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United Kingdom VAT & Duties Tribunals Decisions

You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Prudential Insurance Company Ltd v Revenue & Customs [2006] UKVAT V19675 (12 April 2006)
URL: http://www.bailii.org/uk/cases/UKVAT/2006/V19675.html
Cite as: [2006] UKVAT V19675
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Prudential Insurance Company Ltd v Revenue & Customs [2006] UKVAT V19675 (12 April 2006)

     
    19675
    PRACTICE – public interest immunity – parts of Manuals withheld from publication because disclosure would prejudice the assessment or collection of tax or assist tax avoidance or evasion – PII should be claimed before the Tribunal in the same way as in court with a certificate by the Commissioners – after inspection of the documents the claim for PII was upheld
    LONDON TRIBUNAL CENTRE
    PRUDENTIAL INSURANCE COMPANY LIMITED Appellant
    - and -
    THE COMMISSIONERS FOR HER MAJESTY'S
    REVENUE AND CUSTOMS Respondents
    Tribunal: DR JOHN F AVERY JONES CBE (Chairman)
    Sitting in private in London on 4 April 2006
    Andrew Hitchmough, counsel, instructed by PricewaterhouseCoopers LLP for the Appellant
    Rebecca Haines, counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents
    © CROWN COPYRIGHT 2006
    DECISION ON APPLICATIONS
  1. This is an application by the Appellant opposing Customs' claim for public interest immunity ("PII") for certain documents, and an application by Customs to set aside a witness summons on Mr R Taylor, the reviewing officer. The appeal itself relates to the refusal of Customs to allow a company to be admitted to the Appellant's VAT group on the ground that such refusal was necessary for the protection of the revenue. Mr Andrew Hitchmough appeared for the Appellant and Miss Rebecca Haines for Customs.

  2. On 1 June 2005 following a directions hearing on 27 May 2005 I directed (inter alia):

    3. "3. That the Respondents provide the Appellant with copies of all requested documents included within the list of documents, unless the Respondents claim such documents are privileged under Rule 20(4) or subject to public interest immunity. Any claim of public interest immunity shall be subject to the adjudication of this Tribunal."
  3. Customs' list of documents prepared by Ms Hilary Pawlik, senior lawyer, contained the following:

    4. "The Respondents will not produce copies of the following documents in their possession because they are by their very nature privileged from production in the appeal under Rule 20(4) of the Tribunal Rules, and/or are subject to public interest immunity, and/or are irrelevant:
  4. [documents which are accepted to be privileged]

  5. HMCE Manual, Volume VI, the whole of paragraphs 10.34, 10.35, 10.41, 10.42 and 10.45, the whole of Table 6, and Table 24 (limited to item 4, Protection of the Revenue, paragraphs (a) and (b)).

    6. The Appellant seks disclosure of the last paragraph of item 10.44 of HMCE manual, Volume VI. This paragraph concerns conditions of issue of a notice of direction, and is irrelevant to this appeal or the making of the appealed decision, and therefore the Respondents do not propose to produce a copy of it to the Appellant."
  6. On 3 April 2006 the Appellants made a further application for the disclosure of the equivalent passages in the revised version of the Manual. This application had not been received by Customs but they agreed to treat it as part of the present application.

  7. Mr Hitchmough, for the Appellant, contends:

    8. (1) It is necessary for the Appellant to see the documents for which PII is claimed because in arguing that Customs could not reasonably have been satisfied that refusal to allow the grouping was necessary for the protection of the revenue (s 84(4A) VAT Act 1994) he needs to know whether the decision was made in accordance with the internal guidance, and if so whether the guidance is itself reasonable, and if not, whether it was reasonable to depart from the guidance.
    (2) The documents required relate to an earlier version of the Manual and so there is even less reason for the claim to PII. The fact of the revised version of the Manual might indicate that the earlier version was considered deficient.
    (3) The tests for claiming PII are first, that substantial harm might be caused to the public interest by their disclosure, and secondly, that the public interest in preserving the confidentiality of the documents must outweigh the public interest in securing justice, see Burmah Oil v Bank of England [1980] AC 1090. On the first limb even if the documents might be used for tax avoidance there is nothing to suggest that they would in fact be so used; or that such avoidance would be successful or substantial; that avoidance is not illegal; and there are regulations requiring taxpayers to disclose details of avoidance; and that the version of the Manual has been superseded. On the second limb in the absence of a certificate claiming PII the Tribunal must itself weigh up the two public interests, now taking into account the right to a fair trial in the Human Rights Convention.
    (4) The current procedure relating to PII claims is set out in statements in the House of Commons by the Attorney-General and by the Lord Chancellor in the House of Lords on 18 December 1996 made following the Report by Sir Richard Scott on the Matrix Churchill case. The Attorney-General said:
    "Under the new approach, Ministers will focus directly on the damage that disclosure would cause. The former division into class and contents claims will not longer by applied. Ministers will claim public interest immunity only when it is believed that disclosure of a document would cause real damage or harm to the public interest.
    That new approach constitutes a change in the practice to be adopted by Ministers, but fully respects existing legal principles, as developed by the courts, and is subject to the supervision of the courts. It also accords with the view expressed by the present Lord Chief Justice that
    'public interest immunity should only be claimed for the bare minimum of documents for which the claim of serious harm can be seen to be clearly justified.'
    The Government intend that the test shall be rigorously applied before any public interest immunity claim is made for any government documents. It is impossible in advance to describe such damage exhaustively. The damage may relate to the safety of an individual, such as an informant, or to a regulatory process; or it may be damage to international relations caused by the disclosure of confidential diplomatic communications.
    Normally it will be in the form of direct and immediate harm to, for example, the nation's economic interests or out relations with a foreign state. In some cases, it may be indirect or longer-term damage to which the disclosure of the material would contribute, as in the case of damage to a regulatory process. In any event, the nature of the harm will be clearly explained.
    This new, restrictive approach will require, so far as possible, the way in which disclosure could cause real damage to the public interest to be clearly identified. Public interest immunity certificates will in future set out in greater detail than before both what the document is and what damage its disclosure would be likely to do—unless to do so would itself cause the damage that the certificate aims to prevent. That will allow even closer scrutiny of claims by the court, which is always the final arbiter…".
  8. Miss Haines, for Customs, contends:

    9. (1) It did not appear that there was any argument on relevance at the hearing on 27 May 2005 and accordingly it was open to her to argue that the documents were irrelevant.
    (2) The thought process behind the decision under appeal is set out fully in the statement of case and in two witness statements, which contain all the information necessary for the Appellant to contest the reasonableness of the decision. The unpublished parts of the Manual do not contain anything relevant to the decision in this case.
    (3) There was no objection to the Tribunal inspecting the documents for which a claim for PII was made, and she handed them over to me (and the later version of the Manual was sent to me on the following day).
  9. The documents for which PII is claimed are parts of the Manual that are not published "because disclosure would prejudice the assessment or collection of tax or assist tax avoidance or evasion." I consider that the formula used by Customs in their list of documents in this case of "privileged and/or subject to PII and/or irrelevant" is unhelpful, and Customs should in future state which they consider applies. If the claim is for PII it should be accompanied by a certificate made by the Commissioners in accordance with the Attorney-General's statement in the same way as it would be in a claim in proceedings before a court. There seems to be no dispute that it is proper for this Tribunal to adjudicate on such claims arising in the course of an appeal to the Tribunal. As a general point, I can accept that Customs have made a careful decision not to disclose parts of their Manuals for the reason stated, but in any particular case this still has to be justified. There is also no certificate in this case and therefore there is nothing to say that Customs have weighed up whether they should be disclosed in the circumstances of this case taking into account the prejudice to the Appellant in not seeing them.

  10. So far as relevancy is concerned, the direction made under Rule 20(3) requires that "it appears necessary for disposing fairly of the proceedings" but that does not in my view preclude Customs from challenging the relevancy of any documents, particularly of documents that the tribunal cannot have seen before making the direction.

  11. I have read the documents for which PII is claimed. I can say in general terms that the unpublished parts of the version of the Manual existing at the relevant time contain what has, in my view, been aptly described in the correspondence as "the operational criteria the Commissioners use when an application is made." Although procedural, publication could cause serious harm if taxpayers knew what Customs were looking out for by taxpayers presenting relevant facts in a way that avoidance would be unlikely to be detected. I therefore consider that the first limb is satisfied. The same is true of the unpublished parts of the revised version of the Manual with the exception of paragraph 59 which it can be seen from the heading (which is published) that it contains examples of situations where revenue protection powers may be used. These example are new to that version of the Manual and do not contradict anything in the earlier version. They are therefore not relevant to the present appeal. On the second limb, there is nothing in the unpublished parts of the then current Manual that would assist the Appellant in knowing whether the decision appealed against was, or was not, in accordance with the Commissioners' policy, or in showing whether the decision in this case was unreasonable.

  12. Accordingly, I uphold Customs' claim to PII.

  13. In the second application Miss Haines applies to set aside the witness summons on Mr Richard Taylor, the reviewing officer, on the grounds that his evidence is immaterial to the issue before the Tribunal. The appeal is against the original refusal, not against the review. The Appellant has a copy of the review which upholds the refusal to allow grouping in the original decision but does not support one of the grounds of the decision. I do not consider that anything would be gained by the evidence of Mr Taylor, and I set aside the summons.

    14. JOHN F AVERY JONES
    CHAIRMAN
    RELEASE DATE: 12 April 2006

    LON/04/2392

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