R (Ingenious Media Holdings Plc and Another) v Revenue and Customs Commissioners
| Jurisdiction | England & Wales |
| Judge | Lord Mance,Lady Hale,Lord Reed,Lord Toulson,Lord Kerr |
| Judgment Date | 19 October 2016 |
| Neutral Citation | [2016] UKSC 54 |
| Date | 19 October 2016 |
| Court | Supreme Court |
[2016] UKSC 54
Lady Hale, Deputy President
Lord Mance
Lord Kerr
Lord Reed
Lord Toulson
Appellant
Hugh Tomlinson QC Jessica Simor Qc (Instructed by Carter-Ruck)
Respondent
James Eadie QC David Pievsky (Instructed by Simons Muirhead & Burton Solicitors)
( with whom Lady Hale, Lord Mance, Lord Kerr and Lord Reed agree)
This appeal concerns the scope of the duty of confidentiality owed by Her Majesty's Revenue and Customs ("HMRC") in respect of the affairs of tax payers. The duty is now in statutory form.
Section 18 of the Act is headed "Confidentiality". It provides (with emphasis added by me to highlight the important words):
"(1) Revenue and Customs officials may not disclose information which is held by the Revenue and Customs in connection with a function of the Revenue and Customs.
(2) But subsection (1) does not apply to a disclosure -
(a) which —
(i) is made for the purposes of a function of the Revenue and Customs, and
(ii) does not contravene any restriction imposed by the Commissioners,
(b) which is made in accordance with section 20 or 21,
(c) which is made for the purposes of civil proceedings (whether or not within the United Kingdom) relating to a matter in respect of which the Revenue and Customs have functions,
(d) which is made for the purposes of a criminal investigation or criminal proceedings (whether or not within the United Kingdom) relating to a matter in respect of which the Revenue and Customs have functions,
(e) which is made in pursuance of an order of a court,
(f) which is made to Her Majesty's Inspectors of Constabulary, the Scottish inspectors or the Northern Ireland inspectors for the purpose of an inspection by virtue of section 27,
(g) which is made to the Independent Police Complaints Commission, or a person acting on its behalf, for the purpose of the exercise of a function by virtue of section 28, …
(h) which is made with the consent of each person to whom the information relates, …
(3) Subsection (1) is subject to any other enactment permitting disclosure.
(4) In this section —
(a) a reference to Revenue and Customs officials is a reference to any person who is or was —
(i) a Commissioner,
(ii) an officer of Revenue and Customs,
(iii) a person acting on behalf of the Commissioners or an officer of Revenue and Customs, or
(iv) a member of a committee established by the Commissioners,
(b) a reference to the Revenue and Customs has the same meaning as in section 17,
(c) a reference to a function of the Revenue and Customs is a reference to a function of —
(i) the Commissioners, or
(ii) an officer of Revenue and Customs,
…"
Sections 20 and 21, which are referred to in section 18(2)(b), cover various situations where disclosure is authorised on public interest grounds, such as disclosure to another public body for the purposes of the prevention, detection or prosecution of crime.
Section 5 is headed "Commissioners' initial functions". It provides:
"(1) The Commissioners shall be responsible for —
(a) the collection and management of revenue for which the Commissioners of Inland Revenue were responsible before the commencement of this section, [and]
(b) the collection and management of revenue for which the Commissioners of Customs and Excise were responsible before the commencement of this section, …"
Section 9 is headed "Ancillary powers". It provides:
"(1) The Commissioners may do anything which they think —
(a) necessary or expedient in connection with the exercise of their functions, or (b) incidental or conducive to the exercise of their functions."
Section 51 (headed "Interpretation") defines "function" as meaning "any power or duty (including a power or duty that is ancillary to another power or duty)".
Section 19 makes it a criminal offence for a person to contravene section 18(1) by disclosing revenue and customs information relating to a person whose identity is specified in or can be deduced from the disclosure, subject to a statutory defence if the defendant shows that he reasonably believed that the disclosure was lawful or that the information had already been lawfully made available to the public.
Mr Patrick McKenna is a former senior partner of a global firm of chartered accountants. He is the founder and chief executive officer of Ingenious Media Holdings plc. The company and its subsidiaries (collectively "Ingenious Media") are an investment and advisory group specialising in the media and entertainment industries. Among other things they have promoted film investment schemes involving film production partnerships. The schemes were devised by Mr McKenna and utilised certain tax relief which was then available. The marketing of the schemes stopped when the tax relief ceased to be available.
On 14 June 2012 the Permanent Secretary for Tax in HMRC, Mr David Hartnett, gave an interview to two financial journalists from The Times. They had requested the meeting to discuss tax avoidance. The meeting was recorded and was agreed to be "off the record".
On 21 June 2012 The Times published two articles on the subject of film schemes and tax avoidance. They informed readers that:
"Patrick McKenna … and … [X] … are the two main providers of film investments schemes in the UK.
…
To the Revenue the two men represent a threat. HM Revenue and Customs believes that film schemes have enabled investors to avoid at least £5 billion in tax. Much of that sum, the Revenue says, is attached to schemes created by [X] or Mr McKenna.
…
Mr McKenna, 56, founder of Ingenious Media, is also involved in a long-running Revenue inquiry into three of his partnerships.
…
'He's never left my radar,' a senior Revenue official said of Mr McKenna. 'He's an urbane man, …, he's a clever guy, he's made a fortune, he's a banker, but actually he's a big risk for us so we would like to recover lots of the tax relief he's generated for himself and 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 "senior Revenue official" was Mr Hartnett. The words attributed to him are a direct quotation from the transcript of the interview, and Mr Hartnett was the source of the reference to £5 billion (although in the interview Mr Hartnett gave the figure "utterly off the record"). Mr Hartnett said other things which were not for quotation (and were not quoted), including a description of the film schemes as "scams for scumbags". At the time of the interview, HMRC had not reached a formal decision whether to challenge their validity.
There is no dispute that Mr Hartnett imparted information to The Times regarding the tax activities of Mr McKenna and Ingenious Media, and HMRC's attitude towards them, derived from information held by HMRC about them.
The reasons given by Mr Hartnett for what he said to the journalists about Mr
McKenna and Ingenious were that it was generally in HMRC's interests to try to establish good relations with the financial press; that they provided a way of emphasising to the general public HMRC's views on elaborate tax avoidance schemes; and that Mr Hartnett thought that the journalists might have information of significant value to HMRC, which they might reveal as the dialogue continued, such as details of tax avoidance arrangements which the journalists had uncovered but were unknown to HMRC. Mr Hartnett emphasised that the interview was agreed to be off the record, and that he did not anticipate that his comments about Mr McKenna and Ingenious Media would be published.
The claim by Ingenious Media and Mr McKenna was brought by way of an application for judicial review, although in substance it was a straightforward claim for breach of a duty of confidentiality. The form in which the claim was brought appears to have influenced its perception by the courts below. At first instance, Sales J held that it was not appropriate for the court to approach Mr Hartnett's decision to say what he said as if the court were the primary decision-maker: [2013] EWHC 3258 (Admin), para 40. The court, he held, could only intervene if satisfied that Mr Hartnett could not rationally take the view that speaking to the journalists as he did would assist HMRC in the exercise of its tax collection functions. Sales J emphasised, at para 50, that the rationality standard is a flexible one, which varies in the width of discretion allowed to a decision-maker according to the strength of the public interest and the strength of the interests of any individual affected by the decision to be taken. He laid stress on the fact that the disclosures made were limited and that the interview was agreed to be off the record. The disclosures made were, in his judgment, not irrational, were made for a legitimate purpose and were proportionate. In short, he approached the matter as a review on public law principles of an administrative act, and he dismissed the claim.
Sales J's judgment was upheld by the Court of Appeal in a judgment given by Sir Robin Jacob, with which Moore-Bick and Tomlinson LJJ agreed: [2015] 1 WLR 3183. Sir Robin rejected the claimants' arguments that the disclosures made were not "in connection with a function" of HMRC, properly construed, and that the judge had adopted the wrong standard of review. As to the first argument, he held that a wide meaning should be given to section 18(2)(a)(i) ("… subsection (1) does not apply to a disclosure which is made for the purposes of a function of the Revenue and Customs"). As to the second...
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