Case No: CH/2007/APP/513
Neutral Citation Number: [2008] EWHC 412 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: Wednesday, 6th February 2008 
BEFORE:

THE HONOURABLE MR JUSTICE MORGAN

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BETWEEN:

MALCOLM ARTHUR JOHNSON	
Appellant	
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	HER MAJESTY’S REVENUE AND CUSTOMS
	Respondent	
			
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Wordwave International, a Merrill Communications Company
PO Box 1336, Kingston-Upon-Thames KT1 1QT
Tel No: 020 8974 7305 Fax No: 020 8974 7301 
Email Address: Tape@merrillcorp.com
(Official Shorthand Writers to the Court)

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Mr Price appeared on behalf of the Appellant
Mr Nawbatt appeared on behalf of the Respondent

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Judgement 

MR JUSTICE MORGAN:
1.	This is an appeal by Mr Malcolm Arthur Johnson against the decision of the General Commissioners made on 17th July 2007.  The General Commissioners had held that Mr Johnson had failed to comply with a notice served on him under s.20 of The Taxes Management Act 1970 and they imposed a penalty on Mr Johnson of £300 under s.98 of The Taxes Management Act 1970.

2.	On this appeal Mr Johnson has been represented by Mr Price of counsel and HMRC have been represented by Mr Nawbatt of counsel.  

3.	In order to get to the specific points raised by way of appeal against the Commissioners’ decision, it is necessary to set out something of the relevant background.  The underlying issues between Mr Johnson and Revenue and Customs relate to a transaction which occurred in or around the year 2000.  In particular, on 8th October 2000 there is -- and there is no dispute about this -- to be found a stock transfer form executed by Mr Johnson and by his wife, Mrs Deanna Jean Johnson, whereby those two persons transferred shares which they owned extending to some 25,001 shares, in a company called New Forge Foods Limited, the shares being transferred to Monarch Munificence Limited, the address of which is given as an address in Belfast.  The stock transfer form, which is before the court, refers to the transfer being made for no money consideration.  The form also refers to the transfer being:
“Pursuant to an agreement of even date.” (Quote unchecked) 
	As I understand it, that agreement has not yet been produced to Revenue and Customs and it may have some bearing on the underlying transaction, which led to the execution of this transfer form.

4.	Mr Johnson filed a tax return for the relevant tax year and on page 8 of that tax return in paragraph 23.6 under the heading “Additional information,” Mr Johnson or his advisors on his behalf said this:
“On 8th October of 2000, 25,001 ordinary shares of £1 each in New Forge Foods Limited, being subject to an option, were gifted into a charity, Monarch Munificence Limited.” (Quote unchecked) 

	Again, as far as I understand it, the option which is referred to in the tax return, to the extent that it was recorded in any document, has not been shown to Revenue and Customs.

5.	Some time after those events, Revenue and Customs served on Mr Johnson a notice under s.20(1) of The Taxes Management Act 1970.  The notice is dated 25th August 2005.  The notice required Mr Johnson to deliver or furnish to the Inspector, at a particular address, not later than 24th September 2005, all documents in Mr Johnson’s possession or power, or such particulars as are specified or described in the schedule to the notice.  The schedule to the notice contained two numbered paragraphs.  Paragraph 1 was in these terms:
“Copies of all correspondence and other communications in your possession or power relating to the transactions.” (Quote unchecked) 

	Paragraph 2 was not directed to documents, but it was in these terms, it sought:
“A full explanation of the purpose of the transactions.” (Quote unchecked) 
	The notice continued:
“By describing or defining what the transactions were and the transactions were defined so as to refer to the transfer of 25,001 shares, subject to an option in New Forge Foods Limited to Monarch Munificence on 8th October 2000 and all associated or connected arrangements.” (Quote unchecked) 

	The inspiration for that wording, the reference being to the transfer of shares, was plainly the wording in the tax return to which I have referred.  The definition of transactions was not confined to the transfer of shares, because it expressly embraced all associated or connected arrangements and, indeed, continuing from where I had stopped reading:
“The reference to other arrangements was to include certain matters in particular, but even that must not be an exclusive statement of such arrangements.  Amongst the matters particularised were the purchase of any capital redemption bond, secondly, any arrangements of whatever description whether formal or informal with TPD Taylor or any companies with which TPD Taylor is associated concerning the transfer of shares to Monarch Munificence Limited, their subsequent transfer or disposal and/or the acquisition, holding and/or redemption, encashment, transfer or disposal of a capital redemption bond or contract.” (Quote unchecked) 

	The list of matters particularised then referred to two limited companies that I need not refer to and they contained by referring to:
“Any loan advanced or monies worth transfer of any description received by you or any member of your family related directly or indirectly to the transactions.” (Quote unchecked) 

	The s.20 notice then defined a number of terms, one of which was the term:
“Correspondence and other communications.” (Quote unchecked) 
	I need not read out the entire definition, but it was in wide and extensive terms.

6.	Accompanying the s.20 notice was a letter also dated 25th August 2005 from the relevant Inspector of Taxes recording that a Commissioner had given consent to the service of the s.20 notice I have referred to.  The covering letter included a statement of reasons, which were said to be given in accordance with s.20(8E) of The Taxes Management Act 1970.  I will read the summary of reasons, they are in these terms:
“The reasons given to the General Commissioner in application for consent to issue you with a s.20(1) notice are: 

i.	That you entered into arrangements for the purchase of a capital redemption bond contract for the purposes of avoiding tax.

ii.	That I believe that under those arrangements you were entitled to receive by way of loans part or the entire amount invested in the bond and that there was no expectation of any repayment.  

iii.	That I believe you may have a beneficial interest in the company entering into the capital redemption bond with you.

iv.	That I believe that these rights are not reflected in the valuation of the bond made at the time of its acquisition.

v.	That I believe there has been a preconceived series of transactions designed to produce an artificial loss. 

vi.	Accordingly, I believe that the 2000/2001 self-assessment may be insufficient and that a discovery assessment can be made to recover any under payment of tax.

vii.	The documents in particular as requested are required to establish whether the believed insufficiency in the self-assessment exists and, if it does, to enable the insufficiency to be quantified.” (Quote unchecked) 

7.	In the documents which are before the court there is no immediate reaction or response to the service of that notice and statement of reasons.  However, in the course of a judgment, to which I will refer in a moment, given by Stanley Burnton J on 5th April 2006, there is a reference in paragraph 32 of the judgment to a response to the s.20 notice served on Mr Johnson, the response coming from a Mr Taylor, who is a solicitor who appears to practise in the Isle of Man and who was involved with Mr Johnson in some way or other in relation to a transaction of some kind or other in around 2000 and indeed, Mr Taylor appears to be connected with Monarch Munificence Limited, the transferee of the shares to which I have referred.

8.	Taking the matter from the judgment at paragraph 32, it seems that Mr Taylor, acting on behalf of Mr Johnson, responded to the s.20 notice in this case.  The response was in terms which involved a denial of there having been a capital redemption bond, but in terms which suggested that the purchase of a capital redemption bond was being denied only in circumstances which the bond would be issued in the course of a capital redemption business within the meaning of s.458(3) of the relevant Act.  The Learned Judge commented there was no denial of a purchase of a capital redemption bond issued otherwise than in the course of such a business.

9.	That appears to have been another reaction to the service of the s.20 notice on Mr Johnson.  Around that time Mr Johnson and two other taxpayers, a Mr Collins and a Mr Mitchell, who it seems had some features of their transactions in common, gave an indication of an intention to seek judicial review of the s.20 notices that had been served on the three taxpayers and those proceedings then got underway and resulted in a hearing before Stanley Burnton J on 5th April 2006.  There were various challenges to the s.20 notices served on the taxpayers.  Those challenges included the s.20 notice served on Mr Johnson.  In paragraph 11 of his judgment, in reciting the history in relation to Mr Collins, the Learned Judge read out the reasons which supported the s.20 notice served on Mr Collins and, suffice to say, the reasons in Mr Collins’ case were very similar, if not the same as the reasons given in Mr Johnson’s case.  I refer to those reasons, because the Learned Judge commented on the matter being described and the reasons later in his judgment.  In paragraphs 22 and 24 of his judgment the judge describes what his understanding was of the s.20 notice read together with the reasons and I will read paragraph 22 of that judgment.  The judge said this:
“Reading the reasons sensibly, together with the notice, it is clear that the defendant, Dr Brannigan,” that is the relevant Inspector of Taxes, “has reason to believe that there was a tax minimising scheme, and I use the word minimising in order to be as neutral as possible, which involved the payment of a large sum of money as consideration for a bond which may also have involved the use of a company to grant a bond associated with or owned or controlled by the taxpayer.  That, either in the bond or in some collateral agreement or in some informal agreement there was a right to receive a loan of the whole or part of the consideration for the bond with no legitimate or real expectation of any repayment and, that the possibility of that loan or the right to it may not have been properly included in the value of the transactions as disclosed in the tax return.” (Quote unchecked) 

	That is the end of paragraph 22.  In paragraph 24 the judge said this:
“Looking at the matter sensibly, what this case is about is the belief of the Inland Revenue that Mr Taylor” -- he is the Isle of Man solicitor -- “has been the approved (inaudible) of a tax minimising scheme, which may or may not be defective once all the aspects of the scheme have been put on the table.  The concern of HMRC and the reason for the service of the notice in this case, is to ensure that all the facts are on the table to see whether or not they give rise to a liability for a tax or a disallowance of an allowance other than that set out in the tax return and if so, whether the conditions required for an assessment under s.29 are satisfied.” (Quote unchecked) 

10.	The tax issue, which is being identified in those paragraphs, which are based upon the judge’s reading of the s.20 notices and the reasons is plain enough.  On the face of the stock transfer form, ignoring everything else, it might be said that what had happened was that there was a gift of shares to Monarch Munificence Limited, which I am told has charitable status and therefore, there was a gift of shares to a charity and that is an exempt disposal, as I understand it, for capital gains tax purposes.  

11.	However, if the belief of Revenue and Customs turns out to be well founded, then that analysis of the transaction, certainly Revenue and Customs will say, is quite inadequate, because the real transaction being effected, is that Mr and Mrs Johnson, as owners of the shares, are disposing of those shares in circumstances where, as part of a pre-conceived series of transactions, they receive substantial sums of money and whether they are formally required to repay those monies or not, in practice the expectation would be that no one will ever call upon them to repay them so they will be effectively their monies. The result is, that they have disposed of their shares for a substantial consideration and that will have to be brought into account for capital gains tax.  So it is not conceptually difficult to see what the issue between the taxpayer and Revenue and Customs has been in relation to the transfer of the shares and perhaps the transactions surrounding the specific transfer.
 
12.	I will pick up again one or two parts of Stanley Burnton J’s judgment, which I have been asked to bear in mind.  There was some argument before the judge about the reasons why an Inspector of Taxes might wish to serve a s.20 notice and what the grounds for the Inspector’s and/or the Commissioner’s belief happened to be before such a notice is served.  In paragraph 27, the Learned Judge said this:
“There may be many cases when it is not in the interests of the Revenue to disclose to the taxpayer precisely what information it has.” (Quote unchecked) 

	In paragraph 28 he said:
“An Inspector is not required to satisfy the taxpayer, that in all the circumstances he is justified in proceeding on the section.  There is no express and in my judgment, no implied requirement that the Inspector provide to the taxpayer the evidence from which it came to this conclusion that it was appropriate to apply for consent.  What he must give is a written summary of his reasons for doing so.” (Quote unchecked) 

	Later in the same paragraph the Learned Judge said this:
“He did not set out the evidence he had before him, which gave rise to the belief to which his reasons referred and, in my judgment, he was not required to do so.  Why he gave the notice does appear from the reasons he gave and, in my judgment, they were sufficient for the purposes of the section.” (Quote unchecked) 

13.	The judge then turned his attention to the specific challenges to the s.20 notices in the cases before him.  He dealt with the circumstance that the notices asked, a question as to the purpose for which the taxpayer had entered into the relevant transactions.  At paragraph 31 the judge said this:
“If the purpose of a transaction is relevant to the amount of tax liability or an allowance arising as a result of that transaction, then that purpose is a particular which the Inspector may reasonably require to have furnished to him.  The purpose may relate to cumulative transactions or to a single transaction.  But the purpose for which the transaction or transactions in the present case were entered into may be relevant for the tax liability of” -- and the judge quoted Mr Collins in particular -- “...cannot, I think, be disputed, because one of the issues raised by the Inspector is whether there was any genuine commercial purpose for the transaction or transactions to which the notice relates.  If the transactions were entered into with a view to minimising tax liability and show a chain of transactions having no commercial purpose, then that may be a relevant consideration in determining whether there is a liability for tax beyond that which has already been accounted for.  In those circumstances it seems to me there was power to require the particulars set out in the notice, including the particulars of the purpose of the transaction to be provided to the Inspector.” (Quote unchecked) 

13.	I refer to these passages in the judgment, because at times during the able argument of Mr Price for Mr Johnson, the suggestion was that Mr Johnson found himself in a Kafkaesque world where he was being interrogated and proceeded against and penalised, when he really had not the first idea of why the Revenue were behaving in this way against him and he did not know what they wanted him to say, what they wanted him to provide.  It seems to me that any such suggestion is wholly dispelled by the investigation there was in front of Stanley Burnton J, when he set out in this judgment precisely what it was the Revenue were saying and why they were saying it.  In my judgment, the matter was completely clear at that stage and, indeed, I doubt if it was unclear before that stage.

14.	The judge in his judgment then dealt with the specific case of Mr Johnson.  He referred to the s.20 notice served on him.  He referred to Mr Taylor’s initial response, which I have already recited.  In paragraph 33 he referred to communications that were sent to Mr Johnson’s solicitors.  So it seems that at that time Mr Johnson had the benefit of legal advice and, of course, Mr Johnson was represented by leading and junior counsel, the latter being Mr Price -- who appeared before me -- at the hearing before Stanley Burnton J.

15.	I drew attention earlier to the fact that s.20 notice specifies that the information and documents requested were to be provided by 24th September 2005.  I was informed by both sides on the hearing of the present appeal that, that time limit was effectively put in suspense until the judicial review proceedings were disposed of.  I was also told that the understanding was that the s.20 notice would be complied with following the 5th April and it was suggested to me that the right period for compliance would be, first, 14 days to see if an appeal were brought against the judge’s judgment and then 30 days thereafter for compliance.  That would have taken the period for compliance up to, I think, the middle to the end of May 2006.  In fact, Mr Johnson having lost his judicial review challenge did not, it seems, make any effort to answer the s.20 notice by the end of May 2006.  Indeed, by September 2006 he had equally taken no step to answer the s.20 notice.  

16.	It was in those circumstances, that in September 2006 the relevant Inspector of Taxes, Mr Brannigan, gave information before the General Commissioners of Income Tax for the relevant division and in that information, Mr Brannigan referred to the s.20 notice of 25th August 2005.  He referred to the time limit for compliance of 24th September 2005 and, in paragraph 2 of the information Mr Brannigan asserted that Mr Johnson had failed to comply with the notice, in that he had failed to deliver the documents and the particulars within the time limit.  Now, as I have indicated, the time limit did not expire on 24th September 2005, because it was effectively put into suspense, but no point has been taken that the information referred to 24th September 2005, rather than possibly a date in May 2006.

17.	Having received that information, the General Commissioners issued a summons to Mr Johnson requiring him to attend on 10th November 2006, to answer the information when the matter would be further dealt with .  The summons set out the information and in particular, it set out a statement that Mr Johnson had failed to comply with the s.20 notice, although it did not repeat the erroneous reference to the time limit contained in the information.

18.	Judging the matter at that point, it is clear that there was a valid s.20 notice served in this case, that the time for compliance with the s.20 notice ran out in around May 2006, and that by the date of the information and the summons of September 2006, Mr Johnson had done nothing at all to comply with the s.20 notice.  It might be thought that the charge that he had failed to comply could not be answered and, that the only matter relevant for the General Commissioners, in due course, would have been the appropriate penalty to impose and that might have involved an investigation into whether Mr Johnson had belatedly complied or had continued to fail to comply at the time that the amount of any penalty was being considered.

19.	The information on the summons did, however, produce some response from Mr Johnson and the response effectively took the form of a letter of 7th November 2006, from Mr Taylor -- the Isle of Man solicitor -- sent to Revenue and Customs and that letter of 7th November 2006, was accompanied by a letter of 23rd October 2006 from Mr Johnson.  Although the letter is dated 23rd October, and I am sure it was written by Mr Johnson on that date, it only reached Revenue and Customs with Mr Taylor’s letter of 7th November.  It was some three days before the intended hearing of the summons.  Notwithstanding the late arrival of these two letters, late, in the sense of very near to the hearing date, Revenue and Customs did agree to adjourn the November hearing date and the summons was adjourned Sine Die and was re-issued later as I will recite.

20.	The letter of 23rd October 2006 was described by Mr Price, acting for Mr Johnson, as compliant with the s.20 notice.  I will not read the entirety of the letter of 23rd October 2006, nor the letter of 7th November 2006.  I will, however, describe some features of the exchanges.  The first thing to notice is that this pair of letters enclosed only one relevant document, it was the stock transfer form of 8th October 2000.  No other documents were made available at this stage.  Secondly, Mr Johnson took the line in the course of his letter of 23rd October 2006, that he really did not know very much, and anything he had once known he had forgotten, about the affair.  He said in paragraph 1, he did not have in his possession or power correspondence or communications.  In paragraph 2 he referred to the transfer of shares on 8th October 2000.  He did not describe it as a gift.  He did not describe Monarch Munificence Limited as a charity.  He did not, in truth, say anything about the purpose of the transaction. All of that is left unsaid.  He simply recited the bare facts that there was a transfer on a certain date by a certain transfer to a certain transferee.  He says this:
“The transfer was made on advice received from HLB Kitsons Fiscal Solutions, and I do not have any copy of the advice (if any of it was in writing) nor any clear recollection of any explanation that may have been given by the advisor.” (Quote unchecked) 

21.	As will be seen, there were documents in existence and certainly by the time of the hearing before the General Commissioners, the Revenue and Customs were able to point to quite a good deal of involvement between Mr Johnson and Kitsons indicating that Mr Johnson was guided by Kitsons in relation to the transactions and indeed, the guidance had continued for some time after the transaction itself and furthermore, of course, the matter had been the subject of legal proceedings when, one imagines, Mr Johnson was given advice by leading and junior counsel and solicitors and the matter was gone into in detail on the judicial review.  So it was a somewhat remarkable statement for Mr Johnson to make in paragraph 2 of his letter that, he did not have a clear recollection of any explanation made and given by the advisor.

22.	In paragraph 3 he says he has not purchased any capital redemption bond.  But then he defines his own terms about what a capital redemption bond is in terms very similar to those of Mr Taylor in September 2005, a matter which was remarked upon by Stanley Burnton J.  He then said at paragraph 4.1 he had no knowledge of any arrangement of any description with any of Mr Taylor’s companies.  That is itself a little surprising, because the stock transfer form he enclosed referred to an agreement of even date and on the face of it, that would have been an agreement between Mr and Mrs Johnson on the one hand as transferor and Monarch Munificence Limited, the Mr Taylor company, as transferee.

24.	At paragraph 4.2 he rather rejected the idea that he could be expected to know anything about this transaction and, as I have indicated, there is material which was before the General Commissioners to show that he had every reason to know quite a lot of detail and have a good understanding of the transaction.

25.	At paragraph 6 of his letter he responded to the request for an explanation of the purpose of the transactions, he says this:
“I am unable to provide a full explanation, because I do not have the knowledge of the arrangements with TPE Taylor or any company with which he is associated.  I therefore cannot provide any explanation of any purpose except to the extent provided for in this letter.”  (Quote unchecked) 

	I should add that the letter on my reading of it does not give any explanation of the purpose of the transaction.  So he is saying that he is wholly unable to give an explanation of their purpose and again that, on the face of it, appears a remarkable statement to make.

26.	Accompanying the letter of 23rd October 2006, as I have described, was Mr Taylor’s letter of 7th November 2006.  Mr Taylor, in the second paragraph on the second page says that, he does not have the agreement referred to in the stock transfer form.  To the best of his recollection, that agreement related to the shares and option over them, which could have been exercised by a third party.  He goes on to say no such option has ever been exercised.  Again, it is a little surprising that he is doing this, “To the best of his recollection,” because after all, he is a director of the transferee company, Monarch Munificence Limited, which owns 25,001 shares in New Forge Foods Limited.  

27.	So, those are the letters that were sent.  They do not provide any documents beyond the single stock transfer form. They do not provide any explanation of the purpose of the transactions.  They appear to be a studied attempt to give as little information as possible and certainly no information that could possibly be used by the Revenue, to its advantage, in relation to the arguments which have been identified quite clearly in the judgment in April 2006.

28.	Following those exchanges there was further correspondence.  I have seen the correspondence between the Revenue and Customs and Mr Johnson in May 2007 but that I do not need to recite.  Revenue and Customs asked the General Commissioners to reissue the summons calling Mr Johnson to a hearing on 17th July 2007 and that summons was reissued on 31st May 2007.  There was then further correspondence in June and July 2007, between Revenue and Customs and Mr Johnson and Mr Johnson continued to paint the picture that he was really very much in the dark; he did not know what was being said against him.  He did not know what he was expected to do.  It was unfair to him and in particular, he asked for full disclosure from Revenue and Customs of all of the material that they had obtained from Baker Tilley, a firm of accountants that had taken over the practice of Kitsons to which I have referred.  What Revenue and Customs did in that regard is, on 3rd July 2007, in readiness for a hearing two weeks later on 17th July 2007, they provided to Mr Johnson a bundle of documents, which they indicated they intended to rely upon at the forthcoming hearing.  Again, Mr Johnson said he wanted the whole file.  The stance taken by Revenue and Customs was that they did not intend to rely on anything else.  They were not obliged to show Mr Johnson what they had obtained and they would not do so.  They did not see a need to give any other reasons and they did not give any other reasons.

29.	That was how matters had developed by the beginning of July 2007.  Mr Johnson had referred more than once to the possibility that he might attend the hearing on 17th July 2007 through counsel, and he wanted to have material he could provide to his counsel to act for him on that occasion.  In fact, the only information I have about attempts to instruct counsel are that, on the Friday, before the hearing, that is on 13th July, before a hearing on Tuesday 17th July, Mr Price was instructed to appear before the General Commissioners and Mr Price duly did so.  The General Commissioners dealt with the matter on 17th July, but they did not express their reasons orally in any detail and they did not produce at that time any written record of the hearing.  However, for the purposes of this present appeal to the High Court, the Commissioners have prepared an 11 page document dated 12th December 2007, which sets out in some detail the events of that day, 17th July 2007.

30.	In what they describe as section B of the document, the General Commissioners set out something of the history of the case.  At paragraph 18, they set out in a number of sub-paragraphs, the basis on which Mr Price applied for an adjournment on behalf of Mr Johnson.  There are two points in particular I ought to note.  In paragraph 18.D, Mr Price referred to the fact that third party information and -- I interpose, in particular from Baker Tilley -- was not available to Mr Johnson and the Revenue had declined to supply it to Mr Johnson.  That seems to have been a correct statement of the position.  

31.	It also appears from paragraph 18.A, that the Revenue had been asked to state the specific reasons why Mr Johnson was said not have complied with the s.20 notice and the Revenue failed to give this information.  Mr Price was developing an argument that without these further disclosures and information the case really could not proceed against Mr Johnson on that day and the matter would have to be adjourned.  At paragraph 19 of this document the Commissioners set out the submissions made by Mr Brannigan and these submissions were made for the purposes of objecting to the adjournment and also in support of the summons and the relief sought in the summons.  Mr Brannigan made a number of points.  He referred to the fact that Mr Johnson alleged that he did not have any documents, whereas Mr Brannigan submitted that the Baker Tilley documents showed otherwise, and it has been explained to me that means that if you look at the Baker Tilley document you can see that some of these documents were addressed to Mr Johnson himself.  Mr Brannigan made a number of other points.  He referred to the possibility there was a tax avoidance scheme and there was an associated arrangement and part of that arrangement involved a capital redemption contract or bond.  

32.	Reference is made to the judicial review proceedings and it was also said that following the judicial review proceedings and the initial information, nothing had been heard from Mr Johnson and Mr Johnson had made no effort to comply with the s.20 notice.  That again appears to have been a correct statement of fact.  Mr Brannigan also said that even after the first summons nothing occurred until 7th November and I have described what came on 7th November. Mr Brannigan also indicated that Baker Tilley’s position was that they would not disclose any information without Mr Johnson’s permission and so they were served with a notice under s.20(3).  That is how the Baker Tilley documents had arrived with Revenue and Customs.  So, the General Commissioners had set out those matters following their recital of the history.  

33.	They then went thoroughly into the question of an adjournment.  In paragraph 20 of their reasons as recorded in this document, they pointed out the unusual features of the case.  They pointed to the fact that Mr Johnson had been asked for this information for a considerable time and nothing had happened before the laying of the information.  They recorded that the Inspector had doubts about Mr Johnson’s denials as to his state of mind.  There is then reference to the documents obtained from Baker Tilley and I will not recite all of this in the judgment, but the General Commissioners referred to a number of documents, which gave a very strong impression that Mr Johnson was quite involved in the detail and that many of the matters being alleged by the Inspector of Taxes were indeed supported by that material.  The General Commissioners said this:
“When the Appellant, in his letter dated 23rd October 2006, stated at item 4.1, ‘I have no knowledge of any arrangement of any description with TPD Taylor or... redemption, transfer or disposal of the capital redemption bond or contract.”  In the light of earlier correspondence and telephone conversations, we do not believe this can be correct.” (Quote unchecked) 

34.	They then return to the question of whether there should be an adjournment.  They refer to a decided case, which commented adversely on a taxpayer not coming clean and not giving evidence.  They refer to the fact that Mr Johnson had been served with the documents the Revenue were relying upon, which they said should have made it clear to him there were many inconsistencies in his case and although he was facing a hearing on 17th July 2007, he instructed Mr Price of counsel at a late stage on 13th July 2007.  Their conclusion at paragraph 21 was that there were no grounds for granting any adjournment and they then recorded the decision they had reached on 17th July 2007.

35.	Having, on that date, held that there would be no adjournment, they were then obliged to deal with the summons and adjudicate upon it.  The summons alleged non-compliance with the s.20 notice.  Before they embarked on their consideration of what to do they recorded the fact they did not invite Mr Price to make detailed submissions on the factual material, because they were mindful that Mr Price had emphasised to them when seeking an adjournment that, he really was not in a position to deal with the matter.  That point as to the assistance that Mr Price would be able to give them when they came to adjudicate on the merits is a point that they mentioned more than once in the ensuing discussion.

36.	They then turned their attention to what should be done, which they regarded as a question as to what the penalty should be.  I have already pointed out that, so far as non-compliance is concerned, there really could be no argument but that there had been a non-compliance with the s.20 notice.  But again, if there had been late compliance that might have gone significantly to mitigation and the amount of any penalty.  Although Mr Price submitted to me that it was an entirely new approach to take, that is that non-compliance was established and that all one was concerned with was the amount of the penalty, my reading of paragraph 22 of the Commissioners’ reasons is that is how they themselves approached it.  They considered the question of a penalty.  They had already determined in their earlier reasoning that there had been non-compliance.  There had been no effort to comply so when they came to consider the penalty they looked at a number of matters such as degree of compliance, effort to comply, difficulty of compliance and awareness of the duty to comply.  They then made findings on those matters.  They said, on degree of compliance, that the letter of 23rd October 2006 purported to comply, but they did not believe the accuracy of the reply as they considered the degree of compliance was less than substantial.  As to effort to comply, they said there was no effort to comply on 23rd October 2006 and they queried the accuracy of the replies.  On difficulty with compliance, they did not accept the lack of information put forward by Mr Johnson and they then determined that this was a case in which the maximum penalty of £300 should be imposed and, they took into account Mr Johnson’s failure to cooperate with the Revenue, the fact that Mr Johnson had been aware that compliance was necessary since April 2006 and they also made the point that, Mr Price had been put in a difficult position, because of the conduct of the lay-client, Mr Johnson.

37.	Before leaving the reasons to which I am referring, in paragraph 22 they also commented upon the grounds of appeal, which they had by this time seen.  They wanted to communicate to the court their opinion that there was nothing in those reasons. In so far as their comments deal with matters of fact, I can take them into account.  In so far as the General Commissioners offer their opinion as to whether the reasons were well-founded or were not well-founded I, of course, put that matter on one side and I will form my own view.  Mr Price was minded to be critical of the General Commissioners entering the fray in that way and taking sides, so to speak, in an argument that was essentially between Revenue and Customs and the taxpayer. I do not myself hold it against the General Commissioners that they said what they said.  It is not a matter that is going to influence the ultimate outcome and I do not think that I could say that what they did in this respect throws any doubt on any of their reasoning in relation to earlier matters, much less does it suggest that they committed an error of law in relation to those other matters.

38.	I have dealt with the facts in some detail, because one needs to understand the background before one can address the specific matters complained of.  Mr Price complained, on behalf of Mr Johnson, in the grounds of appeal on various points and, at the oral presentation of the appeal today, Mr Price has concentrated on two matters.  First, he says that the Commissioners should not have proceeded with the hearing in July when two essential things were outstanding.  The first essential matter was that, the Commissioners should require a full specification of all the respects in which Mr Johnson had failed to comply with the s.20 notice, something of the order of a detailed pleading giving particulars of breach.  The second matter which Mr Price says was outstanding and was really of the essence, was that the Revenue and Customs should provide to Mr Johnson every piece of material and information they had obtained from third parties and in particular, Baker Tilley.

39.	I will deal with these two separate matters independently of each other, then consider their combined effect.  First, as regards the specification of particulars of non-compliance, I first make the narrow point that the fact of non-compliance was unanswerable and indeed, the Commissioners correctly proceeded on the basis that there had been a failure to give the information within the specified time.  The Commissioners correctly directed themselves that they would look at the extent of late compliance when considering the amount of any penalty.  It seems to me that, on that ground alone this was not a case where fairness and justice required there to be full particularisation of the non-compliance before the matter could be dealt with.

40.	Secondly, Mr Price’s suggestion that it was for the Revenue to specify the extent of non-compliance rather than for Mr Johnson to comply and give the information, puts matters, in my judgment, the wrong way round.  In a case like this the Revenue may have suspicions and beliefs.  They may have weak grounds or strong ground for those beliefs, but they are largely in the dark.  They did not participate in the transaction.  It is the taxpayer who is in the light and who knows what happened. In this case, Mr Johnson, I am told, had access to two files of documents which came to him from Baker Tilley and it is plainly inappropriate to think that the Revenue can say to the defaulting taxpayer, you have failed to provide document this, document that and document the other, because it is the taxpayer who knows what exists and the Revenue do not.  Now, it may be that Mr Price’s submission does not go that far, but in so far as he says that there is an obligation on the General Commissioners trying the case to insist on the Revenue drawing up a list of particulars of default, I do not accept that there is any such overriding obligation.  I asked: was there any rule which governs the General Commissioners’ hearings which so provide, and I was told there were none.  There is no statutory provision that so provides and neither side could cite any decided authority that gave any guidance as to this being a requirement.

41.	Next, it is right to point out that at the hearing in July the Inspector of Taxes, as recorded at paragraph 19 of the decision, did spell out the respects in which there had been shortcomings. It is not in the form of a pleading served in advance, but it was certainly available to be considered at the hearing which prompted the refusal of an adjournment.  The highest it could be put against the General Commissioners is that, they had always a general residual power to require particulars of allegations which were going to be investigated to be given to the taxpayer against whom the allegations were made.  But if that is as high as it can be put, then equally it must follow that it is for the General Commissioners to decide whether they thought that was an appropriate course as a matter of case management and I can detect no error of law in the decision they reached to proceed with the matter with the material they had before them.  It cannot be said their decision was perverse in the Edwards v. Bairstow sense.  This was a decision which was well within the permissible range for a tribunal of this nature.

42.	The other submission which Mr Price made was that it simply was not fair for this hearing to take place and for a penalty to be selected when the documents which were available to Revenue and Customs had not been handed over in their entirety to Mr Johnson.  Again, I asked whether there was any rule or statutory provision or decided authority which gave any guidance and I was told there was certainly no such requirement imposed on the General Commissioners seeking to deal with a case of this kind.  It seems to me that, just as before, the highest it could be put, is that the General Commissioners might have the power to require the Inspector of Taxes to hand over the documents with a view to there being the fairest possible hearing of the complaint against the taxpayer, but if there is, and I am not deciding here, if there is such a power then it is for the Commissioners to decide whether to exercise it or not and I can detect no error of law in their decision that they were able to get on with the matter.  Indeed, in the absence of such an order for disclosure, it should be remembered in this context that the Revenue were seeking to establish that Mr Johnson had not been frank.  They had Mr Johnson’s answers in his Johnson’s letter and they had the other material from which they drew inferences and asked the Commissioners to draw inferences that Mr Johnson has simply not described the picture accurately.  If Mr Johnson had been concerned about those inferences being drawn from the material, it was always open to him to put in a witness statement and offer himself for cross-examination, when he would have the opportunity to explain everything and to show that the inferences were not justified.  Mr Johnson did not take that course.  Indeed, in support of his appeal where he is saying that the General Commissioners acted perversely and unfairly to him, he has still not put in any witness statement which would give any particular substance to the detail of those allegations.

43.	So, assuming in Mr Price’s favour, taken at its very highest, that the Commissioners had power to do what he says should have been done, I do not see there is any error of law in the course which they took and I think I can go further and say there does not seem to me that there was any real unfairness or risk of unfairness to Mr Johnson in the course adopted by the General Commissioners in this case.  

44.	I have dealt with the specific matters which Mr Price has urged upon me.  Mr Johnson can be satisfied that Mr Price has argued the case tenaciously and taken every point that could possibly be taken and put Mr Johnson’s position in the best possible light.  But I am not persuaded that anything went wrong with this hearing, much less that there was an error of law, which would entitle me to interfere with the conclusion. 

45.	So far as the adjournment is concerned, having dealt with those two specific matters, the challenge to the refusal to adjourn in my judgment completely falls away.  These Commissioners looked at the detailed facts in detail.  They considered the history, the reasons put forward for the adjournment, they did not find the reasons adequate.  That was well within the permissible range of decisions for the General Commissioners in these circumstances.

46.	It follows that I dismiss the appeal in relation to the determination first, of non-compliance with s.20 notice.  Secondly, this was a proper case for the imposition of a penalty.  The amount of the penalty was in the first instance for the Commissioners.  I am entitled to reduce the penalty if I think it is excessive.  This did not feature as a separate ground of appeal.  The appeal has not been brought on the basis that £300 is excessive or that say £250 would be justified and I, therefore, need say no more about it.  I certainly do not alter the amount of the penalty imposed.

47.	I believe that those are all the matters that have been argued , but if there are any points outstanding I will be told.
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