First-tier Tribunal (Tax)

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Cite as: [2010] UKFTT 249 (TC)

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Xentric Ltd v Revenue & Customs [2010] UKFTT 249 (TC) (24 May 2010)
PROCEDURE
Other

[2010] UKFTT 249 (TC)

TC00544

Appeal number: LON/2007/1050

Procedure – application to admit late evidence made shortly before the substantive hearing – whether evidence relevant – whether compelling reason not to admit

FIRST-TIER TRIBUNAL

TAX

XENTRIC LIMITED Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: JUDGE ROGER BERNER

Sitting in public at 45 Bedford Square, London WC1 on 18 May 2010

Michael Goodwin, instructed by The Khan Partnership, for the Appellant

Christopher Foulkes, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

DECISION

1. This is an application by the Respondents dated 29 April 2010 for permission to serve nine witness statements. The Appellant filed on 17 May 2010 a notice of objection to eight of those statements being served. There was no objection to one of the statements, that of Douglas Armstrong, whose evidence effectively replaced that of another HMRC officer who had gone on long-term sick leave, and I have therefore directed that the Respondents be permitted to serve that statement. This decision relates to the other eight witness statements, in respect of which, for the reasons I shall give, I have decided to refuse permission to serve.

2. Michael Goodwin appeared for the Appellant and the Respondents were represented by Christopher Foulkes.

Background

3. The appeal is one of those arising out of investigations by HMRC into Missing Trader Intra Community fraud (“MTIC fraud”), which I need not describe in detail. The disputed decisions of HMRC deny the right of the Appellant to deduct input tax in respect of VAT accounting periods 04/06 and 08/06. In outline, the Respondents say in respect of a total of 27 deals in these periods that they have traced the deal chains to defaulting traders, that the transactions were connected with the fraudulent evasion of VAT and that the Appellant knew or should have known of that fact. In respect of six of the deals in period 04/06 HMRC say they have traced the connection to a defaulting trader through a “simple” chain; in respect of the remaining 23 deals they say they have traced the chain to defaulting traders via contra traders.

4. The appeal (to the then VAT and Duties Tribunal) was made on 12 June 2007. I was referred to a detailed chronology in relation to the witness evidence. The first witness statement, that of David Ball, the HMRC officer who is the principal witness for the Respondents giving evidence in respect of the Appellant and the verification process that was undertaken, was served on 16 November 2007. That was followed on 2 May 2008 by the service of a witness statement on behalf of the Appellant made by Kenneth Olin, who is the managing director of the Appellant. Further witness statements of the Respondents were served on 4 July 2008, and on 27 February 2009. The Appellant served further evidence of Mr Olin on 7 November 2008 and 27 April 2009.

5. On 12 August 2009 a pre-trial review was held at which it was directed that no further evidence be admitted without leave of the Tribunal. It was also directed that the full hearing of the appeal be listed with a time estimate of 15 to 20 days to commence, if possible, on 24 May 2010. Consequential directions were also made to take the matter up to the hearing.

6. On 22 September 2009 the substantive hearing was listed for 20 days commencing on 24 May 2010.

7. On 8 January 2010 there was a hearing to consider an application of the Respondents for additional evidence to be served. This application was allowed on the basis that the evidence was relevant and that the Appellant had sufficient time to consider it and prepare evidence in response prior to the substantive hearing.

8. On 18 March 2010 the Appellant served a fourth written statement of Mr Olin in reply to certain of the Appellant’s evidence, including that served in accordance with the permission of the Tribunal given on 8 January 2010.

9. Following certain disclosure made by the Appellant, and a direction of the Tribunal in this respect on 7 April 2010, the Respondents made an application on 30 April 2010 for permission to serve the witness statements that I have to consider. The statements themselves were received by the Appellant’s representatives between 4 May 2010 and 13 May 2010; some statements were originally sent unsigned, with signed copies being received later in this period.

The witness statements

10. I set out below a very brief description of the evidence contained in the witness statements:

(1) David Ball. This is the fifth witness statement of Mr Ball that the Respondents now seek to serve. The Respondents say that a feature of the Appellant’s transactions and the evidence surrounding the Appellant’s trading is that the director, owner (at the material time he was the ultimate owner) and witness, Mr Olin, is (or was) also a director and owner of another company, EC Trading Aps, which is a Danish company. Both parties rely on the history of the Appellant’s trading and of Mr Olin’s association with EC Trading Aps in support of their cases. Mr Ball’s statement provides additional evidence from the First Curacao International Bank (“FCIB”) in respect of the movement of money in transactions undertaken by the Appellant in the periods preceding the disputed periods, and in respect of EC Trading Aps in February, May and June 2006.

(2) Olabode Ayoola. Mr Ayoola provides evidence in respect of the activities of one of the alleged contra traders, Morganrise Limited. This third statement of Mr Ayoola provides an update on the verification process in respect of Morganrise Limited, and the fact that denial letters have been issued. It sets out brief further information in relation to the deregistration of a number of EU traders connected with Morganrise Limited’s transactions, and states that the input tax credit claimed by the Appellant is accounted for within Morganrise Limited’s broker deals.

(3) Sarah Allen. Ms Allen has provided evidence in relation to Talcoo Traders Limited, an alleged defaulting trader in broker deals conducted by Morganrise Limited. This is the third statement of Ms Allen and provides a brief update in relation to assessments made against Talcoo, including the correction of an error in a previous assessment.

(4) Michael Downer. Mr Downer provides a very brief statement which records that compact disks found during an unrelated search by police of a residential address include details of the FCIB accounts of a number of different businesses and individuals. The details include names, account numbers, user identification numbers, passwords and test key numbers, such that (it is said) the holder of this information could access the accounts and perform transactions. The details of Morganrise Limited’s FCIB account are included.

(5) David Neal. Mr Neal gives evidence in relation to K&M Supplies Limited, another alleged contra trader. His second statement provides an update on information in respect of a number of traders involved in K&M deal chains, and a small amount of additional detail and clarification in respect of his first statement. He also adds observations in respect of the evidence of another served witness, Mr Waxman, which relates to K&M Supplies Limited.

(6) Nikolas Mody. Mr Mody has previously provided a statement in relation to Wildtower Limited, a trader that appears in the transaction chains of the alleged contra trader, Morganrise Limited. This second witness statement provides additional information about the activities of this company, and certain details of an associated company.

(7) James Getchell. This brief statement provides evidence in relation to Fashion Connexions Limited, a freight company, which is said to suggest that the goods did not exist in certain transactions declared by Morganrise Limited.

(8) Dr Kevin Findlay. Dr Findlay has provided a statement that describes the typical distribution channels for the electronic components distribution market (the “white” market), explains the reasons for and describes the legitimate electronic component (“grey”) market, and sets out a view of the tests to perform in considering whether a transaction falls within the legitimate grey market.

The legal principles

11. I start by considering the legal principles that I should apply in determining whether to grant permission to serve the eight witness statements, or any of them.

12. Rule 15(2) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 provides a power both to admit evidence, and to refuse to admit it if “it would ... be unfair to admit the evidence”.

13. Mr Foulkes referred me to the often-cited extract from the judgment of Lightman J in Mobile Export 365 Limited v Revenue and Customs Commissioners [2007] STC 1794. In giving guidance to the Tribunal in that case, Mr Justice Lightman said (at [20]):

“The presumption must be that all relevant evidence should be admitted unless there is a compelling reason to the contrary.”

14. Accordingly, I should first decide if the evidence in question is relevant. If I decide that it is, and should therefore in an ordinary case be admitted, I need then to go on to determine if there is a compelling reason to the contrary.

15. Mr Goodwin referred me to what he termed the basic precept of natural justice, that an appellant is entitled to know the case against him, and that this is particularly important where there is an allegation of fraud or complicity in fraud (see Briggs J in Revenue and Customs Commissioners v Noel Dempster [2008] EWHC 63 (Ch)). This was not in dispute. Mr Goodwin also referred me to the tribunal decision in Europeans Ltd v Revenue and Customs Commissioners (1 September 2008; no 20796) where the chairman (Mr Theodore Wallace) made the point that in a case involving allegations of dishonesty it was particularly important that HMRC address the evidence to be adduced at an early stage and before the appeal is listed. Mr Wallace expressed the view that two months before an appeal already listed is too late for MTIC appeals.

16. As regards whether there is a compelling reason why relevant evidence should nevertheless not be admitted, in Revenue and Customs Commissioners v Brayfal Limited [2008] EWHC 3611 (Ch), Lewison J referred to Commissioners of Customs and Excise v Neways International (UK) Limited [2003] STC 795 and to the requirement set out by Lloyd J in that case, that in considering whether to extend time or otherwise deal with a default, the tribunal should conduct a balancing exercise, weighing the consequences of the default for the innocent party against the possible consequences of any sanction for the party in default. That balancing exercise was held in Brayfal to be equally appropriate in a case where there was an application to admit additional evidence.

17. What is clear from Brayfal is that once prejudice has been identified, it weighs in the balance, and how much weight it should be given must then be determined by the tribunal. One element of that exercise is the question of fairness. Mr Goodwin referred me to Alicja Sosnowska v Dyrektov Izby Skarbowef [2008] ECR I-5129, ECJ, on the question of proportionality and the opportunity to be afforded to a taxpayer whose entitlement to deduct has been withheld to challenge any contention that he has acted fraudulently. He submitted also that EC law recognised the principle of “equality of arms” and that a party to litigation must be afforded a reasonable opportunity to present his case, including is evidence, under conditions that do not place him at a significant disadvantage when compared to his opponent. I accept these points, but I do not think they add any further principles to those set out in Brayfal. They are effectively encompassed in the general principle of fairness in the balancing exercise.

Discussion

18. Mr Foulkes candidly admitted that the service of this evidence is late. He argued that nevertheless the evidence was both relevant and not prejudicial to the Appellant, and that it should be admitted. He said that there was no real prejudice in the sense that the evidence could not be dealt with by the Appellant. He argued that the nature of the Respondents’ case was not altered by the evidence contained in the eight witness statements in question, and that the evidence provides further detail in respect of elements of the Respondents’ case. Some of it updates evidence already admitted. In other respects it provides further relevant and helpful information which will assist the Tribunal in determining the issues in this appeal.

19. The mere fact that evidence is produced late does not of itself preclude it from being admitted. Evidence may be late for a variety of reasons. It may simply have not been discoverable until late in the proceedings, or its relevance may have become apparent only as a result of evidence given, or assertions made, by the other party, even during the course of the hearing itself (see, for example, Commissioners of Revenue and Customs v Earthshine Limited [2010] UKFTT 67 (TC), where the tribunal allowed certain e-mail evidence to be admitted although it had been produced only during the hearing). The question is not the lateness itself, but the degree of prejudice to be weighed in the balancing exercise. But whilst the fact that the evidence is late will not of itself be determinative, the circumstances of a late application will necessarily weigh in that balance.

Relevance

20. I have considered the witness statements and I conclude that the evidence contained in each of them is relevant. Except in relation to the evidence of Mr Ball, Mr Goodwin did not seriously suggest otherwise. He referred to the evidence of Mr Getchell as “remote”, but that evidence does relate to one of the alleged contra traders, and in that context it seems to me that arguments on remoteness go to weight and not to relevance.

21. As regards the evidence of Mr Ball, this relates to transactions of the Appellant before the accounting periods that are in issue in this appeal, and transactions of a non-UK company that is, or was, connected with Mr Olin. I can see the argument that such evidence is not directly relevant to the transactions that are the subject of the appeal, but insofar as it touches upon evidence of Mr Olin, I do not consider that it can be described as not relevant. There would no doubt be a debate about its significance, but that again goes to weight and not to relevance.

Prejudice

22. Mr Goodwin argued that the Appellant would be seriously prejudiced if late evidence were admitted so close to the commencement of the substantive hearing. The hearing was due to start on Monday, 24 May 2010 (although it was agreed at the hearing that the Monday itself would be a reading day), less than a week after the hearing of this application. The application had been made only on 30 April 2010, and the statements had been served at the earliest on 4 May. The case was already substantial, with the trial bundle extending to 35 files. The exhibits served in respect of the new witness statements run to 6 lever arch files, and total something in the order of 2,000 pages.

23. Mr Goodwin submitted that it was simply too late in the proceedings for the Respondents to attempt to adduce further evidence. The Appellant was entitled to know the case against it well in advance of the hearing. The speedy determination of the appeal entails ensuring that the Appellant is able to prepare for the appeal on the basis of knowing the full case that it has to meet. The service of the late evidence would, argued Mr Goodwin, be highly prejudicial to the Appellant, which was at the height of its preparation for the hearing.

24. Mr Goodwin referred me to the history of the service of evidence in this case, in particular the directions agreed between the parties, and approved by Judge Avery Jones on 7 April 2010, which made no provision for the service of further evidence. He argued that the 30 April 2010 application was a clear ambush attempt.

25. Whilst it is always possible for further evidence to be admitted with the permission of the tribunal, regard must be had to the case management process and to directions that have been made in respect of the evidence in general. The purpose of those directions is to enable evidence to be assembled so that each party can have a fair opportunity to prepare its case. They are designed so that a party is not disadvantaged by surprise or ambush. As Lewison J said in Brayfal (at [38]):

“... modern case management attaches importance to a cards-on-the-table approach. It discourages surprises and ambushes.”

26. Mr Foulkes argued that the application to admit the witness statements could not be regarded as an ambush. I accept that the Respondents did not actively seek to obtain an advantage by serving this evidence late. But in my view the reference here to surprise or ambush does not require a deliberate act of a party intended to disadvantage the other. It is the effect on the other party that is material. Viewed objectively, I consider that the 30 April 2010 application did amount to a surprise or ambush in the context of the case management process that had been conducted, both by the tribunal and to an extent by agreement between the parties.

27. Mr Goodwin argued that the prejudice to the Appellant were the application to be granted significantly outweighs any prejudice to the Respondents. The prejudice to the Appellant, he submitted, included the time and effort that would have to be expended by the Appellant when it is at the height of its trial preparation, reviewing the statements, understanding what the documents say and how they support the case that the Respondents wish to advance, and preparing a response if required. This was unfair to the Appellant.

28. On the question of fairness, Mr Foulkes argued that the application had been made as soon as the relevant information came to light. He referred to a case meeting of the Respondents in March 2010 at which time he said that various strands were drawn together and it was appreciated for the first time that certain additional evidence was available. There were, as in all MTIC appeals, a number of officers with responsibility for different traders whose knowledge had to be coordinated; it was inevitable that some of that evidence would become apparent at different times in the process. If that were the process, with a coordination meeting taking place only after a case management exercise designed to avoid surprise and ambush in the production of evidence, and shortly before a hearing that had been fixed since September 2009, then I have to say I regard it as highly unsatisfactory, and not in accordance with the concept of modern case management. Mr Foulkes explained that, as I can readily appreciate, the March 2010 meeting was one of a series of such meetings, but the fact remains that it is apparently as a result of the March 2010 meeting alone that certain evidence, that was already in the possession of the Respondents, was discovered to be relevant to this appeal. This to my mind is not a proper way to conduct the assembly of evidence; the coordination that I was told took place at the March 2010 meeting could in my view, and should, have taken place well before that time.

29. I now turn to consider each of the witness statements to determine in each case if I consider there to be prejudice to the Appellant if I were to permit the statement to be served, and if so whether that prejudice either outweighs, or is outweighed by, the prejudice to the Respondents were I to refuse the application.

Mr Ball’s evidence

30. I turn first to the witness statement of Mr Ball. His new evidence relates to money movements in relation to deals of the Appellant between June 2005 and March 2006, and money movements in relation to three transactions of EC Trading Aps in February, May and June 2006. This evidence has been obtained by tracing the transaction amounts through the FCIB accounts of the relevant trading entities.

31. Mr Foulkes invited me to consider the difficulties, of which the tribunal has heard on a number of occasions, for the Respondents in accessing information from the FCIB servers. Because of the number of requests for access to the relevant computer system, requests are prioritised. In effect there is a queue; as Mr Foulkes put it, those who are closest to a tribunal hearing are at the head of that queue. In my view the internal workings of the system for access to the server on which the FCIB evidence is held cannot be a material consideration in determining the degree of prejudice to an appellant. In this case, indeed, Mr Ball’s evidence shows that normal practice was not followed, and that due to unspecified technical difficulties his evidence was in fact produced by extracting data from requests made by other HMRC officers which had been produced for other cases by officers from HMRC’s Digital Forensic Group.

32. Whilst I appreciate the difficulties that the Respondents must experience in dealing with the large number of MTIC fraud cases that are proceeding through the Tribunal, it must be recognised that a system that operates on a basis that relevant evidence may be accessed, assembled and made available to an appellant only after a hearing is listed, is inherently likely to give rise, depending on the circumstances, to prejudice. In my view, such a process runs contrary to the principles of modern case management, and the cards-on-the-table approach, explained by Lewison J in Brayfal.

33. The new FCIB evidence now produced in Mr Ball’s statement does not relate to the transactions of the Appellant that are the subject of this appeal, and it seeks to introduce such evidence in relation to transactions of EC Trading Aps, a company connected with Mr Olin, the ultimate owner of the Appellant. Mr Foulkes argued that this evidence was produced because Mr Olin’s witness evidence relied upon his own history of dealings in the particular trade in question and through EC Trading Aps. Whilst the need to rebut evidence recently produced by the other party might be a reason for late production of evidence to be weighed in the balance, in this case Mr Olin’s evidence in respect of his background trading and EC Trading Aps, and the early trading of the Appellant, is contained in his witness statement of 7 November 2008. The Respondents were therefore on notice at the time of Mr Olin’s evidence in this regard, and it would have been possible for them to have taken steps at that stage, which would have been within the normal case management process of evidence production, to consider the use of FCIB evidence in this regard.

34. The arguments of the Respondents in relation to the difficulties in accessing the FCIB evidence are, to my mind, further undermined by the fact that FCIB evidence has already been served in relation to the transactions that are the subject of this appeal. The Respondents had access to the FCIB materials for that purpose, and it is clear therefore that it would have been possible to carry out an interrogation of the system and produce the evidence for which permission is now sought, at an earlier stage.

35. In my view the Appellant is prejudiced by the short time before the hearing at which this application has been made. To be treated fairly an appellant must have a reasonable opportunity to consider the evidence and to construct a rebuttal. Although all relevant evidence will assist the tribunal, it will only do so if the party against whom it is directed has a fair opportunity to rebut or throw into question that evidence or any part or aspect of it. Proper consideration of the issues can be achieved only if both parties are given a fair opportunity to prepare their cases in advance of the hearing. I agree with Mr Goodwin that, by reason of the late production of this evidence, which would clearly demand a response, the Appellant has effectively been denied the opportunity of realistically assessing this evidence and seeking to undermine it. The Appellant has been preparing its case on the basis of already substantial evidence. The short time available for consideration of this new evidence is prejudicial to the Appellant.

36. I need to weigh the prejudice that will be suffered by the Appellant against the prejudice to the Respondent were I to refuse the application in respect of Mr Ball’s statement. The prejudice to the Respondents is that they will be deprived of reliance upon this evidence. In this case there is already witness evidence in relation to money movements, through FCIB evidence, for the transactions under appeal. As regards the statements made by Mr Olin in his own witness statement, he will give evidence, and may be cross-examined on what he says there.

37. In the circumstances I have concluded that the late production of this evidence, for which steps to obtain it could in my view have been taken earlier in the process, the prejudice to the Appellant caused by the unexpected production of this new evidence, and the lack of a fair amount of time for the Appellant properly to prepare a rebuttal, do in my view together amount to a compelling reason not to admit this witness statement of Mr Ball at his stage. This will prejudice the Respondents, but I am satisfied that such prejudice does not outweigh the prejudice to the Appellant were I to have allowed the application.

Dr Findlay’s evidence

38. I now turn to consider the witness statement of Dr Findlay. Mr Foulkes argued that Mr Olin has produced substantial evidence of what he claims to be the legitimate grey market. That evidence was produced, I was told, in Mr Olin’s first witness statement (2 May 2008), and it is also included in his witness statement of 7 November 2008. Dr Findlay was, however, only asked to produce his report in April 2010.

39. Dr Findlay’s evidence is substantial. His witness statement alone runs to 66 pages, and there are 27 exhibits. Mr Goodwin argued that the late production of this evidence gave the Appellant no reasonable or comparable opportunity to address the issues raised by Dr Findlay and to seek to rebut that evidence. To do so, argued Mr Goodwin, it would be necessary for the Appellant to instruct its own expert. A possible expert witness had been approached and he had expressed dismay at the request for a report to be compiled in time for the hearing. Mr Foulkes argued that Mr Olin’s previous evidence showed that he would himself be able to address the matters contained in Dr Findlay’s statement, and that the Appellant would be able to cross-examine Dr Findlay and would not thereby be prejudiced.

40. I find there is clear prejudice to the Appellant in the late production of Dr Findlay’s evidence. Although Dr Findlay produced his report in April 2010, the terms on which it was produced were under an engagement letter between HMRC and PricewaterhouseCoopers of 31 March 2009. It is clear to me that this evidence, which has been produced in connection with the evidence of Mr Olin served in 2008, could have been sought and produced much earlier and within the normal case management process of evidence exchange. The evidence is substantial, detailed, and expert in character. The Appellant has been deprived of a realistic opportunity to instruct its own independent witness, and there would be no equality of arms in the suggestion that Mr Olin himself could seek to challenge any element of Dr Findlay’s evidence.

41. In the absence of such equality I conclude that the prejudice to the Appellant were I to allow Dr Findlay’s witness statement to be served clearly outweighs the prejudice to the Respondents of it not being admitted. A party must be given a fair opportunity to introduce its own independent evidence in rebuttal of independent evidence sought to be adduced by the other party. The late production of the witness statement of Dr Findlay deprived the Appellant of that opportunity here, and this is in my view a compelling reason why I should not permit the service of Dr Findlay’s witness statement at this stage.

Mr Downer’s evidence

42. Mr Downer’s evidence relates to FCIB account details obtained from certain CDs that had been discovered as part of a criminal investigation. Mr Foulkes said that this information had become available in respect of civil cases only in early 2010, although Mr Downer’s witness statement itself states that the disks were deemed to be irrelevant to the police investigation as long ago as October 2006, when they were passed to HMRC. Mr Downer himself obtained copies of the CDs in February 2008. It appeared during the hearing of this application that the availability of this evidence had become apparent to the team responsible for this appeal only at the March 2010 case conference to which I have referred earlier.

43. Mr Goodwin argued that this evidence of Mr Downer was sought to be relied upon unfairly. There was no reasonable explanation why it had been produced late. The Appellant would need to consider how such evidence could be challenged. Mr Foulkes, on the other hand, argued that this evidence, in common with other evidence in relation to the alleged contra traders, was evidence that the Appellant would simply say it had no knowledge of, and there would be no rebuttal.

44. Whether the Respondents consider the Appellant will be able to, or will be advised to, seek to rebut particular evidence is, in my respectful view, beside the point. It cannot be right that relevant evidence should be admitted late on the basis that the party seeking to introduce it does not expect the other party to be able to, or will wish to, contravert it. Even if a party claims to have no knowledge of the circumstances to which the particular evidence relates, that party must be given a fair opportunity to consider the detail behind the evidence, its provenance and reliability, in order to be able to consider making a challenge to any inferences that might be sought to be drawn from it. The production of such evidence late in the process, shortly before the hearing, does therefore prejudice the Appellant in this case.

45. In my view, this prejudice to the Appellant outweighs any prejudice to the Respondents in refusing this application in respect of Mr Downer’s statement. There is already substantial evidence in relation to Morganrise Limited, including FCIB evidence, on which the Respondents may base their case.

Mr Getchell’s evidence

46. Mr Getchell is a new witness in this case. His witness statement refers to visits to a freight forwarder, Fashion Connexion Limited, between 2006 and 2007. In September 2006 Mr Getchell says that he faxed to Mr Bell certain documentation that had been seen at a visit that month to Fashion Connexion Limited, and advised him that there was evidence pointing to a conclusion that Fashion Connexion Limited had never arranged transport in relation to certain deals concerning Morganrise Limited. His witness statement also refers to e-mail exchanges between himself and Mr Ayoola from March to July 2007.

47. It appears that, although this information had been available since 2007, it only became apparent at the March 2010 case conference that it should be adduced as evidence in this appeal. I have referred above to my views on the process that resulted in conclusions being reached on evidence only in March 2010. Mr Getchell’s witness statement clearly demonstrates that HMRC officers who were concerned in this appeal, and who themselves produced witness statements in the normal course of evidence exchange, were aware of the availability of this evidence. The process whereby evidence as assembled ought to have been organised so that Mr Getchell’s evidence was produced in good time. The fact that it was not is in my view clearly prejudicial to the Appellant.

48. Mr Foulkes argued that Mr Getchell’s evidence related to a simple matter and did not require investigation by the Appellant. For the reasons I have given already in relation to Mr Downer’s evidence, I consider this argument to be misconceived. The Appellant is entitled to fair notice of evidence of this nature, and a fair opportunity to consider if, and if so how, to seek to challenge it. The late service of this evidence deprives the Appellant of that fair opportunity, and the Appellant is thereby prejudiced. In my view, that prejudice to the Appellant outweighs any possible prejudice to the Respondents in not being able to rely on this evidence.

The evidence of the remaining witnesses

49. In relation to the remaining witness statements (those of My Ayoola, Ms Allen, Mr Neal and Mr Mody), it was submitted by Mr Foulkes that these were in the nature of updating the previous witness statements of those witnesses. I have read the statements now sought to be introduced. Some of the contents can fairly be described as mere updating, and in some cases correction of earlier statements made by some of the witnesses. However, there is, as Mr Foulkes himself quite properly drew to my attention, considerable new material reflected in these statements. Mr Foulkes made the point, which I accept, that investigations in cases of this nature are dynamic and ongoing, and it is inevitable, therefore, that further information will come to light at a late stage. I am not, however, persuaded that, in respect of the evidence contained in these statements, that can be a satisfactory explanation. There is nothing in the statements that suggests that the evidence was available only from March 2010; to the contrary, dates of correspondence between HMRC officers referred to in the statements are from 2008 and 2009. I conclude that this was material available to HMRC at an earlier stage, that it could have been provided to the Appellant as witness evidence in the course of the normal evidence exchange and that it was only at the March 2010 conference that the need to provide witness statements in these respects was appreciated.

50. The late production of this evidence is prejudicial to the Appellant for the reasons I have already given, and which I need not repeat. In my judgement, the prejudice to the Appellant were I to give permission for this evidence to be served outweighs the prejudice to the Respondents if I refuse the application in respect of these statements. To the extent that the new evidence either corrects something that is included in an earlier witness statement, or is something that would render existing evidence of that witness untrue or misleading, this can be conveniently dealt with, subject to permission of the tribunal hearing the appeal, by some additional questions by way of examination-in-chief. To the extent that the witness statements contain new evidence outside this category, the Appellant is prejudiced by the lateness of the production of this evidence, and in my view that prejudice is not outweighed by the prejudice to the Respondents if the evidence is not admitted.

Decision

51. For the reasons I have given, I decide that, although the evidence contained in each of the eight witness statements with which I am concerned in this application is relevant, in each case there is a compelling reason why that evidence should not be admitted. Accordingly, I refuse the Respondents’ application for permission to serve the witness statements of David Ball, Olabode Ayoola, Sarah Allen, Michael Downer, David Neal, Nikolas Mody, James Getchell and Dr Kevin Findlay.

52. As discussed with the parties, I reserve the question of costs of this application.