Open justice FTW! El Reg fought the law – and El Reg won

Vulture goes to tribunal and gets the law changed

The Register has won a legal battle against Midlands-based reseller Aria Technology that will help open up tribunals across England and Wales to greater public scrutiny.

Following one Reg hack's boneheaded ignorance of the law determined struggle for justice, anyone who wants to see legal documents used in tribunal cases can now do that without having to argue in front of a judge before reading them.

This happened because Aria Technology tried to stop Register reporter Gareth Corfield from seeing papers submitted to the Upper Tribunal's Tax and Chancery Chamber, which is a specialised court for tax disputes with the same powers as the High Court.

Before this judgment, there was no explicit right for people other than accused tax-dodgers and HMRC itself to see details of tax disputes that ended up in the tribunal system. With this legal precedent having been set, anyone can now find out what's going on – bringing the tribunals into line with the normal civil and criminal courts, which have had that level of public access for years.

The decision of Tribunal Judge Greg Sinfield to order the release of the documents – creating a legal precedent – is a major win for open justice and will help open up all of the Upper Tribunal to public scrutiny. It also creates a persuasive legal authority for people wanting access to tribunal documents in the First-Tier Tribunal's (FTT) various chambers, from tax matters to immigration to freedom of information appeals.

A carousel of VAT-dodging allegations

In 2016 Aria had lost a First-Tier Tribunal tax case against HMRC, with the tribunal ruling that Aria Technology had dodged £750,000 in VAT through a so-called VAT carousel scheme, or missing trader intra-community (MTIC) fraud, as the lawyers call it.

In a VAT carousel fraud, businesses reclaim VAT from HMRC on goods supposedly sold abroad. They enter the UK without VAT having been paid (as a biz-to-biz transaction), get sold on a few times at a price that supposedly includes VAT, and then "leave" the country, with the last business in the chain, or carousel, reclaiming VAT that was never actually paid to the taxman in the first place. Aria did this with CPUs, HMRC said. Typically the physical goods themselves will sit in a storage location while fake paperwork is generated to build up a chain of sales.

Aria denies the taxman's claims that it was involved in a VAT carousel scheme and is appealing against the FTT's decision to the Upper Tribunal.

That appeal was the point at which El Reg got wind of the case, applying for copies of the notice of appeal, grounds of appeal and the HMRC response. These are the basic documents in any legal appeal case that tells you what each side is arguing about.

The main case is ongoing and is due to be heard in July.

I reject your rules and substitute my own

When the tribunal told him about El Reg's request to view the case papers, Aria Technology Ltd's (ATL) sole director, Aria Taheri, made a formal application to stop its clerks from revealing ATL's "grounds of appeal", which is the legal document setting out in detail why it thinks the FTT was wrong to side with HMRC, and HMRC's formal "response" to the grounds.

HMRC did not argue for or against Aria's application, leaving it for El Reg and Taheri to duke it out.

Reg reporter Corfield cited a previous legal case, Guardian v Westminster Magistrates, in which the Court of Appeal ruled: "Broadly speaking, the requirements of open justice apply to all tribunals exercising the judicial power of the state." In a hearing held at the Royal Courts of Justice on 20 March, he also cited High Court judge Master Victoria McCloud, who ruled in the 2017 case of Dring v Cape Distribution Ltd: "The common law is the master and not the servant of the rules."

Corfield argued that the Upper Tribunal (which, in law, has the same powers as the High Court) had the inherent power to rule that the documents should be disclosed even though there was nothing in its procedure rules explicitly saying it could do that.

On ATL's behalf, Taheri urged the judge not to release the documents, telling the tribunal that when his company's dispute with HMRC came to public light in August 2014, its bank blocked the Aria corporate account for 12 days, leaving the firm "short of funds and unable to pay key suppliers when invoices fell due". His point was that public reporting of Aria's dispute with HMRC before the full case was heard would expose the company to similar problems.

As Judge Sinfield said in his published judgment, rejecting this argument:

In my view, Mr Taheri has not demonstrated that allowing Mr Corfield and The Register access to ATL's notice of appeal and grounds and HMRC's response would lead to any unfairness or is likely to cause ATL or any other person real harm... it is clear that the bank resumed crediting the payments to ATL's account while the hearing was ongoing and continued to do so notwithstanding the subsequent release of the Decision in which the FTT found that ATL, through Mr Taheri and others, knew or ought to have known that it was engaging in transactions connected with the fraudulent evasion of VAT.

Judge Sinfield threw out Aria's application to prohibit disclosure, ordering that the documents must be disclosed to The Register after one month, which gave Aria time to lodge an appeal. They were eventually disclosed by the Tribunal yesterday afternoon. The full judgment can be read here (PDF, 9 pages).

We will be reporting the full details of the Aria Technology v HM Revenue and Customs Upper Tribunal appeal case separately.

This is already making the world a Better Place™

Public reaction to the judgment has been largely positive. An insolvency practitioner from a well-known firm, who spoke to us on condition of anonymity, said: "In traditional civil cases, these documents would all be available for inspection, but until this decision, tribunal documents were not made public. This meant that, even if I was a liquidator of a company that was named in tribunal proceedings, I would not be allowed access to the documents that referred to my company.

"I'm aware of at least one company that I'm suing for MTIC participation [VAT carousel fraud] in one market in one period that has separate tribunal proceedings ongoing arising from separate MTIC dealings in a later period in a different market. The ability to access the documents relating to the later participation should strengthen my case that it was a deliberate participant in the earlier fraud."

Media law barrister Greg Callus told The Register: "It's great that the Upper Tribunal has held that Guardian News & Media v Westminster Magistrates' Court applies in the tribunals system just as it does in the courts. This gives any journalist or lawyer who wants to access documents from the tribunals a single, clear authority as to the test that should apply. A good win for open justice."

In contrast, tax lawyer Catherine Robins of Pinsent Masons moaned: "It could be prejudicial to taxpayers if allegations of tax avoidance in HMRC's statement of case, which the tribunal may later decide are unfounded, are reported in the press before the case has been heard."

This is substantially the same point that Aria argued before Judge Sinfield – and, happily for all of us, the judge threw it out. Pre-hearing reports of civil and criminal court cases are entirely routine for news publishers.

Interviewing himself for this article in the manner of a BBC correspondent, a scintillating Corfield incisively commented: "I'm dead chuffed the judge agreed with me that the open justice principle applies to case papers in tribunals. I'm now looking forward to writing more about the alleged naughtiness of companies that get themselves on the wrong side of the taxman. But before that, I'm having a beer to celebrate my victory." ®

Bootnote

A simple and easy-to-read summary of the case was written by VAT consultant Les Howard for the Accounting website.




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