Finding the facts

TIMOTHY LYONS, barrister, considers the importance of evidence in cases before the tax tribunals.

TAX PRACTITIONERS WHO conduct appeals will need no reminding of just how important reliable evidence is if a client is to stand a good chance of success. For their part, the Commissioners of Customs and Excise also appreciate the importance of evidence. In tax avoidance cases in particular, they may seek preliminary orders from the tribunal, for example, for the production of certain documents. Given that fact-finding is such an important function of the VAT and Duties Tribunals, it may come as something of a surprise to discover that, in some recent excise duty cases, Customs have submitted that the tribunals have no jurisdiction to find the facts of the case. Less surprisingly, the tribunals have affirmed that they have a duty to find the facts of a case whether the appeal is by way of a full hearing or one subject to section 16(4), Finance Act 1994 which gives the tribunals a supervisory jurisdiction in relation to certain matters.

The right to a fair trial

The issue of whether or not the facts of a case could be found by a tribunal arose some time ago in Hodgson v Commissioners of Customs and Excise [1996] V&DR 200. The tribunal decided that it had jurisdiction to determine whether or not Mr Hodgson had certain tobacco with him for personal use. It did so having regard to Article 6(1) of the European Convention on Human Rights which states that:

'In the determination of his civil rights and obligations... everyone is entitled to a fair public hearing within a reasonable time by an independent and impartial tribunal established by law...'

This provision was brought into play by Community law which, in turn, gave Mr Hodgson a right to bring the tobacco in question into the United Kingdom for his personal use without payment of further duty.

Reinforcement of the right to a fair trial

Since the decision in Hodgson, there have been various changes in the legislation governing excise duty, and the European Union has recognised the right to a fair trial in paragraph 47 of the European Union Charter of Fundamental Freedoms. More importantly, however, the Human Rights Act 1998 has come into force bringing home Convention rights. In addition, it is now plain that the courts regard the common law as capable of protecting fundamental rights (which include the right to a fair trial) without recourse to the Convention. As Lord Hoffmann said in R (on the application of Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2002] STC 786:

'... the courts will ordinarily construe general words in a statute, although literally capable of having some startling or unreasonable consequence, such as overriding fundamental human rights, as not having been intended to do so. An intention to override such rights must be expressly stated or appear by necessary implication.'

Lord Hobhouse of Woodborough pointed out in Morgan Grenfell that the appellant in that case did not need either the Human Rights Act 1998 or the Convention to ensure protection of his rights.

Given that the requirements of a fair trial are more firmly embedded in our law than they were when Mr Hodgson's appeal was heard, some might have thought that a tribunal's duty to find the facts of a case would not again be called into question. In fact, it has proved necessary for tribunals to re-state the scope of their jurisdiction in some recent cases.

Dannatt

In Dannatt v Customs and Excise E00243, released on 30 May 2002, the appellant challenged Customs' decision to restore a seized car only if a sum of money were paid. The appeal was governed by section 16(4), Finance Act 1994 which provides that the tribunal's powers to require a further review of the original decision, arise only:

'... where the tribunal is satisfied that the Commissioners or other person making the decision could not reasonably have arrived at it...'

As the Hon Stephen Oliver QC noted in the decision, on one reading of subsection (4) a tribunal has no fact-finding jurisdiction and its sole function is to determine whether Customs have taken into account irrelevant matters or failed to take account of relevant ones. That reading was not, however, the correct one. He concluded that:

'... if section 16(4) is to be construed in an Article 6-compliant manner, it must enable the tribunal to adjudicate on matters of primary fact.'

It is true that in some circumstances a fair trial can be provided by the exercise of a limited supervisory jurisdiction. In others, it will not be. Some guidance as to when a merely supervisory jurisdiction is not adequate has recently been provided by Lord Justice Laws in London Borough of Tower Hamlets v Runa Begum [2002] 2 All ER 668. In a passage quoted in Dannatt, he observed that:

'Where the [legislative] scheme's subject-matter generally or systematically involves the resolution of primary fact, the court will incline to look for procedures akin to our conventional mechanisms for finding facts: rights of cross-examination, access to documents, a strictly independent decision-maker. To the extent that procedures of that kind are not given by the first instance process, the court will look to see how far they are given by the appeal or review; and the judicial review jurisdiction (or its equivalent in the shape of a statutory appeal on law) may not suffice...'

The tribunal concluded that:

'... to a substantial extent the statutory procedure for restoration of forfeited vehicles involves resolution of primary facts.'

It followed, therefore, that its role was not purely supervisory and that it had jurisdiction to find the primary facts of the case.

Gora: fact-finding again

In B S Gora and others v Commissioners of Customs and Excise E00262, released on 20 June 2002, the Hon Stephen Oliver QC again outlined the nature of the tribunals' jurisdiction in a case concerning a refusal to restore excise goods. He said:

'There is nothing in section 16(4) of the Finance Act which prevents the tribunal from examining the underlying and primary facts. The tribunal has been given a flexible procedure which enables it to do so.'

That, surely, puts the matter beyond question.

More questions over jurisdiction

Customs continue, nevertheless, to be concerned with the scope of the tribunals' jurisdiction. This appears from a more recent case, Withymoor Service Station Ltd v Commissioners of Customs and Excise E00316, released on 29 June 2002. The case concerned an appeal against an assessment to excise duty on hydrocarbon oil. It was accepted that the appeal was not concerned with an 'ancillary matter' as defined in section 16(8) and (9), Finance Act 1994. That being so, one would not have expected any question to arise over the nature of the tribunal's jurisdiction. Section 16(4) makes plain that it provides for a supervisory jurisdiction only:

'[i]n relation to any decision as to an ancillary matter, or any decision on the review of such a decision...'

Customs submitted, however, that the jurisdiction of the tribunal was supervisory because of the terms of section 16(5). This states:

'In relation to other decisions, the powers of an appeal tribunal on an appeal under this section shall also include power to quash or vary any decision and power to substitute their own decision for any decision quashed on appeal.'

It is difficult to see how this provision could be said to support any contention that the tribunal's jurisdiction to quash and vary decisions, and substitute its own decision, arose only where it was satisfied that the decision was unreasonable. What was in question was a liability to duty, not the reasonableness of Customs' conduct. Fortunately, the tribunal dealt with the submission robustly stating: 'We do not accept this limitation on our jurisdiction'. This conclusion was reached as a matter of statutory construction and without the need for any reference to Article 6 of the Convention.

Wide impact

Fundamental rights, the right to a fair trial and the right to the protection of private property in particular, are proving of great significance in cases affecting Customs and Excise. They have helped to preserve the jurisdiction of the VAT and Duties Tribunal, but they have also had a wider impact. This is shown, for example, by the tribunal's decision in N Ali & S Begum (17681), a VAT case in which it was decided, among other important matters, that Customs were wrong to contend that Article 6 of the Convention conferred no rights on those appealing against tax and default surcharge assessments, penalty notices and notices to provide security.

Other examples of this wider impact include the well-known decision in Lindsay v Commissioners of Customs and Excise [2002] STC 588, in which the Court of Appeal refused to uphold Customs' policy in relation to the forfeiture of motor vehicles. In the Administrative Court there has been the decision in Fox v HM Customs and Excise [2002] EWHC 1244 (Admin) 3 July 2002 (reported in The Times, 5 July 2002), rejecting Customs' views on what goods are liable to forfeiture within section 141, Customs and Excise Management Act 1979. Most recently, there has been the decision in R v Hoverspeed Ltd and others [2002] EWHC 1630 (Admin), 31 July 2002, in which the power of Customs to carry out cross-border checks on individuals bringing alcohol, cigarettes and tobacco into the United Kingdom from elsewhere in the European Community was successfully challenged.

As this last case demonstrates, a challenge to the nature and exercise of Customs' powers need not be based solely on fundamental rights. Appellants are, increasingly, seeking to test the activities of Customs against European Community law. In the past, Community law strengthened the United Kingdom's protection of fundamental rights in Community law matters. Now that the United Kingdom's domestic law protecting fundamental rights is more robust, it can lend its support to Community law rights.

Timothy Lyons PhD, FTII, barrister practises in the tax chambers of G R Bretten QC at 24, Old Buildings, Lincoln's Inn, London, WC2. His book EC Customs Law was published by Oxford University Press earlier this year; contact Tom Perridge on 01865 354645 or at perridgt@oup.co.uk for further details.

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