HM Revenue and Customs v Smart Price Midlands Ltd & Anor

In a supervisory appeal against refusal of alcohol-wholesaler approval, disclosure must be directed to the issues defined by the refusal reasons, the grounds of appeal and the respondent’s statement of case. Disclosure limited to documents relied on will not ordinarily suffice where the authority holds material unknown to the trader. However, disclosure of every document considered by the decision-maker is excessive.

The appropriate initial order broadly corresponds with standard disclosure, excluding unrelied-on documents entirely adverse to the trader. The tribunal must first resolve disputed primary facts and then decide whether a reasonable officer could have refused approval on the facts found. A refusal notice must itself give the reasons for refusal, rather than unspecified key points.

HMRC refused the respondent traders approval to conduct wholesale alcohol businesses under the Alcohol Wholesale Registration Scheme. They appealed to the First-tier Tribunal under the supervisory jurisdiction in section 16(4) of the Finance Act 1994.

In the Hare Wines proceedings, the First-tier Tribunal ordered HMRC to list every document considered by the decision-maker. The Upper Tribunal dismissed HMRC’s appeal: [2017] UKUT 465 (TCC). In the Gardner Shaw proceedings, the Upper Tribunal set aside a First-tier Tribunal variation which had narrowed equivalent disclosure directions: [2018] UKUT 419 (TCC).

The common issue was the proper scope and timing of disclosure in these supervisory appeals.

1. The Hare Wines appeal was allowed. The global disclosure direction, requiring a list of every document considered by the decision-maker, was quashed. The appeals were remitted to the First-tier Tribunal for further directions. The Gardner Shaw appeal was dismissed, although the global direction in those appeals was not to remain in force and was to be varied by the First-tier Tribunal consistently with this judgment.

2. Under section 16(4) of the Finance Act 1994, the First-tier Tribunal must determine disputed primary facts for itself. It must then decide whether, on the facts found, a reasonable HMRC officer could have refused approval. The tribunal does not conduct a fresh merits assessment of fitness and properness. HMRC’s administrative assessment nevertheless remains subject to effective supervisory review.

3. Rule 27(2) disclosure alone was insufficient as an initial rule in these appeals. HMRC may possess exonerating material unknown to the trader. Conversely, wholesale disclosure of all material considered was disproportionate and irrelevant to the tribunal’s task. The appropriate initial model broadly corresponds to standard disclosure: documents relied on by HMRC, documents adverse to HMRC’s case, and documents supporting the trader’s case should be disclosed. Documents not relied on which are entirely adverse to the trader need not be disclosed.

4. Disclosure should normally follow a refusal letter, notice of appeal and statement of case. The tribunal should then tailor directions to the issues. Relevant issues include the conduct on which HMRC continues to rely, exonerating conduct advanced by the trader, disputes of primary fact and, where raised, whether conditions short of refusal would adequately protect the revenue. Disclosure is a continuing case-management process. HMRC may confine its defence to selected allegations, but must bear the forensic consequences of abandoning other grounds.

5. Regulation 4(4) of the Wholesaling of Controlled Liquor Regulations 2015 requires HMRC to give the reasons for refusal. The Hare Wines refusal letter was inadequate because it referred only to unspecified key points and did not enable the applicant to understand, from that self-standing document, the actual reasons for refusal. Disclosure cannot cure an unclear case.

6. The First-tier Tribunal was not entitled, while the validity of its earlier direction had been determined by the Upper Tribunal and was under appeal, to vary that direction merely because HMRC later supplied better evidence of cost, confidentiality or an alternative disclosure model. The interests of justice and finality did not justify that course on the circumstances presented.

• Court of Appeal (Civil Division): HMRC’s Hare Wines appeal was allowed; the global disclosure direction was quashed and the proceedings remitted. HMRC’s Gardner Shaw appeal was dismissed, but disclosure was to be varied by the First-tier Tribunal in accordance with this judgment.
• Upper Tribunal (Tax and Chancery Chamber): In Hare Wines, dismissed HMRC’s appeal and upheld the global disclosure direction: [2017] UKUT 465 (TCC).
• Upper Tribunal (Tax and Chancery Chamber): In Gardner Shaw, allowed the traders’ appeal and restored the global disclosure direction after setting aside its narrowing variation: [2018] UKUT 419 (TCC).
• First-tier Tribunal (Tax Chamber): Made the global disclosure direction in the AWRS appeals. In the Gardner Shaw appeals, Judge Mosedale later varied it to exclude sensitive material which did not support the trader or adversely affect HMRC.