United Kingdom VAT & Duties Tribunals (Excise) Decisions

Morris v Revenue & Customs [2005] UKVAT(Excise) E00894 (19 July 2005)

E00894

EVASION PENALTIES – Human Rights – Right to hearing within reasonable time – Powers of Tribunal in event of breach – Held on facts that no breaches – Applications dismissed

LONDON TRIBUNAL CENTRE

KARL MORRIS (LON/99/8004) Appellant

and –

HM REVENUE AND CUSTOMS Respondents

KENNETH CECIL FITCH (LON/97/1285 Appellant

and –

HM REVENUE AND CUSTOMS Respondents

MARCUS PAUL HATTERSLEY (MAN/2001/810) Appellant

and –

HM REVENUE AND CUSTOMS Respondents Tribunal: THEODORE WALLACE (Chairman)

Sitting in public in London on 20-22 June 2005

Andrew Young, counsel, instructed by Vincent Curley & Co, for the Appellants

Caroline Neenan, counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2005
DECISION
1. This decision concerns applications by three Appellants in separate appeals, all of whom are all represented by Vincent Curley & Co, for appeals against dishonest evasion penalties to be allowed for want of prosecution. Mr Morris appeals against penalties for evading betting duty which is entirely a domestic tax. The other two appeals concern VAT which is governed by the Sixth Directive. The applications were heard together at the request of the Appellants since they involve the same principles. The facts of course are different and require separate consideration in each case.
2. All the penalties although civil under UK law involve criminal charges for the purposes of Article 6.1 of the European Convention on Human Rights, the first sentence of which is as follows,

"In the determination … of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law."

3. The Appellants submit that there has been a breach of Article 6.1 and that the Tribunal Rules 1986 enable the Tribunal to direct that the appeals should be allowed.

Rules 19(3) provides,

"Without prejudice to the preceding provisions of this rule a tribunal may of its own motion or on the application of a party to an appeal or application or other person interested give or make any direction as to the conduct of or as to any matter or thing in connection with the appeal or application which it may think necessary or expedient to ensure the speedy and just determination of the appeal including the joining of other persons as parties to the appeal."

Rule 19(4) gives the Tribunal power to allow or dismiss an appeal or application if any party fails to comply with a direction.

Facts in the application of Mr Morris

4. Mr Morris appealed on 22 January 1999 against a review decision confirming a penalty notified on 12 November 1998 for dishonestly evading betting duty between March 1996 and April 1998, the penalty having been mitigated by 50 per cent to £7,652.
5. Following visits to his betting shop when Customs took up betting slips, Mr Morris was interviewed on 21 April 1998 after being given Notice 210 "Civil Evasion Penalty Investigation." The interview was tape recorded.
6. In late April following the interview Mr Morris instructed Mr Curley to act for him. Mr Curley is a former Customs officer who is now in private practice as a consultant. After correspondence and a meeting Mr Morris signed a schedule of underdeclared betting duty from 03/96 to 04/98 declaring it to be a full estimate of the duty "not paid through my dishonesty." The schedule was agreed by Customs and served by the Appellant on 31 October 1998. The penalty with 50 per cent mitigation was notified on 12 November. The penalty was confirmed on review and Mr Morris appealed on 22 January 1999 stating, "The penalty is excessive and does not fully reflect the co-operation provided."
7. On 25 June 1999 following two extensions of time and a direction by the Registrar the Statement of Case was served. The appeal was stood over for two months at Mr Curley's request for discussions as to a possible settlement and a further stand over was given to 9 November because Mr Curley was awaiting copy documents.
8. In late 1999 Mr Curley raised the point that the penalty is criminal for Human Rights purposes and asked Customs as the prosecuting authority for legal aid. An amended notice of appeal raised various points including the application of the Police and Criminal Evidence Act. Discussions followed between the parties as to joining Mr Morris' appeal with that of Han and Yau, for whom Mr Curley also acted, to decide whether the penalties were criminal for the purposes of Article 6.1 of the European Convention on Human Rights.
9. After a hearing on 24 July 2000 the President directed by consent that a series of appeals including that of Mr Morris and Han and Yau should proceed to a preliminary hearing on the applicability of Article 6. The preliminary hearing was held on 5 December 2000 with Kenneth Parker QC appearing for Customs and Mr Oliver decided that Article 6.1 did apply [2000] VATTR 312.
10. Customs appealed with leave direct to the Court of Appeal. Their appeal was dismissed by a majority on 3 July 2001 [2001] STC 1188. Permission to appeal to the House of Lords was granted but was not pursued.
11. The implications of the application of Article 6.1 were not considered by the Tribunal and were not therefore the subject of the appeal to the Court of Appeal. In particular the applicability of the Police and Criminal Evidence Act and the standard of proof were not resolved, although observations were made by the Court.
12. No steps were taken by either party or the Tribunal following the decision of the Court of Appeal in July 2001 until 9 September 2002 when the Tribunal sent a letter for dates to avoid for an appeal hearing.
13. Vincent Curley & Co wanted to have a Tribunal decision in Han and Yau as to the burden of proof and standard of evidence and instructed leading counsel. They asked for Mr Morris' appeal to be stood over meanwhile. Customs did not oppose the application and the appeal was stood over on 11 November 2002 for 6 months or 6 weeks from the decision in Han and Yau if sooner.
14. In the event the appeal in Han and Yau was allowed by the Tribunal on 15 May 2003 by reason of the failure of Customs to comply with a direction of the Tribunal.
15. A direction hearing on 12 June 2003 was adjourned for 14 days for inquiries as to the whereabouts of the betting slips. On 7 July the Appellant applied for the appeal to be allowed because Customs had not notified the Appellant within 14 days. On 15 July Customs notified the Tribunal that the slips were held at Cardiff.
16. After a hearing on 25 September 2003 the Tribunal dismissed the application for the appeal to be allowed under Rule 19(4) and directed the Appellant to serve a skeleton argument in support of the separate submission that the appeal should be allowed under Rule 19(3) applied in accordance with Article 6.1 providing for "a fair and public hearing within a reasonable time."
17. The Appellant served a skeleton argument and applied for the application to be joined with those of Mr Fitch, Mr Hattersley and others to argue the issue of want of prosecution.
18. On 11 December 2003 the Tribunal directed that brief particulars be provided of the facts relied on with supporting witness statements.
19. On 19 March 2004 the Tribunal directed the application of Mr Morris to be heard with one of the other applications not before 24 May 2004.
20. On 5 April 2004 the Appellant asked for the matter to be stood over to consider the Tribunal decision in Tuppen v Customs and Excise Commissioners on 14 April 2004 that the Tribunal does not have power to allow an appeal under Rule 19(3). On 26 May the Appellant asked for a further stand over to 30 June 2004.
21. On 26 May 2004 Mr Curley wrote to the chairman of the Board of Customs and Excise asking the Commissioners to use their discretion to allow the appeals which are the subject of this hearing and five other appeals by reason of want of prosecution.
22. Miss Ceri Jenkins, Head of Tax and Excise Litigation, responded that Customs did not accept that the cause of any major delay lay with them and stating that the Tribunal should decide the matter.
23. On 14 July Vincent Curley & Co asked for a further stand over with a view to judicial review proceedings. In the event no such proceedings were taken.
24. On 8 October Vincent Curley & Co asked for a pre-trial review in nine appeals together including that of Mr Morris.
25. On 25 February 2005 the Tribunal gave directions for these three applications to be heard together for two days on 20 and 21 June and gave directions for skeleton arguments and witness statements.
26. During the application hearing it became clear that, in spite of the signed schedule referred to at paragraph 6 above, the case for Mr Morris is that an employee had dishonestly altered the betting slips without the knowledge of Mr Morris and that he himself had not been dishonest. The Tribunal said that an application should be made to amend the grounds of appeal. Mr Young submitted amended grounds of appeal. Miss Neenan did not object to the amendment while not accepting the factual basis. I gave leave.
27. In a statement Mr Curley said that he was instructed that the betting slips had been altered by a member of staff and that Mr Morris had no way of knowing what the amounts of the original bets were. The handwriting on the slips would be an issue if the application that the appeal be allowed for want of prosecution did not succeed.
28. Mr Young told me on instructions that the betting business was sold by Mr Morris in 2003. A manageress ran the business and made the returns. Mr Curley was not told of the sale at the time and Mr Morris no longer held the business records so that it is no longer possible to collate the evidence.
29. Miss Neenan informed me that Customs still hold a sample of the original betting slips at Cardiff and the Appellant had been given an opportunity to inspect.
30. In a further statement Mr Curley said that in April 2001 the Lord Chancellor announced that civil legal aid would be extended to penalty appeals in the Tribunal but that this would be means tested. The financial threshold was very low and Mr Morris did not qualify.

Submissions on the facts concerning Mr Morris

31. Mr Young submitted that there was a criminal charge for the purposes of Article 6.1 when Mr Morris was interviewed on 21 April 1998 and Notice 210 was read to him. That is now over seven years ago. He said that it is not a complicated case such as might justify such a delay. Due to the lapse of time it was not now possible to collate the evidence as to the betting slips. Further, allegations by Customs of creeping disclosure and refusal to attend an interview both of which are disputed were not made in the Statement of Case but were only made in October 2003 when the witness statements were served for Customs.
32. He said that legal aid had been requested for Mr Morris in December 1999 but Customs had refused. There was no equality of arms. The test case with Han and Yau had been funded by Customs, however funding had ceased with the Court of Appeal decision. Customs had been wrong to dispute the application of Article 6.1 Mr Morris could not afford to take up the implications of Han and Yau and had waited for that case to be concluded. However that appeal was allowed because Customs failed to comply with a Direction. Mr Young said that he was reluctant to blame anyone for the delays in the case of Mr Morris but delays there had been. The Statement of Case took five months and Customs did not know the whereabouts of the betting slips at the pre-trial review in June 2003. The lack of funding available to Mr Morris had added to the effect of the delays. He submitted that given the delay from April 1998 a fair hearing is no longer possible for Mr Morris.
33. Miss Neenan said that it was for the Appellant to identify the actual delays for which the authorities are said to be reasonable. He could not complain of the delays caused by his own stand over applications. The time trying to obtain legal aid is not relevant : there is no evidence of excessive delay by the Legal Services Commission. The time taken to resolve the relevance of Article 6.1 was justified : the Court of Appeal had accepted a direct appeal. She said that no unreasonable delay had been shown in progressing the appeal of Mr Morris.

Facts in the application of Mr Fitch

34. On 6 September 1997 Mr Fitch, a building contractor, appealed against evasion penalties totalling £9,582 notified to him on 15 September 1995 for the period 1 June 1991 to 30 November 1994, mitigation of 35 per cent having been allowed.
35. Mr Fitch had attended a tape recorded interview on 24 November 1994 when the Notice 730 was invoked. He was reminded of Notice 730 at a further interview on 26 April 1995. Assessments to tax were notified on 27 July and the penalty followed on 15 September 1995. The penalty notice stated that he could request a reconsideration by the local office or could appeal to an independent VAT Tribunal. The letter did not state the time limit but stated that the procedure and time limit are in Notice 700 or the Tribunal's explanatory leaflet.
36. On 22 January 1996 Mr Fitch wrote saying that he had not received the penalty letter until sometime later and that the penalty was not fair, since the money had been paid to contractors on whose behalf he had signed and no VAT had been charged because the contractors were not VAT registered. On 1 February 1996 a firm of accountants wrote that they had been asked by Mr Fitch to investigate the claim for tax. On 14 February 1996 he wrote to Customs "I wish to make it clear that I am appealing." He did not serve a notice of appeal but instructed the accountants to investigate the matter. Desultory communication and correspondence followed and on 3 April 1997 a Surveyor wrote that "the proper recourse is to appeal to the VAT Tribunal.". The accountants replied to Customs on 22 April 1997 giving "notice of appeal" but without filling in a Notice of Appeal. On 28 July 1997 the Surveyor wrote that he could not understand why if Mr Fitch felt so strongly he had not appealed to the Tribunal stating that the tax and penalty were not due; he wrote that he had on previous occasions "indicated that this is the proper course of action in this case." The accountants asked for the appeal form and it was eventually received by the Tribunal on 10 September with an application for leave to appeal out of time.
37. The application for leave to appeal out of time was listed on 23 October 1997and, after a two minute hearing in the absence of the Appellant at which Customs' solicitor submitted that there were no grounds for allowing the application, the application was dismissed.
38. Mr Fitch telephoned the Tribunal two days later stating that he had been taken ill on his way to the hearing and asked for the date to be reset. It is clear that he had not received the direction. On 27 November the Tribunal directed that the application be reinstated and that the Appellant provide a list of all correspondence relied on. It appears that none of this correspondence was before the Tribunal on 23 October.
39. On 19 February 1998 his accountants provided 20 pages of correspondence apologising for the delay due to Mr Fitch's illness in January.
40. Customs maintained their opposition to the application and after a hearing of three-quarters of an hour on 15 May 1998 leave was granted. The direction required Customs to return all documents relating to the Appellant's business by 22 May, directed an amended notice of appeal by 19 June with both Lists of documents and Customs' Statement of Case by 3 July. An amended notice of appeal was served on 8 June. Customs asked for more details of the grounds and asked for a stand over to 3 August.
41. A brief Statement of Case and List of Documents was served by Customs on 25 November 1998 on the day before a non-compliance hearing. On 31 December 1998 Mr Fitch wrote in a letter that his defence was that the tax assessed "is upon amounts I collected from customers for payment directly to other tradesman."
42. Mr Fitch did not attend a directions hearing on 22 April 1999, his accountants stating that he had not received the notice sent to him. The Tribunal directed that dates to avoid and a time estimate be provided for the appeal hearing. On 3 June Mr Fitch's accountant asked for a stand over of one month. Listing information was not provided by either side until 4 November when Customs gave a time estimate of 5 days but without giving avoid dates.
43. On 12 January 2000 at a hearing when the Appellant did not appear due to gastric influenza, the Tribunal directed that his accountants be removed from the record, that Mr Fitch should file a defence and that Customs state which witnesses were to be called. On 22 March 2000 the Tribunal directed that unless the defence was served by 17 May the appeal would be dismissed. On 15 May Mr Fitch wrote outlining his defence but asking for more time. Customs consented but no defence had been served by 20 July when another "unless" order as given.
44. On 4 August the Tribunal received a lengthy defence together with other documents. Customs served a Reply on 23 August. Mr Fitch responded on 14 September suggesting a meeting to discuss a settlement. Customs served statements by 8 witnesses. On 18 October Mr Fitch required the attendance of all eight witnesses.
45. On 15 January 2001 the Tribunal directed a stand over for 60 days to consider the implications of Article 6 of the Human Rights Convention following Han and Yau and Others v Customs and Excise Commissioners [2002] V&DR 312 decided by the Mr Stephen Oliver QC on 19 December 2000.
46. On 11 April 2001 the Tribunal wrote to Mr Fitch informing him that public funding was now available for certain appeals and that any applications should be made to the Legal Services Commission.
47. On 21 May Mr Fitch instructed Mr Curley to act and on 22 May Mr Curley applied for extensive disclosure from Customs.
48. On 8 June the President directed that the appeal be stood over for the Court of Appeal decision in Han and Yau or if later for the decision of the Tribunal in A M Rahman (LON/2000/172). Judgment was given in Han and Yau on 3 July 2001 [2001] STC 1188, however Rahman has yet to be decided.
49. Customs wrote on 21 January 2002 stating that they were anxious to progress the matter but making no reference to the direction of 8 June 2001 for a stand over. On 23 May 2002 Customs provided Mr Curley with some documents which he had requested. On 17 June Customs wrote to the Tribunal a letter including the following,

"The Commissioners are concerned with the lack of progress in this matter. They are concerned that the witnesses' recollections may have been dulled by the effluction of time. The appellant is also entitled to a speedy trial. In those circumstances the Commissioners seek a directions hearing so that the matter may proceed."

Mr Curley responded by asking for the case to be stood over for the decision of the Tribunal in Han and Yau which involved issues as to the admissibility of evidence and the burden and standard of proof. Customs said that they would not object to a stand over for the decision in Islam and this was directed. That decision was released on 8 October 2002 (Decision 17834).

50. At the request of Customs a direction hearing was listed on 25 February 2003 but was postponed to 24 March at the Appellant's request. The parties agreed a direction by consent on 19 March.
51. On 30 June and 23 September 2003 Mr Curley wrote that the Appellant was having extreme difficulties in obtaining information because the events were between 1991 and 1994.
52. On 21 October 2003 Mr Curley applied for this and other appeals including those of Mr Morris and Mr Hattersley to be allowed for want of prosecution. Thereafter the chronology is the same as in the appeal of Mr Morris.
53. Mr Fitch said in a statement that he and the accountants then representing him had tried to resolve the dispute with Customs but to no avail. He had written three times to Customs in early 1996 stating that he intended to appeal. In April 1997 at Customs' suggestion, his accountants wrote that he was appealing. When the application for leave was listed in October 1997 the Surveyor was not opposing it. He could not attend because he was taken ill on the day but had expected the application to be a formality. He stated that Customs had reneged on its consent resulting in a delay until May 1998 when leave was granted.
54. He stated that his accountants may have been unfamiliar with Tribunal practice and were eventually removed from the record in January 2000. He needed extensions to serve his defence because he thought that he had to gather his evidence first. This was already difficult in 2000. He stated that out of ten relevant witnesses he has only had a positive response from one. One has died, two are abroad; two have not responded to repeated requests; one cannot be found and three have said that as the transactions took place so long ago they no longer have the documentation available, cannot remember the detail and do not wish to be subjected to an adversarial hearing in the circumstances.

Submissions on the facts concerning Mr Fitch

55. Mr Young said that an undue time passed from the initial taped interview in November 1994 and the imposition of a penalty in September 1995 for a period going back to 1991. He said that it was inappropriate for Customs to have objected to an extension of time to appeal, submitting that a late appeal against penalties for dishonesty should be allowed unless there are exceptional reasons, because an appellant is innocent until proved guilty. He said that by the time the Statement of Case was served in 1998 it was four years from the interview.
56. He said that the underlying problem for Mr Fitch was lack of funding resulting in inequality at arms between the parties. There had been a delay in serving the defence because the Appellant did not know what he was doing. When Mr Curley was instructed in 2001 it was on a contingency basis; to date Mr Fitch's representatives had been paid nothing. They had to cut the coat according to the cloth. Customs should not have assumed that Mr Fitch had sufficient knowledge of legal procedures; he should not be blamed for the delay in appealing, he thought that he had appealed.
57. Miss Neenan said that the penalty notice was well within the time limit. She did not accept that Customs had reneged on an undertaking not to seek leave to appeal out of time. The accountants' unfamiliarity with the appeal process could not found an argument based on unreasonable delay. Customs had been entitled to oppose an extension of time to appeal.
58. She said that Mr Fitch could not have been surprised by the matters relied on in the Statement of Case. He knew what the case was and could have collected the evidence. The case would turn on his evidence as to the arrangements with his contractors. She said that there was nothing to justify a finding of unreasonable delay. She did not accept that there was insufficient evidence for a fair trial.

Facts in the application of Mr Hattersley

59. Mr Hattersley appealed by notice served on 5 April 2001 against an assessment on him as a director of Eurocom Cellular Wholesale Traders Ltd ("Eurocom") of penalties totalling £35,712 by reason of VAT dishonestly evaded by the company from 17 May 1997 to 30 April 1998. The penalty assessment on Mr Hattersley was dated 24 November 2000 and followed his arrest on 28 April 1998 on suspicion of being knowingly concerned in the fraudulent evasion of VAT and his interview under caution at a police station in the presence of his solicitor and his further interview under caution on 29 June 1998.
60. Assessments were made on Eurocom in April 1999, although that company was in fact dissolved in March 1999. On 4 October 2000 Mr Hattersley's solicitor was informed that he would not be prosecuted but that a civil evasion penalty was being considered. On 20 November 2000 Mr Hattersley was notified of apportionment on him of the evasion penalty. It appears from the notice that the full amount of tax liable to penalty was £142,859, that 75 per cent mitigation was allowed and that the penalty was rounded down.
61. The appeal was lodged on 5 April 2001 by Mr Hattersley, his legal aid having ceased when he was told he would not be prosecuted. He did not apply for an extension of time to appeal but ticked the box stating that it was in time. Mr Hattersley served a brief List of Documents on 18 May 2001 stating that all relevant documents and originals were held by Customs. Customs asked for and were given a series of extensions for the Statement of Case and their List which were eventually served on 22 October 2001, the day before a directions hearing. Ten witness statements were served by Customs also on 22 October.
62. Mr Hattersley asked for the directions hearing to be taken out of the list because he could not attend, however the chairman was unaware of this. Mr Curley was instructed to act on 16 October on contingency fee basis. He objected to Customs' witness statements under Rule 21 and was given an extension of time to serve the defence. On 21 February 2002 Mr Curley requested further documents and unused material from Customs. Various documents were provided by Customs on 11 April. On 30 April the Appellant applied for more time for the defence pending receipt of unused material requested from Customs.
63. A pre-trial review was notified for 17 October.
64. On 30 September Mr Curley wrote that his firm had received authority from the Legal Services Commission on 20 September 2002 and on 11 October wrote that an application was being made for legal aid for Mr Hattersley. He asked for Mr Hattersley's appeal to be stood over pending a possible appeal to the Court of Appeal in Lai and Lai (2002) Decision 17739 and the Tribunal appeal in Han and Yau.
65. The defence was served on 29 January 2003. The Appellant admitted dishonest evasion of £15,945 but disputed the amount of the penalty which was based on £142,859.
66. On 14 March 2003 the Legal Services Commission issued a certificate of public funding for full representation for Mr Hattersley.
67. Customs were given three extensions of time to serve a reply. On 22 May 2003 the Manchester Tribunal directed that the appeal be set down for 3 days.
68. On 10 October 2003 a hearing was notified for 22-24 March 2004.
69. On 26 November 2003 on the Appellant's application the Manchester Tribunal directed a preliminary issue as to want of prosecution by Customs and transferred the matter to London where other similar applications were to be heard.
70. In a statement Mr Hattersley said that because of the delay and passage of time he had been unable to gather evidence necessary to substantiate his appeal. He wrote that the assessment was on the basis that Eurocom did not engage in any legitimate trade. All of Customs' documentation for the Tribunal was generated in the course of the criminal investigation; once he found himself facing a civil evasion penalty legal representation was not available. It was only with the assistance of his present advisers that he was now aware of the nature and substance of the evidence which he needed. In any event the earliest date on which he would have been aware of the allegations against Eurocom and himself was when the Statement of Case was served in October 2001. In the fast changing mobile phone industry it would have been difficult to gather evidence even by 2001 since most of his contacts had ceased trading or were not contactable by 1999. In particular he was unable to trace Chris Sharpe, of Import Copiers, a Greek company, which was one of Eurocom's main customers.

Submissions on the facts concerning Mr Hattersley

71. Mr Young said that there was an unacceptable delay between Mr Hattersley's arrest on 28 April 1998 and the penalty notice dated 24 November 2000. No legal funding was available from the time when the prosecution was dropped in October 2000 until March 2003. He said that there had been delays with requests for documents from Customs. Although matters were progressing now, Mr Hattersley had been prejudiced by the earlier delays.
72. Miss Neenan said that this was a more complex case on it facts than the others however a fair hearing was still possible. She said that the civil penalty had been imposed as soon as the decision not to prosecute was taken. She said that the delay in imposing the penalty notice and in serving the Statement of Case were not excessive given the complexity of the case. Mr Hattersley had made limited admissions of dishonesty. She said that his problems due to lack of legal advice were not the fault of Customs or the Tribunal. Much documentation had been made available but there were difficulties with evidence even at the interviews in 1998. The difficulties of the Appellant arose from the fact that documents had been falsified rather than the passage of time.

Legal Submissions for Appellants

73. Mr Young submitted that in all three appeals the right under Article 6.1 to a fair hearing within a reasonable time had been violated. He submitted that in each case the violation was sufficiently serious for the appeals to be allowed and he said that the Tribunal has power to allow the appeals.
74. He said that in King v United Kingdom (No.2) [2004] STC 911, the Court of Human Rights had held that the issue of the Hansard warning marked the commencement of the criminal proceedings within Article 6.1. That was when "the situation of the [suspect] has been substantially affected," see Eckle v Germany (1982) 5 EHHR 1, at [73]. By parity of reasoning the issue of Notice 730 to Mr Fitch and of Notice 210 to Mr Morris marked the commencement, as did Mr Hattersley's arrest.
75. He said that the circumstances of each case must be considered in deciding whether the delay is unreasonable, see Abdoella v Netherlands (1992) 20 EHRR 585. In H v United Kingdom (1987) 10 EHRR 95, the Court said that it is necessary to take account of the complexity of the case, the conduct of the parties and what was at stake. Article 6 does not require the applicants actively to co-operate with the judicial authorities, see Eckle at [82]; they were entitled to make full use of the remedies available to them.
76. Mr Young said that Rule 18(2) of the Tribunal Rules which gives power to dismiss an appeal for want of prosecution but not to allow it violates Article 6. He said that Tuppen v Customs and Excise Commissioners (2004) should not be followed. He submitted that Rule 19(3) should be interpreted to enable the Tribunal to allow an appeal in appropriate circumstances such as the present. He said that Dombo Beheer BV v Netherlands (1993) in the Court of Human Rights shows that the Convention applies to procedural rules.
77. He said that the appeals of Mr Fitch and Mr Hattersley which involve VAT engaged EU law. The Convention forms a part of the general principles of EU law, see Johnston v Chief Constable (Case 222/84) [1986] ECR 1651. These include the principles of effectiveness and equivalence, see BP Supergas v Greece (Case C-62/92) [1995] STC 805 and the right to effective judicial review, see Garage Molenheide BVBA v Belgium (Cases C-286/94 and others) [1994] STC 126 at paragraph 63. He also referred to Re Claimants under Loss Relief GLO [2004] STC 1054 at [23]. He submitted that Rule 19(3) should be interpreted to give the Tribunal power to allow an appeal as being necessary or incidental to the other powers, see Attorney General v Great Eastern Railway Co (1880) 5 App Cas 473.

Legal Submissions for Customs

78. Miss Neenan said that the rights under Article 6.1 to a fair hearing and to a hearing within a reasonable time are distinct, see Attorney General's Reference (No.2 of 2001) [2004] 2 AC 72 at [12]. The consequence of failure to determine an appeal within a reasonable time is not necessarily that the appeal should be allowed : prejudice is crucial. It had not been suggested in any of the cases in the Court of Human Rights that an appeal should be allowed because of delay.
79. She said that the wording of Rule 19(3) is not wide enough to permit an appeal to be allowed or dismissed through lapse of time alone without the breach of a direction. In any event she said that these are not cases where a fair trial is no longer possible. The powers in Rule 19(3) are to make directions not to determine or decide an appeal. In contrast Rule 19(4) specifically empowers the Tribunal to dismiss or allow an appeal in the event of a breach. She said that Rule 19 including Rule 19(4) is "sensible and operative" (see per Lord Selborne in Great Eastern Railway at page 479) without implying into Rule 19(3) power to allow an appeal.
80. Miss Neenan said that the lapse of time may affect Customs more seriously than the Appellants since dishonesty has to be established by cogent evidence, see Khawaja v Home Secretary [1984] AC 74. She said that it is necessary to identify the periods of delay of which the Appellants complain. The fact that the advisers for Mr Fitch and Mr Morris are acting without funding is not a reason to allow the appeals without considering the merits. It could not be right to allow an appeal because an appellant fails to act to secure evidence or legal advice in timely fashion. In Union Alimentaria Sanders Sa v Spain (1989) 12 EHRR 24 the Court emphasised the appellant's obligations at paragraph 35.
81. She said that the Appellants could not properly complain of delays of which they were the authors such as Mr Fitch's failure to attend hearings through illness, the change of representatives or the applications for legal aid. She said that Article 6.3(c) only requires legal assistance where the interests of justice require and an appellant has not sufficient means.
82. Miss Neenan said that there is no criminal charge within Article 6.1 until a penalty is notified, see Lai and Lai v Customs and Excise Commissioners (2002) Decision 17739 at paragraph 25. She distinguished King v United Kingdom on the footing that the Hansard warning covered a possible prosecution so that the Police and Criminal Evidence Act ("PACE") applied, whereas PACE does not apply to civil penalties. She submitted that the time for measuring any delay runs from the issue of the penalty notices. She also referred to Attorney General's Reference (No.2 of 2001) at [27].

Conclusions

83. It is convenient to consider the legal submissions first and then to consider the facts in each application.
84. There is no dispute that the penalties in each case are criminal charges within Article 6.1 so that the Applicants are entitled to a fair hearing by the Tribunal within a reasonable time.
85. The submission for Customs that the time runs from the imposition of the penalty rather than the giving of Notice 730 and Notice 210 is in conflict with the decision of the Court of Human Rights in King v United Kingdom (No.2) [2004] STC 911 at 921j. It is to be noted that under paragraph 2.1 of Notice 730 the procedure starts with the investigating officer explaining "why we believe the underdeclaration arises from dishonest conduct on your part." At that point in my judgment "the situation of the [suspect] has been substantially affected," see Eckle 5 EHRR 1, para 73. It does not seem to me that this conclusion conflicts with Attorney General's Reference (No.2 of 2001) [2004] 2 AC 72; however in any event King was decided after that case.
86. It is necessary to take account of the circumstances of each case in deciding whether there has been unreasonable delay, including the complexity of the case, the conduct of the parties and what is at stake. While an appellant is not required by Article 6 to co-operate actively with the judicial authorities (see Eckle, para 82), he is required "to show diligence in carrying out the procedural steps relevant to him, to refrain from using delaying tactics and to avail himself of the scope afforded by domestic law for shortening the proceedings" (see Union Alimentaria 12 EHRR 24, at para 35). I accept the submission of Miss Neenan that the Tribunal is only concerned with delays which are the responsibility of the authorities. Delays for which an appellant is responsible do not give rise to a breach of his right to a hearing within a reasonable time.
87. I do not consider that the time taken up with determining whether Article 6 applies to evasion penalties can be treated as contributing to a breach of the Article 6.1 rights of the Applicants. The matter was dealt with very speedily by the Tribunal and the Court of Appeal.
88. This brings me to the consequences if the Tribunal concludes that the Applicants' rights to a hearing within a reasonable time have been violated.
89. This application concerns whether the appeals should be allowed and in particular whether they should be allowed at this stage.
90. In Attorney General's Reference [2004] 2 AC 72 Lord Bingham pointed out at [23] that "the Strasbourg jurisprudence gives no support to the contention that there should be no hearing of a criminal charge once a reasonable time has passed." Later in that paragraph he said, "The sole matter to be taken into consideration is thus the prejudice possibly entailed …"
91. At paragraph 24 Lord Bingham said that the remedy for a breach of the right to a hearing within a reasonable time will depend on the nature of the breach and all the circumstances. He said this,

"It will not be appropriate to stay or dismiss the proceedings unless (a) there can no longer be a fair hearing or (b) it would otherwise be unfair to try the defendant. The public interest in the final determination of criminal charges requires that such a charge should not be stayed or dismissed if any lesser remedy will be just and proportionate in all the circumstances. The prosecutor and the court do not act incompatibly with the defendant's Convention right in continuing to prosecute or entertain proceedings after a breach is established in a case where neither conditions (a) or (b) is met, since the breach consists in the delay which has accrued and not in the prospective hearing."

That case concerned a prosecution in the criminal courts, however in my judgment Lord Bingham's observations apply to appeals against evasion penalties before the Tribunal. The public interest is not as great as where prosecution for a crime is concerned, however the public interest is involved in deterring dishonest evasion of tax or duty. It would only be appropriate to allow an appeal if by reason of the delay it is no longer possible for there to be a fair hearing or it would otherwise be unfair to pursue the matter.

92. The Tribunal is clearly under a duty to ensure that an Appellant receives a fair hearing within a reasonable time. In so far as this is possible the Tribunal should use its powers under Rule 19(3) to give directions "to ensure the speedy and just determination of the appeal." Provided this can be achieved no problem arises. Those powers are supported by the express power to allow or dismiss an appeal if a party fails to comply with a direction.
93. Rule 19(3) and (4) will cover the overwhelming majority of cases of delay. The Tribunal can seek to prevent further delay by a direction and can allow or dismiss an appeal in the event of non-compliance. A recent example of the use of these powers was in UK Tradecorp Ltd v Customs and Excise Commissioners [2004] V&DR 438.
94. Rule 19 does not however cover a situation where a fair hearing is no longer possible.
95. It seems to me that if the failure to hear an appeal within a reasonable time prevents a fair trial of an appeal involving a criminal charge for Convention purposes, perhaps through the death of a vital witness or the loss or destruction of crucial evidence, the Rules must if this is possible be interpreted and applied so as to give effect to an appellant's rights under Article 6.1 and if appropriate to allow the appeal.
96. Rule 18(2) gives the Tribunal power to dismiss an appeal for want of prosecution where an appellant has given guilty of inordinate or inexcusable delay. This does not empower the Tribunal to allow an appeal where Customs are guilty of delay. It is thus one-sided and is only used in exceptional circumstances.
97. The powers in Rule 19(3) are "to ensure the speedy and just determination of the appeal" and enable the Tribunal "to make any direction as to the conduct of or as to any matter or thing in connection with the appeal."
98. Such powers do not obviously extend to dismissing or allowing an appeal thus determining it. The power under Rule 19(4) which depends on non-compliance is clearly necessary in order to make the procedural rules effective, however that is not the same as interpreting Rule 19(3) as enabling the Tribunal to allow an appeal. It does not seem to me that Rule 19(3) can have been intended by Parliament to include a power to dismiss or allow an appeal. The words of the Rule do not stretch that far, even applying the principle in Attorney General v Great Eastern Railway 5 App Cas 473.
99. That however does not conclude the matter because of section 3 of the Human Rights Act.
100. In Ghaidan v Godin-Mendoza [2004] 2 AC 557 Lord Nicholls at [32] said that section 3 is,

"apt to require a court to read in words which change the meaning of the enacted legislation, so as to make it Convention-compliant."

In the next paragraph he went on to say that this must not have the effect of adopting "a meaning inconsistent with a fundamental feature of the legislation."

101. In my judgment the reading in of words enabling the Tribunal to allow an appeal where there has been such a delay as to deprive an Appellant of his right under Article 6.1 to a fair trial cannot be regarded as inconsistent with a fundamental feature of the legislation. The whole purpose of Rule 19(3) is speed and justice. Such a reading of Rule 19(3) would also accord with the principle of effectiveness in Community law, see per Peter Gibson LJ in Re Claimants under Loss Relief GLO [2004] STC 1054 at [25], although Community law is only relevant to the appeals of Mr Fitch and Mr Hattersley.
102. Although in my judgment Rule 19(3) must therefore be read so as to enable the Tribunal to allow an appeal where the rights of an appellant under Article 6.1 have been violated, the use of such power will only be appropriate where because of the delay no lesser remedy is available so as to ensure a fair hearing.
103. The basic point is that the mere violation of the rights of the Applicants of their right under Article 6.1 to a hearing within a reasonable time does not give rise to a right to have the appeals allowed. Allowing the appeals is only appropriate if a fair hearing is no longer possible.
104. A decision to allow the appeals is exceptional and will depend on substantial prejudice being established which cannot otherwise be remedied. This will depend on the facts of the particular case.
105. The approach on behalf of the Applicants has concentrated on the contention that the appeals should be allowed and did not address what directions if any might be given to mitigate the effect of the delays. A substantial amount of material was produced with the result that the hearing took three days instead of the two listed. I have considered this with care but I do not consider that any unreasonable delays have been established for which the authorities are responsible.
106. I do not consider that there was any unreasonable delay in the case of Mr Morris up to the service of the Statement of Case although five months for the Statement of Case was a long time. Thereafter Mr Curley was anxious to resolve the position regaining Mr Morris' convention rights. That took time but was not the cause of any unreasonable delay. The loss of time since then has been primarily attributable to the present application. I am not satisfied that there has been any breach of Mr Morris' Convention rights and his application is dismissed.
107. As to Mr Fitch, the delay in imposing the penalty was not great. There was a considerable delay in serving the notice of appeal; the responsibility for that lay with Mr Fitch and his accountants. The loss of time because Customs opposed leave to appeal out of time was unfortunate, but I reject the suggestion that Customs should not oppose leave in evasion cases as a matter of principle. Both the Statement of Case and the defence were slow. The real complaint by Mr Fitch appears to be that legal funding is not available due to his means. That however is a matter for the Legal Services Commission using the tests laid down. It is to be noted that Article 6.3(c) specifically envisages a means test. I am not satisfied that Mr Fitch has established a breach of his rights so as to justify allowing the appeal.
108. In his case it is however to be noted that the Statement of Case served by Customs in 1998 was very brief and no reply was served. While this will be a matter to be considered if and when it arises, the Tribunal will no doubt give careful consideration as to whether amendments or additions should be allowed after so long.
109. Finally, I consider the application of Mr Hattersley who was originally arrested in April 1998. No satisfactory explanation has been given for the delay of 2½ years until the penalty was imposed. This was followed by a delay of six months in serving the Statement of Case. It appears that all documents seized from him were held by Customs until 2001 or 2002. There may be problems with the evidence in this case but as Miss Neenan pointed out the burden of proof is on Customs. In spite of the delays I am not satisfied that a fair trial is not possible. Mr Hattersley may have been hampered by the lack of legal aid before 2003, that however is not a matter for the Tribunal.
110. None of the applications succeed. The appeals will go forward for hearing.
THEODORE WALLACE CHAIRMAN RELEASED: 19 July 2005

LON/99/8004

LON/97/1285

MAN/2001/810