R v Commissioners of Inland Revenue, ex parte Lorimer
| Jurisdiction | England & Wales |
| Judgment Date | 31 July 2000 |
| Date | 31 July 2000 |
| Court | Queen's Bench Division |
Queen's Bench Division (Crown Office List).
Burton J.
David Ewart (instructed by Child & Child) for the applicant.
Timothy Brennan (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the judgment:
Bank Mellat v Nikpour UNK[1985] FSR 87
Behbehani v Salem WLR[1989] 1 WLR 723
Brink's-MAT Ltd v Elcombe WLR[1988] 1 WLR 1350
Campbell v United Kingdom HRC(1992) 15 EHRR 137
General Mediterranean Holdings SA v Patel WLR[2000] 1 WLR 272
Gouriet v A-G ELR[1978] AC 435
IR Commrs v Plummer ELR[1980] AC 896
Kuwait Oil Co (KSC) v Idemitsu Tankers KK (The Hida Maru)UNK[1981] 2 Lloyds Rep 510
L (a Minor) (Police Investigation: Privilege), Re ELR[1997] AC 16
Lloyds Bowmaker v Britannia Arrow Holdings plc WLR[1988] 1 WLR 1337
Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp (a Firm)ELR[1979] 1 Ch 384
Moodie v IR Commrs TAX[1993] BTC 85
Parry Jones v Law Society ELR[1969] 1 Ch 1
Pepper (HMIT) v Hart TAXELR[1992] BTC 191; [1993] AC 593
R v Derby Magistrates' Court, ex parte B ELR[1996] AC 487
R v IR Commrs, ex parte Banque Internationale a Luxembourg SATAX[2000] BTC 228
R v IR Commrs, ex parte Taylor (No. 2) TAX[1990] BTC 281
R v IR Commrs, ex parte TC Coombs & Co TAXELR[1991] BTC 89; [1991] 2 AC 283
R v Kensington Income Tax Commrs, ex parte Princess Edmond de Polignac ELR[1917] 1 KB 486
R v Secretary of State for the Home Department, ex parte LeechELR[1994] QB 198
R v Secretary of State for the Home Department, ex parte SimmsWLR[1999] 3 WLR 328
R v Special Commr, ex parte IR Commrs TAX[2000] BTC 215
Ramsay (WT) Ltd v IR Commrs ELR[1982] AC 300
S (Hospital Patient: Court's Jurisdiction), Re [1996] Farn 1
Walker (HMIT) v Centaur Clothes Group Ltd TAX[2000] BTC 121
Judicial review - Power to call for documents - Notice to banks to produce documents relating to solicitor's tax affairs - Whether application to general commissioner for consent to issue notices included non-disclosure or mis-disclosure of relevant material - Whether Revenue could require disclosure of documents to which legal professional privilege might attach - Taxes Management Act 1970,Taxes Management Act 1970 section 20 subsec-or-para (3) section 20 subsec-or-para (7) section 20B subsec-or-para (8)ss. 20(3), (7) and 20B(8).
This was an application for judicial review by a solicitor seeking to quash notices issued by the Revenue under the Taxes Management Act 1970,Taxes Management Act 1970 section 20 subsec-or-para (3)s. 20(3) in the course of an investigation into his affairs.
The applicant was a solicitor whose clients included overseas companies. The Revenue were investigating his affairs, suspecting that he might have a personal interest in those companies and that he had not given an adequate explanation of the source of funds involved in certain transactions.
Having obtained the consent of a general commissioner, the Revenue issued notices to two banks requiring them to produce a wide range of documents concerning not only the applicant's own accounts but also accounts of certain overseas companies for which he had acted.
The documents required by the notices included correspondence, bank statements, records of all accounts over which the applicant was a signatory or had power of attorney, notes of telephone conversations, internal memoranda, guarantees given by the applicant, loan agreements and record of credit cards to which the applicant was a signatory as well as any documents relating to the applicant's financial position or assets.
The notices were not disputed in so far as they related to the applicant's own personal affairs. However, he asserted that the notices should be quashed in so far as they related to the affairs of his clients where there was no Revenue investigation into the affairs of those clients.
The applicant originally challenged the notices on the ground that they were irrational. In interlocutory proceedings he sought discovery of the material put before the general commissioner on which his consent was based. Eventually, although the court refused to order the material to be disclosed, the case proceeded on the basis of an agreed summary of the material put before the commissioner. After that limited disclosure the applicant abandoned the irrationality challenge, but claimed that consent should not have been given because the inspector had not disclosed relevant material and had included erroneous material that might have caused the commissioner to refuse consent. The applicant also sought a declaration as to the position of the recipient of a notice under Taxes Management Act 1970 section 20 subsec-or-para (3)s. 20(3) who held documents covered in whole or in part by legal professional privilege.
The applicant contended that the inspector had not mentioned the following: his explanation of his failure to submit invoices to one of his clients for work done; his reasons given for spending money on property before he had acquired an interest in it from a company situated in overseas; or the source of finance for the purchase of certain residential properties.
He also disputed the Revenue's assertion that he had the day-to-day management of a Liberian company in which they suspected he had an interest. The Revenue conceded that the applicant had not had the day-to-day management of the company but the question remained whether that mistake on the part of the Revenue was material to the general commissioner's decision.
Held, dismissing the application:
1. There was a duty to disclose so that a commissioner, on an ex parte application for consent to the issue of a notice under TMA 1970,Taxes Management Act 1970 section 20 subsec-or-para (3)s. 20(3), should be satisfied under subs. (7) that in all the circumstances the inspector was justified in issuing the notice. The duty extended to disclosure of matters which could properly have influenced the commissioner in granting his consent. Thus, even if there were other grounds, the non-disclosure or the incorrect disclosure of a factor that might have weighed in the balance against the Revenue and in favour of the taxpayer would be material. But in the event of material non-disclosure, the notices would not automatically be quashed. The court was entitled to consider whether, if the full facts had been available on the ex parte application, the order would still have been granted: R v IR Commrs, ex parte TC Coombs & CoTAX[1991] BTC 89 followed.
2. In this case there was neither non-disclosure nor mis-disclosure of the applicant's explanation of his affairs. Any incompleteness or inaccuracy made no difference to the decision of the commissioner as to the applicant's reasonably suspected beneficial interest in the companies for whom he was acting or the commissioner's conclusion that there were reasonable grounds to question the applicants sources of finance.
3. In relation to legal professional privilege, a client's privilege was preserved by the Taxes Management Act 1970, Taxes Management Act 1970 section 20B subsec-or-para (8)s. 20B(8)where a notice under Taxes Management Act 1970 section 20 subsec-or-para (3)s. 20(3) was served on a legal adviser as third party. However, that did not entitle such legal adviser as a taxpayer, whose own affairs were being investigated, to the protection of legal professional privilege: Gouriet v A-G ELR[1978] AC 435 considered; R v IR Commrs, ex parte Taylor (No. 2) TAX[1990] BTC 281 followed.
Burton J: Mr Lorimer is a solicitor and brings an application by way of judicial review of two notices issued by the Revenue under Taxes Management Act 1970 section 20 subsec-or-para (3)s. 20(3) of the Taxes Management Act 1970, on 13 August 1999, against two banks, Bank Julius Baer & Co Ltd and the Bank of Scotland.
The notice against Bank Julius Baer reads as follows, addressed to the manager:
I, the undersigned [who is Mrs Lorna McPherson, the relevant inspector] being one of Her Majesty's Inspectors of Taxes authorised for the purposes of Taxes Management Act 1970 section 20Section 20 of the Taxes Management Act 1970. For the purpose of enquiring into the taxliability of Mr MBA Lorimer [with his address] Hereby require you under subsection (3) of that Section not later than 30/9/99 to deliver to me at the above office or, if you so elect, make available for inspection by Ms LL McPherson of Inland Revenue Special Compliance Office, Manchester all such documents in your possession or power as are specified or described in the Schedule below.
Your attention is drawn… [and then she refers to an enclosure which contains subsections of the Act]
The schedule reads as follows:
1. All correspondence and bank statements detailing the account title, account number and date the account was opened and closed, of all accounts to which Mr Lorimer was or is an authorised signatory or over which he had Power of Attorney.
2. All correspondence and enclosures between the bank and Mr Lorimer.
3. All correspondence, agreements, notes of telephone conversation and internal memoranda relating to the granting of payment under, and assets used to secure guarantees given by or on behalf of Mr Lorimer, whether solely or jointly with others.
4. Loan applications made by Mr Lorimer, whether in his name or the name of another person or persons together with the loan agreements which resulted from those applications.
5. Internal notes and memoranda relating to any discussion between the bank and Mr Lorimer.
6. Record of credit cards to which Mr Lorimer is or was an authorised signatory.
There was a similar notice in respect of the Bank of Scotland, to which there was a schedule which read as follows:
Schedule in respect of Mr MBA Lorimer:
1. Records of bank accounts.
2. Records of accounts at other branches or banks.
3. Records of the transfer of funds to or from the United Kingdom.
4. The bank's customer record cards or other similar records and all other...
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