England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
THE UPPER TRIBUNAL
(TAX AND CHANCERY CHAMBER)
MR JUSTICE WARREN
JUDGE BISHOPP
FTC/14/2010

		Royal Courts of Justice Strand, London, WC2A 2LL
		16/12/2011

Lord Justice Lewison:

1. On 24 January 2005 an officer of HMRC assessed Mr Hankinson to income tax and capital gains tax in respect of the tax year 1998-1999. The bill came to over £30 million. The reason why the assessment was made so long after the end of the tax year in question was that it was what is called a "discovery assessment" made under section 29 of the Taxes Management Act 1970. This appeal from the Upper Tribunal [2010] UKUT 361 (TCC) [2010] STC 2640 (Warren J, President and Judge Colin Bishopp) concerns the conditions that must be fulfilled before a discovery assessment can be made.
2. Section 29, as it stood at the relevant time, provided:

"(1) If an officer of the Board or the Board discover, as regards any person (the taxpayer) and a year of assessment—

(a) that any income which ought to have been assessed to income tax, or chargeable gains which ought to have been assessed to capital gains tax, have not been assessed, or

(b) that an assessment to tax is or has become insufficient, or

(c) that any relief which has been given is or has become excessive,

the officer or, as the case may be, the Board may, subject to subsections (2) and (3) below, make an assessment in the amount, or the further amount, which ought in his or their opinion to be charged in order to make good to the Crown the loss of tax.

(2) Where—

(a) the taxpayer has made and delivered a return under section 8 or 8A of this Act in respect of the relevant year of assessment, and

(b) the situation mentioned in subsection (1) above is attributable to an error or mistake in the return as to the basis on which his liability ought to have been computed,

the taxpayer shall not be assessed under that subsection in respect of the year of assessment there mentioned if the return was in fact made on the basis or in accordance with the practice generally prevailing at the time when it was made.

(3) Where the taxpayer has made and delivered a return under section 8 or 8A of this Act in respect of the relevant year of assessment, he shall not be assessed under subsection (1) above—

(a) in respect of the year of assessment mentioned in that subsection; and

(b) in the same capacity as that in which he made and delivered the return,

unless one of the two conditions mentioned below is fulfilled.

(4) The first condition is that the situation mentioned in subsection (1) above is attributable to fraudulent or negligent conduct on the part of the taxpayer or a person acting on his behalf.

(5) The second condition is that at the time when an officer of the Board—

(a) ceased to be entitled to give notice of his intention to enquire into the taxpayer's return under section 8 or 8A of this Act in respect of the relevant year of assessment; or

(b) informed the taxpayer that he had completed his enquiries into that return,

the officer could not have been reasonably expected, on the basis of the information made available to him before that time, to be aware of the situation mentioned in subsection (1) above.

(6) For the purposes of subsection (5) above, information is made available to an officer of the Board if—

(a) it is contained in the taxpayer's return under section 8 or 8A of this Act in respect of the relevant year of assessment (the return), or in any accounts, statements or documents accompanying the return;

(b) it is contained in any claim made as regards the relevant year of assessment by the taxpayer acting in the same capacity as that in which he made the return, or in any accounts, statements or documents accompanying any such claim;

(c) it is contained in any documents, accounts or particulars which, for the purposes of any enquiries into the return or any such claim by an officer of the Board, are produced or furnished by the taxpayer to the officer, whether in pursuance of a notice under section 19A of this Act or otherwise; or

(d) it is information the existence of which, and the relevance of which as regards the situation mentioned in subsection (1) above—

(i) could reasonably be expected to be inferred by an officer of the Board from information falling within paragraphs (a) to (c) above; or

(ii) are notified in writing by the taxpayer to an officer of the Board.

…

(8) An objection to the making of an assessment under this section on the ground that neither of the two conditions mentioned above is fulfilled shall not be made otherwise than on an appeal against the assessment. …"

3. Although "discovery assessments" have a long history it is common ground that the circumstances in which they may be made were tightened on the introduction of self-assessment. The mechanics of the self assessment scheme are contained in the Taxes Management Act 1970, as amended. A taxpayer must make and normally deliver a tax return by 31 January of the year following the year of assessment ("the filing date"). His return should disclose all the relevant information and correctly assess, on the basis of it, the tax due. It must also include a self-assessment of the tax due. HMRC may then enquire into the return by issuing a formal notice within twelve months after the filing date. The power to open an enquiry is unfettered. If HMRC give notice of enquiry there are wide powers enabling HMRC to require the taxpayer to produce documents and particulars. At the end of any such enquiry HMRC may amend the return and issue a closure notice. If HMRC make no enquiry and the taxpayer has not amended his return, the self-assessment return becomes final on the expiry of that twelve month enquiry period, subject only to the possibility of making a discovery assessment. That twelve month period is often referred to as the "enquiry window".
4. Section 20 of the Taxes Management Act 1970 (and now Schedule 36 to the Finance Act 2008) also gives powers to call for information. These powers may be exercised after the enquiry window has closed. Notice under section 20 (1) and 20 (3) may be given by an inspector authorised by HMRC, but it can only be given with the consent of the tribunal. If the inspector gives notice in exercise of these powers he must give the taxpayer a written summary of his reasons for applying for consent: section 20 (8E). The giving of a notice under section 20 is a precursor to the making of a discovery assessment; and it can only be done where there is a sensible or practical possibility of a discovery assessment being made under section 29: R (oao Johnston) v Branigan [2006] EWHC 885 (Admin) §§ 14, 15; R (oao Pattullo) v HMRC [2009] CSOH 137 [2010] STC 107 § 91.
5. Moses LJ explained the changes to section 29 consequent upon the introduction of self-assessment in Tower MCashback LLP 1 v HMRC [2010] EWCA Civ 32 [2010] STC 809 (§§ 12 – 18). He pointed out (§ 24):

"As I have already observed, apart from a closure notice, and the power to correct obvious errors or omissions, the only other method by which the Revenue can impose additional tax liabilities or recover excessive reliefs is under the new s 29. That confers a far more restricted power than that contained in the previous s 29. The power to make an assessment if an inspector discovers that tax which ought to have been assessed has not been assessed or an assessment to tax is insufficient or relief is excessive is now subject to the limitations contained in s 29(2) and (3) (s 29(1)). Section 29(2) prevents the Revenue making an assessment to remedy an error or mistake if the taxpayer has submitted a return in accordance with s 8 or s 8A and the error or mistake is in accordance with the practice generally prevailing when that return was made. Section 29(3) prevents the Revenue making a discovery assessment under s 29(1) unless at least one of two conditions is satisfied (s 29(3)). The prohibition applies unless the undercharge or excessive relief is attributable to fraudulent or negligent conduct (s 29(4)) or having regard to the information made available to him the inspector could not have been reasonably expected to be aware that the taxpayer was being undercharged or given excessive relief (s 29(5)). There are statutory limitations as to the time at which the sufficiency or otherwise of the information must be judged. These provisions underline the finality of the self-assessment, a finality which is underlined by strict statutory control of the circumstances in which the Revenue may impose additional tax liabilities by way of amendment to the taxpayer's return and assessment."

6. This summary of the provisions is both accurate and entirely uncontroversial; but understandably it does not address the point raised by this appeal. It is useful background, but no more.
7. In the present case the assessment was raised on the ground that HMRC had discovered that, as regards the tax year 1998-1999, Mr Hankinson had been resident and ordinarily resident within the UK. On Mr Hankinson's appeal to the First Tier Tax Tribunal (Judge Avery Jones CBE and Judge Clark) the FTT decided that Mr Hankinson was indeed resident and ordinarily resident in the UK for that year of assessment. They also decided that Mr Hankinson's residence and ordinary residence had been "discovered" by HMRC; and that the undercharge to tax for that year of assessment was attributable to negligent conduct by Mr Hankinson. For good measure they also decided that when the enquiry window closed an officer of the Board could not have been reasonably expected, on the basis of the information made available to him before that time, to be aware of the undercharge to tax for that year of assessment. There is no appeal against any of these findings of fact.
8. The issue on the appeal is this. In order to invoke the power under section 29:

i) Is it sufficient that an officer of the Board discovers that there has been an insufficiency for the year of assessment in question; or

ii) Must he also consider whether either or both of the conditions in section 29 (4) and (5) is or are fulfilled?

9. Both the FTT and the Upper Tribunal held that the making of a discovery was sufficient; and that whether either or both the conditions are fulfilled is a question of objective fact to be decided in case of dispute by way of appeal. The essence of the contrary argument, advanced by Mr Mathew QC for Mr Hankinson, is that the conditions laid down in section 29 (4) and (5) are pre-conditions to the raising of an assessment. These pre-conditions are safeguards for the taxpayer introduced to counter-balance the introduction of (i) the extraordinary power of random enquiry (for 12 months after a tax return has been submitted) given to HMRC, and (ii) the extensive obligations of disclosure imposed on the taxpayer, inherent in the self assessment regime effective from 1996/97.
10. Mr Mathew began by describing the nature of an assessment. In Whitney v IRC [1926] AC 37, 52 Lord Dunedin said:

"Now, there are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex hypothesi, has already been fixed. But assessment particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay."

11. This was repeated by Lord Nolan in Golden Bay Cement Co Ltd v Commissioner of Inland Revenue [1998] STC 1172, 1176 in which he said that the Privy Council could not accept a particular submission because:

"It proceeds upon the assumption that it is the assessment which imposes the liability to tax, whereas in truth that liability can only be imposed by the application of the charging and relieving provisions of the Act."

12. In the present case the liability was created by the combination of the taxing statute and the fact that Mr Hankinson was resident and ordinarily resident in the UK during the year of assessment. His liability to pay tax did not depend on fulfilment of the pre-conditions in section 29, for the simple reason that the statutes do not say so. Accordingly, whether the pre-conditions are or are not satisfied is irrelevant to Mr Hankinson's actual liability to pay tax. The discovery assessment was simply the administrative particularisation of the amount that Mr Hankinson was required to pay. Thus, the argument runs, the fetters imposed upon the making of an assessment are procedural fetters which preclude HMRC from issuing the piece of paper quantifying liability. The next step in the argument is that, in order to comply with the pre-conditions, the HMRC officer who discovers an undercharge must himself consider whether either or both of the pre-conditions is or are satisfied. If he gives no consideration to that question, then the pre-conditions are unsatisfied with the result that the purported assessment cannot lawfully be issued. Equally if, after consideration, he considers that neither pre-condition is satisfied he cannot lawfully issue an assessment.
13. Ms Simler QC, appearing with Mr Nawbatt for HMRC, says that this argument is wrong. They say that section 29 does not require the officer making the assessment to have discovered both that there is a loss of tax and that one or both of the pre-conditions is satisfied.  In practice the officer is likely to consider these conditions, but there is no legal requirement to do so. The real safeguard for the taxpayer lies in the fact that in considering the validity of the assessment the Tribunal is concerned not with whether the officer considered that the conditions were fulfilled but whether the conditions are in fact fulfilled; and that the burden of showing that one or both conditions are fulfilled rests on HMRC.
14. Although Mr Mathew is technically correct in saying that tax is imposed by statutory charging provisions rather than by assessment, the Taxes Acts do not always use these expressions with perfect technical accuracy. As Nolan LJ pointed out in Walters v Tickner [1993] STC 624, 625-6 words, even in a taxing statute, are sometimes loosely used; and the words "charge" and "assessment" do not always bear the same meanings. I do not, therefore, think that the first step in Mr Mathew's argument is as solid as he would wish it to be.
15. Nor, in my judgment, is Mr Mathew's argument borne out by the words of the section itself. I begin with section 29 (1). This sub-section comes into operation if an officer of the Board "discovers" an undercharge. The word "discovers" in this context has a long history. Although the conditions under which a discovery assessment can be made have been tightened in recent years following the introduction of the self-assessment regime, the meaning of the word "discovers" in this context has not changed. In R v Commissioners for the General Purposes of the Income Tax for Kensington [1913] 3 KB 870 Bray J said that it meant "comes to the conclusion from the examination he makes and from any information he may choose to receive"; and Lush J said that it was equivalent to "finds" or "satisfies himself". In Cenlon Finance Co Ltd v Ellwood [1962] AC 782 the House of Lords considered the meaning of the word "discovers". They rejected the argument that a discovery entailed the ascertainment of a new fact. Viscount Simonds said:

"I can see no reason for saying that a discovery of undercharge can only arise where a new fact has been discovered. The words are apt to include any case in which for any reason it newly appears that the taxpayer has been undercharged and the context supports rather than detracts from this interpretation."

16. Lord Denning said:

"Mr. Shelbourne said that "discovery" means finding out something new about the facts. It does not mean a change of mind about the law. He said that everyone is presumed to know the law, even an inspector of taxes. I am afraid I cannot agree with Mr. Shelbourne about this. It is a mistake to say that everyone is presumed to know the law. The true proposition is that no one is to be excused from doing his duty by pleading that he did not know the law. Every lawyer who, in his researches in the books, finds out that he was mistaken about the law, makes a discovery. So also does an inspector of taxes."

17. In R (oao Pattullo) v HMRC Lord Bannantyne said of this part of what he called a two-stage process (§104):

"… the first preliminary part of the test is no more than an assertion by the officer of a newly discovered insufficiency."

18. That section 29 (1) is dealing with the subjective views of the officer concerned is borne out by the consequence of the making of a discovery viz. that he may make an assessment of the amount "which ought in his … opinion" to be charged to make good the loss of tax. It is true that this power is said to be subject to sub-sections (2) and (3). However, those sub-sections do not refer to the officer's opinion at all.
19. Sub-section (2) refers to the making of an error in a return which was in fact made in accordance with generally prevailing practice. The burden of proving the existence of the error and a generally prevailing practice rests on the taxpayer. In HMRC v Household Agents Ltd [2007] EWHC 1684 (Ch) [2008] STC 2045 Henderson J said of equivalent provisions relating to corporate taxpayers (§ 45):

"… it seems clear to me as a matter of general principle that the burden of proof must rest on the party who asserts that there has been an operative mistake in the return, and that the return was in fact made in accordance with the generally prevailing practice. That party will inevitably be the taxpayer, not HMRC. In other words, the burden lies on the taxpayer to establish that para 45 applies, not on HMRC to establish that it does not apply."

20. If the burden of proof lies on the taxpayer, it makes no sense for HMRC to have to investigate the question before issuing the assessment, as the logic of Mr Mathew's argument necessarily entails.
21. In addition by contrast with sub-section (1), which refers to the officer's opinion, the satisfaction of the conditions in sub-sections (4) and (5) is to be judged as a question of fact. This emerges most clearly from the decision of this court in Langham v Veltema [2004] EWCA Civ [2004] STC 544 in relation to the second of the two conditions. Auld LJ said (§ 33):

"More particularly, it is plain from the wording of the statutory test in s 29(5) that it is concerned, not with what an Inspector could reasonably have been expected to do, but with what he could have been reasonably expected to be aware of. It speaks of an Inspector's objective awareness, from the information made available to him by the taxpayer, of "the situation" mentioned in s 29(1), namely an actual insufficiency in the assessment, not an objective awareness that he should do something to check whether there is such an insufficiency …"

22. Likewise in HMRC v Household Agents Ltd Henderson J said of the equivalent provisions (§ 48):

"By contrast, it seems to me that the burden of establishing that paras 43 or 44 apply must rest on HMRC, because in the absence of any evidence of fraud or negligent conduct (para 43), or of material to satisfy the test of objective non-awareness (para 44), there would be no basis for a conclusion that either of those paragraphs applied, and nothing to displace the general rule that discovery assessments may not be made. I would add, however, that in relation to para 44 the question is unlikely to be of much practical significance, because the nature of the enquiry is an objective one and the return and accompanying documents which have been submitted to HMRC should always be available."

23. Henderson J's discussion of the burden of proof and the party upon whom it lay is predicated on the basis that the question whether either or both of the conditions are satisfied is to be decided ex post facto by an impartial tribunal; and not on the say-so of HMRC before making the assessment. If section 29 required the officer to consider whether either or both of the conditions were fulfilled and come to a conclusion on the matter, one would have expected the section to have said so. One might also have expected that the officer would have been required at least to state which condition he considered to have been satisfied, even if he might not be required to give full reasons for his conclusion. But section 29 imposes no such requirement. This is in marked contrast to the power to call for information under section 20. It is also notable that in Langham v Veltema Auld LJ said (§ 32):

"If, as here, the taxpayer has made an inaccurate self-assessment, but without any fraud or negligence on his part, it seems to me that it would frustrate the scheme's aims of simplicity and early finality of assessment to tax, to interpret s 29(5) so as to introduce an obligation on tax inspectors to conduct an intermediate and possibly time consuming scrutiny, whether or not in the form of an enquiry under s 9A, of self-assessment returns when they do not disclose insufficiency, but only circumstances further investigation of which might or might not show it." (Emphasis in original)

24. What goes for section 29 (5) must go for section 29 (4) too. HMRC cannot have an obligation to investigate whether the taxpayer has been guilty of negligence or fraud before issuing the assessment, especially where section 29 does not, on its face, impose such an obligation. But in practical terms it seems to me that if Mr Mathew's construction is right it would have the effect of imposing such an obligation on HMRC, because the material necessary to form a concluded view on that question would almost always be in the taxpayer's possession and would not have accompanied his self-assessment return.
25. Mr Mathew also said that if the officer considered the conditions and came to the view that one of them had been fulfilled, then on any subsequent appeal by the taxpayer HMRC would be entitled, on proper notice, to rely on fulfilment of the other condition either as well as or instead of the condition which the assessing officer had considered had been fulfilled. This submission is in my judgment inconsistent with Mr Mathew's primary position. If HMRC can change horses mid-stream, it must follow that they can rely on non-fulfilment of one of the conditions without having given it a moment's thought before issuing the challenged assessment.
26. The provision relating to appeals contained in section 29 (8) also points against Mr Mathew's construction. That says that an objection to the making of an assessment on the ground that neither of the two conditions mentioned is fulfilled must not be made otherwise than on "an appeal against the assessment". Necessarily this presupposes that there is an assessment against which an appeal can be mounted; even if the ground of appeal is that the making of the assessment was precluded by non-fulfilment of the conditions. Mr Mathew said that one of the purposes of section 29 (8) was to prevent the taxpayer from challenging the issuing of an assessment by judicial review. That is undoubtedly right. He went on to say that another purpose was to protect the taxpayer against the possibility of substantive appeals when the real battle was over the question whether either or both conditions had been satisfied. He may well be right about that; but in an appropriate case in which that question can be decided as a discrete question, sensible case management would allow a preliminary issue to be determined. In some cases, however (and this was one) the question of satisfaction of the conditions and the underlying tax liability cannot be divorced. A further result of section 29 (8), as it seems to me, is that the taxpayer cannot apply for an order in advance preventing HMRC from making an assessment on the ground that no consideration has been given to the fulfilment of the conditions. This, too, points against Mr Mathew's construction.
27. The Upper Tribunal put the point as follows (§ 23):

"The phrase "he shall not be assessed", as it is used in s 29, means "he shall not be validly assessed". Accordingly, if one or both of the conditions is fulfilled, the assessment is valid; if neither of them is fulfilled, the assessment is invalid. The subjective opinions of the assessing officer or the Board about fulfilment of the conditions have no part to play in the operation of s 29. We consider this to be the only conclusion consistent with sub-s (8): the subject matter of an appeal is whether or not either of the conditions is fulfilled, without any form of qualification. If neither is fulfilled, the assessment should not have been made and will be invalid. And that is so whether the officer had formed the view that the conditions were fulfilled (and turns out to be wrong) or whether he has not considered them at all. The protection for the taxpayer in either case is his right of appeal under sub-s (8)."

28. I agree. I agree also with the FTT's alternative way of putting the point (§ 97):

"We think that the words "the taxpayer shall not be assessed under that sub-section" in s 29(2) and the corresponding words "he shall not be assessed under sub-section (1) above" in s 29(3) do not mean that the officer is precluded from making a discovery assessment in the first instance; the words provide a means of testing whether the safeguards set out in s 29(2) to (5) preclude the assessment from taking effect in the taxpayer's particular circumstances…"

29. In addition as the Upper Tribunal pointed out, Mr Mathew's argument would lead to conceptual confusion. They said (§ 26):

"Suppose, then, that the officer considers that one or both of the conditions is fulfilled: he is, if Mr Mathew is right, under a duty to raise an assessment. But if he, the officer, is wrong, the assessment should not have been raised. Accordingly, he appears to be under a duty to raise an assessment which sub-s (3) provides is not to be made. Similarly, the officer might conclude that there may have been negligence on the part of the taxpayer, but his conclusion is very much on-balance. Is it really the case that he must raise an assessment if he thinks the chance of success is slightly over 50% but is not permitted to do so if he thinks the chance of success is slightly under 50%? We do not think so."

30. I cannot see that it matters for the purposes of this appeal whether there is a duty to make a discovery assessment or merely a power. Even without the superimposition of a duty the conceptual confusion remains. Mr Mathew argues that the task of the FTT is to be sure, upon the taxpayer's challenge to the validity of the assessment, that the responsible HMRC officer applied the tests correctly before he made the assessment. In other words the FTT must be satisfied that there was a "discovery" made on the correct basis (i.e. not on mere suspicion or speculatively) and that fulfilment of the pre-conditions was properly considered on the basis of pertinent evidence. But that does not answer the problem. Suppose that the officer considers the pre-conditions and forms the opinion that the insufficiency is due to negligence on the part of the taxpayer. The taxpayer appeals. The FTT considers that the officer was justified in forming the opinion that he did on the materials available to him, but that on further consideration (and perhaps in the light of further material submitted by the taxpayer) they disagree with his conclusion. If the officer's opinion is the touchstone then they must uphold the assessment. In that event the result of Mr Mathew's argument is that the taxpayer has less protection than would be afforded to him if the FTT had to decide whether the pre-conditions were in fact fulfilled or not. If, however, the satisfaction of one or both conditions is to be decided by the FTT as a question of fact on all the evidence, what is the relevance of the officer's opinion to the question the FTT have to decide? In my judgment Mr Mathew's stress on the protection given to the taxpayer militates against rather than in favour of the interpretation he propounds.
31. Mr Mathew retorts that an assessment must either be valid or invalid when it is issued. It cannot have a half life dependent on a subsequent finding by the FTT. The concept of a valid assessment becoming invalid is insupportable. The effect of the Upper Tribunal's construction is to create a new kind of assessment: one which is subject to further statutory tests, if challenged, and may be voidable. Until that decision, an assessment has either been valid or invalid. That has been the statutory position since the inception of income tax in 1803. A valid assessment creates a defined liability. There is nothing in section 29 to justify the introduction of an assessment of intermediate status. However, in my judgment Mr Mathew's interpretation of section 29 does not bear out this robust submission. Consider again the case of the officer who carefully considers whether the pre-conditions have been satisfied and comes to the conclusion that at least one of them has been. Mr Mathew's argument would suggest that such an assessment is valid. But now suppose that the FTT disagrees with him, and allows the taxpayer's appeal. Surely the assessment has now become invalid; or perhaps never was valid in the first place. Mr Mathew's retort was that success for the taxpayer in front of the FTT would result in the discharge of the assessment; and that was not the same as the assessment becoming invalid. But if that submission is right it would mean that a valid assessment could be issued even if neither condition was in fact satisfied, just because a tax inspector thought they were. Yet that contradicts the words of section 29.
32. Both Mr Mathew and Ms Simler invited us to read the decision of the House of Lords in Scorer v Olin Energy Systems Ltd [1985] AC 645, although neither made oral submissions about it. In that case, following an assessment made by the tax inspector, the taxpayer appealed against the assessment and also produced a computation of profits claiming a deductible loss. The loss had arisen in part of the taxpayer's business called the "shipping division" while the profits had accrued in part of the taxpayer's business called the "airbreaker division." The taxpayer claimed to set off the loss against the profits. The appeal was compromised when the inspector said in writing that he agreed the taxpayer's computation. The question before the House was whether that agreement precluded the Revenue from raising a subsequent discovery assessment when they changed their mind about the correct tax treatment of the loss. Thus the question concerned the scope of the agreement. That in turn was in effect a question of construction. Lord Keith of Kinkel (who gave the leading speech) made two points. First he said that the material presented in the taxpayer's computation "was sufficient to bring home to the mind of an ordinarily competent inspector in his position precisely what they were claiming". Second he said (p. 658) that:

"The situation must be viewed objectively, from the point of view of whether the inspector's agreement to the relevant computation, having regard to the surrounding circumstances including all the material known to be in his possession, was such as to lead a reasonable man to the conclusion that he had decided to admit the claim which had been made."

33. This is a wholly orthodox approach to the construction of any agreement in writing. To paraphrase a well-known statement: the House was ascertaining the meaning that the documents would have conveyed to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the agreement. I cannot see that this case bears on the point we have to decide.
34. However, for the reasons I have given I consider that both the FTT and the Upper Tribunal came to the right answer for the right reasons. I would dismiss the appeal.

Sir Mark Waller:

35. I agree.

Lord Justice Mummery:

36. I also agree.