CPR31 Disclosure for AWRS Appeals
The Court of Appeal has weighed in on the Alcohol Wholesaler Registration Scheme (“AWRS”) disclosure debacle in Revenue and Customs Commissioners -v- Smart Price Midlands Ltd and Anor; Revenue and Customs Commissioners -v- Gardner Shaw UK Ltd and Ors  EWCA Civ 841. The Revenue appealed what was described as a “global disclosure direction”. The order required the Revenue to provide disclosure in the following terms:
“the Respondents shall send or deliver to the Tribunal and the Appellants a list of all documents which were considered by the Respondents’ officer when reaching the decision at issue in this appeal and indicating which, if any, of those documents the Respondents do not rely on in this appeal, together with any other documents which the Respondents intend to rely on in this appeal.”
Lady Justice Rose, giving the Judgment of the Court (McCombe and Newey LJJ concurring) set out the background to the AWRS regime and the Revenue’s obligation to consider whether a trader is “fit and proper” to hold an approval.
Role of the FTT in AWRS cases
The Court examined, and reaffirmed, the jurisdiction of the First-tier Tribunal (Tax Chamber) when considering appeals against AWRS refusals. It observed that the Gora jurisdiction applied and set out the position at paragraph 19 as follows:
“Thus, the role of the FTT in these appeals will be to decide for itself any disputed primary facts on which HMRC’s decision was based then consider whether the refusal to grant approval was one which a reasonable officer could make on the basis of the facts as found.”
Different disclosure models
The Court considered a number of disclosure models advanced by the Revenue. They were:
- Disclosure of documents upon which a party relies pursuant to r27(2) of The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009;
- Standard disclosure pursuant to CPR31;
- Disclosure in judicial review proceedings; and
- Disclosure which would apply in Upper Tribunal financial services cases pursuant to Schedule 3 of the Tribunal Procedure (Upper Tribunal) Rules 2008.
The Court rejected all but a modified version of standard disclosure. At paragraph 56 the Court found as follows:
“56. In my judgment, HMRC should give what corresponds to standard disclosure under the CPR but with the same qualification as the Court accepted in the Namli case, that is excluding documents which are not relied on and which are entirely adverse to the applicant’s case. If disclosure is generally to be given on that basis, it does not seem to me helpful for disclosure to take place before the stage at which it is envisaged by rule 27(2). That rule contemplates that disclosure will take place after the Refusal letter has informed the trader of “the reasons” for the refusal, the notice of appeal under rule 20 has set out the appellant’s grounds for bringing the appeal and HMRC have served the statement of case setting out their position in relation to the case. If all that happens as it should, the FTT should be in a position to invite the parties to agree directions for disclosure on the standard basis, having regard to the areas of dispute emerging after those three procedural steps. …”
Namali is dealt with at paragraph 46 of the decision as follows:
“46. The court in Namli therefore held that the judge had been right to exercise his discretion to limit disclosure having regard to the overriding objective, including the saving of expense and the need not to take up unnecessary court resources by requiring SOCA to make applications for public interest immunity in respect of the documents. They upheld a direction that each party give disclosure of documents that (i) he relies on; (ii) adversely affect his own case; (iii) support another party’s case and (iv) he is required to disclose by any relevant practice direction.”
At first blush the Revenue have secured victory in this case. They have received clear guidance about the way in which they must approach disclosure in AWRS cases before the FTT. The “keys to the warehouse” global disclosure order given by the FTT has been torn up by the Court.
However, this is likely to feel a hollow win. The Court significantly criticised the Revenue’s processes in AWRS cases and specifically the decision letter sent to taxpayers advising them that they would not be given an AWRS approval. It was also critical of the fact that there was a decision letter from the decision-making officer and a further “HMRC Response letter” which did not appear to have any bearing on the decision letter.
At paragraph 59 the Court stated:
“59. … Unfortunately this appeal has progressed in a way which makes it difficult at this stage to order disclosure that is tailored, even in a broad brush way, to the matters in dispute between the parties. The main problem is the opacity of the reasons given for the refusal of approval. If what happened in the Hare Wines appeal is at all typical of HMRC’s process in determining applications, it reveals a chaotic decision-making process which is almost bound to generate appeals and create case management problems in any tribunal proceedings. I agree with the comment of the Upper Tribunal in Hare Wines UT that the Refusal letter is inadequate and incomplete. The obligation placed on HMRC in regulation 4(4) of the Wholesaling of Controlled Liquor Regulations 2015 is to give ‘the reasons’ not the ‘key points’ for the refusal. The applicant should be able to understand the reasons for the refusal of the application from the refusal letter as a self-standing document. The relationship in the Hare Wines appeal between the Refusal letter and the HMRC Response letter both sent on 20 March 2017 is not explained. The Refusal letter is from Ola Onanuga, who is presumably the decision-maker for the purposes of the global disclosure direction. It states simply that one ground for the refusal is that Mr Hare is involved as the guiding mind of the business but does not say anything about why his involvement is objectionable. The Refusal letter does not expressly incorporate everything in the HMRC Response letter and it does not say whether Ola Onanuga has seen or considered all the information that was available to Edward Fyle who wrote the HMRC Response letter. It is entirely unclear to me, for example, whether the tax loss letters have been relied on by Ola Onanuga as part of the reason why Hare Wines is not fit and proper, or whether Mr Hare’s spent conviction has played any part in the decision to refuse as asserted by Mr Fyle but not mentioned in Refusal letter.”
The Court went on to say:
“60. This confused position has made it difficult for Hare Wines properly to formulate its grounds of appeal and has then been compounded by HMRC’s statement of case. That document appears in one section simply to replicate the brief reasons given in the Refusal letter but in a later section raises a host of other points without explaining in some cases whether and why HMRC have apparently rejected the arguments put forward in the Rainer Hughes letter.”
With these comments in mind, it may be that the Revenue will need to reconsider the way in which decision letters are formulated so as to ensure that the reasons for refusal are clearly given. If there is no such change in approach, it may be that the Revenue will find themselves subject to satellite litigation in the FTT seeking particulars, strike out or stays on the basis of abuse. Only time will tell how successful any of those Applications will be in light of the comments from the Court of Appeal.
As Lady Justice Rose pertinently observed, “disclosure is not a cure for a lack of clarity in HMRC’s case”.