Fitch v Revenue & Customs [2006] UKVAT V19914 (14 July 2006) 

19914

Practice – Evidence – Documents – Whether HMRC entitled to produce witness statements to which Appellant objects – Application for late service under Trib Rule 21 – No direction extending time – Objection by Appellant – Customs notified Appellant of intention to produce statements at appeal – Statements not in Customs’ List of Documents under Rule 21 – Relevance of Trib Rule 28(1) – Statements excluded

LONDON TRIBUNAL CENTRE

KENNETH CECIL FITCH	           Appellant

-	and –

THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

Tribunal:	THEODORE WALLACE (Chairman)

Sitting in public in London on 30 June 2006

Andrew Young, Counsel, instructed by Vincent Curley & Co, for the Appellant 

Caroline Neenan, counsel, instructed by the Acting Solicitor, for the Respondents

© CROWN COPYRIGHT 2006

DECISION

1.	This was an interlocutory application by the Appellant in an appeal against penalties under section 60 of the VAT Act 1994 totalling £9,582.05 notified on 15 September 1995 for dishonest evasion of VAT from 1 June 1991 to 30 November 1994.

2.	Essentially the case for Customs is that the Appellant dishonestly failed to include cash receipts from the VAT returned as payable. 

3.	The Appellant’s case in outline is that although the sums were received from customers they were due from the customers to contractors and that the customers had asked him to pay the contractors on their behalf.

4.	The Appellant asked the Tribunal to rule on the admissibility of statements by seven customers which Customs intended to produce at the appeal without calling them as witnesses and to which the Appellant had objected.

5.	It is exceptional for such an application to be made in a directions hearing in advance of the appeal however I concluded that it did come within Rule 19(3) which is very widely worded and enables the Tribunal to make any direction as to the conduct of an appeal which it may think expedient to ensure the speedy and first determination of the appeal.

6.	In the particular circumstances of this case I decided to exercise my discretion to consider the application.

7.	On 25 November 1998 Customs served a Statement of Case with a very brief List of Documents.

8.	On 13 September 2000 Customs served statements by the seven witnesses all of whom were customers. The statements were out of time under Rule 21 and, although Customs applied for an extension of time to serve the statements, no direction was given by the Tribunal.

9.	The statements were served on the Appellant who wrote to the Tribunal on 18 October 2000 that he wanted all the witnesses to attend.

10.	On 12 June 2001 Vincent Curley & Co who were by then representing the Appellant wrote again objecting to the statements.

11.	On 1 December 2005 Customs wrote to the Appellant’s representative stating that they would no longer be calling any of the customers as witnesses, but listing the documents which they would be relying on at the appeal. The list included witness statements plus exhibits from the seven customers.

12.	A further letter by Customs dated 15 February 2006 stated that Customs were aware of the Appellant’s objection to the statements but that the contents of the statements and the documentation in support were the material which informed the investigating officers’ decision to raise the assessment and the officers could speak to that material and be cross-examined in relation to it.

13.	Customs have at no stage applied to amend the List of Documents of 25 November 1998 which was as follows: 

(1)	Copy disputed decisions;
(2)	Copy VAT 1;
(3)	Copy correspondence between the parties and
4)	Notes of interview.

This list was wholly inadequate particularly for a section 60 appeal. The letter of 1 December 2005 was not sent to the Tribunal.

14.	If Customs had applied to amend their List to include the witness statements the Appellant would have been entitled to object as he has in this directions hearing.

15.	Since the witness statements were served out of time under Rule 21 and no extension was directed, they were not technically served under Rule 21.

16.	Rule 21(4) provides that if a party objects to a witness statement being read as evidence of any fact stated therein and serves a notice of objection within time,

“the witness statement shall not be read or admitted in evidence”.

Rule 21(4) goes on to provide that the maker may give oral evidence.

17.	It is quite clear that if the Tribunal had given leave for late service under Rule 21 it would also have extended the time for objection. In the present case Customs were well aware of the Appellant’s objection and referred to it in the letter of 15 February 2006.

18.	Mr Young emphasised that this is an evasion penalty appeal being criminal for Convention purposes. He said that if the Customs officers could produce as part of their own evidence the statements to which the Appellant had objected the purpose of Rule 21 would be defeated. The Appellant would be deprived of the chance of cross-examining the witnesses.

19.	Miss Neenan relied on Rule 28(1) which provided,

“(1)	Subject to paragraphs (4) and (5) of rule 21 and to rule 21A a tribunal may direct or allow evidence of any fact to be given in any manner it may think fit and shall not refuse evidence tendered to it on the grounds only that such evidence would not be admissible in a court of law.”

She said that questions based on the statements had been put to the Appellant in interview by Mr Gerber and submitted that he should be permitted to produce them.

20.	I did not understand her to submit that the statements should be admitted as evidence of the truth of their contents. She did not suggest that the Appellant had been invited to read the statements during the interview.

21.	She told the Tribunal that in fact one and maybe two of the witnesses could attend to give oral evidence and that she was not clear as to four of them. She did not seek to include the other witness. She said that some of the statements had exhibits attached. She submitted that the proper time for a ruling as to whether the statements should be admitted was at the hearing.

Conclusions

22.	This is a very old appeal. The witness statements in question were made between March and July 1995 and covered events several years earlier.

23.	Part of the delay arose over the issue of whether section 60 appeals constituted criminal proceedings within Article 6 of the European Convention on Human rights. The President decided in December 2000 that they were covered by Article 6. Customs appealed to the Court of Appeal which upheld the Tribunal, see Customs and Excise Commissioners v Han and Yau and related appeals [2001] 1 WLR 2253; [2001] STC 1188. The Court of Appeal decision was on 3 July 2001.

24.	On 21 October 2003 the Appellant applied for the appeal to be allowed because of want of prosecution by Customs. The Appellant’s application which was joined with similar applications in other cases was dismissed on 19 July 2005.

25.	I now turn to the present application.

26.	If the witness statements had been validly served under Rule 21 and the Appellant had objected under Rule 21(4) the express wording of the subrule would have prevented the statement from being read or admitted in evidence; in the absence of an objection the statements could have been read “as evidence of the facts stated therein”, see Rule 21(3).

27.	As it was although the statements were served on the Appellant no direction was given extending the time for service under Rule 21 and the Appellant notified the Tribunal in October 2000 that he wanted all the witnesses to attend. I have no hesitation in holding that the matter should be considered as if Rule 21(4) applies.

28.	Miss Neenan submitted that the statements should be admitted under Rule 28(1). Since Rule 28(1) is expressly subject to Rule 21(4) it cannot be interpreted either as overriding Rule 21(4) or as enabling the Tribunal to admit evidence excluded under Rule 21(4).

29.	In any event I see no tension between Rule 28(1) and Rule 21(4) because the crucial word in Rule 28(1) is “only”. The exclusion of witness statements under Rule 21(4) is because of the express words of that subrule and not because the statements would be inadmissible in a court of law.  

30.	The statements by the customers contain material which is central to the allegation of dishonesty and which the Appellant disputes. Quite apart from Rule 21(4) in my judgment it would be wrong in principle for the Tribunal to allow such statements to be read as evidence of the truth of their contents without the witnesses attending in the face of objections by the Appellant.  The position might have been different if no objection had been made, see Wayne Farley Ltd v Customs and Excise Commissioners [1986] STC 487.

31.	There was no suggestion that any of the statements might be relevant on the footing that the Appellant had read them when being interviewed and had given answers which could only be understood if the statements were read. In fact the interviews preceded the statements.

32.	It appears that in the event some of the customers are available to be called as witnesses.  If they are called it will be for the Tribunal hearing the appeal to decide whether they should be allowed to refresh their memories in the witness box by reading the statements which related to events which were not recent when the statements were made.

33.	It may be that the statements may be admitted by the Tribunal as previous consistent statements as a result of cross-examination : that again will be a matter for the Tribunal hearing the appeal if the issue arises.

34.	I conclude that Customs are not entitled to include the witness statements in the List of Documents which they propose to produce at the hearing and are not entitled to rely on the statements as part of their case.

35.	This ruling does not cover the documents exhibited to the customers’ statements such as quotations by the Appellant. It may well be that those documents can be produced in evidence by the officers who are to give evidence.

36.	I further direct that within 21 days Customs provide a full List of Documents and within 56 days serve statements or supplementary statements by all witnesses intended to be called or in the case of statements already served confirm whether the witness is to be called.

THEODORE WALLACE
CHAIRMAN

RELEASED: 14 July 2006

LON/97/1285