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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Jimenez, R. (On the Application of) v The First Tier Tribunal (Tax Chamber) [2019] EWCA Civ 51 (31 January 2019) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2019/51.html Cite as: [2019] BTC 4, [2019] 1 WLR 2956, [2019] EWCA Civ 51, 21 ITL Rep 561, [2019] WLR 2956, [2019] STC 746 |
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Charles J
B e f o r e :
LORD JUSTICE LEGGATT
and
LADY JUSTICE NICOLA DAVIES
____________________
THE QUEEN ON THE APPLICATION OF TONY MICHAEL JIMENEZ |
Respondent/Claimant |
|
- and - |
||
THE FIRST TIER TRIBUNAL (TAX CHAMBER) HER MAJESTY'S COMMISSIONERS FOR REVENUE AND CUSTOMS |
Defendant Appellant |
____________________
Rory Mullan and Paul Luckhurst (instructed by Excello Law) for the Respondent
Hearing date : 18 December 2018
____________________
Crown Copyright ©
Lord Justice Patten :
"(1) An officer of Revenue and Customs may by notice in writing require a person ("the taxpayer")—
(a) to provide information, or
(b) to produce a document,
if the information or document is reasonably required by the officer for the purpose of checking the taxpayer's tax position.
(2) In this Schedule, "taxpayer notice" means a notice under this paragraph."
"(1) Where a person is required by an information notice to provide information or produce a document, the person must do so—
(a) within such period, and
(b) at such time, by such means and in such form (if any),
as is reasonably specified or described in the notice.
(2) Where an information notice requires a person to produce a document, it must be produced for inspection—
(a) at a place agreed to by that person and an officer of Revenue and Customs, or
(b) at such place as an officer of Revenue and Customs may reasonably specify.
(3) An officer of Revenue and Customs must not specify a place that is used solely as a dwelling.
(4) The production of a document in compliance with an information notice is not to be regarded as breaking any lien claimed on the document."
"In this Schedule, except as otherwise provided, "tax position", in relation to a person, means the person's position as regards any tax, including the person's position as regards—
(a) past, present and future liability to pay any tax,
(b) penalties and other amounts that have been paid, or are or may be payable, by or to the person in connection with any tax, and
(c) claims, elections, applications and notices that have been or may be made or given in connection with the person's liability to pay any tax,
and references to a person's position as regards a particular tax (however expressed) are to be interpreted accordingly."
"67. As Ms Julie Anderson, for HMRC, said, schedule 36, like its predecessor scheme in section 20 of the TMA, represents a balance between the interests of individuals and the interests of the wider community. So far as concerns the interests of the wider community, the statutory scheme is intended to assist HMRC in its investigation of tax avoidance and tax evasion. Complex and sophisticated corporate and international arrangements are often the hallmark of schemes to avoid or evade tax and are often intended to throw a veil of obscurity over the reality of underlying transactions. Such complex arrangements feature in the present case, which concerns an investigation into suspected cross-border corporate tax avoidance and evasion under which tax has been wrongly claimed on interest on "loans" made through a web of onshore and offshore companies.
68. The purpose of the statutory scheme is to assist HMRC at the investigatory stage to obtain documents and information without providing an opportunity for those involved in potentially fraudulent or otherwise unlawful arrangements to delay or frustrate the investigation by lengthy or complex adversarial proceedings or otherwise. It is inevitable in many cases, particularly where there are complex arrangements designed to evade tax, that at the investigatory stage it will be difficult, if not impossible, for HMRC to be definitive as to the precise way in which particular documents will establish tax liability. It is also clear that in many cases disclosure of HMRC's emerging analysis and strategy and of sources of information to the taxpayer or those associated with the taxpayer may endanger the investigation by forewarning them."
"broad, general, universal principle that English legislation, unless the contrary is expressly enacted or so plainly implied as to make it the duty of an English court to give effect to an English statute, is applicable only to English subjects or to foreigners who by coming into this country, whether for a long or a short time, have made themselves during that time subject to English jurisdiction … But, if a foreigner remains abroad, if he has never come into this country at all, it seems to me impossible to imagine that the English legislature could have ever intended to make such a man subject to particular English legislation."
"Put into the language of today, the general principle being there stated is simply that, unless the contrary is expressly enacted or so plainly implied that the courts must give effect to it, United Kingdom legislation is applicable only to British subjects or to foreigners who by coming to the United Kingdom, whether for a short or a long time, have made themselves subject to British jurisdiction. Two points would seem to be clear: first, that the principle is a rule of construction only, and secondly, that it contemplates mere presence within the jurisdiction as sufficient to attract the application of British legislation. Certainly there is no general principle that the legislation of the United Kingdom is applicable only to British subjects or persons resident here. Merely to state such a proposition is to manifest its absurdity. Presence, not residence, is the test.
But, of course, the Income Tax Acts impose their own territorial limits. Parliament recognises the almost universally accepted principle that fiscal legislation is not enforceable outside the limits of the territorial sovereignty of the kingdom. Fiscal legislation is, no doubt, drafted in the knowledge that it is the practice of nations not to enforce the fiscal legislation of other nations. But, in the absence of any clear indications to the contrary, it does not necessarily follow that Parliament has in its fiscal legislation intended any territorial limitation other than that imposed by such unenforceability: see Government of India v. Taylor [1955] A.C. 491, 503. Indeed, British tax liability has never been exclusively limited to British subjects and foreigners resident within the jurisdiction. As long ago as 1889, Lord Herschell in the well-known case of Colquhoun v. Brooks (1889) 14 App. Cas. 493, 504, summarised the income tax position in one sentence (which received the approval of this House in Westminster Bank Executor and Trustee Co. (Channel Islands) Ltd. v. National Bank of Greece S.A. [1971] A.C. 945, 954):
"The Income Tax Acts, however, themselves impose a territorial limit; either that from which the taxable income is derived must be situate in the United Kingdom or the person whose income is to be taxed must be resident there.""
"in the light of the accepted practice of nations and comity in the field of international law and international relations, eyebrows might be raised at the notion that Parliament had in 1914 or 1883 given jurisdiction to any bankruptcy court, which might well be a county court, to summon anyone in the world before it to be examined and produce documents."
"any person who— (a) is or has been an officer of the company; or (b) has acted as liquidator or administrator of the company or as receiver or manager … or (c) not being a person falling within paragraph (a) or
(b), is or has been concerned, or has taken part, in the promotion, formation or management of the company."
"Where a company has come to a calamitous end and has been wound up by the court, the obvious intention of this section was that those responsible for the company's state of affairs should be liable to be subjected to a process of investigation and that investigation should be in public. Parliament could not have intended that a person who had that responsibility could escape liability to investigation simply by not being within the jurisdiction. Indeed, if the section were to be construed as leaving out of its grasp anyone not within the jurisdiction, deliberate evasion by removing oneself from the jurisdiction would suffice."
"23. The present case stands between In re Tucker [1990] Ch 148 and In re Seagull [1993] Ch 345. The category of persons embraced by CPR Pt 71 is confined to "an officer" of the company or other corporation—on the face of it probably only a current officer at the time of the application or order, whereas section 133 extended (unsurprisingly since it deals with a company being wound up) to past officers and some other closely connected persons. There is in the context of CPR Pt 71 no equivalent of the provision in section 25(6) which was for Dillon LJ "conclusive" in In re Tucker. On the other hand, CPR Pt 71 is concerned with obtaining information in aid of the enforcement of a private judgment. The public interest that "those responsible for the company's state of affairs should be liable to be subjected to a process of investigation and that investigation should be in public" (In re Seagull [1993] Ch 345, 354) is absent. The universality of a winding up order, in the sense that it relates at least in theory to all assets wherever situate, is also absent. Private civil litigation is different. A fair and efficient legal system is of course a cornerstone of the rule of law, and it can also be said that there is a public interest in a court getting to the bottom of litigation and ensuring that parties have the means of obtaining full information to enable it to do so. Yet the parties have no right to ask the court to summon witnesses from abroad for that purpose. While a judgment crystallises rights and establishes an unsuccessful defendant's liability, the court is still acting in aid of private rights after judgment, and it may be questioned whether, in terms of public interest, there is a very great difference between the importance of evidence for the trial of liability and quantum and for the enforcement of a judgment. A judgment which is mistaken because of a lack of full information or documentation could even be seen as a greater miscarriage of justice than a judgment which is not enforced because of the same lack.
24. In my view Dillon LJ's observation in In re Tucker [1990] Ch 148, 157 that "eyebrows might be raised" at the notion that Parliament had in 1914 or 1883 given jurisdiction to any bankruptcy court to summon anyone in the world before it to be examined and produce documents has weight also in the context of CPR Pt 71. The historical origin of CPR Pt 71 consists in an amendment of the Rules in 1883 made in the light of the decision in Dickson v Neath and Brecon Railway Co LR 4 Ex 87 in 1869. The Court of Exchequer there held that the pre-existing power to order oral examination of a judgment debtor did not enable examination of the company's three directors, about whose presence within the jurisdiction there was clearly no doubt. The Rule Committee in 1883 is likely to have been focusing on domestic judgments and domestically based officers. If it thought at all about foreign judgments, which might be enforced in England, it is unlikely to have contemplated that a judgment creditor, having come here for that purpose, would then need assistance abroad to make the enforcement effective. The extreme informality of the process by which the rules enable an order for examination to be obtained continues to point towards a purely domestic focus. An application for an order may under CPR Pt 71 be made without notice, may be dealt with ministerially by a court officer and will lead to the automatic issue of an order (albeit with the general safeguard of the right to apply to set aside which exists under CPR r 23.10 in the case of any order made without service of the relevant application notice). These considerations all tend to point against the application of CPR Pt 71 to company officers outside the jurisdiction.
25. Sir Anthony Clarke MR, with whose judgment the other members of the Court of Appeal in the present case agreed, said, ante, p 107, para 16 that it would "defeat its object" if CPR r 71.2 were restricted to persons within the jurisdiction. That is, I think, to put matters substantially too high. Small though the world may have become, relatively few officers of companies are likely to contemplate, let alone be able to undertake, emigration or flight to a different country in order to avoid giving information about their company's affairs. For the same reason, the deployment in In re Seagull [1993] Ch 345 of the possibility of "deliberate evasion" by an officer removing himself from the jurisdiction seems to me a factor of greater forensic than real weight, although such weight as it may have may be greater after the calamity of compulsory winding up (when something has evidently gone wrong and may require embarrassing or even potentially incriminating investigation) than in the context of an unpaid judgment debt.
26. In my view CPR Pt 71 was not conceived with officers abroad in mind, and, although it contains no express exclusion in respect of them, there are lacking critical considerations which enabled the Court of Appeal in In re Seagull to hold that the presumption of territoriality was displaced and that the relevant statutory provision there, on its true construction and having regard to the legislative grasp or intendment, embraced a foreign officer. Although CPR Pt 71 is limited to officers of the judgment debtor company, I regard the position of such officers as closer to that of ordinary witnesses than to that of officers of a company being compulsorily wound up by the court. I conclude that CPR Pt 71 does not contemplate an application and order in relation to an officer outside the jurisdiction."
"(1) If in the course of the winding up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, the following has effect.
(2) The court, on the application of the liquidator may declare that any persons who were knowingly parties to the carrying on of the business in the manner above-mentioned are to be liable to make such contributions (if any) to the company's assets as the court thinks proper."
"[212] The appellants accept that the English courts have jurisdiction in personam. Their challenge is to the court's subject matter jurisdiction as discussed by Hoffmann J in Mackinnon v Donaldson Lufkin & Jenrette Securities Corp [1986] 1 All ER 653 at 657, [1986] Ch 482 at 493 and Lawrence Collins LJ in Masri v Consolidated Contractors International (UK) Ltd (No 2) [2008] EWCA Civ 303, [2008] 2 All ER (Comm) 1099, [2009] QB 450 (at [30] and [31]). It relates to whether the court can regulate the appellants' conduct abroad. Whether a court has such subject matter jurisdiction is a question of the construction of the relevant statute. In the past it was held as a universal principle that a UK statute applied only to UK subjects or foreigners present in and thus subjecting themselves to a UK jurisdiction unless the Act expressly or by necessary implication provided to the contrary (Re Sawers, ex p Blain (1879) 12 Ch D 522 at 526 per James LJ). That principle has evolved into a question of interpreting the particular statute (Clark (Inspector of Taxes) v Oceanic Contractors Inc [1983] 1 All ER 133 at 139 and 144, [1983] 2 AC 130 at 145 (Lord Scarman), 152 (Lord Wilberforce); Masri v Consolidated Contractors International (UK) Ltd (No 4) [2009] UKHL 43, [2010] 1 All ER (Comm) 220, [2010] 1 AC 90 (at [10]) (Lord Mance); and Cox v Ergo Versicherung [2014] UKSC 22, [2014] 2 All ER 926 at [27]–[29] (Lord Sumption)). In Cox v Ergo at [29] Lord Sumption suggested that an intention to give a statute extra-territorial effect could be implied if the purpose of the legislation could not effectually be achieved without such effect.
[213] In our view s 213 has extra-territorial effect. Its context is the winding up of a company registered in Great Britain. In theory at least the effect of such a winding-up order is worldwide (Stichting Shell Pensioenfonds v Krys [2014] UKPC 41, [2015] 2 WLR 289 at [34] and [38]). The section provides a remedy against any person who has knowingly become a party to the carrying on of that company's business with a fraudulent purpose. The persons against whom the provision is directed are thus (a) parties to a fraud and (b) involved in the carrying on of the now-insolvent company's business. Many British companies, including Bilta, trade internationally. Modern communications enable people outside the United Kingdom to exercise control over or involve themselves in the business of companies operating in this country. Money and intangible assets can be transferred into and out of a country with ease, as the occurrence of VAT carousel frauds demonstrates. We accept what HMRC stated in their written intervention: there is frequently an international dimension to contemporary fraud. The ease of modern travel means that people who have committed fraud in this country through the medium of a company (or otherwise) can readily abscond abroad. It would seriously handicap the efficient winding up of a British company in an increasingly globalised economy if the jurisdiction of the court responsible for the winding up of an insolvent company did not extend to people and corporate bodies resident overseas who had been involved in the carrying on of the company's business."
"(4) A disclosure order is an order authorising an appropriate officer to give to any person the appropriate officer considers has relevant information notice in writing requiring him to do, with respect to any matter relevant to the investigation for the purposes of which the order is sought, any or all of the following—
(a) answer questions, either at a time specified in the notice or at once, at a place so specified;
(b) provide information specified in the notice, by a time and in a manner so specified;
(c) produce documents, or documents of a description, specified in the notice, either at or by a time so specified or at once, and in a manner so specified.
(5) Relevant information is information (whether or not contained in a document) which the appropriate officer concerned considers to be relevant to the investigation."
"91. Those notices were given to persons who were, and were known by SOCA to be, outside the jurisdiction of the United Kingdom. It was Mr Jones's submission, advanced before the Court of Appeal, that the authority given by a disclosure order to give disclosure notices only applies to notices given to persons within the jurisdiction. In making this submission Mr Jones relied particularly on the presumption that, unless it clearly provides to the contrary, a statute will not have extraterritorial effect.
92. The majority of the Court of Appeal, Ward and Carnwath LJJ, rejected the defendants' attack on the validity of the notices; Richards LJ dissented. The gist of the reasoning of Carnwath LJ appears in the following short passage of his judgment, at paras 50-51:
"50. … is there any reason why persons who are reasonably considered to have an interest in property validly subject to a disclosure order, and who have a sufficient presence within the jurisdiction for a notice to be effectively given to them, should be treated as outside the 'legislative grasp' of the statutory scheme?
51. As a matter of common sense, it is difficult to see why mere presence in or absence from the country at the time of sending or delivery of the notice is the critical factor. For example, a person normally resident at an address in this country could not sensibly seek to deny that the notice had been 'given' to him at that address, merely because he happened to be out of the country at the time (for example, on a business or holiday trip)."
93. Ward LJ proceeded on the premise that a recovery order could be made in respect of property outside the jurisdiction. He commented, at para 77, that the extraterritorial effect of Part 5 could not be denied and that he could not see why Part 8 should not act in the same way. For the reasons that I have given I consider that he proceeded on a false premise.
94. The point is a very short one. No authority is required under English law for a person to request information from another person anywhere in the world. But section 357 authorises orders for requests for information with which the recipient is obliged to comply, subject to penal sanction. Subject to limited exceptions, it is contrary to international law for country A to purport to make criminal conduct in country B committed by persons who are not citizens of country A. Section 357, read with section 359, does not simply make proscribed conduct a criminal offence. It confers on a United Kingdom public authority the power to impose on persons positive obligations to provide information subject to criminal sanction in the event of non-compliance. To confer such authority in respect of persons outside the jurisdiction would be a particularly startling breach of international law. For this reason alone I consider it implicit that the authority given under section 357 can only be exercised in respect of persons who are within the jurisdiction."
"68. However inconclusive the debate as to legislative history, the legislative purpose and the mischief at which s.2(3) is aimed permits of no such doubt. As already indicated, the SFO's business is "…top end, well-heeled, well-lawyered crime…". By their nature, most such investigations will have an international dimension, very often involving multinational groups conducting their business in multiple jurisdictions, whether through a branch or subsidiary structure (it should matter not). It follows that the documents relevant to the investigation of a UK subsidiary of such a group may well be spread between the UK and one or more overseas jurisdictions. The simplicity of document transfer and access has of course been massively enhanced by internet and web technology post-dating 1987 but, as already discussed, it cannot be suggested that the international dimension of the SFO's mandate was unknown or not appreciated at the time of the enactment of s.2(3). For my part, putting to one side for the moment, any questions of MLA, there would be a very real risk that the purpose of s.2(3) would be frustrated (Bilta) if, as a jurisdictional bar, the SFO was precluded from seeking documents held abroad from any foreign company.
69. The context here concerns the investigation and prosecution of top-end fraud. There is, accordingly, an extremely strong public interest in the extraterritorial ambit of s.2(3), which is anything but a private matter. That public interest extends to the UK's international obligations under instruments such as the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (2011). It is thus readily distinguishable from the private interest in civil litigation, with which Masri was concerned. S.2(3) is instead much more closely analogous to the other decisions in the insolvency field highlighted above, namely, Paramount, Seagull and Bilta. In all those decisions, much influenced by policy and public interest considerations, the provisions in question were treated as applying extraterritorially. There are of course differences between the regime of the Insolvency Act 1986 and that of the CJA 1987, as indeed Mr Kovalevsky contended. But those differences do not serve to displace the analogy or to obscure the very real similarities in terms of policy considerations. Put another way, it would be surprising if the law was more astute to assist inquiries into bankruptcy than investigations into and prosecutions of serious fraud on an international level.
70. In Masri, Lord Mance (at [24]) utilised the practical touchstone of whether "eyebrows might be raised" at the notion that Parliament had conferred the extraterritorial jurisdiction in issue. Applying that same touchstone here, I cannot see that eyebrows would be raised. Instead, a careful consideration of the context, the underlying policy considerations and the overwhelming case for s.2(3) having at least some extraterritorial application, would compel the answer that there was no jurisdictional bar precluding the SFO from giving a notice to any foreign companies in respect of any documents held abroad, regardless of their relevance to an investigation into a UK company, and regardless of the degree of connection between the foreign company, the UK and a UK company. Furthermore, it is to be appreciated that a s.2(3) notice seeks documents; it does not involve questioning individuals abroad, entering premises abroad, seizing foreign property (cf., R v Cuthbertson [1981] AC 470, at p.485) or (certainly in this case) requiring the party to whom the notice is directed to take steps requiring permission from the US authorities.
71. Accordingly, I would conclude that the extraterritorial ambit of s.2(3) is capable of extending to some foreign companies in respect of documents held abroad. For my part, however, I would not go further and say that the reach of s.2(3) extended to all foreign companies in respect of documents held abroad, subject only to the safeguards or limitations in ss. 1 and 2 of the CJA 1987. As it seems to me, the right answer (to adopt the expression used by Lord Mance, in Masri, at [10]) is a "nuanced answer": s.2(3) extends extraterritorially to foreign companies in respect of documents held outside the jurisdiction when there is a sufficient connection between the company and the jurisdiction. It may be noted that the potential relevance of the documents to the investigation is not the basis of the challenge."
"The governing principle of enforcement jurisdiction is that a state cannot take measures on the territory of another state by way of enforcement of its laws without the consent of the latter. Persons may not be arrested, a summons may not be served, police or tax investigations may not be mounted, orders for production of documents may not be executed, on the territory of another state, except under the terms of a treaty or other consent given."
"245. As for enforcement jurisdiction, in the Lotus case (France v Turkey), the Permanent Court said (at 18-19):
"Now the first and foremost restriction imposed by international law upon a state is that – failing the existence of a permissive rule to the contrary – it may not exercise its power in any form in the territory of another state. In this sense jurisdiction is certainly territorial; it cannot be exercised by a state outside its territory except by virtue of a permissive rule derived from international custom or from a convention."
246. That is a statement about enforcement jurisdiction, namely the limits of the right of a state to act on the territory of another state or to take measures on its own territory which require compliance in another state. Thus a state cannot, without the consent of the territorial sovereign, perform official acts in a foreign state or carry out official investigations in the foreign state. The inability of a foreign state to claim, directly or indirectly, its taxes in England is sometimes put on the basis that it is an illegitimate extension of its territorial jurisdiction: see Government of India v Taylor [1955] AC 491."
Lord Justice Leggatt :
Lady Justice Nicola Davies: