Ingenious Media Holdings Plc and Another (Claimants/Appellants) v HM Revenue & Customs
| Jurisdiction | England & Wales |
| Judge | Sir Robin Jacob,Lord Justice Tomlinson,Lord Justice Moore-Bick |
| Judgment Date | 04 March 2015 |
| Neutral Citation | [2015] EWCA Civ 173 |
| Docket Number | Case No: C1/2013/3302 |
| Court | Court of Appeal (Civil Division) |
| Date | 04 March 2015 |
[2015] EWCA Civ 173
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
ADMINISTRATIVE COURT
Mr. Justice Sales
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Moore-Bick
Vice-President of the Court of Appeal, Civil Division
Lord Justice Tomlinson
and
Sir Robin Jacob
Case No: C1/2013/3302
The Queen on the application of
Mr. Hugh Tomlinson Q.C. and Miss Jessica Simor Q.C. (instructed by Olswang LLP) for the appellants
Mr. James Eadie Q.C. and Mr. David Pievsky (instructed by HMRC Solicitor's Office) for the respondent
Hearing date: 29 th January 2015
This is an appeal is from a judgment and order of 25 th October 2013 of Sales J, [2013] EWHC 3258. The appeal is by permission of the Judge.
The Facts
The primary facts are not in dispute. I summarise them here though the Judge sets them out in more detail.
The first claimant, Ingenious Media Holdings Limited ("Ingenious") and its subsidiaries conduct, inter alia, a business of promoting film investment schemes ("film schemes") in the form of partnerships which are intended to allow participating taxpayers to take advantage of certain tax reliefs and exceptions. Mr McKenna is the founder and CEO of Ingenious.
I say "intended to allow" because HMRC says that all or most of these film schemes are ineffective and that the wealthy individuals taking part in them are not allowed the reliefs and exceptions claimed. We are not in this case concerned with who is right: that is a matter being pursued through the appropriate tax tribunals.
A great deal of potential tax is at stake – HMRC estimate that film schemes represent a £5 billion risk to revenue. The claimants have been aware for some time before June 2012 of HMRC's scepticism as to the validity of these schemes and that they were likely to be challenged as indeed they were later in the year.
Tax avoidance schemes had been in the news a lot in early 2012 and two journalists on The Times, Mr Mostrous and Ms Schlesinger, had done a considerable amount of investigation of the subject. In the spring of 2012 Mr Mostrous contacted HMRC's press office to ask for a background briefing. This ultimately resulted in a 75 minute meeting on 14 th June 2012 between them and Mr Hartnett, then the Permanent Secretary for Tax. Prior to the meeting The Times told HMRC that it had amassed a good deal of information about tax avoidance schemes which could be of value to HMRC. It also made clear that one of the subjects to be discussed was film schemes.
I should interpolate that "tax avoidance schemes" in the present context means special arrangements made by a taxpayer so as to minimise his or her tax liability. There is no question or suggestion of dishonesty – that is called tax evasion. What HMRC contends is that some film schemes are ineffective and in particular that the schemes or most of them involving partnerships to finance film-making promoted by Mr McKenna via Ingenious are so. That is hotly disputed and is currently the subject of substantial proceedings in the relevant tax tribunal.
The meeting was explicitly agreed to be "off the record," a matter repeated several times by Mr Hartnett and acknowledged to be so by the journalists during the meeting as the transcript shows. "Off the record" meant to Mr Hartnett that nothing said would be published. The transcript appears to make it clear that that was the journalists' understanding too – for instance at one point Mr Mostrous said of a remark by Mr Hartnett that it was "a shame to waste it off the record."
It quickly became apparent that the journalists already knew of the claimants and their film schemes. Having discussed another individual who promoted film schemes, Mr McKenna was discussed, but only after the journalists had first mentioned his name. The actual conversation went like this:
"Mr Hartnett: …. we engage with people who promote tax avoidance because we want to stop them. I've been involved with successive governments with film schemes from about 2004. There's another notable individual in the field who you haven't mentioned but I've seen him too.
Ms Schlesinger: Patrick McKenna?
Mr Hartnett: Ah
Ms Schlesinger: No?
Mr Hartnett: There is only one other notable individual in the field."
Mr Hartnett told them he wished to recover the tax relief purportedly allowed by these schemes. He told the journalists that HMRC estimated that film schemes represented a £5 billion risk for HMRC.
Mr Hartnett, under what he thought was the protection of "off the record," expressed his views about film schemes, including those of the claimants, in less temperate language than he would have used publicly. What he said was this:
"Mr Mostrous: With McKenna do you think he is enacting any active schemes or any schemes that could be used to deprive the Revenue of tax now?
Mr Hartnett: I don't know
Mr Mostrous: He's not on your radar?
Mr Hartnett: Oh, he's never left my radar.
Mr Mostrous: What do you think of him because he presents a very different profile.
Mr Hartnett: He's an urbane man, he's a former Deloitte partner, he's a clever guy, he's made a fortune, he's a banker, but actually he's a big risk for us to so we would like to recover lots of tax relief he's generated for himself and for other people. Are we winning? I would say, beginning to. I think we'll clean up on film schemes over the next few years"
Mr Mostrous: That applies to Mr McKenna as well as film schemes in general?
Mr Hartnett: I think we'll clean up on film schemes over the next few years. You may end up laughing at that statement because maybe we'll lose it in the courts, litigation's a hell of a risk, but you won't find anybody here at all, even the most pro-wealthy people, and I'm not sure we've got any, who thinks film schemes are anything other than scams for scumbags."
The Judge said (at [51]) that at no point did Mr Hartnett "pass to the journalists any information which Ingenious Media and Mr McKenna had provided to HMRC about their affairs."
However, although this was not the main thrust of his argument, Mr Hugh Tomlinson QC for the claimants drew attention to the fact that Mr Hartnett did refer, albeit in general terms, to the fact that Mr McKenna had personally claimed tax relief via his film schemes. He said this was information about Mr McKenna's personal tax affairs. Of this the Judge said:
"51 … that was information which was obvious in the context of Mr McKenna's identity and involvement in film investment schemes."
That is a conclusion which I think was open to the Judge given all the surrounding circumstances. I cannot say that the Judge was wrong in that evaluation.
It follows that this appeal must be decided on what was the real, main and major point of Mr Hartnett's discussion with the journalists so far as it related to Mr McKenna and Ingenious. This was about their activities as promoters of film schemes, not their individual tax affairs.
In apparent breach of the "off the record" understanding some (but not all) of what was said in the meeting was then published in a Times article on 21 st June 2012 as coming from a "senior Revenue official". I say "apparent breach" because neither The Times' nor the individual journalists' side of the story, if any, is the subject of evidence in this case. It is neither necessary nor appropriate to say more about this here. What does matter is that Mr Hartnett clearly thought that what he said would not be published. Whether or not, as the appellants contend, "off the record" means only that the source of the quotation cannot be named does not matter, though I have to say that that seems unlikely given what the journalists said during the interview.
An example of what was said about Mr McKenna at the off the record meeting which was published is the passage I quoted above:
"He's never left my radar, He's an urbane man, he's a former Deloitte partner, he's a clever guy, he's made a fortune, he's a banker, but actually he's a big risk for us to so we would like to recover lots of tax relief he's generated for himself and for other people. Are we winning? I would say, beginning to. I think we'll clean up on film schemes over the next few years"
The further "scams for scumbags" passage was not in the published article and went no further than the journalists. The complaint about that aspect of the interview has to be and is limited accordingly.
Causes of action not pursued
One might have thought that the heart of the complaints made lie in the field of private rather than public law. After all Mr Tomlinson described vividly Mr McKenna's shock at finding himself one of the targets of a front page main story in The Times and that a senior HMRC official had discussed him and his company, Ingenious. And one can envisage possible civil causes of action, for instance breach of confidence, breach of statutory duty and defamation. In fact defamation proceedings were started, though they have now been abandoned.
Mr James Eadie QC told us that HMRC had decided that there was no point in objecting to the form of the proceedings – that his clients considered that all the complaints could be met in these judicial review proceedings and that in any event there might be some matters which could only be dealt with in judicial review proceedings. So better all in one go.
Complaints that are made and remedies sought
The complaints are as follows:
(a) That HMRC acted unlawfully...
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