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Cite as: [2019] ScotCS CSOH_92, 2019 GWD 39-634, [2019] CSOH 92

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OUTER HOUSE, COURT OF SESSION

[2019] CSOH 92

P843/18

OPINION OF LORD ARTHURSON

In the petition of

ARINZE NWOKOLO (AP)

Petitioner

for Judicial Review

of a decision by the Upper Tribunal (Immigration and Asylum Chamber) to refuse

to grant permission to appeal

Petitioner: Caskie; Drummond Miller LLP

Respondent: Pugh; Office of the Advocate General

19 November 2019

Introduction

[1] The petitioner is a national of Nigeria. He arrived in the United Kingdom in 2006 as

a student and was subsequently granted periods of leave to remain. He operated a business

under what is known as the “points based system”. In order to obtain points under this

system, the petitioner required to demonstrate his income. As a result of obtaining the

necessary points, and obtaining continuing leave to remain as a result, the petitioner reached

a point in time at which he could apply for indefinite leave to remain on the basis of his

length of residency in the United Kingdom, namely 10 years. The respondent refused the

petitioner’s application for indefinite leave to remain by letter of 27 June 2017 in terms of

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Immigration Rule 322(5). The petitioner appealed against that decision to the First-tier

Tribunal (“the FtT”). By decision dated 25 January 2018 that appeal was dismissed.

Permission to appeal was refused in due course by another judge of the FtT. The petitioner’s

application to the Upper Tribunal for permission to appeal to itself was refused by the

Upper Tribunal by decision dated 15 May 2018.

[2] The petitioner’s case falls within a category of cases known as “tax discrepancy

cases”, which term refers to the points based system referred to above. The respondent

refused the petitioner’s application due to discrepancies in the petitioner’s declarations of

income to the respondent and to HMRC in the tax years 2012/13 and 2013/14. It was not in

issue between the parties at the substantive hearing which proceeded on the petition that in

the event that, if the income declared by the petitioner to the respondent was accurate, he

would have obtained sufficient points under the system to allow him in due course to make

a valid application for indefinite leave to remain based on his period of residency. The

discrepancy between the figures declared to the respondent in respect of the petitioner’s

applications for leave to remain, and in his subsequent tax returns declared to HMRC, over

the said two year period amounted to some £10,913.

Submissions for the petitioner

[3] The primary challenge advanced on behalf of the petitioner had been foreshadowed

in ground one of the grounds of appeal to the Upper Tribunal and amounted to this:

whereas in the generality the tax year runs from 6 April in one year to 5 April the following

year, the accountancy period for the petitioner’s business ran from 1 July in one year to

30 June the following year. Accordingly, if any income or loss was incurred in the period

from 6 April in the first year to 30 June that year, figures related to that income or loss would

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in all likelihood emerge in a tax return but not necessarily in the petitioner’s business

accounts. The chronological variation between the tax year and the business year meant that

there would always be a discrepancy in the figures disclosed to the Secretary of State on the

one hand and to HMRC on the other hand. A forensic accountancy report prepared by

Chadwick-Thompson Accountancy Limited in respect of the two tax years in question had

been prepared following upon the decision of the FtT and accordingly was not before that

tribunal when it made its decision. The report was, however, before the Upper Tribunal

when the Upper Tribunal refused permission to appeal. Counsel submitted, on an analysis

of that report, that an income stream had started in respect of the petitioner’s business in

around November 2012 and had run through to 30 June 2013. After that date, the

profitability of the business had collapsed, and this in turn had impacted on the tax to be

paid by the petitioner in respect of his business.

[4] Counsel developed this submission by observing that, while the Chadwick-Thompson

forensic accountancy report was not before the FtT, business bank statements and accounts

from Santander were before it. The FtT, in its decision letter dated 25 January 2018, at

paragraph 22 thereof, had indicated that in its view the appellant had failed to provide a

reasonable or proper explanation for the discrepancy at his interview, in his statement or at

the hearing. The FtT made reference to a number of documents presented by the petitioner in

respect of his appeal, which included bank statements, emails and invoices. The FtT had then

stated at paragraph 22:

“However without further explanation these documents are of limited assistance

to me. Significantly I had little or no clear evidence from the appellant or his

accountant to support the claim that his income ‘criss-crossed’ two tax years.”

Counsel submitted that it would be a relatively straightforward task for a specialist tribunal

such as the FtT to embark on and complete an exercise of going through the bank statements

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which were before it in order to assess the periods November 2012 to 5 April 2013 and

6 April 2013 to 30 June 2013. Chadwick-Thompson had embarked upon this exercise, and

there was in its report a reconciliation of the relevant figures. A proper engagement with

the material before it ought to have led the FtT to conclude that: (i) there was no actual

discrepancy; (ii) there was therefore no deception; and (iii) that the petitioner in these

circumstances was bound to succeed. Standing that this was a tax discrepancy case, the FtT

should, as a given, have understood the distinction which required to be drawn between an

accountancy period and a tax year. In addressing this issue the Upper Tribunal, in its

decision refusing permission to appeal dated 15 May 2018, appeared in turn not to have

engaged at all with the material which was before the FtT, and, even more significantly, with

the forensic accountancy report which was before it at the time that it made its

determination.

[5] Counsel advanced supplementary submissions in respect of grounds three and four

of the grounds advanced to the Upper Tribunal. Ground three dealt with matters of onus.

The FtT had erroneously approached this question, determining in terms that the petitioner

had failed to discharge an onus of proof, whereas the correct position in law was that the

onus to prove conduct such as deception, as alleged here, was a matter for the respondent to

discharge. Counsel submitted that the authorities indicated that there was a single standard

of proof on this matter, namely the balance of probabilities, but that this required to be

flexible in its application: JC [2007] UKAIT 00027 at paragraphs 10, 11 and 13; MZ (Pakistan)

v Secretary of State for the Home Department [2009] EWCA Civ 919, per Pill LJ at paragraph 10;

and the dicta of Underhill LJ in R (Balajigari) v Secretary of State for the Home Department

[2019] 1 WLR 4647 at paragraphs 43 and 44. I pause at this point to observe that the Upper

Tribunal in the present case had concluded that the onus point set out in ground three had

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“no arguable merit”. Notwithstanding that position, counsel for the respondent in his own

submissions indicated very properly that he was driven to accept that the Upper Tribunal

had fallen into error in respect of its approach to ground three, but contended in turn that

this error was, nevertheless, not a material one. Counsel for the petitioner, anticipating this

point, noted, under reference to Underhill LJ in Balajigari, supra, at paragraph 135, that “the

Court should observe great caution in refusing relief on the basis of immateriality”. In any

event, counsel observed, it was unknown what difference the admittedly erroneous

approach to onus taken by the FtT and, in due course on permission to appeal, by the Upper

Tribunal, would have made to the disposal of the petitioner’s case. It could not be said that

the outcome would inevitably have been the same, counsel submitted.

[6] Finally, on ground four, dealing with the undesirability or otherwise of the petitioner

remaining in the United Kingdom, and in particular the alleged failure by the FtT to

consider matters of character and conduct, counsel submitted that while the FtT had

considered an article 8 case in respect of the petitioner, it had omitted an essential step in

process, namely providing the petitioner with an opportunity to advance reasons why his

presence in the UK was not undesirable, standing his otherwise unblemished history of

residence. In support of this submission, counsel referred to Balajigari, supra, at

paragraphs 38, 39, 130 and 131, submitting that the decision of the FtT did not demonstrate

any consideration of such an exercise of discretion.

[7] I should add for completeness that counsel for the petitioner made a submission in

respect of ground two of the grounds placed before the Upper Tribunal which dealt with

what was said to be the failure of the FtT to have regard to the business bank account, noting

that the Upper Tribunal in giving its reasons for refusal of permission had recorded in

summary the terms of ground two but made no ruling on it. I did not consider this to be a

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matter of significance, taking the view that consideration of ground two had been subsumed

into the Upper Tribunal’s consideration of ground one.

Submissions for the respondent

[8] Inviting the court to dismiss the petition and to refuse the remedy of reduction

sought, counsel for the respondent submitted that the appropriate fact finding body in the

petitioner’s case was the FtT, and that the court ultimately required to consider that

tribunal’s fact finding decision, albeit through the lens of the challenged decision of the

Upper Tribunal refusing permission to appeal. The petitioner had been provided with an

opportunity to explain his position to the FtT. His explanation was deemed by that tribunal

to be insufficient, and the FtT was accordingly entitled to make a finding of dishonesty. The

Upper Tribunal was correct in holding that no error should be imputed to the determination

of the FtT.

[9] While counsel accepted that the forensic accountancy report from

Chadwick-Thompson on the face of it provided an explanation for certain discrepancies, he

reminded the court that this document was not of course before the FtT, and submitted that

that tribunal could not be faulted therefore for not taking it into account.

[10] In the normal run of earnings discrepancy cases, under reference to Oji vSecretary of

State for the Home Department 2019 SLT 233, at paragraphs 25 and 27, per Lord Tyre, counsel

submitted that the first matter to be addressed was the objective one of whether a

discrepancy existed, and that thereafter the second matter duly arose, namely whether that

discrepancy was dishonest. On the issue of honesty, the lack of an explanation by an

applicant would be something which any decision maker would wish reasonably to take

account of. Counsel noted that the decision in Balajigari, supra, dealt with decisions which

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were subject to a rationality challenge. Counsel accepted that, nevertheless, even if his

analysis, in terms of which the relevant dicta on earnings discrepancy matters in Balajigari

were obiter, the dicta of the court on this point should be regarded on any view as

persuasive. Counsel submitted that the proper approach was to consider whether there was

a discrepancy and thereafter whether that discrepancy, if any, was dishonest, accepting that

exceptional cases could arise justifying a departure from that approach and involving an

article 8 analysis: Balajigari at paragraphs 39, 92 and 104 to 106. In the event that a

discrepancy was found to exist, and only in that event, counsel submitted that there were six

elements in the guidance applicable arising from Balajigari, namely: (i) the FtT requires to

consider dishonesty for itself; (ii) in doing so, and without reversing the burden of proof,

the lack of explanation for dishonesty from an applicant will be significant; (iii) the FtT

required to act with procedural fairness, which will involve giving an applicant the

opportunity to call witnesses; (iv) it would be unlikely, where a discrepancy exists, that the

mere assertion of a mistake would suffice; and, (v) where dishonesty is found, that will in

general justify refusal of an application, although (vi) there may be exceptional reasons why

this may not be the case.

[11] Counsel proceeded to address the primary point raised concerning the distinction

between the tax year and the accounting year for the petitioner’s business, noting that on

any view a discrepancy appeared on the face of the figures. He accepted that this could be

explicable, perfectly innocently, but that there nevertheless was a discrepancy and that

accordingly it was not surprising that the respondent had sought an explanation before

reaching any conclusion on the matter. The FtT had noted a questionnaire and the terms of

an interview with the petitioner, who had indicated therein that he wished to make no

changes to the figures for the tax years in question. On the facts, an explanation was called

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for, counsel submitted, and, the relevant question having been asked, it had been answered

by the petitioner and nothing had been raised by way of explanation. In exercising its fact

finding function, the FtT had proceeded then to consider whether the discrepancy was

dishonest. While the forensic accountancy report relied on by the petitioner provided more

information on what was happening with the petitioner’s business, it would be wrong to

view matters through the prism of that report in attempting to assess what the FtT should

have made of the material before it. Insofar as this accountancy input was an exercise of

forensic accountancy, it was a step too far to hold that the FtT had erred in law by not

engaging in an exercise of forensic accountancy itself. It was surprising, surely, counsel

submitted that the catastrophic collapse of the petitioner’s business after June 2013 had not

been mentioned by him at interview, for example. The FtT had been correct to state at

paragraph 22 of its decision letter of 25 January 2018 that little or no clear evidence on behalf

of the petitioner had been placed before it to support the claim that the petitioner’s income

had “criss-crossed” the two tax years in question. The finding at paragraph 24 that the

petitioner had misled the respondent in order to inflate his earnings as part of the

requirement to score points arose at the conclusion of an exercise undertaken by the FtT in

terms of which it had found a discrepancy, sought an explanation from the petitioner at each

stage of the process, and then duly found in fact that no satisfactory explanation had been

given.

[12] Counsel submitted that in the course of this exercise no reversal of onus was in terms

engaged in by the FtT. Absent an explanation, the inference of deception had reasonably

been drawn on the whole facts before the FtT and no error or law had been made out on its

part, bearing in mind that the forensic accountancy report was not before the FtT. On the

question of onus, counsel accepted, as set out above, that the Upper Tribunal had fallen into

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error, but contended nevertheless that this error had not materially affected its disposal of

the petitioner’s case. Reading the decision letter of the FtT as a whole, it was plain that the

determination was not made on the basis that the onus was on the petitioner.

[13] Referring again to Balajigari, supra, per Underhill LJ at paragraph 92, counsel

submitted that in the petitioner’s case, article 8 being engaged, where the exercise described

in paragraph 92 of Balajigari required to be subject to an article 8 assessment, it was of note

that the FtT in the petitioner’s case had indeed undertaken such an assessment, as was

evident on the face of paragraphs 25 and 26 of its decision letter.

[14] In conclusion, counsel for the respondent submitted that the FtT decision could not

be impugned and that no material arguable error had arisen for consideration by the Upper

Tribunal. Reduction should therefore be refused and the petition dismissed. In passing,

counsel finally noted that the forensic accountancy report was in effect new evidence, and

that this document accordingly could potentially be the subject of a fresh claim in terms of

Immigration Rule 353, which would allow matters to proceed properly with due

consideration being given to that report, albeit from the last solid footing in this case

established in the decision of the FtT.

Discussion and determination

[15] The forensic accountancy report from Chadwick-Thompson did not exist at the time

that the FtT made its determination on 25 January 2018. It was instructed after that

determination and prepared in March 2018. The FtT cannot be faulted for not considering

matters arising in that report. The Upper Tribunal, in its consideration of the petitioner’s

application for permission to appeal, however, did have the Chadwick-Thompson report

before it in the process leading to its own determination to refuse permission on 15 May

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2018. On my reading of the reasons provided by the Upper Tribunal in support of that

refusal, there appears to be no engagement on the part of the Upper Tribunal whatsoever

with the terms and import of that forensic report insofar as it appeared to reconcile the

figures referred to in the business accountancy period and relevant tax years. I have reached

the view that this can reasonably be characterised as an arguably material omission on the

part of the Upper Tribunal in its consideration of the petitioner’s case. It further appears to

me on the face of the material which has been summarised as being available to the FtT, that

the nuts and bolts of the financial position of the petitioner’s business were in terms

available to the FtT.

[16] I have considerable sympathy with the view expressed at paragraph 22 of the FtT

decision letter to the effect that the available documents were of limited assistance to it

without further explanation. Nevertheless, in holding there to be a discrepancy in looking at

the figures brought out by comparison of the business year period and the relevant tax year

periods and in thereafter drawing an inference of dishonesty, the FtT can be said arguably to

have erred. On the raw financial material before the FtT, there was, we now know due to

the terms of the forensic accountancy report, no material discrepancy at all, and of course

only in the event of a valid finding of discrepancy can one proceed to find, by way of

inference, any dishonesty established. Perhaps more fundamentally, the FtT as a specialist

tribunal ought to have been able to grasp the relatively straightforward distinction between

the period of a business accountancy year and the tax year, and in turn to appreciate the

potential import thereof in this case. That does not appear, on the face of the material

considered before this court, to have been done by the FtT, and, a fortiori, standing the

availability to it of the said forensic accountancy report it certainly has not been a matter

apparently even engaged in, let alone grappled with, by the Upper Tribunal.

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[17] Counsel for the respondent very properly accepted that the FtT and the Upper

Tribunal had erred in law on the matter of onus, but contended that the outcome of the

petitioner’s application would inevitably have been the same. Standing the view which I

have expressed above concerning the erroneous approaches of the FtT and the Upper

Tribunal in respect of the establishment of a discrepancy in and of itself, perhaps the issue of

onus is now an otiose one. Nevertheless, while it is correct that the question of onus may

have been neither here nor there in the mind of the decision maker at the FtT, the error of

law embarked upon was on any view a blatant error; that said, perhaps the more important

point is that this matter is an unknown factor in the determination exercise, and, for my part,

I prefer to conclude that it cannot be said with confidence that the disposal would inevitably

have been the same had a proper approach to onus been observed in this case.

[18] I accordingly in these circumstances hold that grounds one and three, as advanced

before the Upper Tribunal in respect of the petitioner’s application for permission to appeal,

must be considered to be at least arguable grounds in respect of error of law. Having

reached that view, the remedy of reduction consequently follows and I propose to grant that

relief to the petitioner in the interlocutor accompanying this decision. I must add, however,

that I cannot so view the position on ground four, which was maintained by counsel for the

petitioner at the substantive hearing. Documents referred to by counsel for the petitioner

within the papers made clear that it was contended on behalf of the petitioner in a letter

from his solicitors dated 7 November 2016 to the respondent that refusal of his application

would be in breach of his article 8 rights. The FtT at paragraphs 25 and 26 of its decision

letter has reached reasonable conclusions in respect of that article 8 claim, in the whole

circumstances. Having said that, standing the view which I have taken of the other grounds,

whereby I have concluded that the respondent has arguably wrongly refused the

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petitioner’s claim, I am of the view on reflection that this must have an effect on the article 8

case, in the light of the dicta of the Court of Appeal in TZ (Pakistan) v The Secretary of State for

the Home Department [2018] EWCA Civ 1109 at paragraph 34. In these circumstances,

therefore, standing the decisions which I have made in respect of the other grounds, the

fourth ground also ought to remain at least at large as an arguable ground before the Upper

Tribunal.

[19] Finally, while I appreciated the candour of counsel for the respondent in submitting

that an alternative route for the petitioner in this case was to make a fresh claim in terms of

Immigration Rule 353, in view of the agreed fact that the Chadwick-Thompson forensic

accountancy letter dated March 2018, was before the Upper Tribunal as it reached its

decision in May 2018, although it was not of course before the FtT, it cannot be said to be

new evidence in the particular context of a challenge to the refusal of the petitioner’s

application for permission by the Upper Tribunal. In any event, in the light of the findings

which I have already made, the petitioner’s application for relief before this court must

succeed on the basis of the arguable errors of law which have been identified.

Disposal

[20] For these reasons I sustain the plea-in-law for the petitioner, repel pleas-in-law two

and three for the respondent, and grant decree of reduction of the decision of the Upper

Tribunal dated 15 May 2018 in respect of the petitioner’s application for permission to

appeal. I propose meantime to reserve all questions of expenses.