Pierhead Drinks Limited v The Commissioners for HMRC

A tribunal may determine whether a company’s key personnel are fit and proper where that is integral to deciding whether the company should hold a regulatory authorisation. A company acts through natural persons, so the fitness and propriety of its directors and other key persons may be indistinguishable from that of the company for that purpose.

Procedural fairness does not require a tribunal to give a witness advance notice equivalent to a Salmon letter. It is sufficient if the factual case supporting an adverse finding has been adequately put in cross-examination and the witness has a proper opportunity to answer it.

HMRC refused Pierhead Drinks Limited registration under the Warehousekeepers and Owners of Warehoused Goods Regulations 1999. The First-tier Tribunal dismissed Pierhead’s appeal in [2016] UKFTT 286 (TC). It found that Richard Hercules was Pierhead’s guiding mind and was not fit and proper. It also found that Ian Hercules, Pierhead’s director, was not fit and proper to hold a WOWGR authorisation.

Before the Upper Tribunal, Pierhead no longer challenged the refusal of registration. Ian Hercules instead challenged the adverse finding about him. He contended that it was outside the issues in the appeal and had been made without procedural fairness. The central issue was whether the First-tier Tribunal was entitled to make that finding.

1. Appeal dismissed. The First-tier Tribunal was entitled to find that Ian Hercules was not a fit and proper person to be a director of a company registered under WOWGR.

2. The issue was within the proper scope of Pierhead’s appeal. In assessing whether a company was fit and proper for WOWGR registration, the tribunal was entitled, and in the circumstances bound, to consider the fitness and propriety of its directors and key personnel. The company could operate only through natural persons. This did not involve piercing the corporate veil.

3. Ian Hercules had presented himself, with his father, as having relevant excise experience. The evidence concerning his role in businesses with compliance failures, his lack of sufficient excise knowledge, and his involvement in Euro Trade was therefore relevant. The fact that the finding concerning Richard Hercules independently justified refusal did not prevent the First-tier Tribunal from deciding the issue concerning Ian Hercules in the alternative.

4. In any event, the process was fair. The matters underlying the adverse finding had been adequately put to Ian Hercules in cross-examination. He had access to the evidence and an opportunity to answer it. Article 8 of the ECHR did not require the First-tier Tribunal to give separate advance notice that it might make an adverse finding, or to issue a Salmon letter.

5. The tribunal added that, had the finding been outside the appeal and reached through a procedurally unfair process, the appropriate remedy would have been to set it aside and issue a revised decision without it. That contingency did not arise.

• Upper Tribunal (Tax and Chancery Chamber): Dismissed the appeal and left the First-tier Tribunal’s finding concerning Ian Hercules in place.
• First-tier Tribunal (Tax Chamber): Dismissed Pierhead’s appeal against HMRC’s refusal of WOWGR registration: [2016] UKFTT 286 (TC).