s concerns about the delay and expense that would be involved in remitting the appeal back to the FTT. However, we see no realistic alternative. As we have noted, the FTT must seek to decide whether or not the Appellant was responsible for, or complicit in, the smuggling attempt. To do so, it would need to see all the evidence and hear the answers given by witnesses in cross-examination. The FTT’s assessment of the reliability and credibility of Mr Szczepaniak as a witness will no doubt be of some importance to this matter. We have access to the parties’ witness statements, but do not have any transcript of the FTT hearing and, even if we did, it is doubtful whether we could determine the relevant matters of fact. Accordingly, with some regret, we have concluded that a differently constituted FTT will need to re-hear this appeal. Having reached that conclusion, we do not need to deal with the other submissions that we have summarised briefly at [29] above. However, to ensure that the FTT hearing the remitted appeal is in as good a position as possible to deal with that appeal, we will make some brief observations on those points. The Appellant is wrong to argue that paragraph B of the Respondent’s policy necessarily applies if a driver is involved in a smuggling attempt. If both the operator and the driver are responsible for the smuggling attempt, paragraph C can apply. Whether or not the Respondent could, or should, publish its policy on restoration is of no relevance to this appeal. That is because, in this appeal the Respondent makes the serious allegation that the Appellant was responsible for, or complicit in, an attempt to smuggle 2.6m cigarettes into the UK. If that allegation is true (which the differently constituted FTT will have to decide), the Appellant can scarcely complain that it could not have realised that there would be significant repercussions. If the allegation is untrue then, as we have observed, the Respondent’s refusal to restore the vehicle is unlikely to be reasonable whether or not the policy was published. 14 Neither this Tribunal, nor the FTT, has any power in the context of this appeal to require the Respondent to change its policy on restoration whether that policy is considered contrary to A1P1 or otherwise. Rather, the relevant question for determination is whether the Respondent’s review decision in this specific case was unreasonable. That said, if the FTT determines that the entire policy on restoration is unreasonable, and contrary to A1P1, it may conclude that the particular decision made in pursuance of that policy is unreasonable. That will be a matter for the FTT, but we would observe that we see little force in the Appellant’s argument that the policy takes no account of a haulier’s blameworthiness. Under s16 of FA 1994, the appeal is against the Respondent’s decision on review. Therefore, the fact that the review decision may refer to matters that the Respondent did not mention in its original refusal under s152 of CEMA does not, of itself, make the review decision unreasonable. However, if the reference to fresh material is arbitrary, or the Appellant had no adequate opportunity to comment on that material, the FTT may well wish to take those factors into account when determining the reasonableness or otherwise of the review decision. Disposition The Appellant’s appeal is allowed. The Decision is set aside. We remit the appeal back to the FTT with a direction that it be heard by a differently constituted tribunal. JUDGE TIM HERRINGTON JUDGE JONATHAN RICHARDS RELEASE DATE: 1 October 2019