Elbrook (Cash and Carry) Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 23 August 2017 |
| Neutral Citation | [2017] UKFTT 650 (TC) |
| Date | 23 August 2017 |
| Court | First-tier Tribunal (Tax Chamber) |
[2017] UKFTT 0650 (TC)
Judge John Brooks
Geraint Jones QC and Christopher Snell, instructed by Rainer Hughes, appeared for the appellant
Howard Watkinson and Joshua Carey, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Value added tax – Procedure – Application by company for further and better particulars of HMRC's case – Whether application justified and proportionate – No – Company's application dismissed.
The First-tier Tribunal (FTT) dismissed the application by the company for further and better particulars of HMRC's Statement of Case, because the application was neither justified nor proportionate.
In this case, which concerned fraud, Elbrook unsuccessfully applied for further and better particulars of HMRC's Statement of Case. The dispute is not of general interest, so a detailed headnote has not been prepared.
HMRC denied input tax credits of £771,430 for the 01/13 to 04/15 accounting periods (the “First VAT appeal”) and £502,309 for the 04/12 to 07/13 accounting periods (the “Second VAT appeal”), on the grounds that Elbrook knew, or should have known, that transactions it had entered into were connected to the fraudulent evasion of VAT. Earlier hearings concerning Elbrook include Elbrook (Cash and Carry) Ltd [2017] TC 05637 (an application to join additional appeals and admit further evidence) and R & C Commrs v Elbrook (Cash & Carry) Ltd [2017] BVC 514 (a successful hardship application by Elbrook).
Then Elbrook applied for further and better particulars of the Consolidated Statement of Case, which had been served by HMRC on 20 June 2017.
The FTT noted that where an allegation of fraud is made it must be pleaded “fairly and squarely”. In this case, there was a dispute as to whether there had been an allegation of fraud against Elbrook. HMRC's Consolidated Statement of Case at para. 34, 138 and 139 stated that Elbrook's transactions formed part of an “orchestrated scheme to defraud the Revenue”, that it had actual knowledge that its transactions were connected with VAT fraud and that it was a “knowing participant” in an overall scheme to defraud the Revenue. However, The FTT decided that it was unnecessary to decide this issue, as HMRC contended that, even if there had been an allegation of fraud against Elbrook, it would still not be entitled to the further and better particulars that it sought and so the application could be determined on this basis (para. 13 of the decision).
The FTT noted that a request for further and better particulars should be concise and confined to matters that are reasonably necessary and proportionate to enable the first party to prepare its case, or to understand the case it must meet (para. 14 of the decision). However, exhaustive and hugely detailed requests for further information are not necessarily justified or proportionate.
Elbrook contended that the provision of the information, which it sought, was necessary to enable it to prepare witness evidence. The lack of particularity could lead to delays and possibly short adjournments at the substantive hearing if further instructions need to be taken and additional evidence required.
The FTT dismissed Elbrook's application, because the Consolidated Statement of Case had provided Elbrook with a sufficient explanation of HMRC's position to enable it to understand the case against it. The application by Elbrook was tantamount to requiring a Statement of Case to contain the text of witness statements. In the circumstances, the application for further and better particulars was neither justified nor proportionate (para. 34 of the decision).
The FTT noted the lack of cooperation between the parties, which is often true where a case is related to fraud. HMRC did not point to one piece of evidence as establishing that the Elbrook had been a knowing participant, but relied on the cumulative circumstantial evidence for the inference that it had participated. Alternatively, HMRC argued that Elbrook should have known that its transactions were connected with fraud by another person, because the transactions permitted no other reasonable explanation.
[1] By an application, dated 6 July 2017, the appellant, Elbrook (Cash and Carry) Limited (“Elbrook”), seeks further and better particulars of the Consolidated Statement of Case filed and served by the respondents (“HMRC”) in accordance with directions issued on 20 June 2017 and that the appeal be listed for a substantive hearing with a time estimate of 15 days in November/December 2017.
[2] Having noted the distinct lack of cooperation between the parties to date and reminded them of their obligation, under rule 2(4) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, to “help the Tribunal to further the overriding objective”, I explained that the Tribunal was fully aware and understood that Elbrook, being a commercial organisation wished to get its appeal on for hearing at the first available opportunity and that I hoped, as the directions and therefore further progress in the appeal had been stayed pending the outcome of this application, that following the release of this decision the parties would take the opportunity to co-operate and make a joint application for directions to progress the appeal to a hearing. I indicated that were they to do so the Tribunal would do what it could to accommodate them.
[3] In the circumstances, Mr Geraint Jones QC who appeared, with Mr Christopher Snell, for Elbrook did not pursue its application for the hearing to be listed for 15 days in November/December 2017. Therefore, the only issue before the Tribunal was the application for further and better particulars, which was opposed by HMRC represented by Mr Howard Watkinson and Mr Joshua Carey.
[4] To put the application in context it is necessary to briefly explain the background to the proceedings.
[5] Elbrook appeals against:
- HMRC's to revoke its registration as an owner of duty suspended goods under the Warehousekeepers and Owners of Warehoused Goods Regulations 1999 (WOWGR) (the WOWGR appeal); and
- HMRC's decisions to deny input tax credits of £771,430.20 for its 01/13 to 04/15 VAT accounting periods (under reference TC/2015/02184 – the First VAT appeal) and £502,309.35 for its 04/12 to 07/13 accounting periods (under reference TC/2016/02974 – the Second VAT appeal) on the grounds that it knew or should have known that transactions it had entered into were connected to the fraudulent evasion of VAT.
[6] Following a contested application hearing on 24 January 2017 I directed that the WOWGR and VAT appeals be heard contemporaneously (for reasons given in my decision in Elbrook (Cash and Carry) Ltd [2017] TC 05637 released on 27 January 2017). Additionally, having first canvassed the availability of parties, witnesses and counsel, I directed that the hearing be listed between 7 and 18 August 2017.
[7] As there was an appeal by HMRC to the Upper Tribunal against the decision of the First-tier Tribunal that had allowed Elbrook's hardship application (see Elbrook Cash & Carry Ltd [2016] TC 04976) I made further directions on 1 February 2017, under which the parties were to notify the Tribunal of the Upper Tribunal's decision on that appeal within seven days of its release.
[8] On 7 March HMRC made an application to set aside the directions for a contemporaneous hearing of the WOWGR and VAT appeals and vacate the August hearing dates. I dismissed this application on the papers and the parties were notified by letter from the Tribunal dated 21 March 2017.
[9] Following the dismissal by the Upper Tribunal of HMRC's appeal in relation to hardship in the First VAT appeal on 10 May 2017 (see R & C Commrs v Elbrook (Cash & Carry) Ltd [2017] BVC 514) the parties were requested to provide either agreed directions or, if they could not agree, their own proposals for the progress of the appeals to a substantive hearing commencing on 7 August 2017. HMRC subsequently agreed that Elbrook would suffer hardship if it was required to pay the VAT in the Second VAT appeal.
[10] On 21 May 2017 HMRC made an application for directions in which it sought to vacate the August 2017 hearing. Elbrook, not wanting the hearing to be lost opposed the application. At a hearing, on 16 June 2017, I reluctantly directed that the hearing be vacated in the light of the submission of counsel for HMRC that the 10 days for which the appeal was listed would not be sufficient for the hearing given his estimate that 25 days was necessary.
[11] Directions for the progress of the appeal were issued on 20 June 2017 under which HMRC were to file and serve a Consolidated Statement of Case for the VAT appeals by 30 June 2017 (which they did on 20 June 2017) and the appellant to file and serve its reply by 14 July 2017 (which it did on 6 July 2017). With its reply to the Consolidated Statement of Case the appellant also made the application for further and better particulars for which, as it was opposed by HMRC, a hearing was listed on 18 August 2017.
[12] It is not disputed that where an allegation of fraud is made it must be pleaded “fairly and squarely”. As Lord Millet observed in Three Rivers District Council v Governor and Company of the Bank of England [2003] 2 AC 1:
[184] It is well established that fraud or dishonesty (and the same must go for the present tort) must be distinctly alleged and as distinctly proved; that it must be sufficiently particularised; and that it is not sufficiently particularised if the facts pleaded are consistent with innocence: see Kerr on Fraud and Mistake, 7th ed (1952), p. 644; Davy v Garrett (1878) 7 ChD 473 at 489; Bullivant v Attorney General for Victoria [1901] AC 196; Armitage v Nurse [1998] Ch 241 at 256. This means that a plaintiff who alleges dishonesty must plead the facts, matters and circumstances relied on to show that...
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Elbrook Cash and Carry Ltd
...had not been a failure to comply with directions but issued fresh directions. SummaryThe FTT decision in Elbrook (Cash and Carry) Ltd [2017] TC 06077 dismissed an application by the appellant (“Elbrook”) for further and better particulars of HMRC's Statement of Case. The background to this ......