Hope v Revenue And Customs

A judgment obtained by fraud may be set aside only where there is conscious and deliberate dishonesty and the dishonesty was material to the decision. Serious allegations do not prevent summary judgment where the claim has no realistic prospect of success.

A tax assessment cannot be challenged indirectly by alleging that HMRC should have reached a different factual conclusion, particularly where the taxpayer failed to provide a satisfactory explanation or pursue the statutory appeal. Section 73 of the VAT Act 1994 does not create a private damages action for failure to assess to the best of HMRC’s judgment. A common-law duty of care is fact-sensitive, but the pleaded facts did not establish one here.

HMRC had presented a bankruptcy petition against Emma Hope after voting against proposals for an individual voluntary arrangement. Earlier proceedings concerning the admission of HMRC’s tax debt had resulted in findings that delays and the failure to explain discrepancies were largely attributable to Miss Hope and her advisers. Those findings were upheld on appeal.

Miss Hope issued a Part 7 claim seeking to set aside the earlier judgment for alleged fraudulent misrepresentations and claiming damages for fraud, negligence, breach of statutory duty and misfeasance in public office. HMRC applied to strike out the claim or obtain summary judgment. The central issues were whether the pleaded fraud was sufficiently arguable, whether the tort and statutory claims disclosed viable causes of action, and whether the claims were abusive or estopped by the earlier proceedings.

1. Fraud and summary judgment. The claim was struck out, alternatively summary judgment was entered for HMRC. The applicable test required conscious and deliberate dishonesty which was material to the earlier court’s decision. The allegations did not meet that test. The Audit Report did not show that HMRC knew the whole discrepancy was attributable to trading outside the scope of VAT. The contemporaneous correspondence showed that HMRC sought explanations and supporting evidence, while the explanations supplied were inaccurate, incomplete or late. There was no evidence of a cover-up or of a material dishonest representation.
2. The suggestion that the 2007 assessment was under appeal did not disclose an arguable fraud claim. The evidence showed an internal review and an appeal concerning penalties and surcharges; an appeal to the Tax Tribunal was made only after the creditors’ meeting. In any event, the existence of an appeal did not affect the debt created by the assessment and was not material to the earlier decisions. The treatment of the 2010 assessment was likewise supported by the evidence and did not show conscious dishonesty.
3. Misfeasance in public office. The pleaded case did not disclose reasonable grounds. The necessary factual foundation was inconsistent with the findings already made by the earlier courts, including that HMRC was entitled to raise the 2007 assessment and that the explanation and supporting documentation had not been provided satisfactorily.
4. Breach of statutory duty. Section 73 of the VAT Act 1994 requires an assessment to be made to the best of the Commissioners’ judgment, but it does not confer a private right of action for damages. The Commissioners for Revenue and Customs Act 2005 did not indicate an intention to protect a limited class through such an action. Statutory appeal machinery existed and was not properly pursued.
5. Common-law duty of care. The possibility of a duty owed by HMRC to a taxpayer cannot be excluded in every case, but the pleaded facts did not establish foreseeability, proximity, a voluntary assumption of responsibility, or that imposing a duty would be fair, just and reasonable. HMRC’s attendance at the business premises, risk assessment and participation in the IVA meeting did not suffice. The claim also failed for want of loss caused to Miss Hope personally.
6. Estoppel and abuse. The earlier decisions were judgments of competent courts involving the same parties. The material facts could and should have been raised in the IVA proceedings. Miss Hope was therefore estopped from reopening those issues, and the attempt to do so was abusive. Limitation and reflective loss were not determined because the claims had already failed.

The claim concerned an attempt to set aside earlier IVA proceedings and their appellate determination on grounds of fraud. The earlier findings had been upheld on appeal, permission to appeal had been refused, and an application to reopen had also been dismissed. This court struck out the new claim, alternatively entered summary judgment for HMRC.