Home or Away Ltd v Customs and Excise [2003] UKVAT V18195 (15 June 2003)

 18195

PROCEDURE – Evidence – Witness summons granted to Commissioners against appellant’s accountant – Application by accountant to set aside summons – Conceded that no professional privilege arises – Whether accountant protected by anything analogous to privilege – Whether statement of policy in public notice is agreement binding upon commissioners – Whether summons ought to be set aside on ground that accountant will be forced to give evidence in breach of confidence – VAT Trib Rules 1986, r 22(6), (8) – Public Notice 700/47/93

PROCEDURE – Direction that Commissioners should serve witness statements by given date – Failure by Commissioners to serve witness statement of Appellant’s accountant – No witness statement in existence – Whether Appellant prejudiced thereby – Whether ground for setting aside witness summons – Application dismissed

EVIDENCE – witness summons granted to Commissioners against Appellant’s accountant – Application by accountant to set aside – Whether summons should be set aside on ground that account will be forced to give evidence in breach of confidence – whether Commissioners contractually bound by Public Notice 700/47/93 to treat client’s communications to an accountant in same way as those to a solicitor – Application dismissed

HUMAN RIGHTS – Witness summons granted to Commissioners against Appellant’s accountant – No professional privilege arises – Whether breach of Article 6 of ECHR – Whether discrimination against Appellant on ground that no accountant has been compelled to give evidence in breach of confidence before – Whether discrimination in that a solicitor would be protected by privilege but not an accountant – ECHR Art 6, 14
LONDON TRIBUNAL CENTRE
Appellant
HOME OR AWAY LTD
J F CHANCE

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

Tribunal:	ANGUS NICOL  (Chairman)

Sitting in public in London on 17 January 2002

Mr Derek Pratt, Tax Consultant, for the Appellant

Mr R Harris of counsel, for the Respondents

© CROWN COPYRIGHT 2002

REASONS FOR DIRECTION

1.	The Appellant carries on a car hire and taxi business.  This appeal is concerned with the question of whether certain persons, known as controllers, whose function it is to liaise with the drivers and direct them as to what jobs they are to do, are employed by the Appellant, so that their activities form part of the services supplied by the Appellant.  J F Chance (“Mr Chance”) is an accountant who acts for the Appellant and gives it accountancy and fiscal advice.  

2.	This appeal first came on for hearing, before me, on 27 September 2001.  On that occasion, Mr Derek Pratt, a tax consultant, who represents the Appellant and the Applicant  in this application, in opening the Appellant’s case made it known for the first time that the factual basis of his client’s case was significantly different from that which had been notified in writing by Mr Chance to the Commissioners.  Mr Harris, for the Commissioners, said that the Appellant's case was now fundamentally different from that for which he had come prepared.  He said to the Tribunal that, subject to instructions, it would be necessary for him to put certain questions to Mr Chance, and possibly to seek disclosure of documents from him, because Mr Chance had provided written statements of fact which were now said by Mr Pratt to be wrong.

3.	The Commissioners applied for an adjournment, which was granted, postponing the hearing until 17 and 18 January 2002.  Other directions were also given, the only one of which is relevant to the present application was a direction that the witness statements of all witnesses upon whose evidence the Commissioners intended to rely should be served not later than 30 November 2001.

4.	For some reason there followed a delay, until the Commissioners applied for a witness summons to compel Mr Chance to attend the hearing to give evidence, which had been granted by the Registrar of this Tribunal on 27 December 2001.  Mr Pratt was not informed of this until Friday 11 January 2002, four working days before the date fixed for the hearing of the appeal.  Also on 11 January Mr Chance served a notice of application for a direction to set aside the witness summons, under rule 22(4) and (8) of the Value Added Tax Tribunals Rules 1986.

The Applicant’s contentions

5.	The grounds of the application are, first, that the Institute of Chartered Accountants of England and Wales, of which Mr Chance is a member, had entered into an agreement with the Commissioners which is set out in Public Notice 700/47/93.  This provides, inter alia, that the Commissioners “recognise that tax advisers have a duty of confidentiality to their clients”. Mr Chance contends that for the Commissioners to call him as a witness will cause him to breach that duty.  Secondly, Mr Chance says that the Appellant will not have had a fair trial since it will suffer discrimination in contravention of Article 14 of the European Convention on 

Human Rights when read with Article 6, since it is the first and only time that a tax adviser will have been required to give evidence in breach of the duty of confidentiality.  Thirdly, the Appellant will be prejudiced at the hearing since the Commissioners have not yet served Mr Chance’s witness statement, and the Appellant will therefore not be aware of what Mr Chance will say in evidence.

6.	There was an exchange of correspondence between Mr Pratt (who also represents Mr Chance in this application) immediately before the date of the hearing.  In a letter dated 15 January 2002, signed by Mr Bettoney and faxed to Mr Pratt, the Commissioners explained why they were taking the course of calling Mr Chance.  The letter said:

“The basic reason for intending to call Mr J F Chance is the apparent change in the basis of the case from the time the facts were originally put to the Commissioners (when the Appellant was represented by the former accountant [i.e. Mr Chance]) and the earlier hearing when it was represented by the current advisors.

Objection has been raised on the ground of privilege; the Commissioners do not accept that such privilege applies to that relationship.  Counsel has advised that he does not, in any event, intend to enquire as to any legal/tax advice but he wishes to establish who gave what information to the accountant and at what point.”

The letter then suggests that in the circumstances the Applicant might wish to withdraw his objection to the witness summons.  It ends by saying that the Commissioners will seek a direction for costs if the application should fail.

7.	Mr Pratt replied in a fax dated 16 January 2002.  The first point that he made was:

“Dealing with the matters raised in your letter, it is denied that there has been any change in the way the Appellant’s case has been put; what has happened is that, unlike the Respondents, clear and unambiguous questions were put to the Appellant’s officers by their present representatives, the clear and unambiguous answers to which are contained in the statements before the Tribunal.  The Appellant cannot be blamed if the Respondents jump to conclusions when truthful answers are given to the questions put, if the latter did not enable the whole picture to be explained.”

At present, the significance of the last two sentences of that paragraph are not wholly clear, but will no doubt become so at the hearing of the appeal.

8.	Mr Pratt’s fax goes on to accept that legal privilege does not arise in this case, and said that the Tax Faculty of the Institute of Chartered Accountants, the Institute of Taxation, and the VAT Practitioners’ Group had expressed concern that the want of that privilege which was available to solicitors put them at a disadvantage, that the Commissioners had agreed with those concerns, “and therefore entered into an agreement set out in Public Notice 700/47/93”.  He said,

“In [Notice 700/47/93] the Commissioners agree to treat information held by, inter alia [sic], Accountants as they would that held by Solicitors.  If you were to ask questions of Mr Chance as to what was said to him by our client and at what stage the Respondents would be in breach of this agreement.”

9.	Mr Pratt then said that although the Appellant could not rely upon rule 22(6) or the Tribunal Rules, the Human Rights Act 1998 had the effect that the Appellant had the right not to be discriminated against, under Article 14, and he referred to the case of Chassagnou v France (29 April 1999) (Appns 25088/94, 28331/95, 28443/95).  Finally, Mr Pratt contended in that fax that the Commissioners’ “threat as to costs” amounted to further discrimination against the Appellant.

The terms of Public Notice 700/47/93

10.	The introduction to Notice 700/47/93 (“the Notice”) sets out its scope in the following terms:

“This statement outlines the legal powers and practice of Customs and Excise concerning access to business records and information.  It has been issued after consultation and agreement with the Tax Faculty of the Institute of Chartered Accountants in England and Wales and the VAT Practitioners’ Group.  It deals with the position of tax advisers’ confidential advice and opinion.  A tax adviser (who need not be professionally qualified) is any person appointed by a client either directly by the client, or indirectly via another tax adviser, to give advice on the client’s tax affairs.”

The Notice goes on to set out briefly the responsibilities of Customs and Excise in the proper management and collection of VAT, mentioning that the Commissioners need to have access to a trader’s business records and accounts, and the Commissioners awareness that a great deal of the information to which they gain access is confidential.

11.	The part of Notice 700/47/93 upon which the Appellant principally relies is paragraph 6.2, which says as follows:

“Confidential advice
As part of their services to clients, tax advisers communicate with clients or other tax advisers for the purpose of giving or obtaining opinion or advice about clients’ past or future VAT affairs.  Such communication can include notes of meetings and telephone calls, international memoranda, letters and faxes and management letters.  Depending on their content, such communications may or may not be subject to Customs’ statutory powers of access.
Customs recognise that tax advisers have a duty of confidentiality to their clients.  Whilst the duty of confidentiality may sometimes be over-ridden by legal requirements, Customs will not normally request the tax adviser or the trader to produce a communication relating to confidential opinion or advice of the type described above.  Auditors’ working papers and management letters, except to the extent that they contain information relating to goods and services or supplies, acquisitions or importation's, fall into this category.”

Mr Pratt contended that the expression “legal requirements” in that paragraph was limited to the matters set out in paragraph 4.1, which states:

“Customs’ powers concerning the provision of information and the keeping and production of records and accounts are set out principally in the VATA 1983, Sch 7 (as amended) [now paragraph 7(2) of Schedule 11 to the VATA 1994] and the VAT (Accounting and Records) Regulations SI 1989/2248 which are described by Customs in Part VIII of Notice 700 (The VAT Guide).  This Notice is issued to all VAT Registered persons.”

The VAT (Accounting and Records) Regulations 1989 have been revoked, and the regulations now relating to accounting and records are contained in Part V of the VAT Regulations 1995, SI 1995 No 2518.

12.	Mr Pratt further contended that, Customs having entered into the agreement contained in the Notice, there would be discrimination against the Appellant if Mr Chance were compelled to give evidence, because the Appellant would have to face disclosure of evidence which had been given in confidence to Mr Chance as its accountant.

The Commissioners’ failure to serve a witness statement made by Mr Chance

13.	Mr Pratt pointed out that there had been a considerable delay between the granting of the adjournment and giving of the direction relating to service of witness statements and the application for the witness summons.  Thereafter there was a further avoidable delay, from 27 December 2001 to 11 January 2002.  No witness statement has yet been served.  There was no reason, he submitted, why the Commissioners’ evidence should not have been served by 30 November 2001.  The Appellant does not know what evidence the Commissioners are proposing to adduce from Mr Chance, although he conceded that there was some indication given in the Commissioners’ faxed letter of 15 January 2002.  This, Mr Pratt said, would leave the Appellant at a disadvantage at the hearing.

Discrimination in breach of Article 14 of the ECHR

14.	Mr Pratt relied upon the first sentence of Article 6 and on Article 14 of the Convention.  He contended, first, that because no tax adviser had hitherto ever been required to give evidence disclosing confidential information, the requirement that Mr Chance should do so discriminated against the Appellant.  Secondly, there was discrimination against the Appellant in that the Appellant is in a worse position than it would be since Mr Chance is a chartered accountant and not a solicitor, and therefore has not the protection of professional privilege.  Thirdly, he relied upon the inherent unfairness of Mr Chance being forced to disclose confidential communications between himself and the Appellant.  Mr Pratt expressly said that it was not the Appellant’s case that there would not be a fair trial of the appeal with regard to all the matters set out in Article 6.

15.	Mr Pratt referred to paragraphs 89 and 91 of the decision in Chassagnou v France, as illustrating what discrimination means, and establishing that Article 14 is not free-standing.  In those paragraphs the Court said:

“89.	The Court reiterates that Article 14 has no independent existence, but plays an important role by complementing the other provisions of the Convention and the Protocols, since it protects individuals, placed in similar situations, from any discrimination in the enjoyment of the rights set forth in those other provisions.  Where a substantive Article of the Convention has been invoked both on its own and together with Article 14 and a separate breach has been found of the substantive Article, it is not generally necessary for the Court to consider the case under Article 14 also, though the position is otherwise if a clear inequality of treatment in the enjoyment of the right in question is a fundamental aspect of the case (see the Dudgeon v United Kingdom judgment of 22 October 1981, Series A no. 45, p 26, § 67).
. . .
91.	The Court reiterates that a difference in treatment is discriminatory if it ‘has no objective and reasonable justification’, that is if it does not pursue a ‘legitimate aim’ or if there is not a ‘reasonable relationship of proportionality between the means employed and the aim sought to be realised’.  Moreover, the Contracting States enjoy a certain margin of appreciation in assessing whether and to what extent differences between otherwise similar situations justify a different treatment (see, most recently, Larkos v Cyprus [GC] no.29515/95, §29, ECHR 1999-I).

16.	In replying to the Commissioners’ contentions, Mr Pratt suggested, without developing the submission, that there might be a kind of privilege relating to communications between an accountant and his client which were made in contemplation of proceedings.  The pending appeal would, he said, come within the definition of “proceedings” for the purposes of Article 6 of the Convention on Human Rights.  He conceded that there was no mention of any such privilege in paragraph 6.2 of or anywhere else in the Notice.  He said that in the context of the evidence that Mr Chance might be called upon to give, it was not possible to distinguish between information and advice, and it would inevitably be Mr Chance’s advice to his client that would be concerned if he had to give evidence.

17.	Finally, Mr Pratt asked the Tribunal to consider the nature of the appeal: namely that the Appellant would be asking the Tribunal to examine all the evidence and decide how the law should be applied to it.  In particular, the Tribunal would have to decide who made the supplies, and whether it was the individual controllers or the Appellant company.  He contended that if the Commissioners may have been misled, that was a matter that went to costs, rather than giving rise to a need to compel Mr Chance to give evidence, since it was relevant to the facts of the appeal.  But it was irrelevant that a controller may have told the Appellant’s accountant something which was wrong which the accountant then told the Commissioners.

The Commissioners’ contentions

Notice 700/47/93

18.	The Notice, Mr Harris said, is a public notice which, on its face, deals with opinions and advice.  Even on the face of it, it envisages that confidentiality may be over-ridden by legal requirements.  Mr Harris said that there was no intention of asking Mr Chance about his opinions and advice given to his clients.  The intention was to ask why Mr Chance told the Commissioners one thing, repeatedly and in writing, and the Appellant now says the opposite.  It was, Mr Harris said, essential to the doing of justice to both sides in this appeal that the Commissioners should be able to explore the reason for the dramatic change in the Appellant’s case.  All the “new facts” lend weight to the Appellant’s case and harm the Commissioners’ case, and the Commissioners cannot be expected to accept them at face value.  The Tribunal should be informed as to why the facts have changed, and could not do justice without hearing Mr Chance.  In the first place, Mr Harris contended, paragraph 6.2 of the Notice does not apply, and if it did this is a case in which confidentiality should be over-ridden by the legal requirements.

19.	Mr Harris contended that the expression “legal requirements” in paragraph 6.2 of the Notice was not confined to the matters set out in paragraph 4.1.  There was nothing in the Notice to suggest this.  A witness summons is a legal requirement, and paragraph 6.2 was apt to cover that and the need for Mr Chance to give evidence.  There was no evidence as to whether “contemplation of proceedings” was in the minds of the Commissioners and the parties whom they consulted in connexion with the Notice.

Discrimination: Articles 6 and 14

20.	The Appellant had made no reference to any part of Article 6 except the first sentence.  Nor had any submission been made as to how the calling of Mr Chance would deny the Appellant a fair and public hearing.  On the contrary, Mr Harris contended, it would be unfair to the Commissioners if Mr Chance were not to be called.  Nor, he said, was any submission made as to the person against whom there would be discrimination as compared with whom else.  There cannot be discrimination of a person except in relation to different treatment of some other person.  Merely to say that such circumstances as in the present case had not occurred before, even if that were shewn to be the fact, was not enough.

21.	Mr Harris submitted that the principle to be applied was not whether Mr Chance should be called as a witness, but who are the relevant witnesses.  The question should be asked, Is a particular witness relevant?  If the answer is in the affirmative, the next question should be, Is there any reason why he should not be called to give evidence?  It was the Commissioners’ contention that Mr Chance’s evidence would be relevant and that there was no reason why he should not be called.  Referring to Chassagnou, Mr Harris said that in this case, if there was any discrimination, there was an objective and reasonable justification; the proposed step had a legitimate aim, namely the doing of justice between the parties to this appeal.  There was also a reasonable relationship of proportionality between the means employed, the calling of Mr Chance, and the aim sought to be realised.

Prejudice caused by delay in serving witness statement

22.	This was a case in which the Commissioners could not obtain a witness statement from the proposed witness, since he was the Appellant’s accountant, and they had to rely upon a summons.  There is therefore no witness statement to serve.  Furthermore, Mr Chance is the Appellant’s accountant, and the Appellant knows what passed between them.  The Commissioners, on the other hand have no idea what Mr Chance is going to say, since they have no witness statement.  In any event, the nature of the questions which the Commissioners wish to ask was made clear at the hearing on 27 September;  the Appellant is therefore not taken by surprise, and will suffer no prejudice.  The interests of justice demand that Mr Chance answer questions; if there is any prejudice that consideration outweighs it.

23.	Mr Harris explained that the delay in applying for the witness summons was the need to take instructions from Miss Kerwin, an officer of Customs, who had been ill, and from head office.  However, there had been some delay not thus accounted for, for which he apologised.

Conclusions

Notice 700/47/93

24.	It appears from the wording of this Notice that the element of agreement between the bodies mentioned in paragraph 1 and the Commissioners was as to a statement of policy formulated by the Commissioners and to be pursued by the Commissioners, in doing which they felt it proper to consult with the three named bodies and to have a measure of agreement with them as to the proposed policy.  There is nothing in the Notice which suggests that it is an agreement, in the sense of a binding legal agreement, and in particular there is nothing in the Notice which amounts to an agreement by the Commissioners that they will treat information held by accountants as they would that held by solicitors (see Mr Pratt’s fax of 16 January 2002).  There is therefore, in my judgment,  no agreement of which the Commissioners can be in breach.  It is also the case that the Notice expressly deals with confidentiality of opinions and advice.  What is in point in the present case is factual information.

25.	In any event, the wording of paragraphs 4.1 and 6.2 of the Notice do not, in my judgment, bear the meaning, between them, contended for by Mr Pratt.  Paragraph 4.1 simply sets out those documents and other items which a trader is obliged to furnish to the Commissioners  so as to inform the Commissioners of that trader’s tax position.  It would not make sense to provide in a later paragraph that confidentiality may be over-ridden only by the legal requirement to perform a statutory duty which is already obligatory.  The wording of paragraph 6.2, referring simply to “legal requirements” without qualification, and in particular without reference to paragraph 4.1, is, in my judgment, sufficiently wide to extend to any legal requirement.  

26.	Although the Notice contemplates the duty of confidentiality which a tax adviser has to his client, the circumstances in this appeal are such that it appears to me to be reasonable that that duty should be over-ridden by the requirement to place before the Tribunal the unusual evidential situation that has come about.  If it be the case that Mr Chance was given certain information, as being the true facts of the matter, which he, acting properly on behalf of his client, passed on to the Commissioners, and if the Appellant is now putting forward a case which departs significantly from those facts or even contradicts them, it appears to me that it is in the interests of justice that the facts surrounding that departure from their original case should be examined.  It may reveal matters which go to the credibility of the Appellant’s case, one way or the other.

Articles 6 and 14 of the Convention on Human Rights

27.	Article 14 provides:

“The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.”

The first sentence of Article 6 provides:

“In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law....”

It is not suggested that the Appellant is being denied a fair and public trial of its appeal in some way or on some ground which would not apply to another appellant to that other’s advantage as opposed to that of this Appellant.  The only contention which might amount to discrimination is that an accountant is treated differently from a Solicitor.  This is a matter of well established law: professional privilege covers the relationship between a solicitor and his client, and does not cover that between an accountant and his client.  In respect of legal matters, as in the present case, it is open for an appellant to instruct either an accountant or a solicitor.  

28.	It is also suggested by the Appellant that discrimination arises because no accountant has ever before been compelled to give evidence in breach of confidentiality, and that therefore Mr Chance is the subject of discrimination, and through him his client the Appellant.  I agree with Mr Harris that it is not enough to establish discrimination to shew that it has never happened before. In any event, it is by no means certain that it is the first time that it has happened.

29.	In my judgment, no difference in treatment of the Appellant, as opposed to the treatment of some other appellant, has been established.  If the matters to which Mr Pratt alludes were to amount to a difference or inequality in treatment, then, following paragraph 91 of the judgment in Chassagnou, it seems to me that there is a reasonable and objective justification for it in the sense explained in that paragraph.  But following paragraph 89 of that judgment also, no breach of Article 6 has been established in this case.  The proposal is to call as a witness, albeit against his will and that of the Appellant, an accountant, so as to ask him about factual matters already known to the Appellant which are of evidential value in the determination of the appeal.  Article 14 has no independent existence if no other Article is engaged.

Delay in serving witness statement

30.	There was undoubtedly a delay of some weeks between the granting of the adjournment and the application for the witness summons.  This was partly explained by the Commissions by the need to take instructions, including gathering information from an officer who was off duty by reason of illness.  However, part of the delay was not explained.  In fact no witness statement of Mr Chance exists.  This is scarcely surprising since he is an unwilling witness.  However, the fact remains that there is no statement to be served.  But in all the circumstances it seems to me that no prejudice will be suffered by the Appellant.  First, the intention to question Mr Chance was made known on 27 September, together with a brief mention of the scope of the proposed questions.  It is therefore the case that the Appellant is not taken by surprise.  Secondly, the Appellant knows, or has had the means of discovering, all that Mr Chance knows about the case, including the factual statements that he gave to the Commissioners.  Thirdly, in his fax of 15 January, Mr Pratt stated that it was denied that there is any change in the way in which the Appellant’s case is put.  If that is so, the Appellant should have no apprehension over the calling of Mr Chance.  In my view, no prejudice to the Appellant will arise out of the delay in serving, or failure to serve, a witness statement of Mr Chance.

31.	For the above reasons I direct that this application be dismissed.

32.	The Commissioners made it known that it is their intention to apply for the cost of this application, on the ground that it was bound to fail and that in their fax of 15 January 2002 they invited the Appellant to withdraw it.  Both parties took the view that it would be reasonable for the costs of today to be reserved to the outcome of the appeal, as were the costs of 27 September 2001.  Accordingly I direct that the costs of this application be reserved.

ANGUS NICOL
Chairman
Release Date: 15 June 2003

LON/99/1333-HOM.NIC