Chandanmal and Others (t/a C Narain Bros)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 13 March 2012 |
| Neutral Citation | [2012] UKFTT 188 (TC) |
| Date | 13 March 2012 |
| Court | First-tier Tribunal (Tax Chamber) |
[2012] UKFTT 188 (TC)
Judge Barbara Mosedale
Mr J Dagnall, Counsel, instructed by Hill Dickenson, for the appellants;
Mr J Kinnear, Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents
Procedure - whether case to be stayed pending ECJ decision - whether expert witness to comply with CPR - yes - whether opinion evidence of someone with "expertise" to be admitted - no - exclusion of witness statement containing largely opinion evidence - leave to serve substitute statement
The First-Tier Tribunal granted, in part, several applications made by the taxpayers in connection with their pending appeal for the recovery of input tax claimed against the HMRC. It ruled that HMRC's witness should provide further statement on his compliance with Court Procedure Rules, Part 35. It excluded a statement for its substantially inadmissible content, while it also allowed another statement and simply rejected its inadmissible parts. Finally, the Tribunal stayed the application for leave to serve substitute statement until HMRC had decided to file a substitute statement.
The taxpayers filed for recovery of input tax claimed for the period of 2004-06 in the amount of £4,718,819. HMRC refused based on the allegation that the transactions in which the input tax was incurred were connected to Missing Trader Intra-Community fraud and that the taxpayers knew or ought to have known this.
The taxpayers applied for certain procedures to address some of the issues they raised during the hearings pending before the appeal. The procedures they applied for included, among others, a stay in the proceedings, compliance with Court Procedure Rules ("CPR"), Part 35, exclusion of a witness' statement, exclusion of opinion evidence, exclusion of witness statement containing opinion evidence, and leave to serve substitute statement.
(2) Whether the proceedings before the First-Tier Tribunal should be stayed pending the decision of the Court of Justice of the European Union ("CJEU") in Bonik.
(3) Whether there was compliance by one of the witnesses with CPR, Part 35.
(4) Whether or not opinion evidence of someone with expertise should be admitted.
(5) Whether a leave to serve substitute statement should be allowed.
Held, granting the taxpayer's applications in part:
1.The Tribunal refused to stay the proceedings because both parties would have the benefit of the CJEU's opinion in Bonik EOOD v Direktor na Direktsi Obzhalvane I upravlenie na izpalnenieto, VarnaECAS (C-285/11) ("Bonik") before the hearing of this unresolved appeal. The taxpayers would not be prejudiced by the refusal to stay. Considering that the events in this appeal took place six years ago, the interest of justice would be best served if this appeal would be heard as soon as possible. Besides, the reference in Bonik appeared to be only peripherally relevant to this appeal.
2.With respect to the expert witness statement by HMRC, the Tribunal agreed with the taxpayers that the witness should provide a further statement on his compliance with CPR, Part 35. While the witness was instructed to observe the practice direction of experts and appeared that he dutifully did so, there was failure on his part to properly reference all his sources from a confidential report.
3.The Tribunal granted the taxpayers' application and excluded the statement made by HMRC's other witness because it consisted of inadmissible parts substantially exceeding admissible ones.
4.It also ruled that, with respect to HMRC's another witness, parts of his statement were considered admissible and the failure of the taxpayers to cross examine this witness did not mean an acceptance of the statement.
5.The taxpayers alleged that the statement made by HMRC's last witness contained many sections that amounted to prejudicial opinion evidence. Unfortunately, the witness died before he was able to undertake the disclosure exercise as agreed by the parties. While HMRC expressed intentions to make a replacement witness statement, it would not withdraw the deceased witness' statement until the new statement was ready. The Tribunal then decided that the application made by the taxpayers be stayed pending the decision of HMRC on whether they would withdraw the statement.
1.This appeal is against a decision by HMRC to deny the appellants recovery £4,718,819 input tax claimed in the period 04-06. The grounds of HMRC's refusal are an allegation that the transactions in which this input tax was incurred were connected to MTIC fraud and that the appellants knew or ought to have known this.
2.After a full day's application hearing before me I reserved my decision to give me time to read in detail the witness statement of Mr Stone which the appellant sought to be excluded from proceedings. I promised to issue directions after the hearing and provide written reasons for them. The directions are issued to the parties: this decision records my reasons for them.
3.The stay is refused firstly on the grounds that even if it were appropriate for proceedings to be stayed pending the release of the Bonik decision Bonik EOOD v Direktor na Direktsi Obzhalvane I upravlenie na izpalnenieto, VarnaECAS (C-285/11) (2001, unreported), it is virtually certain that the CJEU will have delivered its judgment in Bonik before this appeal comes on for hearing bearing in mind that due to other directions made (explained below) it is most unlikely this appeal will come on for hearing before 2013. Therefore, there is no prejudice to the Appellant in refusing a stay. The parties will have the benefit of the CJEU's opinion in Bonik before the hearing of this appeal.
4.Secondly, in any event, I do not consider it appropriate for proceedings to be stayed behind Bonik as the matters at issue in this appeal took place six years ago. It is in the interests of justice to bring this matter on to hearing as soon as possible. One witness has already died and the matter should come on before the remaining witnesses lose their recollection of events.
5.Thirdly, the reference in Bonik appears to be only peripherally relevant to this appeal because it concerns a chain of transactions in which, unlike this case, it appears the goods did not exist and because there is no allegation of actual knowledge. There is therefore only a small possibility that the CJEU's decision in Bonik would significantly change this Tribunal's understanding of the CJEU's decision in Kittel as explained by the Court of Appeal in Mobilx.
6.It is therefore in the interests of justice that the parties should continue to prepare this case for hearing pending the CJEU's decision in Bonik.
7.HMRC have served an expert witness statement by Mr Fletcher, a consultant with KPMG, who gives expert evidence on the grey market in mobile phones. It contains only a statement of truth and not the normal expert witness statement given under Part 35 of the Court Procedure Rules ("CPR"). The appellant seeks a direction that Mr Fletcher provides a further statement saying whether he has complied with Part 35 of CPR.
8.It is part of the role of the court or Tribunal to ascertain the reliability of evidence of fact: where opinion evidence is being expressed in a specialist area it may not be as easy for a court or Tribunal to assess the reliability of that evidence. It is likely to be for that reason that the courts have detailed rules, such as CPR 35 for the High Court, which seek to ensure the reliability of expert evidence.
9.CPR practice direction 35 at 2 requires an expert witness to give an independent view. At 3.2 it requires the expert witness to state his expertise, disclose his sources, make clear if anyone helped him with the report, summarise the range of opinions on the matter and give reasons for his own opinion, and state that he has complied with his duty to the court. At 2.5 he is required to communicate any material change of view to the parties without delay.
10.HMRC point out that the Tribunal does not have rules similar to CPR part 35. The Tribunal can admit what evidence it chooses (SI 2009/273 subsec-or-para 2 rule 15Rule 15(2)(a) of Tribunal Procedure (First Tier Tribunal) (Tax Chamber) Rules 2009) and theoretically could admit expert evidence from an expert who was not independent. But I see no good reason why I would do that in this case. A Tribunal as much as a court is concerned with the reliability of expert evidence. It is right and in the interests of justice that the only opinions of witnesses relied on by the Tribunal are witnesses who are both expert in the specialist area on which they give their opinion and who are impartial between the parties.
11.I reviewed the requirements of CPR Practice direction 35 paragraph 3.2 at the hearing and HMRC agreed that Mr Fletcher would comply or had complied with every one. Indeed, Mr Kinear said Mr Fletcher was instructed to observe the practice direction on experts. However, I note that in one respect at least I was not satisfied that Mr Fletcher had necessarily complied with the practice direction. His summary of sources at paragraph 1.3.1 of his statement does not contain a reference to a confidential report from Nokia which the appellant believes that Mr Fletcher may have relied on when compiling the report and I know from my experience in another case that Mr Fletcher did rely on in compiling the report in that case.
12.This only goes to reinforce my view that expert witnesses, even in the Tribunal, should comply with the requirements of CPR practice direction 35 and state that they have done so. Indeed, it is normal practice within the Tribunal to direct that expert witnesses should do so.
13.That such a direction has not been given in this case is likely to be because leave to serve an expert witness...
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