England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		25/10/2013

Mr Justice Sales :

Introduction

1. This is an application for judicial review of a decision of the Defendants ("HMRC"), acting by one of their most senior officials, the Permanent Secretary for Tax at the relevant time (David Hartnett - "Mr Hartnett"), to disclose information relating to the First Claimant ("Ingenious Media") and the Second Claimant ("Mr McKenna") in an "off the record" briefing with two journalists from The Times newspaper on 14 June 2012. The journalists, Alexi Mostrous and Fay Schlesinger, published articles in The Times on 21 June 2012 regarding tax avoidance schemes, including film investment schemes, in which they named Ingenious Media and Mr McKenna, among others, as the promoters of such schemes. In their articles, Mr Mostrous and Ms Schlesinger drew upon and quoted statements made by Mr Hartnett in the briefing regarding the Claimants. The Claimants seek declaratory relief that the disclosures made by Mr Hartnett were unlawful.

The Facts

2. The facts are shortly stated. Ingenious Media and its subsidiaries are an investment and advisory group with a specialisation in investment work in the media and entertainment industries, including promoting film investment schemes in the form of partnerships which allow participating taxpayers to take advantage of certain tax reliefs and exemptions. Mr McKenna is the founder and Chief Executive Officer of the Ingenious Media group.
3. In spring 2012 Mr Mostrous approached HMRC to ask for a background briefing on the issue of tax avoidance, which was attracting much attention in the media. Mr Mostrous was interested in finding out more about HMRC's approach to countering avoidance. Paul Franklin, a senior member of HMRC's press office, spoke to Mr Mostrous and suggested a meeting with Mr Hartnett.
4. It was agreed that Mr Hartnett would have a meeting with Mr Mostrous and Ms Schlesinger to provide them with a background briefing on tax avoidance issues and that it should be "off the record". As Mr Franklin explained in his evidence, a background briefing is intended to inform the piece which a journalist proposes to write. It helps avoid inaccuracies. The understanding between the press office and journalists is that nothing said in an "off the record" background briefing will be published. Mr Hartnett's understanding of the concept of an "off the record" briefing was the same. At the briefing itself there were a number of explicit references to it being "off the record" and at one point Mr Mostrous referred to a particular statement by Mr Hartnett and commented that it was "a shame to waste it off the record" (i.e. Mr Mostrous appeared to acknowledge that he could not publish anything said at the meeting).
5. So far as HMRC were concerned, the interview was to be with responsible journalists from a national newspaper of good repute who could be relied upon not to publish anything said by Mr Hartnett in the course of the briefing. HMRC were surprised and disappointed when on 21 June 2012 remarks made by Mr Hartnett at the "off the record" briefing were published by Mr Mostrous and Ms Schlesinger, in breach of the understanding between them.
6. In advance of the meeting with Mr Hartnett, Mr Mostrous had conversations with Mr Franklin and sent through questions on issues relating to HMRC's work in relation to tax avoidance schemes, including film investment schemes. Mr Mostrous told Mr Franklin that in the course of its research The Times had amassed a good deal of information about tax avoidance schemes which he would be prepared to make available to HMRC if the lawyers for The Times agreed. Mr Franklin briefed Mr Hartnett about this. Mr Hartnett was keen to obtain any information which might be of assistance to HMRC.
7. Mr Hartnett was also keen to provide a briefing to the journalists in order to influence their views about matters affecting HMRC and the challenges faced by HMRC and to try to influence the messages about tax avoidance schemes which the journalists would ultimately convey to the public in their articles on the subject of tax avoidance. In particular, there was at this time media speculation about the willingness of HMRC to enter into "cosy" deals with certain taxpayers, thereby being unduly generous and lenient to them in the collection of tax, which Mr Hartnett wished to counter. He also wished to impress on the journalists and, through them, the wider public HMRC's disapproving and sceptical attitude in relation to film investment schemes because of concerns that they were simply being used as devices to avoid tax rather than for genuine commercial reasons and in view of the big risk presented by them in terms of the amount of potential tax lost through use of them; and that HMRC were serious in trying to combat tax avoidance through use of such schemes. As Mr Hartnett explained in his evidence, he "hoped that as a result of this briefing, the journalists would be prompted to emphasise to the public that investors in such schemes would be asked searching questions by the tax authorities, and that this might have the effect of discouraging people from investing in them."
8. It is relevant at this point to say something about film investment schemes, tax planning, tax avoidance and tax evasion. The tax regime allows for certain reliefs for individuals in connection with investment through partnership vehicles in the production of films, which can be set against their personal liability to pay income tax. Ingenious Media and Mr McKenna, among others, promote investment schemes marketed to wealthy individuals based on utilising these tax reliefs so as to minimise the tax they pay. HMRC are sceptical whether these schemes have a sufficient genuine commercial purpose, or whether they are primarily aimed at avoiding payment of income tax which would otherwise be due.
9. Tax evasion is the term usually used to refer to plainly illegal attempts to evade payment of tax which is clearly due and payable. There is no suggestion, and was none by Mr Hartnett, that the Claimants have engaged in tax evasion in this sense in operating their film investment schemes.
10. Distinct from issues of tax evasion, the notion of tax avoidance is altogether more ambiguous. It is a grey area. The tax code contains many reliefs of various kinds in relation to a range of different taxes, and taxpayers can be expected to seek to take advantage of them in the ordinary course of managing their affairs so as to achieve tax efficiency in the sense of minimising the tax they pay. This is tax avoidance in a certain sense, but often the term "avoidance" is used in a more pejorative sense. Beyond entirely normal forms of tax efficient planning there may be ways in which a taxpayer changes his conduct in light of tax advantages available under the tax code (for instance, because of the availability of a tax relief a particular course of conduct may appear commercially viable or attractive whereas otherwise it would not be), and there are different shades of this along a spectrum from minor adjustments in ordinary commercial behaviour to engaging in transactions not for any significant commercial purpose but with the predominant objective of simply avoiding liability to tax in relation to the taxpayer's other ordinary activities. It is well known that the elaborate nature of the tax code, the diverse nature of tax reliefs it contains, the difficulty of drafting them with precision so as to cover only beneficial and acceptable forms of tax efficient planning while excluding less acceptable forms of tax avoidance thought to be contrary to the public interest, and the ingenuity of taxpayers and their advisers in seeking to minimise their tax liabilities pose a significant difficulty for tax authorities around the world. It is one reason why tax codes are frequently amended, to catch and stop forms of tax avoidance which the tax authorities and the public come to regard as unacceptable or illegitimate and unfair in some way; why certain aspects of the tax code allow for specific measures to be taken by HMRC to challenge the legitimacy of transactions which they regard as predominantly designed to avoid tax rather than for genuine commercial purposes; and why in some jurisdictions a general anti-avoidance rule is operated. There may also be transactions or schemes which are more borderline, where the tax authorities have an attitude of disapproval and scepticism as to whether they fall within the spirit of the relevant reliefs or exemptions in the tax code, without necessarily going so far as to seek to take action to prevent them having effect.
11. In relation to the film investment schemes of the kind promoted by Ingenious Media and Mr McKenna, there is a substantial difference of view between the Claimants and HMRC. The Claimants maintain that their schemes are used for genuine commercial purposes to finance the making of films, and point to examples where films have been financed, produced and distributed at a profit. HMRC, on the other hand, have for some time had an attitude of scepticism and disapproval in relation to these schemes, pointing to other examples where the financing has not resulted in the making of profitable films (while substantial tax liabilities have been avoided) and where they regard it as questionable whether it was genuinely expected that they would. The Claimants had been aware for some time before June 2012 of HMRC's attitude of scepticism and that they were investigating the validity of their schemes. Latterly, in November 2012 HMRC decided to issue closure notices in relation to film investment partnerships of wealthy taxpayers promoted by the Claimants, which (if upheld by the Tribunal) will have the effect of preventing those partnerships from operating to allow reliance on the tax reliefs claimed and hence preventing avoidance of tax by the individuals involved. The Claimants have appealed to the First-tier Tribunal against these closure notices. There has as yet been no determination of those appeals.
12. Mr Tomlinson QC, for the Claimants, emphasises that by the date of the briefing in June 2012 HMRC had not yet decided to issue closure notices in relation to the Claimants' film investment schemes; still less had the question whether those schemes were properly and genuinely commercial schemes or not been judicially determined by the Tribunal. Nonetheless, it is clear from the evidence that HMRC's view at the time of the briefing, as reflected in Mr Hartnett's statements to the journalists, was that film investment schemes of the type promoted by the Claimants did at the very least represent a form of tax avoidance outside the spirit of the law, which HMRC was keen to minimise, rather than a genuine, normal and acceptable form of tax planning.
13. The briefing by Mr Hartnett took place on 14 June 2012. Mr Mostrous, Ms Schlesinger and Mr Franklin were present. The briefing lasted about 75 minutes. In relation to the briefing, Mr Hartnett was very conscious of his obligations as an officer of HMRC regarding taxpayer confidentiality. In view of the private, "off the record" nature of the briefing he did not consider that he breached any of those obligations. He expected that nothing said in the briefing would be quoted, published or attributed, at any rate without reference back to HMRC's Press Office for agreement on a form of words. In conducting the briefing, Mr Hartnett was keen to gain the journalists' confidence and develop a rapport with them. This meant that he felt he had to open up a dialogue with them, being relatively open and frank and, as he explained in his evidence, using colloquial or even colourful language which he would not use in more public contexts.
14. Mr Franklin recorded the briefing and a transcript was available in evidence:

i) Mr Mostrous began by explaining that The Times had been doing a lot of work looking into tax avoidance, the persons involved in it, the sort of schemes being used and the sums involved. He said that they had built up a lot of evidence about different sorts of schemes and wanted to find out about HMRC's "reaction and interaction with those schemes". The discussion proceeded to touch on proposals for introduction of a general anti-avoidance rule in the United Kingdom, other legislative responses to tax avoidance and the resources available to HMRC to address tax avoidance and tax evasion;

ii) The journalists then taxed Mr Hartnett with the suggestion that HMRC had agreed unduly lenient settlements of tax liability with some taxpayers. Mr Hartnett denied this vigorously, and gave as an example the way in which HMRC were prepared to stick to their guns in their dealings with a named individual whom Ms Schlesinger had indicated was of interest in The Times' investigation. The name was redacted in the transcript: I will refer to him simply as X. Mr Hartnett said that he had met and engaged with X, because X promoted tax avoidance and HMRC wished to stop tax avoidance: "we engage with people who promote tax avoidance because we want to stop them" (that is to say, not in order to try to make "cosy" deals with them). He then said that there was one other notable individual in the field of film schemes whom the journalists had not mentioned, "but I've seen him too". Ms Schlesinger immediately identified this person as Mr McKenna and Mr Hartnett in substance confirmed this. He emphasised that he had not seen either of Mr McKenna or X on his own, but only with lawyers and investigators present. Mr Tomlinson sought to suggest that by introducing Mr McKenna into the discussion in this way, Mr Hartnett singled him and his company, Ingenious Media, out for discussion in an unfair and improper way amounting to abuse of power. I do not accept this suggestion. In my view, on a fair reading of the discussion in the transcript, Mr Hartnett only referred to Mr McKenna (without initially naming him) in order to demonstrate to the journalists that he was being open with them in the course of rebutting the suggestion that he met those involved in tax avoidance to arrange "cosy" deals with them. He did not refer to Mr McKenna in order to target him in an inappropriate way. Reference to him in the context of tax avoidance involving film investment schemes was appropriate and natural in the context of the discussion with the journalists. It was immediately clear that the journalists were already well aware of the identity of Mr McKenna and his involvement in promoting film investment schemes;

iii) Mr Hartnett said that film investment schemes were a £5 billion risk for HMRC, meaning that use of them put the collection of that amount of tax at risk;

iv) Mr Mostrous asked if Mr McKenna was operating any active schemes, to which Mr Hartnett said that he did not know, but confirmed that he had never left "his radar";

v) Mr Mostrous asked Mr Hartnett what he thought of Mr McKenna, and Mr Hartnett replied:

"He's an urbane man, he's a former Deloitte partner, he's a clever guy, he's made a fortune, he's a banker and all of that but actually he's a big risk for us so we would like to recover lots of the tax relief that he's generated for himself and other people. Are we winning? I would say beginning to …"

vi) Mr Mostrous asked if that comment applied to Mr McKenna as well as film investment schemes in general, and Mr Hartnett replied:

"I think we'll clean up on film schemes over the next few years. You may end up laughing at that statement because maybe we'll lose it in the courts, litigation's a hell of a risk, but you won't find anybody here at all, even the most pro-wealthy people, and I'm not sure we've got any, who thinks film schemes are anything other than scams for scumbags."

At this point in the briefing Mr Franklin and Mr Hartnett both emphasised that Mr Hartnett was speaking off the record, and Mr Mostrous commented that it was a shame to waste the final phrase off the record;

vii) There was then some general discussion about film investment schemes before Mr Hartnett and the journalists went on to discuss other forms of tax avoidance or tax planning schemes and other matters. At the end of the meeting Mr Hartnett asked the journalists for the information they held about the matters discussed during the briefing. That request was followed up later, but in the event the journalists did not provide HMRC with the information they had.

15. On 21 June 2012, The Times published articles by Mr Mostrous and Ms Schlesinger about tax avoidance. They referred to Mr McKenna and Ingenious Media, amongst others. The principal article, by Ms Schlesinger, set out significant quotations and information taken from the briefing by Mr Hartnett, including using the £5 billion figure for tax avoided by means of film investment schemes, the "radar" quotation at para. [14(iv)] above and the description at para. [14(v)] above.
16. On 22 June 2012, solicitors acting for the Claimants wrote a letter to HMRC protesting at the release of information about them to The Times, which they claimed involved breach of confidence, defamation and misfeasance in public office. The letter requested HMRC to issue a statement disclaiming the comments reported and making clear that Mr McKenna is not a "big risk" for HMRC. By letter dated 13 July 2012 HMRC replied, rejecting the claims and declining to issue the statement requested.
17. The Claimants then commenced these judicial review proceedings, claiming that HMRC had acted unlawfully in breach of their obligations under public law.
18. In their Statement of Facts and Grounds, the Claimants say that the disclosure of their names by Mr Hartnett and the allegations made by him against Mr McKenna, in particular labelling him as a "threat" and a "big risk" for HMRC, caused concern and loss of investment, the consequences of which were difficult to ascertain but are "estimated to be no less than £20 million". Although the Statement of Facts and Grounds bore a statement of belief in the truth of the facts set out signed by a solicitor on behalf of the Claimants, there is no detailed evidence from the Claimants to substantiate the claim about the loss suffered by them and its extent.

The legal framework and grounds of challenge

19. Section 18 of the Commissioners for Revenue and Customs Act 2005 (the 2005 Act) provides, in relevant part, as follows:

"18 Confidentiality

(1) Revenue and Customs officials may not disclose information which is held by the Revenue and Customs in connection with a function of the Revenue and Customs.

(2) But subsection (1) does not apply to a disclosure -

(a) which –

(i) is made for the purposes of a function of the Revenue and Customs, and

(ii) does not contravene any restriction imposed by the Commissioners …"

20. Section 51 of the 2005 Act is an interpretation provision. Section 51(2) provides:

"In this Act –

(a) 'function' means any power or duty (including a power or duty that is ancillary to another power or duty), and

(b) a reference to the functions of the Commissioners or of officers of Revenue and Customs is a reference to the functions conferred –

(i) by virtue of the Act, or

(ii) by or by virtue of any enactment passed or made after the commencement of this Act."

21. The Claimants submit that HMRC acted in breach of section 18(1) in making the disclosures they did, and that their conduct was not authorised by anything contained in section 18(2). They say that information about the identities of Mr McKenna and Ingenious Media; regarding Mr McKenna's background and his tax affairs (he has generated tax relief for himself: para [14(v)] above); and in relation to the opinion of HMRC about him and Ingenious Media (they promote tax avoidance and "scams for scumbags" and represent a "big risk" for the Revenue in terms of loss of tax which ought to be paid: para. [14(iii)-(vi)] above) was all confidential information which could not lawfully be disclosed by Mr Hartnett in the briefing.
22. The Claimants also relied on section 182 of the Finance Act 1989. That provision creates an offence of disclosure of confidential information held in the course of exercise of various public functions, including tax functions. However, the parties were agreed that no argument additional to that based on section 18 of the 2005 Act depended on the operation of section 182 and it is not necessary to take up further time in analysing it.
23. Guidance has been issued by HMRC, under the auspices of the Commissioners of Revenue and Customs, in relation to a large range of issues relevant to operation of the tax system. Although in various places the Guidance is addressed to HMRC officials, it is a document substantial parts of which are available to the public. The Guidance is divided into numbered sections, designated "IDG[number]". IDG10100 introduces the Guidance in relation to handling information held by HMRC. It states that the Guidance "deals with the confidentiality rules which apply to HMRC Information …". It goes on to say:

"This manual will provide you with guidance on the circumstances in which information may be disclosed outside HMRC, and within HMRC. Please read and understand the guidance in this manual before making any disclosures of HMRC information.

Following this guidance will help you disclose in a lawful way. There are sanctions for those who disclose information when there is not lawful authority to do so, including criminal sanctions for more serious cases."

24. In broad terms, the various paragraphs in the Guidance provide HMRC officials with background information about the legal rules under which they operate (e.g. there is a section entitled, "What is the Human Rights Act?", and another entitled, "What is the Data Protection Act?") and practical guidance, often at a level of some generality, about the approach officials should follow when addressing various issues.
25. The Claimants relied on section IDG40430 of the Guidance. That provides as follows:

"IDG40430 – Sharing information outside of HMRC: disclosure for HMRC's functions: disclosing customer information

HMRC may disclose customer information (i.e. information which identifies a HMRC customer, or allows the recipient to deduce information about the identity of a customer) where such a disclosure is necessary for the purpose of HMRC functions.

How can I determine whether a disclosure is "necessary" for HMRC's functions?

Whether or not a disclosure is necessary can be a difficult judgement to make but the main consideration is whether making the disclosure will enable you to carry out the functions of the department. You should consider each disclosure on a case-by-case basis and if you are content that the disclosure is required to enable you to carry out your duties, then you can lawfully disclose. If in doubt seek guidance from Information Policy and Disclosure (see IDG80100).

Examples of necessary disclosure include:

passing HMRC debt details to the Official Receiver in bankruptcy work

providing the police with details of a forthcoming visit so they can assess the health and safety risk (see IDG40460),

making inquiries about a HMRC customer with a third party (see IDG30400)

carrying out distraint in a public place.

In these cases, the disclosure of identifiable personal details is directly necessary for the performance of HMRC's functions.

What if there is more than one way to carry out HMRC's function?

"Necessary" is not restricted solely to situations in which the only way to carry out a HMRC function is to make the disclosure. There can be situations where a number of ways forward may be available, some of which involve disclosure of customer information and some of which don't.

For example, if by not making a disclosure HMRC were to be less effective in carrying out its own functions then the disclosure should be made. A situation like this might be where a tax enquiry could be concluded more quickly by revealing information obtained from a third party. We should not wait until forced to reveal this information, such as by an order in court proceedings if, by disclosing it earlier, the HMRC customer is more likely to recognise and agree to their true tax liability. An early disclosure is more resource efficient for both HMRC and the customer.

Similar examples may apply where HMRC is seeking to be more effective, i.e. HMRC could carry out its functions without the disclosure, but by making the disclosure, those functions are carried out more effectively.

Proportionality (see IDG40160 and IDG40140) is a particular consideration here too. Consider the infringement of the individual customer's rights to privacy against the necessity of the disclosure. Is the infringement necessary and proportionate to the objective being sought? Seek advice from Information Policy and Disclosure if in doubt (IDG80100).

How to make a lawful disclosure of customer information

It will be lawful to disclose customer information provided that:

only the minimum level of information about the customer is disclosed to allow the function to be carried out, and

the making of the disclosure is necessary (as described above) for the exercise of HMRC's functions.

Common situations where a disclosure of customer information would not be lawful

There are many situations where the function of HMRC can be carried out without making the disclosure, yet the disclosure would nonetheless bring broader benefits. An example here might be the provision of information about cash seizures to the police. Providing cash seizure information is not necessary for HMRC to carry out its functions, or to help progress particular cases, but it may help the wider fight against crime and so benefits would accrue to law enforcement (perhaps including HMRC) from the disclosure.

But for the disclosure of customer information this is not sufficient. There must be a more direct connection to HMRC's functions. Such disclosures cannot be made for the purposes of HMRC's functions, but often there will be another lawful method of disclosure such as a legal gateway (IDG40320) or public interest (IDG60000).

Particular difficulties can occur where the functions of HMRC and another person or government department are closely tied together. Distinguishing whether disclosure supports HMRC's functions, the other person's functions, or indeed the functions of both, is problematic. Where disclosures in such situations are contemplated, further guidance should be sought first (see IDG80100)."

26. There was a dispute between the Claimants and HMRC as to whether the Guidance, and IDG40430 in particular, constituted a "restriction imposed by the Commissioners" for the purposes of section 18(2)(a)(ii) of the 2005 Act. The Claimants contended that it did; HMRC submitted that it did not.
27. In my view, the Guidance, including IDG40430, does not constitute a "restriction" for the purposes of section 18(2)(a)(ii). Although it is guidance issued with the authority of the Commissioners (and so could be said to be "imposed" by them) and although it is described in IDG10100 as dealing with "the confidentiality rules" which apply to HMRC information (which might suggest that it is intended to be strongly prescriptive in nature, and hence capable of being characterised as containing "restrictions" on release of information), the remainder of the introduction in IDG10100 quoted above indicates that it is intended only to have the status of "guidance" which will "help" officials to adopt a lawful approach to disclosure. This language does not suggest that the provisions of the Guidance are intended to be strongly prescriptive and in the nature of mandatory "restrictions" limiting the range of situations in which it may be lawful for officials to disclose information. Moreover, examination of the contents of the Guidance strongly supports the impression that it is not a document which is intended to operate as or have the status of formal "restrictions" issued under section 18(2)(a)(ii). The Guidance describes the legal rules governing disclosure which are found elsewhere – it is in that sense that it "deals with" the confidentiality rules which apply to HMRC information (as stated in IDG10100) – and gives practical tips and guidance about how to go about complying with those rules. It does not purport to lay down formal binding "restrictions" on disclosure. In particular, it does not lay down any such "restrictions" with the clarity and formal precision which one would expect in relation to an instrument which was intended to operate as a formal and legally binding derogation from wider powers of disclosure as set out in section 18(2) of the 2005 Act; and most especially it does not lay down any such "restrictions" with the clarity and formal precision which one would expect in relation to an instrument which might give rise to criminal liability on the part of officials under section 182 of the 1989 Act.
28. The Claimants' alternative submission is that IDG40430 provides a statement of the approach which HMRC will adopt to the exercise of their discretionary functions in relation to disclosure of information, and therefore gives rise to a legitimate expectation on the part of the Claimants that it will be complied with. The Claimants maintain that HMRC, acting by Mr Hartnett, acted unlawfully in that he failed to comply with IDG40430 and released information to the journalists about the Claimants which it was not "necessary" to release, in the sense in which that term is used in IDG40430. HMRC dispute that the Guidance gave rise to any legitimate expectation, and also contend that in any event Mr Hartnett had complied with IDG40430, because he regarded the disclosures he made in the briefing as "necessary" in the requisite sense. I address these rival arguments below.
29. The Claimants also submit that the disclosures made by Mr Hartnett were in breach of HMRC's obligation under section 6(1) of the Human Rights Act 1998 ("the HRA") to act compatibly with the Claimants' Convention rights. In my view, there is nothing in the language of section 18(2) of the 2005 Act, especially when read in light of the requirement of section 3(1) of the HRA to interpret it in a manner compatible with Convention rights when it is possible to do so, which requires HMRC to act in a way which is incompatible with the Claimant's Convention rights, and so nothing in section 6(2) of the HRA which excludes HMRC's obligation under section 6(1) to act compatibly with those rights.
30. Mr Tomlinson submits that HMRC acted in violation of Mr McKenna's right to respect for his private life under Article 8 of the European Convention on Human Rights ("ECHR"), by making disclosures to the journalists about Mr McKenna personally regarding his background (para [14(v)] above), his tax affairs (he has generated tax relief for himself: para [14(v)] above) and the opinion of HMRC about him (he promotes tax avoidance and "scams for scumbags" and represents a "big risk" for the Revenue in terms of loss of tax which ought to be paid: para. [14(iii) to (vi)] above).
31. Article 8 provides:

"Right to respect for private and family life

1. Everyone has the right to respect for his private and family life, his home and correspondence.

2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others."

32. Mr Tomlinson argues that two distinct aspects of Mr McKenna's right to respect for his private life were violated by the disclosures made: (i) the right to respect for confidentiality of information held by HMRC in relation to himself, which was supposed to be treated as private for his benefit and protection, and (ii) the right to protection of his reputation as an aspect of his private life for the purposes of Article 8. Mr Tomlinson argues that Ingenious Media's right to protection of its reputation under Article 8 was also violated.
33. In addition to Mr McKenna's reliance on Article 8, both Mr McKenna and Ingenious Media submit that the disclosures made by Mr Hartnett violated their rights under Article 1 of the First Protocol to the ECHR (a provision I will call "A1P1"), because they were made with the intention (as Mr Hartnett states in his evidence) that potential investors in the film investment schemes promoted by the Claimants would be discouraged from investing in them.
34. A1P1 provides:

"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."

35. On this part of the Claimants' case, Mr Tomlinson argues that the disclosures by HMRC interfered with the peaceful enjoyment of the Claimants' possessions, in the form of business goodwill enjoyed by them with their clients (cf Van Marle v Netherlands (1986) 8 EHRR 483, paras. [41]-[42]), with the result – intended by HMRC - that the Claimants have suffered a significant loss of business. Mr Tomlinson says that it was illegitimate and unlawful for HMRC to try to discourage use of the Claimants' film investment schemes by characterising them as tax avoidance at a time when there had been no judicial determination by the First Tier Tribunal regarding the lawfulness of the schemes. He suggests that this is analogous to the violation of the Convention right under Article 6(2) (presumption of innocence in relation to criminal charges) which occurs when a state official makes a public pronouncement that an individual is guilty of an offence before that individual has been tried by a court and found guilty.
36. In addition to these grounds of complaint, the Claimants submit that the disclosures about them by Mr Hartnett were unlawful, since they involved an abuse of power by him in singling them out for criticism and release of confidential information relating to them specifically, rather than taxpayers in general, and (they say) he acted on a personal hostile view of the Claimants and their business.
37. The Claimants did not pursue any argument based upon the Data Protection Act 1998.

Legal Analysis

(i) Breach of section 18(1) of the 2005 Act, read with section 18(2)(a) – Ground 1(A)

38. The Claimants submit that the disclosures made by Mr Hartnett were not made "for the purposes" of a function of HMRC. Neither the objective of influencing the public discussion of HMRC and tax avoidance schemes nor the objective of trying to encourage the journalists to provide HMRC with information about such schemes were for the purposes of a function of HMRC as defined in section 51 of the 2005 Act; further or alternatively, there was no sufficient rational or direct connection between the objectives pursued and the function of collecting tax; further or alternatively, the disclosure was neither necessary nor proportionate; further or alternatively, Mr Hartnett failed to give proper consideration to whether the disclosures should be made. This group of complaints was described as Ground 1(A).
39. I do not accept these submissions. In my view there was a rational connection between the function of HMRC to collect tax in an efficient and cost-effective way and the disclosures made by Mr Hartnett in the course of the briefing, and his decision to make the limited revelations that he did was based on a judgment which fell well within the lawful parameters of section 18(2)(b).
40. In coming to my conclusion under this heading, I would emphasise two features of the law and facts. First, the decision regarding what to say to the journalists which might be helpful to assist HMRC in the performance of their functions called for evaluative judgments to be made by Mr Hartnett both before the briefing (in calling for information to prepare himself for it) and in the course of the meeting with the journalists (in deciding how to handle their exchanges to promote a sensible and helpful dialogue with them). In my view, the court's role in assessing whether Mr Hartnett stayed within the bounds of the law is not to "second guess" his decisions taken in the twists and turns of a conversation in which the court did not participate, and against a background of policy and handling relations with the press with which the court is not deeply familiar and in relation to which Mr Hartnett and those advising him within HMRC are experts. It is not appropriate for the court to approach the matter as if it were the primary decision-maker.
41. Mr Eadie QC for HMRC submitted that the court should only intervene to find the disclosures unlawful by reference to section 18 if Mr Hartnett's judgment that it would be conducive to the functions of HMRC to make the disclosures in question if that judgment was irrational. In support of that submission, Mr Eadie cited a passage from my judgment in Accenture Services Ltd v Revenue and Customs [2009] EWHC 857 at [34]-[35], in which I referred to the approach to review of the lawfulness of certain evaluative judgments adopted in Moyna v Secretary of State for Work and Pensions [2003] 1 WLR 1929, HL, at [19]-[20], and went on to say:

"Is it for the court to make the necessary evaluative judgments as primary decision-maker … or is the proper approach … for the court to treat HMRC as the primary decision-maker for making such evaluative judgments …, having regard to the evidence before them, and subject only to review by the court to ensure that their judgment was not an irrational one? In my judgment, the latter is the correct approach on an issue of this kind. HMRC are the body entrusted by Parliament with the role of administering the tax system, who have made the relevant decision …. They have experience and expertise in making evaluative judgments of the kind in question here. .."

42. The context in Accenture Services and the particular evaluative judgment called for were different from those in the present case. Nonetheless, I consider that the basic approach set out in Accenture Services, which reflects general principles of public law, is applicable here, as Mr Eadie submitted.
43. I consider that Mr Hartnett could properly and rationally take the view in the circumstances of the briefing that it would assist HMRC in the exercise of their tax collection functions to seek to foster a spirit of co-operation with the journalists, and that to do that it would be desirable to discuss the matters in which they were interested and about which they were already well informed with measured frankness. Mr Hartnett could properly and rationally take the view that the limited disclosures which he made in relation to the Claimants were directly relevant to the discussion with the journalists and were appropriate to be made to foster such a spirit of co-operation.
44. In general, it is legitimate for HMRC to seek to maintain good and co-operative relations with the press. The efficient and effective collection of tax which is due is a matter of obvious public interest and concern. Coverage in the press about such matters is vital as a way of informing public debate about them, which is strongly in the public interest in a well-functioning democracy. HMRC have limited resources to devote to the many aspects of their tax collection work, and it is legitimate and appropriate for them to seek to maintain relations with the press and through them with the public to inform public debate about the tax regime and the use of HMRC's resources. It is also relevant to the exercise of HMRC's functions to provide proper and accurate information to correct mis-apprehensions or captious criticism regarding the exercise of their functions (such as any misplaced suggestion that they had engaged in unduly lenient "cosy deals" with certain taxpayers), in order to maintain public confidence in the tax system. If such confidence were undermined, the efficient collection of taxes could be jeopardised, as disaffected taxpayers might withhold co-operation from the tax authorities. These considerations provided good objective grounds for Mr Hartnett's decision to participate in the briefing and to seek to foster the spirit of co-operation with the journalists to which I have referred.
45. Mr Hartnett's wish to encourage the journalists to share information with HMRC about tax avoidance, which could be of direct assistance to HMRC in relation to their tax collection functions by helping to inform them about where to focus their attention and investigations, was a further legitimate basis for that decision. He could rationally and lawfully take the view that the journalists would be unlikely to assist HMRC in this way unless HMRC for their part demonstrated a degree of measured frankness about the topics under discussion in return.
46. In addition, I consider that Mr Hartnett could lawfully and rationally take the view he did regarding co-operation and sharing information with the journalists at the briefing so as to encourage them to understand and convey to the public the negative attitude which HMRC had to participation by taxpayers in film investment schemes. HMRC and Mr Hartnett were lawfully entitled to take the view that loss of tax revenue as a result of participation in film investment schemes was detrimental to the due and proper collection of taxes and that it would be desirable to seek to deter members of the public from being too ready to participate in such schemes. There was a significant question mark in relation to such schemes whether participants in them were motivated by genuine commercial calculations or rather by a predominant desire to use them to avoid paying tax which would otherwise be due from them. HMRC had an interest to challenge and investigate the true reasons of taxpayers for participation in such schemes, which had already been manifested by HMRC before the briefing. It was fair and appropriate for HMRC to seek to convey the message to the public that taxpayers who participated in such schemes could expect to have such participation rigorously scrutinised by HMRC, and thereby seek to deter taxpayers who did not have substantial and genuine commercial reasons apart from simply seeking to avoid tax from participating in the schemes in the first place.
47. I do not accept the submission by Mr Tomlinson that this was an illegitimate objective for HMRC because there had been no decision or tribunal ruling that film investment schemes of the kind promoted by the Claimants should be regarded as ineffective or unlawful schemes for avoiding tax. There are many areas of the tax code where difficult and contestable evaluative judgments are required before the ultimate liability of an individual to pay tax can be determined. The question whether participation in film investment schemes is effective to enable a taxpayer to avoid paying tax otherwise owed by him is one such area. In deciding how to promote the fair, efficient and cost-effective collection of taxes, HMRC are entitled to identify areas of uncertainty and doubt in relation to which they will wish to be rigorous in challenging taxpayer behaviour and areas in relation to which they will wish to deter taxpayers from acting in ways which appear to be outside the spirit of the tax code and may well prove in due course to be outside its letter. This is a proper way for HMRC to seek to pursue their function of collecting taxes, while seeking to keep the costs of doing so to a minimum. This being so, it is also desirable that HMRC's message about their sceptical attitude to certain forms of taxpayer behaviour should be conveyed to the public. Moreover, promoting public awareness of HMRC's attitudes in relation to such questionable areas of operation of the tax code is a way of giving taxpayers fair warning of situations where they may expect to find their affairs looked at with particular care. All these considerations provided further proper grounds on which Mr Hartnett could rationally and lawfully take the view that his participation in the briefing and the extent of the disclosures he made were justified.
48. I do not accept that the analogy which Mr Tomlinson drew with the actions of a public official issuing statements about the guilt of an individual before they have been tried and found guilty is apt in the present context. There are very strong reasons of fairness why an individual should not be labelled as a criminal without first having the protection of a fair trial. Those reasons do not apply in the tax collection context. HMRC are charged with the primary responsibility for collection of taxes, and are entitled to form and publicise views about situations in which they will seek to contend that taxes are due and tax reliefs cannot properly be claimed. In doing so, they do not brand individuals as criminals, but simply give fair notice of the attitude which HMRC are likely to adopt to the conduct of their affairs and the assessment they may be likely to make of the tax due from them. Moreover, since it is in the interest of the public as a whole that tax collection should be cost-effective, and thus requires prioritisation in the use by HMRC of their resources, it is legitimate for HMRC to seek to manage the assessment and collection of tax by conveying such messages to individual taxpayers and to the public.
49. The second feature of the case which I emphasise is the very limited nature of the disclosures made by Mr Hartnett and the particular circumstances in which he made them.
50. The rationality standard is a flexible one, which varies in the width of the discretion allowed to a decision-maker according to the strength of the public interest and the strength of the interests of any individual affected by the decision to be taken: R v Secretary of State for Defence, ex p. Smith [1996] QB 517; R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs [2008] UKHL 61; [2009] 1 AC 453. The basic statutory rule under which HMRC operate is that set out in section 18(1) of the 2005 Act, requiring them to maintain confidentiality of information about a taxpayer's affairs. That reflects a very longstanding tradition and strong public expectation of the standards to be expected of the tax authorities, particularly in relation to information which taxpayers provide to the authorities about themselves. It also reflects a strong policy interest associated with the fair and efficient collection of taxes, namely to encourage taxpayers to be frank and open with HMRC about their affairs - undeterred by fear that the information they disclose might be released to the public - so that HMRC can make a proper and accurate assessment of the tax due from them. These features of the context in which HMRC operate tend, in my view, to narrow the scope of the discretion to be allowed to HMRC under the rationality standard in disclosing information about taxpayers outside HMRC or other responsible public bodies. Thus, for example, it would have been a matter for grave concern and close scrutiny by the court if Mr Hartnett had given the journalists (even in an "off the record" briefing) access to the full tax files of Mr McKenna and Ingenious Media, with all the private information which they had supplied to HMRC about themselves, even if he did think that such a course might help in some way with the collection of tax.
51. Mr Hartnett did not do that. HMRC had been approached by apparently responsible journalists from a reputable newspaper, who made clear their interest in discussing tax avoidance schemes (including in particular film investment schemes) and HMRC's attitude to such schemes, and also made clear that they had a good background knowledge of their own about the subject. It was agreed that the briefing was to be "off the record." The discussion of Ingenious Media and Mr McKenna proceeded only after it was clear that the journalists were aware of Mr McKenna's identity and involvement in film investment schemes. Mr Hartnett did not pass to the journalists any information which Ingenious Media and Mr McKenna had provided to HMRC about their affairs. Although Mr Tomlinson placed emphasis on the information that Mr McKenna had claimed tax reliefs (para. [14(v)] above), that was information which was obvious in the context of Mr McKenna's involvement in film investment schemes about which the journalists were themselves well aware. The other information provided by Mr Hartnett in relation to the Claimants consisted of statements about HMRC's attitude to them and their investment schemes which was, in my view, in a materially different category from private information provided by a taxpayer to HMRC about himself, and in relation to which there was a less compelling case for maintaining complete privacy of the information. It was information about the attitude of HMRC to tax avoidance schemes in a particular context which was directly relevant to conveying to the public the sort of message which HMRC are entitled to seek to convey, as set out above.

(ii) Unlawfulness under section 182 of the 1989 Act – Ground 1(B)

52. As explained above, this complaint adds nothing to Ground 1(A) and it is unnecessary to consider it separately.

(iii) Breach of legitimate expectation in relation to IDG40430

53. In his oral submissions, Mr Tomlinson did not seek to pursue an argument of breach of legitimate expectation in respect of the Charter issued by HMRC, which had been adumbrated in the Claimants' claim as originally framed and in his skeleton argument (where it was described as Ground 1(C)). I was not taken to the Charter and no argument based upon it was developed.
54. However, as explained above, Mr Tomlinson did advance the submission that IDG40430 contained guidance which gave rise to legitimate expectations on the part of the Claimants, which expectations had been impermissibly defeated by the actions of Mr Hartnett in making the disclosures. Since this submission tracked very closely Mr Tomlinson's submissions under Ground 1(A) and since Mr Eadie did not object, I allowed Mr Tomlinson to develop it and rely upon it.
55. Mr Eadie submitted that IDG40430 was simply guidance, and therefore could not give rise to a legitimate expectation on the part of anybody. I do not accept this submission, put in that bald way. In appropriate cases, policy guidance issued by a public authority to its officials can give rise to enforceable legitimate expectations. Indeed, that is a common type of case in which legitimate expectations are found to arise.
56. The Claimants did not themselves know about or rely on IDG40430. They did not know about the briefing until after the publication of the journalists' reports on 21 June 2012. But the absence of detrimental reliance by a claimant seeking to assert an enforceable legitimate expectation does not matter in certain situations: see Oxfam v HMRC [2009] EWHC 3078 (Ch) at [45]-[55], especially at [54], where I said this:

"There is another class of case, in which an absence of detrimental reliance on the part of the individual may be irrelevant. Where one is dealing with a general statement of policy (i.e. at the other end of the spectrum of assurances from the present case) and there is no question of the public authority changing that general policy (so it is not an In re Findlay [[1985] AC 318] type of case), then ordinary rules of public law preventing a public authority from acting arbitrarily and capriciously will have the effect that the authority will not be entitled to disapply that policy in an individual case where there is no rational basis for distinguishing that case from the general run of cases covered by the policy: cf Mullen [[2004] UKHL 18; [2005] 1 AC 1] at [61]. Like cases should be treated alike, and in such a situation the individual will have a good claim to be entitled to the benefit of the policy in his case even though there has been no detrimental reliance on his part (and, indeed, even if he was not personally aware of the policy). This seems to be the sort of case contemplated by Sedley LJ in Begbie [[2000] 1 WLR 1115] at 1133D-E ("I have no difficulty with the proposition that in cases where government has made known how it intends to exercise its powers which affect the public at large it may be held to its word irrespective of whether the applicant had been relying specifically upon it") and by Bingham LJ in another leading case in this area, R v IRC, ex p. MFK Underwriting Agencies Ltd [1990] 1 WLR 1545, at 1569C-D ("No doubt a statement formally published by the Inland Revenue to the world might safely be regarded as binding, subject to its terms, in any case falling clearly within them"). It is a position which accords with well recognised general principles."

Also see R (Lumba) v Secretary of State for the Home Department [2011] UKSC 12; [2012] 1 AC 245, in particular at [26].

57. In the present case, if the other requirements to establish a claim to a breach of a legitimate expectation were made out, I consider that the Claimants would be entitled to rely on these general public law principles requiring HMRC to act consistently and without arbitrariness so as to require them to comply with the policy set out in IDG40430.
58. I turn, then, to consider whether those other requirements are made out. In my view they are not. I accept Mr Eadie's further submission that Mr Hartnett acted properly in compliance with the policy in IDG40430.
59. I should mention that I have reservations whether IDG40430 could be said to be a policy which is "clear, unambiguous and devoid of relevant qualification" to the standard required in the authorities to establish a claim based on a substantive legitimate expectation of the kind which Mr Tomlinson advances here: see ex p. MFK Underwriters Ltd and R (Davies) v HMRC [2011] UKSC 47; [2011] 1WLR 2625. However, Mr Eadie did not seek to resist the claim on this basis, and it is not necessary to examine this question any further.
60. Mr Eadie's submission, which I accept, is that Mr Hartnett acted in compliance with the policy in IDG40430 and did not breach it. HMRC's case on this issue is closely similar to its case in answer to the claim based on section 18, and the same reasoning applies. In particular, although IDG40430 requires a standard of "necessity" to be applied in deciding whether information held by HMRC may be disclosed, it also supplies its own definition and guidance about what in the context of that part of the Guidance is to be regarded as satisfying the "necessity" test. The position is that a disclosure which is sufficiently directly related to, and not remote from, providing assistance to HMRC in the performance of their functions will be taken to satisfy the test.
61. Deciding whether there is a sufficient nexus between a disclosure and the assistance to be gained by HMRC in carrying out their functions calls for evaluative judgments to be made. In the context of the legitimate expectation claim, the approach set out in Accenture Services referred to above is again applicable. Accenture Services was in fact a legitimate expectation case, and the observations at paras. [34]-[35] were directed to the application of the HMRC policy guidance which was relevant in that case. In the present case, for reasons closely similar to those set out above in relation to the claim under section 18, Mr Hartnett could rationally and lawfully take the view that the measured degree of disclosure he made to the journalists at the briefing was necessary, in compliance with the guidance set out in IDG40430.

(iv) Breach of section 6 of the HRA, taken with Article 8 ECHR – Ground 1(D)

62. For the purposes of this claim, Mr Tomlinson relied on two aspects of the "private life" limb of Article 8: (a) Mr McKenna's privacy interest in the maintenance of confidentiality in relation to information about himself held by HMRC; and (b) Mr McKenna's and Ingenious Media's interest in the protection of their reputations. He submitted that HMRC violated the Claimants' Article 8 rights in these respects by their disclosure of the information referred to above to the journalists, and hence acted in contravention of their obligation under section 6(1) of the HRA.
63. In relation to the first aspect of Article 8 relied on (confidentiality), Mr Eadie submitted that there had been no action by HMRC which was sufficiently serious or intrusive as to amount to a failure to accord respect to Mr McKenna's private life. I do not accept this submission. In my view, the release by a public authority (as here, by HMRC) responsible for the relationship between citizen and state in some important respect (here, the tax relationship between the Claimants and the state) of confidential information about that citizen regarding that relationship, in order to serve the purposes of the public authority, will usually involve an interference with the citizen's right to respect for private life under Article 8(1) which will require justification under Article 8(2). That is the position here. The maintenance by the state of databases regarding citizens itself involves infringement of the right of respect for private life under Article 8(1): see for example, among many authorities, Amann v Switzerland (2000) 30 EHRR 843 and Copland v UK (2007) 45 EHRR 37, paras. [43]-[44]. In my view, deliberate use by a public authority of such information by releasing it to journalists to promote the interests of the state also, a fortiori, involves interference with rights under Article 8(1).
64. Mr Eadie made the further submission that any interference with rights under Article 8(1) was objectively justified under Article 8(2), in that the disclosures were made for the legitimate objectives of promoting the economic well-being of the country (ensuring proper, efficient and cost-effective collection of tax) and for the protection of the rights and freedoms of others (to ensure the fair distribution of the tax burden across all tax payers); and were proportionate and necessary in a democratic society. Mr Eadie submitted that in assessing the proportionality of the disclosures made, I should accord HMRC a wide margin of appreciation, on the grounds that the area of tax is a subject of economic and social policy in relation to which such a margin of appreciation is regularly allowed for public authorities: see e.g. James v United Kingdom (1986) 8 EHRR 123, esp. at para. [46]; National and Provincial Building Society v United Kingdom (1997) 25 EHRR 127 at paras. [79]-[80]. He also again emphasised the limited nature of the disclosures made by Mr Hartnett and the fact that he understood that they were being made to only two people for very limited purposes, in an "off the record" briefing.
65. I do not agree that the margin of appreciation for HMRC in relation to judgments regarding disclosure of confidential information regarding the tax affairs of an individual is as wide as Mr Eadie suggested. Although the background of tax policy and the need for well-informed practical judgments on the ground by experienced officials about how best to promote the effective collection of tax are factors which tend to expand the ambit of the margin of appreciation which is applicable in this context, the countervailing factors to which I have referred at para. [50] above increase the weight to be given to the interests of the individual in striking the fair balance required by the ECHR, and tend to reduce the margin of appreciation to be applied. Also, the disclosures made were not direct expressions of national policy in setting levels of taxation and so forth, unlike the sort of measures in issue in the authorities referred to above. Balancing these factors leads me to conclude that the relevant margin of appreciation is neither particularly wide nor especially narrow, but in the middle ground.
66. Taking that margin of appreciation into account, I consider that the disclosures made by Mr Hartnett were clearly lawful under Article 8 (protection of confidentiality), for the reasons given by Mr Eadie and as already reflected in the reasoning above in respect of section 18. The disclosures were made for the legitimate objectives identified and, having regard to the limited nature of the disclosures made and the "off the record" nature of the briefing, were proportionate to those objectives. The relevant proportionality standard is satisfied even though it is, I think, more demanding than the rationality standard referred to above in relation to section 18 taken by itself.
67. In relation to Mr Tomlinson's further argument that HMRC violated the Claimants' Article 8 rights to protection of their reputation, I accept Mr Eadie's primary submission that the disclosures by Mr Hartnett, in the particular circumstances in which they were made, were not such as to infringe the Claimants' right to respect for this aspect of their private life under Article 8(1).
68. It is clear from the authorities that Article 8 (private life) will in some circumstances give rise to a right to protection of an individual's reputation: see e.g. Re Guardian News and Media [2010] 2 AC 697, para. [42]. In support of his submissions on this aspect of the case, Mr Tomlinson relied in particular on Mikolajova v Slovakia, application no. 4479/03, judgment of 18 January 2011. In that case, the Court of Human Rights reviewed the relevant principles in relation to protection of reputation under Article 8 at paras. [53]-[55] as follows:

"53. The Court recalls its judgment in the case of Chauvy and Others v. France, no. 64915/01, § 70, ECHR 2004-VI, where in the context of a complaint under Article 10, it explicitly recognised for the first time "the right of the persons … to protect their reputation, a right which is protected by Article 8 of the Convention as part of the right to respect for private life." This was confirmed in Pfeifer v. Austria, no. 12556/03, § 38, ECHR 2007-XII where the Court held that States were under a positive obligation to protect individuals' right to reputation, as an element of their "private life" under Article 8 of the Convention.

54. In Sanchez Cardenas v. Norway, no 12148/03, § § 33 and 38, 4 October 2007 the Court found that a passage in a domestic judgment which "conveyed information to the effect that the High Court, having regard to the state of the evidence, held a suspicion that the applicant had sexually abused" his son, was in the context of an authoritative judicial ruling "likely to carry great significance by the way it stigmatised him and was capable of having a major impact on his personal situation as well as his honour and reputation." Consequently, the Court took the view that the facts underlying the applicant's complaint fell within the scope of Article 8 of the Convention.

55. The Court explained its approach to such cases in its judgment in A. v. Norway, no. 28070/06, § 64, 9 April 2009, holding that in order for Article 8 to come into play, the attack on personal honour and reputation must attain a certain level of gravity and in a manner causing prejudice to personal enjoyment of the right to respect for private life (see Sidabras and Džiautas v. Lithuania, nos. 55480/00 and 59330/00, § 49, ECHR 2004-VIII). Similarly, in Karakó v. Hungary, no. 39311/05, § 23, 28 April 2009 the Court considered that reputation had been deemed to be an independent right mostly when the factual allegations were of such a seriously offensive nature that their publication had an inevitable direct effect on the applicant's private life. This has been more recently confirmed by the Court in its judgment in the case of Polanco Torres and Movilla Polanco v. Spain, no. 34147/06, § 40, 21 September 2010 (not yet final)."

69. In my judgment, applying the test set out by the Court there, although the disclosures in the present case were of a sufficiently seriously offensive nature as potentially to engage Article 8, the circumstances in which they were made, in an "off the record" briefing with responsible journalists who could apparently be trusted not to give the disclosures wider circulation, were such that it could not be said that their disclosure would have "an inevitable direct effect on the applicant's private life". If the disclosures did not come into the public domain, the ability of the Claimants to form relationships with other persons (the important dimension of the concept of "private life" which is accorded protection by the caselaw in this area, such as Sidabras and Džiautas v Lithuania) would not have been directly affected by them; and HMRC had good grounds for thinking that the disclosures would not come into the public domain. The disclosures involved no sufficient direct or grave interference with the Claimants' private life interests as to infringe the requirement of the right of respect for private life.
70. Even if a sufficient interference with the Claimants' reputational interests under Article 8(1) had been established, I consider that the very limited interference with those interests that occurred was again clearly objectively justified and proportionate for the same reasons as given in relation to Mr McKenna's case based on confidentiality, as explained above. Mr Hartnett regarded the characterisations of the Claimants in discussion with the journalists, though colourful in parts, as fair comment; and there was in my view a sufficient basis for them such that his behaviour in using such characterisations could not be described as irrational or as so lacking in adequate grounds as to be illegitimate in all the circumstances.

(v) Breach of section 6 of the HRA, taken with A1P1 – Ground 1(E)

71. The Claimants' claim based on A1P1 is founded upon the part of Mr Hartnett's evidence in which he says that he hoped that the journalists would, as a result of his encouragement, convey to the public the negative and sceptical attitude of HMRC regarding film investment schemes of the kind promoted by the Claimants, so as to deter people from using those schemes (and hence deprive the Claimants of future business). Mr Tomlinson submits that this was a direct and deliberate effort by HMRC to deter people from using the lawful services of the Claimants, and as such constituted a violation of A1P1.
72. At the outset under this heading I should mention that I have reservations whether the loss of future business income of which the Claimants complain here can properly be regarded as a deprivation of or interference with a "possession" in the sense in which that term is used in A1P1. Cases such as, e.g., Denimark Ltd v United Kingdom (2000) 30 EHRR CD 144 (in which loss of future business income was found not to be a "possession" until it has been earned or an enforceable claim to it exists) would need to be examined alongside Van Marle to reach a fully informed view about this. However, Mr Eadie did not seek to meet the case against HMRC on this basis, so it is not appropriate to examine that question any further in this judgment.
73. Instead, Mr Eadie submitted, first, that there was no good evidence that the message of disapproval and scepticism which HMRC hoped to convey to the public via the journalists had had any significant effect on the business of the Claimants; and that simply pointing to the fact that HMRC deliberately intended to bring about such a result was insufficient to show that there had been any interference for the purposes of A1P1 with the Claimants' property or possessions in the form of their business. No authority was cited on either side in relation to this point to guide me in resolving it.
74. I do not think that Mr Eadie's submission is correct. In my view, the notion of interference with peaceful enjoyment of possessions inherent in A1P1 is wide enough to cover elements of both intention and effect in relation to state action. If a state takes measures deliberately and illegitimately intending to damage possessions of an individual, even though the actual effects of such measures may be likely to be minimal, I consider that the individual would be entitled to complain of violation of A1P1.
75. However, it is again my view that such interference as was involved by the giving of the briefing with the intention described was justified as being proportionate action taken to promote legitimate public interest objectives. A state may have good grounds for wishing to deter members of the public from making purchases of goods or services the supply of which may be lawful in itself. One might refer, for example, to campaigns by state authorities to deter people from engaging in smoking or excessive drinking, i.e. to discourage them from buying cigarettes or alcoholic drinks, the supply of which is perfectly lawful. A state is not limited in its options when considering how to encourage particular patterns of behaviour on the part of the public to simple use of the law to ban such activities, or not. There may be many good reasons why a state may wish to take steps to discourage certain forms of behaviour without taking the extreme step of outlawing activities. A1P1 does not disable state authorities from using other, less drastic means of trying to influence the behaviour of the public where there are legitimate reasons for doing so.
76. In my view, the attitude of disapproval and scepticism which HMRC adopted in relation to use of film investment schemes, and the decision to seek to inform the public about that attitude in order to influence their behaviour, fell well within the wide margin of appreciation applicable to decisions of state authorities in the field of tax policy. These are matters of the kind in relation to which it is appropriate to apply the wide margin of appreciation which is generally applicable in relation to promulgation of rules or policies in contexts which call for broad social and economic judgments. There will only have been a violation of A1P1 if HMRC proceeded on the basis of a judgment in relation to action taken to promote a legitimate public interest which was "manifestly without reasonable foundation": see e.g. James v United Kingdom (1986) 8 EHRR 123, esp. at para. [46]; National and Provincial Building Society v United Kingdom (1997) 25 EHRR 127 at paras. [79]-[80]; and the review of the authorities in SRM Global Fund LLP v Commissioners of HM Treasury [2009] EWCA 788 at [43]-[60] and AXA General Insurance Ltd at [29]-[41] (Lord Hope DPSC) and [107]-[134] (Lord Reed JSC). The actions of HMRC and Mr Hartnett in this case cannot be criticised as falling on the wrong side of this standard.

(vi) Abuse of power – hostile targeting of the Claimants – Ground 2

77. Mr Tomlinson maintained, in effect, that Mr Hartnett had deliberately targeted the Claimants without good reason by naming them to the journalists and discussing HMRC's attitude towards them. I dismiss this allegation. Mention of the Claimants arose naturally in the context of the questions which the journalists asked regarding tax avoidance, with particular reference to film investment schemes. Mr Hartnett did not target the Claimants capriciously or out of spite or other improper motive. As explained above (see para. [14(ii)]), Mr Hartnett had proper and lawful reasons for making the disclosures about the Claimants which he did.
78. In other respects, the Claimants' abuse of power claim added nothing to their other claims which have been discussed above.

Conclusion

79. For the reasons given above, all the various claims brought by Mr McKenna and Ingenious Media are dismissed.