20347
LONDON TRIBUNAL CENTRE				Reference No: 

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								Appellant/Applicant

								Respondents

	A TRADING COMPANY	Appellant
	
	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMS 	Respondents

	Tribunal: DR DAVID WILLIAMS (Chairman)

	Sitting in private in London on 17 July 2007 

	DIRECTION

UPON CONSIDERING the application of the Respondents of 11 06 2007 for directions 

AND UPON CONSIDERING the application of the Appellant for further disclosure of documents by the Respondents (“the Commissioners”)

AND UPON HEARING Miss Hutchings and Mr Webb of counsel for the Appellant and Mr Singh of counsel for the Commissioners
					 	
THE TRIBUNAL DIRECTS THAT:

1	(a)	For the avoidance of doubt, the proper processes not having been completed, this  appeal is not currently listed for a full hearing on any date in October 2007. 
	
	(b)	The parties provide the tribunal with a time estimate for the hearing and dates to avoid for the period of six months form that date not later than 14 days after the date on which they agree the witnesses to be called at the hearing or, in the absence of agreement, after the date on which the parties have supplied the statements directed in paragraph 3(a). 

2	Both parties having already provided lists of documents, the Commissioners supply copies of the documents requested by the Appellant (and not already supplied to it) within 14 days of the release of these directions, and the Appellant supply copies of any documents requested by the Commissioners (and not already supplied to them) by that date.

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3	The parties supply the names and identities of witnesses together with a witness statement in proper form for each witness and all exhibits to each statement by exchange on 28 September 2007. 

4	The Commissioners provide either within those witness statements and exhibits, or by an amended or further list of documents such list of documents to be produced at or before that date, and any documents in the list requested by the Appellant to be produced within 7 days of the request:

(a)	Details (including registered addresses, VAT registration commencement and cancellation and other details held) of all companies contended by the Commissioners to form part of the chains of transactions in which the Commissioners contend that there is a loss of value added tax in the United Kingdom (“VAT”) with which it is contended that the Appellant is or is probably linked through Company T (“the linked transactions”) 

(b)	Summaries of the sequences of transactions in the chains of transactions in which the Appellant is involved and the linked transactions together with schedules of the relevant details of goods, prices, timings and sums of VAT involved and identifying in each case the defaulting trader or traders, the reason for default, and the VAT remaining outstanding

(c)	 Copies of invoices and other documents held in respect of the individual transactions contended to be part of the linked chains

(d)(i) With regard to the individual parties to the specific transactions in the linked chains who are or have been registered for VAT, any action taken by the Commissioners to end that registration and whether there are or have been any criminal prosecutions or civil proceedings against those parties or their officers or 	assessments subject to appeal, in each case limited to details of criminal or civil proceedings that are on the public record 

(ii) The Commissioners may respond with regard to this direction if they consider it appropriate by any claim for public interest privilege or other similar grounds for withholding information and the Appellant may make application to the tribunal concerning any such response

(e)	Details of dealings between the Commissioners and Company T, in so far as they are relevant to this appeal, concerning transactions in chains of which the Appellant is also part or as part of the linked transactions and with particular reference to transactions involving Samsung Serene items  

(f)	Details (in so far as not already disclosed) of guidance, information or assistance that the Commissioners contend were given to the Appellant relevant to its activities as a registered trader either generally or with specific regard to the transactions involving the Appellant or in the linked chains leading up to or during the periods relevant to this appeal.

5	(a)	The parties be at liberty to serve a supplemental witness statement for any witness identified under paragraph 3 by exchange not later than 19 October 2007. 

(b)	Any documents requested by one party from the other from any supplemental list of documents be provided by this date. 

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6	The following timetable applies for the full hearing.	

(a)	The Appellant serve on the Commissioners a draft index to the common bundle of documents not later than 42 days before the first day of the hearing
 
(b)	 The Commissioners serve on the tribunal and the Appellant an indexed and paginated common bundle of documents not later than 21 days before the first day of the hearing

(c)	The Appellant serve on the tribunal, with a copy to the Commissioners, a skeleton argument not later than 14 days before the first day of the hearing

(d)	The Commissioners serve on the tribunal, with a copy to the Appellant, a skeleton argument not later than seven days before the first day of the hearing

(e)	The parties serve on the tribunal an agreed bundle of authorities not later than three days before the hearing

(f)	If the parties wish the tribunal to undertake preliminary reading on the first day of the hearing (for example for the morning of the first day) before the parties and their representatives attend, counsel may jointly indicate the suggested reading and not later than three days before the first day of the hearing ask the tribunal to undertake that reading 

(g)	Each party serve any presentational material to be used at the hearing (for example flow charts of transactions) on the tribunal and the other party not later than three days before the first day of the hearing

(h)	The parties cross-index their witness statements to the common bundle shall provide the tribunal with this by the beginning of the first day of hearing 
 
7	A reference to compliance by a date or day as a time limit in these directions is a reference to compliance by 4 pm on that day

8	Save as above, the application by the Appellant for disclosure by the Commissioners be dismissed

9	So that the tribunal may consider any further appropriate directions:

(a)	If either party make any reference for review or otherwise to the High Court (or any other Court of relevant jurisdiction) in respect of any decision subject to this appeal or any related matter between the parties then that party inform the tribunal forthwith of the application, of the date or dates on which the application is to be heard by the High Court, and of the outcome of the application, and provide the tribunal with the full decision of the High Court as soon as it is available to that party; and

(b)	If the Appellant appeal any other decision of the Commissioners with regard to VAT in related or similar circumstances to this appeal, then the parties inform the tribunal, when the appeal is registered, that that appeal or those appeals are related or similar to this appeal

10	The costs in the applications for disclosure and directions be costs in the cause

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11	The tribunal being minded to publish these directions because of general issues raised in them, the parties indicate within 14 days of the release of the directions whether they have any objection to publication and whether they request any amendments or corrections to the directions before publication.

12	Liberty to apply

REASONS

1	These full reasons are given by the tribunal without, and in place of, a formal request by either of the parties for reasons for these directions. They are given because, as the tribunal notes below, it was only offered partial argument by the parties about the authorities submitted to be relevant to these directions. Relevant authorities were also issued shortly after the hearing but before the tribunal was in a position to reach a full decision on the applications made. The tribunal therefore takes the view that it should set out in full its considerations for the directions given.  

Listing of the case for hearing
2	Counsel for the Appellant represented to the tribunal at the hearing that the Appellant had obtained a date or dates for hearing this appeal before the full tribunal in October 2007. Counsel for the Commissioners objected that he had had no notice of this, nor had those instructing him. He had not even as of the start of that hearing received the Appellant’s list of documents. (The tribunal noted that is was served the previous day). He therefore applied for the hearing to be vacated. The tribunal observed that there was no date or indication of a date on the official files before the tribunal either by way of copies of communications to the parties or by way of judicial or administrative file note. It therefore took the view for the purposes of the hearing that there was no hearing to vacate, but indicated that it would cause this to be checked. 

3	Immediately after the hearing, the chairman checked the official listings of tribunal hearings with the relevant officers. There was no indication in the official listings that any date had been set for the hearing of these appeals, nor were the officers aware of any date awaiting entry. There was clearly no official basis for the instructions given to counsel for the Appellant. Accordingly, the tribunal does not consider that the contended date for listing in October is relevant to these directions. Directions to assist listing this case in the usual way are given in these directions.

4	More generally, the tribunal observes that it is in its view entirely improper for one party to seek a date or dates through administrative means for hearing an appeal ahead of full case management directions being agreed with the tribunal (or if not agreed then when issued by the tribunal after a hearing) and without raising the matter with the other party.  This is particularly so when that party also makes specific directions about matters such as disclosure that are directly relevant to the fair conduct of the hearing. Whether a case is to be listed is, at least in cases of dispute, a matter for judicial decision and cannot in any circumstance be a matter for one of the parties alone where the hearing involves both parties and, as here, witnesses for both parties. The standard practice is for the tribunal to invite dates to avoid once witnesses have been identified and the case is ready for hearing. There is no reason why this case should be conducted in any other way. 

Relevant caselaw
5	Counsel for the Appellant relied extensively at the hearing on the decision of Burton J in R(Just Fabulous (UK) Ltd) v HMRC [2007] EWHC 521, [2007] All ER (D) 271, of 15 03 2007. Counsel could not produce a copy of that decision to the tribunal or the Respondents at that hearing when asked. This prevented counsel for the Commissioners, who had not been given notice of the Appellant’s intention to rely on this decision, from having an opportunity to deal with the points 
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raised. Nor was the tribunal able to consider the points in detail at the hearing. It was however agreed that, to make progress, the Appellant would produce a copy to the tribunal after the hearing and that the tribunal would consider it before issuing directions. (It was noted at the time, and the tribunal accepted, that the judgment was not then readily available from some of the usual sources.). 

6	The tribunal noted that in that decision Burton J referred to and followed the decision of Lightman J in R(UK Tradecorp Ltd)) v CEC, [2005] STC 138, and also endorsed the decision of Charles J in Megantic Services Ltd v HMRC [2006] EWHC 3232 (Admin). The tribunal therefore had regard to those decisions also. It also had regard to the decision of Lightman J issued on 20 07 2007 in Mobile Export 365 Ltd v HMRC, Shelford IT Ltd v HMRC [2007] EWHC 1737 (CH) as that decision, issued very shortly after the hearing in this case, set out general guidance to the tribunal when making directions about evidence, including issues before the tribunal in this appeal. The tribunal also had full regard to the comments of the tribunal about disclosure in its decision in Calltell Telecom Ltd and Opto Telelinks (Europe) Ltd v HMRC also issued on 20 07 2007 and therefore without the benefit of Lightman J’s observations.

Contra trading
7	This case is one where the Commissioners allege that the transactions involving the Appellant were linked through the route of contra-trading to fraudulent transactions. At the hearing the Appellant noted that the case might be looked at as one of invalid invoicing rather than MTIC fraud. Mr Singh endorsed the statement of case assertions that the contention was that this was a case involving MTIC fraud elsewhere in chains of transactions linked to the Appellant through the process referred to as contra trading. The tribunal takes the view that this is the nature of the decision under appeal and that this is stated adequately in the current statement of case read with the responses to the Appellant’s request for further and better particulars. The tribunal accepts from the above authorities that the Commissioners are entitled to state a case in this appeal on that basis. Clearly, however, as Burton J notes, this may raise further evidential issues to be considered at a later stage in this or other appeals. These do not require further disclosure at this stage. 

Timetabling directions
8	The process of obtaining and considering the authorities after the hearing, together with the tribunal’s decision to give full reasons for its directions in the light of that process, resulted in some parts of the timetable partially agreed at the hearing being overtaken. As this is a case still to be listed, nothing immediately turns on this. The tribunal has set revised dates in these directions. The parties are invited, by agreement if reasonably possible or otherwise by individual application, to suggest other dates to those in these directions if there is good reason to do so. The parties are therefore at liberty to make any appropriate application about any date.  

Directions for disclosure
9	This is one of a number of recent appeals by taxable persons refused input tax by the Commissioners because they are said to be involved in chains of transactions also said to involve MTIC fraud by third parties (including acquisition frauds, carousel frauds and contra-trading frauds) and in which appellants have made applications for wide-ranging disclosure from the Commissioners. It is important for the tribunal to have in mind in such cases the powers under which it operates and the guidance given by the courts about the use both of those powers and the powers possessed by the Commissioners. 

10	  The applications must be considered by reference to the ordinary operation of the VAT Tribunal Rules.  In the absence of specific direction, these require that:

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(a)	the Commissioners state a case setting out the matters and facts on which they rely to support the disputed decision (rule 8):

(b)	both parties send the tribunal a list of documents in their possession, custody or power which they intend to produce at the hearing (rule 20(1)); and

(c)	both parties serve witness statements containing evidence proposed to be given by the witness at the hearing (rule 21).

Where, as here, a party seeks disclosure from the other party that either anticipates the disclosures to be made in the ordinary course of preparation of a case, or that goes significantly beyond what might ordinarily be expected, the tribunal must consider the application in accordance with the general principles that apply to its proceedings.

11	The starting point must be that the tribunal should treat appellants in the same way as it treats the Commissioners with regard to any application save in so far as there are grounds to decide otherwise. That is an inherent part of the duty to be fair both at common law and under the principles of European law. Both the common law and the fundamental European approach of “equality of arms” apply to both parties. But, as the tribunal in Calltell commented, there are significant areas of evidence in cases such as this that are accessible only to the Commissioners in the use of their powers, and where appellants can fairly expect the Commissioners to undertake extensive disclosure of relevant documents in their possession custody or control or evidence not otherwise available to those appellants.    

12	The tribunal accepts and follows the guidance of Lightman J in Tradecorp (above) as to the duty of the Respondents to investigate and act proportionately. It respectfully has paragraphs 18 to 27 of that judgment in mind both with regard to the relationship between the Appellant and Commissioners in this appeal and with regard to the powers, and operation of those powers, by the Commissioners with regard to third parties. It follows that the tribunal should ensure that its directions fully reflect the principle of proportionality in ensuring full but not excessive disclosure. 

13	The tribunal takes into account from the decision of Burton J in Just Fabulous, on which the Appellant relied, the need to consider the principle of certainty but also that it is in his view “trumped by” the objective of preventing tax evasion, avoidance and abuse, and in particular the principle identified by him from the European jurisprudence that:

	“traders who take every precaution which could reasonably be required of them to 	ensure that their transactions do not form part of a chain which includes a transaction 	vitiated by VAT fraud must be able to rely on the legality of those transactions.” 

14	The tribunal also considers that directions for disclosure should also reflect the way in which the burden of proof falls in the appeal. The decisions of the European Court of Justice and those of the tribunal itself were the subject of comment by Burton J in Just Fabulous. They establish the principle that it is for the Commissioners to show that there is fraud in the chains in which the Appellant was involved or alleged to be involved, and it is for the Appellant to show that, on the balance of probabilities, it neither knew nor should have known that it was involved in transactions associated with the fraud shown by the Commissioners. There is therefore a duty on the Commissioners to produce full details of the alleged chains. In this appeal it has been made clear that the Appellant is not alleged directly to be involved in any fraud. Accordingly, the evidential duty on the parties remains to be tested by the ordinary civil standard. It is therefore for the Appellant to show, in the terms quoted in the previous paragraph, the steps it took to ensure that it avoided 
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transactions in which it should have known of fraud or probable fraud. The Appellant cannot look to the Commissioners to discharge that duty for it on an evidential basis. 

15	Finally, the applications must be relevant to the appeals before the tribunal and not to other disputes between the parties. In so far as they concern third parties, they again must be relevant to the case being made by the Commissioners. 

These applications
16	In this case the Appellant made an extensive application for details that were submitted by the Commissioners to go beyond what is relevant to this appeal and also what is necessary for it. The tribunal notes that, at the same time, the Commissioners accepted some aspects of the application. These directions reflect the agreed disclosures but also go beyond them.

17	In so far as the Commissioners contest the relevance or necessity of elements of the application by the Appellant the tribunal considered each element of the application in the light of the above rules and principles. It also considered whether disclosure should be in advance of the usual procedures or whether it is sufficient that the details be served at the time of service of skeleton arguments or at the hearing itself. 

18	With regard to the application for disclosure about the specific issue of the “Samsung Serene”, the tribunal agrees with the Commissioners that this is a matter to be dealt with in witness statements.  

19	The tribunal accepts that where the information is presentational, rather than new evidence, then it is adequate that it be provided at the time bundles are agreed. This applies for example to diagrammatic portrayals of transaction chains or schedules.

20	The tribunal rejects the application by the Appellant that the Commissioners provide “copies of all notes to include but not limited to notebooks/day books of all officers” of the Commissioners “to include the case officers for all relevant traders within both the Appellant’s and the contra trading chains.” The tribunal agrees with the Commissioners that it is not obvious that in so far as these “notes” are relevant that they are necessary to the discharge by the Commissioners of the burden of proof on them. The Commissioners rightly offered this documentation about both the Appellant and the alleged contra trader.  The tribunal sees no good reason in the application of the Appellant as presented to it that production with regard to any other trader can be regarded as required within the principles of certainty, proportionality and fairness in this case. 

21	The tribunal also rejects the application at this stage for “details of all other traders … who do not feature within the contra transactions but have received denial letters or assessments in respect of losses arising from the same contra transactions.” The Commissioners contended that this was neither necessary nor relevant to the appeals. The Appellant contended that there was a genuine concern that the Commissioners might be collecting the same VAT from several parties. The tribunal notes that this was considered by Burton J in Just Fabulous and that these are issues that he left to the tribunal on the basis that they might not arise and were not bound to arise in that case. Nonetheless, the tribunal is not clear how that is relevant to the question before it in this appeal, namely whether the Appellant knew or ought to have known of the fraud (assuming it proved). If the tribunal finds that there is fraud in relevant transactions, and it also finds that the Appellant knew or ought to have known of this, it fails at present to see why it should not find that that is so regardless of whether some other party also should have known. Any issue of double recovery arises after that issue and is separate from it.  

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22	The tribunal records that the Appellant, rightly in its view, did not pursue the initial requests for disclosure of information about request for mutual assistance made to other EU states. 

DAVID WILLIAMS
Chairman
Release Date:	05/09/07

[Issued in anonymous form with corrections following submissions of the parties under direction 11]