Andrea
| Jurisdiction | UK Non-devolved |
| Judgment Date | 22 December 2016 |
| Neutral Citation | [2017] UKFTT 850 (TC) |
| Date | 22 December 2016 |
| Court | First Tier Tribunal (Tax Chamber) |
Judge Heidi Poon
Steve Bartlett and Gary Brothers of Independent Tax, appeared for the appellant
Simon Bracegirdle and Mr B Horton, presenting officers of HM Revenue and Customs, appeared for the respondents
Procedure – Application for hearing in private – Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 32 – Celebrity status of the appellant – Deductibility of expenses against income – Principle of open justice – Whether the test of necessity for derogation met – Whether anonymity strictly necessary – Whether confidentiality of information at risk of breach – Whether right to privacy infringed – European Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR), art. 6, 8 and 10 – Human Rights Act 1998 – Proportionality – Alternative measures under SI 2009/273, r. 14 and Contempt of Court Act 1981, s. 4(2), 11 – Practice Guidance (Interim Non-Disclosure Orders) [2012] 1 WLR 1003 – Application refused.
The First-tier Tribunal (FTT) refused a celebrity taxpayer's application for a hearing to be held in private.
The appellant was a celebrity who was a self-employed media entertainer and performer. The substantive matter in the appeal concerned the deductibility of: (1) £90,000 of legal and professional expenses incurred in connection with defamation proceedings brought against the appellant's ex-wife; and (2) £15,000 Annual Investment Allowance claimed for the improvement costs of security gates at the appellant's home.
The appellant applied for the hearing of his substantive appeal to be held in private under the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273 or the tribunal rules), r. 32. HMRC did not oppose the application.
The FTT summarised the relevant issues to be considered as:
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1) The publicity issue – whether the celebrity status of the appellant would have attracted publicity that would have interfered with the administration of justice to the extent that justice could not have been done unless the hearing was in private.
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2) The confidentiality issue – whether the appellant was at risk of breaching the confidential agreement in settlement of the libel action against his ex-wife, settled by confidential mediation process, unless the hearing was in private.
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3) The right to respect for private and family life – whether the Convention rights under ECHR, art. 8, of the appellant, his children, and his ex-wife would be infringed unless the hearing was in private.
The FTT noted that a hearing in private, which necessitated an anonymity order for the reporting of the proceedings, was only to be granted in the most compelling of circumstances.
The FTT first considered whether a hearing in private was justified.
The FTT found that as HMRC did not oppose the application it was all the more important for it to stand back from the seeming consent, and to take note of the warning expressed by Sir Christopher Staughton in Ex p P, The Times, 31 March 1998 that ‘when both sides agree that information should be kept from the public, that was when the court had to be most vigilant’.
In deciding whether the appellant had discharged the burden of establishing any derogation from the general principle of open justice, the FTT considered the issues involved in the following order: (1) the substantive issue of the appeal; (2) whether the publicity issue met the test of necessity; (3) whether the appellant's Convention rights under ECHR, art. 8 as regards confidentiality and privacy were sufficiently interfered with to justify any derogation from open justice.
The FTT found that on the substantive issue the application failed at the first hurdle; there was nothing in the merits of the appeal that needed to touch upon the details of the libel action, or the private life of those involved, or the father-child relationship dealt with in the libel case.
The FTT was also not persuaded that the publicity issue met the test of necessity to justify any derogation from a public hearing. The publicity issue raised by the appellant did not amount to ‘special circumstances where publicity would prejudice the interests of justice’ (ECHR, art. 6(1)).
The Practice Guidance (Interim Non-Disclosure Orders) WLR[2012] 1 WLR 1003 issued by Lord Neuberger MR on 1 August 2011, said that there was no general exception to open justice where privacy or confidentiality was in issue.
For the case to be heard in private the appellant had to satisfy the FTT that by nothing short of excluding the public could justice be done (Scott v Scott ELR[1913] AC 417). Having considered all relevant aspects of the grounds in the application, the FTT concluded that the facts of the case fell very far short of the stringent requirements needed to meet the test of necessity for any derogation from a public hearing.
The FTT went on to consider whether an anonymity order was necessary with reference to the issues of public interest and the protection of the individuals' right to privacy. In particular it considered the interplay of rights between ECHR, art. 8 and 10.
The FTT noted that anonymity could only be granted where it was strictly necessary. It found that there were no exceptional or compelling circumstances to justify anonymity, given that the unqualified rights under art. 2 or 3 were not engaged, and the potential interference with the appellant's right to respect for his private and family life, and his ex-wife's right to privacy seemed to be limited in scope. Furthermore, the FTT had regard to proportionality, and considered that anonymity was a disproportionate measure to safeguard any potential interference with the individuals' ECHR, art. 8 rights, especially in view of the alternative procedural measures that could be put in place to achieve the purpose, such as restricting reporting of the proceedings or withholding confidential information, which the appellant was at liberty to apply for directions.
The application for the hearing to be in private was refused. The decision was however anonymised until the appeal process of the decision was exhausted.
This case serves as a reminder that derogations from the fundamental principle of open justice can only be justified in exceptional circumstances when they are strictly necessary to secure the proper administration of justice.
In this case even though HMRC did not oppose the application for the hearing to be held in private the FTT found that the facts of the case fell very far short of the stringent requirements needed to have met the test of necessity for any derogation from a public hearing.
[1] By notice dated 3 September 2015, the Appellant's representative, Independent Tax, applied for the hearing of the substantive appeal to be held in private under rule 32 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (‘the Tribunal Rules’).
[2] The case management hearing was in public, and was principally to hear the application on behalf of the appellant for the substantive hearing to be held in private.
[3] HMRC do not oppose the application.
[4] There was no request to list the hearing with initials in place of the actual name of the appellant prior to the hearing of the application. The session list therefore recorded the name of the appellant to this application. Although sitting in public, only the representatives for both sides attended the hearing; no member of the public was present.
[5] In recognition that my decision on the application could be appealed, I have anonymised the decision and withheld details of the date and venue of the hearing until the appeal process of this decision is exhausted.
[6] The appellant is a self-employed media entertainer and performer who earns his income from a variety of sources, from television and public appearances, to performance on stage, to modelling and writing, within the UK and abroad. He has a public profile, and his representative refers to him as a celebrity.
[7] HMRC opened enquiry into the appellant's tax return for 2010–11. The substantive matters of the appeal concern the deductibility of two sums of expenses:
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1) legal and professional expenses of £90,245 under s 34(1) and (2) of the Income Tax (Trading and Other Income) Act 2005 (‘ITTOIA 2005’);
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2) expenditure of £15,055 claimed as Annual Investment Allowance (AIA) under Part 2 of the Capital Allowances Act 2001 (‘CAA 2001’).
[8] The legal and professional fees were incurred in connection with defamation proceedings brought against the appellant's ex-wife over comments she had made in the written media and on television. It is the appellant's case that he had brought the proceedings because his relationship with his children and his reputation are important to him.
[9] The improvement costs to the security gates were to control entry and exit to the appellant's dwelling by an intercom system. The appellant's case is that the gates are necessary to protect him and his family from the attention of the media and the fans.
[10] HMRC disallowed the claims. In respect of the legal expenses, HMRC maintain that the test of ‘wholly and exclusively for the purposes of the trade’ cannot be satisfied, given that a clear purpose of the legal expenses was to safeguard the appellant's relationship with his children, which cannot be for any business purpose. A second purpose was to protect the appellant's reputation which cannot ‘necessarily be a wholly business purpose’. Furthermore, a stated object of the claim to damages is personal in nature, and there is no reason why the legal costs should be separated from the damages they were expended to secure.
[11] As regards the improvement costs for the security gates, HMRC consider that the qualifying conditions under s 33 CAA 2001 are not met. To qualify for s 33 AIA, there would...
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