Mukesh Sehgal, R (on the application of) v The Commissioners for HMRC

An agreement alleged to have been reached during alternative dispute resolution is determined objectively, by reference to the parties’ words and conduct viewed in their documentary context. A summary of discussions, even if described as positive or helpful, does not establish agreement on the underlying facts unless that is objectively conveyed. Where contemporaneous documents record only clarification, a proposed submission, or an unresolved dispute, the court should not infer a binding agreement or legitimate expectation from silence or the absence of express disagreement. Judicial review cannot succeed on an alleged breach of agreement, legitimate expectation or irrationality where the factual premise of the claim is not established.

The claimants sought judicial review of HMRC’s decisions of 25 January 2019 to amend their 2006/07 self-assessment returns by closure notices under Taxes Management Act 1970, section 28A. Permission had been granted by the Administrative Court and the claim was transferred to the Upper Tribunal under Senior Courts Act 1981, section 31A(3).

The claimants alleged that, at an ADR meeting on 25 October 2017, HMRC agreed relevant facts and agreed to recommend settlement on that basis. They relied principally on an exit document, subsequent emails and feedback forms. The grounds were breach of agreement, breach of legitimate expectation and irrationality. The central issue was whether any agreement on the relevant facts had been reached.

1. Application refused. The claimants failed to establish that HMRC agreed the relevant facts at the ADR meeting or agreed that the dispute would be settled on that basis.
2. The existence and terms of any agreement were matters to be determined objectively, rather than by the parties’ subjective beliefs. In evaluating disputed recollections, the Tribunal adopted the approach in Gestmin SGPS SA v Credit Suisse (UK) Ltd & anor [2013] EWHC 3560, placing primary weight on contemporaneous documents, known or probable facts and the opportunity afforded by cross-examination to test the documentary record. The observations in Simetra Global Assets Ltd v Ikon Finance Ltd [2019] EWCA Civ 1413 concerning the importance of contemporary documents were also of assistance.
3. The exit document recorded an attempted ADR process that had not reached resolution and an agreement that the claimants’ adviser would prepare a summary for HMRC’s solicitor’s office. It did not record agreement on the facts.
4. The email of 27 October 2017 was objectively a summary of discussions and of the claimants’ case. References to factual understanding, HMRC adding comments and colour, and the claimants confirming the numbered matters did not amount to an agreed statement of facts. Several matters were propositions, arguments or mixed questions of fact and law rather than agreed facts. The reference to McLaughlin v HMRC [2012] UKFTT 245 (TC) led to a submission for legal advice on its relevance; it did not evidence agreement on the underlying dispute.
5. HMRC’s failure immediately to contradict the email did not create agreement or legitimate expectation. It was reasonably understood as the claimants’ summary of matters discussed and their case. Since no agreement on the relevant facts was established, there was no breach of agreement or legitimate expectation, and no basis for concluding that HMRC’s later decisions were irrational.

• Administrative Court: permission to bring judicial review proceedings was granted.
• Upper Tribunal (Tax and Chancery Chamber): the claim was transferred under Senior Courts Act 1981, section 31A(3), and the application for judicial review was refused.