Fluid Systems Technologies (Scotland) Ltd & Ors, R (on the application of) v The Commissioners for HMRC

Cross-examination in judicial review proceedings remains exceptional. It may be permitted where oral evidence is necessary for the fair and just disposal of the claim. This includes a disputed and material fact concerning the decision-maker’s reasoning, particularly where the documentary decision and subsequent witness evidence appear to conflict. The existence of an alternative statutory defence does not remove the need to determine an anterior issue of unlawfulness where that issue must first be resolved. Any permission should be confined to the factual issue requiring clarification and should be limited in duration and scope.

The claimants challenged HMRC’s refusal of repayment applications under the Disguised Remuneration Repayment Scheme. The judicial review had been granted permission in the Administrative Court and transferred to the Upper Tribunal for determination at a substantive hearing.

The claimants sought permission to cross-examine the HMRC decision-maker. They alleged that the decision-maker had applied an incorrect “clear indication” test instead of the statutory reasonable-disclosure requirement. HMRC relied on a witness statement denying that the incorrect test had been applied and argued that the claim could be resolved objectively, without determining the decision-maker’s actual approach. The central issue was whether limited cross-examination was necessary for the fair and just determination of the claim.

1. Application granted. Limited cross-examination of the HMRC decision-maker was permitted at the substantive hearing.
2. Cross-examination in judicial review is exceptional because primary facts are often undisputed. The tribunal nevertheless retains a discretion to allow it where oral evidence is necessary for the fair and just disposal of the claim. That principle was reflected in the R (oao Bancoult) v Secretary of State for Foreign and Commonwealth Affairs decision, [2012] EWHC 2115 (Admin).
3. The issue of what test the decision-maker applied was a material fact. The claimants alleged that applying the “clear indication” test constituted an error of law, while HMRC disputed that allegation. HMRC’s reliance on the statutory highly-likely-no-difference defence did not mean that the tribunal could avoid deciding whether the test had first been misapplied.
4. There was an apparent conflict between the decision letter, which suggested that the “clear indication” test had been applied, and the witness statement, which denied that this was the test. It was insufficient for the claimants merely to make submissions on the relevance and weight of the witness statement. Since HMRC relied on that evidence, fairness required that the claimants be able to test it through cross-examination.
5. The permission was limited to the issue of what test the decision-maker applied in relation to reasonable disclosure. The anticipated duration was approximately 30 minutes, subject to the substantive hearing panel’s control of duration and timetable.

Permission for the judicial review had been granted by the Administrative Court, after which the proceedings were transferred to the Upper Tribunal. This decision determined the claimants’ interlocutory application for cross-examination before the substantive hearing.