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N19: Cross-examination
Proper purpose of cross-examination
"[82]...And, again speaking generally, it seems to me that the proper purpose of cross-examining a factual witness is two-fold: first, to seek to undermine or qualify or mitigate the effect of evidence they have given which is adverse to the cross-examining party – for example by challenging the credibility or reliability of the witness, or otherwise testing the completeness or accuracy of their evidence – and second, to elicit further factual testimony helpful to the cross-examining party. It is not the proper function of crossexamination to argue the case, or debate issues of law, or seek to get the witness to agree with factual propositions of which they cannot themselves give relevant evidence. In practice counsel is often allowed considerable latitude to stray into these areas, but strictly speaking evidence in cross-examination is no more admissible if it is not evidence of facts of which the witness can speak of his own knowledge than it is in chief." (Mungavin v. HMRC [2020] UKUT 11 (TCC), Nugee J)
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- Not to highlight evidence
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“He submitted that it might be necessary to cross-examine in order to highlight various matters in the evidence. We do not accept that this is a good reason to cross-examine in the FTT, where the tribunal will have already read the evidence. To require a witness to attend in order to repeat uncontroversial matters in a witness statement is not consonant with the overriding objective.” (HMRC v. Fairford Group plc [2014] UKUT 329 (TCC) §45, Simon J and Judge Bishopp)
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- Cross examination refused at information notice appeal hearing where related to substantive tax position
"[9] I asked Mr Williams to tell me the questions he would seek to put to Mr Sangha in cross-examination, so that I could determine whether these were properly directed to the issue that was the subject of the appeal, namely the validity of the information notice.
[10] Having heard all the questions Mr Williams wanted to ask Mr Sangha, I took time to consider the matter. I was satisfied that the questions were designed to elicit further information about Mr Sangha's tax position, rather than being concerned with the validity of the information notice. The information Mr Williams sought may have properly been the subject of an enquiry or an information notice, but the purpose of the hearing was not to permit HMRC to conduct an on-the-spot enquiry.
[11] I therefore decided not to allow Mr Williams to put his questions to Mr Sangha in cross-examination. Mr Jones said that if Mr Williams did not cross-examine Mr Sangha, he would not seek to cross-examine Officer Andrews. Therefore neither witness was cross-examined." (Sangha v. HMRC [2024] UKFTT 564 (TC), Judge Gauke)
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Must be directed at the issues in the hearing
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Unnecessary to challenge opinions and inferences of witness of fact
"[110] I can understand that had [the taxpayer's counsel] been in a position to cross-examine Officer Bradley she might well have taken the opportunity to challenge his assertions both as to what could be inferred from the primary facts and as to whether that amounted to negligence. But I do not think she needed to do this. As I have sought to explain, what he said about the inferences that could be drawn and why HMRC contended that each Appellant was negligent was not evidence that he was giving from his own knowledge that needed to be challenged: it was in the nature of submissions. Even without challenging it in cross-examination, there was nothing to stop submissions being made that an inference should not be drawn or that, even if drawn, such inferences did not constitute sufficient material on which to make a finding of negligence."
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[116] As with the issue of negligence, I can see that [the taxpayer's Counsel] might have wanted to use the cross-examination of Officer Bradley as an opportunity to challenge the assessment of HMRC as to the level of discount, but I do not think she needed to do that to make submissions that the overall level of penalty was too high." (Mungavin v. HMRC [2020] UKUT 11 (TCC), Nugee J)
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Cross-examination not dependent upon positive case
“On the other hand, as the Upper Tribunal recognised, cross-examination is not dependent on the appellant having made a positive case or having served evidence in rebuttal. All that is required is identification of the respects in which the evidence is disputed. There may be many legitimate reasons why a party who is not itself in possession of contrary evidence might wish to cross-examine the witnesses of the other party. There might be internal inconsistencies in the witness statement, inconsistencies with other evidence put forward by that other party in the case or in other cases. There might be omissions of fact where something might be expected. Where the facts deposed to are not within the actual knowledge of the witness but are the product of research or investigation, by the witness or possibly by others, there might be questions as to the nature of such investigation or research. It would be wrong to place any obstacles in the way of an appellant wishing to test the evidence of HMRC in that way, and it would deprive the tribunal of the benefit of having heard that evidence being so tested.” (CF Booth Ltd v. HMRC [2016] UKFTT 261 (TC), §15).
But party who puts to proof without identifying areas of dispute not entitled to cross-examine
“In our view the FTT should also direct that if an appellant raises no positive case, serves no evidence challenging the evidence of HMRC's witnesses, and does not identify the respects in which the statements of those of HMRC's witnesses who deal only with the questions set out at [47], above are disputed, then their evidence can be given, and will be accepted by the tribunal, in the form of a written statement under r 15(1) of the FTT Rules (see also r 5(3)(f)), and that cross-examination of that witness will not be permitted.” (HMRC v. Fairford Group plc [2014] UKUT 329 (TCC), §148, Simon J and Judge Bishopp).
“Notwithstanding that in MTIC cases the burden of proof lies with HMRC, an appellant who does nothing more than put HMRC to proof will not be entitled to cross-examine those witnesses for HMRC who give evidence in relation to certain aspects of the case…[I]f the appellant makes no positive case with respect to the issues specified in the directions, serves no evidence which challenges the evidence of HMRC’s witnesses in those respects and does not identify the areas of dispute in that evidence, then the appellant will not be entitled to cross-examine those witnesses, whose witness statements will be accepted by the tribunal.” (CF Booth Ltd v. HMRC [2016] UKFTT 261 (TC), §§10…13).
Not required to disclose line of cross-examination
“Obviously, crossexamination is limited to those issues that arise on the pleadings in any given case, and must be conducted relevantly and appropriately. Subject to that, the cross-examiner is not obliged to give advance notice of the lines of questioning that are intended to be pursued, 27 25 and we consider that the Appellant’s contention regarding ambush to be misconceived and wrong.” (White v. HMRC [2018] UKUT 257 (TCC), §34, Marcus Smith J and Judge Jonathan Richards).
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“The modern approach to case management is, as is well-established, one of “cards face up on the table”, but that does not mean that a party should be obliged to disclose in advance its line of questioning in cross-examination. It is enough, as the Upper Tribunal indicated at [49], that the appellant identify the respects in which the relevant witness statements are disputed or, I would say, not accepted. There is no necessity for an appellant to go further than that.” (CF Booth Ltd v. HMRC [2016] UKFTT 261 (TC), §16).
Allegations of impropriety must be exhaustively particularised in writing prior to cross-examination
“all allegations of impropriety and lack of bona fides should be exhaustively and unequivocally particularised in writing prior to cross-examination…” (GSM Export (UK) Ltd v. HMRC [2014] UKUT 0529 (TCC), §23, Proudman J).
However
"[36]...The allegation that a witness is dishonest must be put fairly and squarely to the witness in cross-examination before the tribunal can find the witness is dishonest, but does not need to have been pleaded in advance in cases where the burden is on the taxpayer." (Award Drinks Ltd (in liquidation) v. HMRC [2020] UKUT 201 (TCC), Judge Raghavan and Judge Thomas Scott)
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Query whether the distinction is between alleging a witness was dishonest in the past (which can and should be pleaded) versus alleging a witness is lying in their evidence.
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See also L10: Statement of case
Duty to put your case on serious allegations
“I cannot help saying that it seems to me to be absolutely essential to the proper conduct of a cause, where it is intended to suggest that a witness is not speaking the truth on a particular point, to direct his attention to the fact by some questions put in cross-examination showing that the imputation is intended to be made, and not to take his evidence and pass it by as a matter altogether unchallenged, and then, when it is impossible for him to explain, as perhaps he might have been able to do if such questions had been put to him, the circumstances which it is suggested indicate that the story he tells ought not to be believed, to argue that he is a witness unworthy of credit. My Lords, I have always understood that if you intended to impeach a witness you are bound, whilst he is in the box, to give him an opportunity of making any explanation which is open to him; and, as it seems to me, that is not only a rule of professional practice in the conduct of a case, but is essential to fair play and fair dealing with witnesses.” (Browne v. Dunn (1893) 6 R 67, Lord Herschell, quoted in Allied Pastoral Holdings Pty Ltd v. Federal Commissioners of Taxation [1983] 1 NSWLR 1 at 16 - 18 and Markem Corp v. Zipher Ltd [2005] EWCA Civ 267, §59);
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"[45] [HMRC's Counsel] accepted that the finding in this case that Firm A acted deliberately in causing an inaccurate entry to be made in the 2007/08 tax return could be characterised as a finding of dishonesty. She also accepted that it was not open to the FTT to make a finding of dishonesty where such an allegation had not been pleaded or put to the witness in cross examination." (Danpal v. HMRC [2023] UKUT 86 (TCC), Judge Herrington and Judge Bowler)
“It remains a fundamental tenet of jurisprudence both at the European Court level and in this jurisdiction that allegations of wrong doing have to be made against the person in question and they must be put both fairly and squarely…This merely reflects law at the ECJ level and the national level as set out above. This is a fundamental tenet that allegations of wrongdoing are put.” (HMRC v. Infinity Distribution Ltd [2015] UKUT 219 (TCC), §§25…26, Peter Smith J).
“It is clear to us that we cannot find a witness to have been dishonest in relation to statements made in the past unless the allegation is plainly made and put to him with the evidence supporting the allegation and in a manner which gives him a fair chance to rebut it. Unless those criteria were satisfied we would not make a finding of dishonesty. Even if those criteria were satisfied we would consider making such a finding only if relevant to the matters we have to decide.’ These paragraphs show that the FTT had well in mind the standard requirements of fairness and natural justice which must be satisfied if a tribunal or other body performing a judicial function is to be entitled to make a finding of dishonesty. Rightly, no criticism was made of these paragraphs by either side in their written or oral submissions on the present appeals.” (Ingenious Games LLP v. HMRC [2015] UKUT 105 (TCC), §§42 – 43; see also §§65, 67, Henderson J).
“It is also well settled that a tribunal is not entitled to find serious allegations established against a party who calls relevant witness unless those allegations are clearly formulated and put in cross-examination.” (Mobilx Ltd v. HMRC [2009 EWHC 133, §16, Floyd J; cited in Pars Technology Ltd v. HMRC [2011] UKFTT 9 (TC), §40, Judge Mosedale).
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“it is a cardinal principle of litigation that if serious allegations, in particular allegations of dishonesty are to be made against a party who is called as a witness they must be both fairly and squarely pleaded, and fairly and squarely put to that witness in cross examination. In my judgment the tribunal’s conclusion that it was constrained, notwithstanding suspicion, from making the necessary findings of knowledge against Mr Dempster…was nothing more nor less than a correct and conventional application of that cardinal principle.” (HMRC v. Dempster [2008] STC 2079, §26, Briggs J);
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"[56] During the cross-examination of Mr Lynch [the taxpayer], quite rightly, reminded the Tribunal of the important rule in rule in Browne v Dunn [1893] 6 R 67 HL, under which the tribunal is not entitled to disbelieve a witness's evidence on a point unless it has been specifically challenged in cross examination. Mr Boch stopped short of challenging Mr Lynch’s evidence in this way and we accepted the evidence as it was presented by Mr Lynch. We therefore do not find that possible inconsistencies between that evidence and earlier correspondence is a relevant factor beyond the admission by Mr Lynch that he had made a number of mistakes, which, as we have set out above, we have not found to be a good reason for the delay." (Cork Bonded Warehouse Limited v. HMRC [2022] UKFTT 215 (TC), Judge McGregor)
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“Clearly also [allegations of dishonesty] must be put squarely to her when she gives evidence.” (Vale Europe Ltd v. HMRC [2014] UKFTT 1042 (TC), §16);
“[Moses LJ in Mobilx] was quite clear in the same paragraph that such behaviour had to be ‘put’ to the witness in cross examination; in other words, the Court of Appeal did consider such behaviour as dishonest, as it ruled the witness had to be given a specific opportunity to give an explanation before adverse inferences could be drawn.” (Citibank NA v. HMRC [2014] UKFTT 1063 (TC), §29, Judge Mosedale).
Prior notice
“I remain of the opinion that, unless notice has already clearly been given of the cross-examiner’s intention to rely upon such matters, it is necessary to put to an opponent’s witness in cross-examination the nature of the case upon which it is proposed to rely in contradiction of his evidence, particularly where that case relies upon inferences to be drawn from other evidence in the proceedings.” (Allied Pastoral Holdings Pty Ltd v. Federal Commissioners of Taxation [1983] 1 NSWLR 1 at 26, Hunt J, quoted in Markem Corp v. Zipher Ltd [2005] EWCA Civ 267, §60)
“In Markem Technologies Ltd v Buckby [2005] EWCA Civ 267, Jacob LJ, giving the judgment of the Court of Appeal, first noted at [59] that the reports of Browne v Dunn are difficult to access, and then went on to rely on extracts from the case set out by Hunt J in Allied Pastoral Holdings Pty Ltd v Commr of Taxation [1983] 1 NSWLR 1 at [16]-[18]. Jacob LJ also approved Hunt J’s “valuable comments” on Browne v Dunn, including the following dictum taken from Phipson on Evidence, 12th ed (1976):
“Failure to cross-examine, however, will not always amount to an acceptance of the witness's testimony, e.g. if the witness has had notice to the contrary beforehand, or the story is itself of an incredible or romancing character.”
Applying those principles, and noting that Ms Pleming’s witness statement was filed after Ms Henderson’s and that it contained explicit challenges to some of Ms Henderson’s statements, I find that Ms Henderson was therefore on notice, before the hearing, that parts of her evidence had not been accepted by HMRC. Furthermore, Mr Tolley drew Mr Furness’ attention to these challenges in the course of the hearing…To the extent that Ms Henderson’s witness statement is in conflict with the evidence given by Ms Pleming, I have preferred the latter, which was supported by contemporaneous documentation.” (Paya Ltd and Tim Wilcox Ltd v. HMRC [2016] UKFTT 660 (TC), §§143 – 145 – conflicting witness statements where neither witness called to give evidence).
Fair notice and an opportunity to deal with allegation
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"[39] It is perhaps worth adding two comments. First, where a witness' honesty is to be challenged, it will always be best if that is explicitly put to the witness. There can then be no doubt that honesty is in issue. But what ultimately matters is that the witness has had fair notice of a challenge to his or her honesty and an opportunity to deal with it. It may be that in a particular context a cross-examination which does not use the words "dishonest" or "lying" will give a witness fair warning. That will be a matter for the trial judge to decide. Secondly, the fact that a party has not alleged fraud in his pleading may not preclude him from suggesting to a witness in cross-examination that he is lying. That must, in fact, be a common occurrence." (Howlett v. Davies [2017] EWCA Civ 1696, Newey LJ)
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However (emphasis on importance of seeing how witness responds)
“In response the Defendant drew my attention to the fact that in Rahme there had not it seemed (see paragraph 70) even been a challenge to the accuracy of the witness' evidence in that case, and that may be the reason why in Rahme Morgan J considered that his "hands . . . [were] tied . . . by the failure to challenge his evidence in this respect". I do not consider that my hands are tied. But in my judgment if there is to be such an onslaught on the honesty and credibility of these two professional witnesses as has been carried out in the Closing Submissions, challenge to the accuracy of their evidence is plainly insufficient, and it must be necessary and in any event sensible and fair to put to a witness that in certain (in this case apparently numerous) respects he has been dishonest and is not telling the truth. This is not simply out of fairness to the witness, but it is also necessary for the judge, because if I am to conclude that an otherwise apparently honest and respected professional has been deliberately false and misleading, I must have the opportunity to see how the witnesses respond to each such suggestion and see whether I am persuaded by their answer (if any).” (Tullow Uganda ltd v. Heritage Oil and Gas Ltd [2013] EWHC 1656 (Comm), §62, Burton J).
- Sham allegation put by suggesting that parties intended some other arrangement
"[123] I have considered Ms Brown’s arguments regarding pleading sham at [42] to [49] above. I do not accept Ms Brown’s submission that the way in which HMRC have put their case requires proof of dishonesty. It is clear that HMRC do not consider Mr Northwood to have been honest. However, in my view, this case falls within the category described in Hockin as a pretence that does not cross the threshold into dishonesty. My finding is that the RT documentation was dressed up to achieve a tax benefit but this was “not evasion, and there was no attempt, as there would be in the case of evasion, to conceal what actually happened, however the parties chose to dress it up”.
[124] I also do not agree that HMRC did not put the sham allegation to Mr Northwood in cross-examination. The questions put to Mr Northwood did not simply suggest the situation where parties made an agreement which was unfavourable to one of them, or artificial. The questions were put in the context of a situation where the parties intended some other arrangement. I therefore find that the allegations were put fairly and squarely to Mr Northwood and that he was given an opportunity to rebut them." (Northwood v. HMRC [2023] UKFTT 351 (TC), Judge Sukul)
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Requirement for witnesses to be cross-examined on factual matters Tribunal relies on
“In our judgment, the FTT erred in law in taking into account in its legal reasoning in relation to its alternative conclusion at paragraph [85] of the Second FTT Decision the further investigations mentioned at paragraph [215] of the First FTT Decision, because there were no grounds for it to do so. Those further investigations were not raised with S&I’s witnesses and were not the subject of any evidence, at least no such evidence was referred to. In our judgment, in the circumstances, there can have been no reasonable and proper basis for advancing them and relying upon them.” (S&I Electrical plc v. HMRC [2015] UKUT 162 (TCC), §71, Asplin J and Judge Walters QC).
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- Tribunal required to accept unchallenged evidence unless it is inherently implausible or contradicts compelling evidence
“In each case it is open to the court to reject evidence because of its inherent implausibility or because it is contradicted by or not supported by the documents…” (Bryce Ashworth v. Newnote Ltd [2007] EWCA Civ 793, §34).
“It is appropriate no doubt in Ord 14 proceedings for the court to be credulous, not least when the claim is brought, as here, in fraud. The court should not, however, be gullible and, to my mind, only extreme gullibility could lead one to suppose that any innocent explanation exists here for these huge unearned payments. I regard the proposed defence as one of breathtaking improbability; frankly, it is nonsense.” (Orange Personal Communications Services Ltd v. Squires, CA, 6 February 1998, unreported)
“HMRC did not require Melanie or any of the other witnesses to be cross-examined and therefore, provided their evidence is credible (see National Westminster Bank Plc v. Daniel [1993] 1 WLR 1453), which it is, HMRC must be taken to have accepted it.” (Freedman v. Freedman [2015] EWHC 1457 (Ch), §11).
“Before the Master it was common ground, consistent with the decision in National Westminster Bank v Daniel (1993) 1 WLR 1453, that the Master had to decide whether any of the evidence that was put before him was incapable of belief.” (DCD Factors plc v. Ramada Trading Ltd [2015] EWHC 1046 (QBD), §9).
“…it does not appear that Mr Lobler’s evidence was challenged in this regard, so that it was necessary for the FTT to accept it.” (Lobler v. HMRC [2015] UKUT 152 (TCC), §28, Proudman J).
“It is not clear from the Decision why, notwithstanding Mr Beal’s clear statement the FTT came to the conclusion that it was possible (no higher than that) that Reed would have proceeded without a dispensation. Mr Beal’s evidence was not challenged in cross examination and we have not been shown any other evidence which suggests that any doubt should be cast on the categoric nature of Mr Beal’s statement. In those circumstances we accept Mr Glick’s submission that the only finding on the evidence before it that was open to the FTT was that Reed would not have proceeded with the Schemes without a dispensation. We therefore make that finding of fact for the purpose of our consideration of Issue 7.” (Reed Employment Plc v. HMRC [2014] UKUT 160 (TCC), §165, Proudman J and Judge Herrington).
“in the absence of any challenge to [the taxpayer’s] evidence to the Tribunal…it was not open to the Tribunal to disbelieve that evidence…This rule of evidence is simply an application of the principles of natural justice which apply in all courts and tribunals.” (Okolo v. HMRC [2012] UKUT 416 (TCC));
"[62] Mr Jeremy Barnett referred several times to the fact that Mr Bradley elected not to cross examine the two witnesses and that therefore their evidence must stand. This is, undoubtedly true and in fact, with regard to the statements of fact and expressions of their own beliefs regarding their tax position, Mr Bradley expressly accepted this position." (Barnett v. Fox [2023] UKFTT 62 (TC), Judge McGregor)
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"[The taxpayer] rightly points out that many of the witnesses were not challenged in cross-examination and that therefore their evidence should be found as facts. We have done so." (Islam v. HMRC [2022] UKFTT 188 (TC), Judge Anne Scott)
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Party must establish the evidence was unchallenged
“[Counsel for HMRC], who did not appear before the Judge, notes that there are a number of places in his written skeleton argument where [Counsel for the taxpayer] has referred to certain witness evidence being unchallenged. I have no way of knowing whether what he says is correct. There is no transcript of the hearing in the bundle before me nor even any notes of the evidence. I have before me an appeal on a point of law. I can see from the Decision what the Judge did and did not decide. But I cannot take as an established fact something which depends only on an assertion that the evidence on that fact was unchallenged.” (Norseman Gold Plc v. HMRC [2016] UKUT 69 (TCC), §97, Warren J)
Not required to traverse every point in a witness statement for it to be challenged
“We do not believe that this principle goes so far as to suggest that a tribunal is bound to accept every word in a witness statement unless the passage in question was put to the witness specifically in cross-examination and challenged. In a case such as this, with a vast amount of documentary evidence submitted as well as lengthy witness statements and extensive oral evidence, that would be impracticable and indeed is not encouraged. In Markem Corporation, relied on by Arnold J in Okolo, in the passage quoted above, the principle being enunciated was that it was not open to challenge the evidence of a witness upon a matter which he has not had the opportunity of giving an explanation by reason of there having been no suggestion whatsoever in the course of the case that his story is not accepted: see paragraph 59 of Jacob LJ’s judgment. It must be open to the Tribunal to consider all the evidence put before it in the round when considering whether to accept a particular unchallenged passage in a witness statement, as opposed to considering the credibility of a witness’s story as a whole.” (Reed Employment Plc v. HMRC [2014] UKUT 160 (TCC), §128, Proudman J and Judge Herrington).
Not required to put it to every witness (one witness who deals with the point in chief is sufficient)
“In my judgment the FTT was correct in its view, expressed in paragraph 441 of its Decision, that there was no requirement to put to Mr Rashid matters about the due diligence material upon which Mr Plowman had given a witness statement and was questioned. I agree that the Appellant appears to have ignored the principle in Re Yarn Spinners' Agreement [1959] 1 All ER 299 at 309 per Devlin J that a party’s case may be put to any of the witnesses who deal with the matter in chief and it can then be relied upon by that party in argument.” (Edgeskill Limited v. HMRC [2014] UKUT 38 (TCC), §138, Hildyard J).
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- Do not wait until closing to point out deficiencies in evidence
“[144] Turning then to the quality of the evidence itself, we agree with [the taxpayer] that it too left something to be desired in that various statements of fact were not supported by the appropriate exhibits. On the other hand, as we have already observed, [the taxpayer] did not seek to challenge any of the Respondents’ witness evidence in relation to the historic transactions by way of cross-examination. Instead, he waited until he made his closing submissions to point out those deficiencies. Accordingly, whilst we agree that some of the evidence presented to us was not supported by the appropriate exhibits, we are nevertheless left with various statements of fact made by the witnesses which have not been challenged and which, subject to the point made in the paragraph below in relation to one of the historic transactions, we have no reason to doubt." (Vortex Enterprises Limited v. HMRC [2023] UKFTT 211 (TC), Judge Beare)
- Not required to traverse every detail of a witness’s evidence that is not accepted
“Perusal of the entire transcript shows, in our view, that it must have been abundantly clear to Mr Andrews that his credibility was being challenged, both generally and in respect of various details. It is also apparent from the transcript that he was given the opportunity of answering the propositions which were put to him, of either knowing or ‘blind eye’ participation in transactions connected to fraud, and that he attempted to answer them. We do not accept Mr Bridge’s argument that every disputed point of detail must be put to a witness and that if it is not his evidence on it must be taken to be unchallenged, and correspondingly accepted by the tribunal. If that were so the length of the hearing of a case of this kind would be extended unnecessarily and tediously by questions putting essentially the same point repeatedly. It is enough that the witness should understand which parts of his evidence are challenged, and why, and that he has a proper opportunity of answering the challenge.” (Tricor plc v. HMRC [2016] UKUT 362 (TCC), §38, Morgan J and Judge Bishopp).
- Not required to challenge opinions expressed by witness of fact
"[57] As the speech of Lord Herschell LC in Browne v Dunn makes clear, if the party cross-examining a witness is going to suggest at the end of the evidence that the witness is lying, that case must be put to the witness to give him the opportunity of refuting it. To take two common examples from other areas of the law: a prosecution witness whom the defendant accuses of having committed the crime himself must have that accusation put to him. A claimant in a personal injury case who is accused of dishonestly exaggerating his symptoms must likewise have that imputation put to him. But Mr Turner's evidence in the passage relied on by Mr Peacock seems to me as far from that type of case as it is possible to be. The critical sentence is essentially a statement of the argument for TDS, or of Mr Turner's opinion on an issue of law, rather than a statement of fact: this is emphasised by the introductory words "whatever the main purpose or purposes of the [Swap] and loan novations", since it is plain that the purpose of the Swap and loan novations was tax avoidance." (Travel Document Service v. HMRC [2018 EWCA Civ 549, Bean LJ)
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Fair opportunity to respond (including production of documents)
“It does not seem to us that we should make a finding of dishonesty of any of the three individuals unless the allegation is put to them fairly and squarely with an opportunity to reply. If the absence of all the documents they might possibly be able to rely on means that they are unable fairly to reply, we should not make such a finding.” (Ingenious Games LLP v. HMRC [2015] UKUT 105 (TCC), §§46 – 47, Henderson J, FTT repeated the procedural safeguards “impeccably” and note direction that witnesses would have four weeks to adduce additional evidence once notified of general nature of allegations - §80).
Permitting further cross-examination due to failure to put case
“In our view, the objectives of flexibility and informality suggest that the FTT should have permitted the additional questions to have been put.” (HMRC v. SDM European Transport Ltd [2013] UKUT 0251 (TCC), §21).
“FTT clearly considered that HMRC should still be permitted to put the allegations of dishonesty to the three individuals, despite their previous failure to do so and despite the exchanges during the course of the hearing…It is a discretionary assessment of the kind with which the appellate tribunal cannot interfere, unless an error of law…is demonstrated…In my judgment the Appellants have been unable to demonstrate any error of law…” (Ingenious Games LLP v. HMRC [2015] UKUT 105 (TCC), §§68 – 69, Henderson J).
No distinction between rejecting evidence and not accepting it
“the distinction…between non-acceptance and rejection is artificial. A conclusion that a statement given in evidence as to what happened cannot be accepted means that the tribunal does not accept that what was said to have happened took place. Thus, the tribunal proceeds upon the basis that the event said to have happened did not take place. A conclusion that the evidence must be rejected may show the force of the tribunal’s views, but the effect upon the factual matrix is the same. A finding that the tribunal did not accept that an event happened is a conclusion that there was no evidence which established on the balance of probabilities that it did take place.” (Hurley v. Taylor [1999] STC 1 at 11, Aldous LJ);
Non-witnesses
If a party is on notice that a serious allegation is made against him in a case and he declines the opportunity to give evidence, the Court or Tribunal may find that allegation proven:
“This was not a case where it could be said that MRH had had an opportunity to give evidence to rebut the allegation of fraud or dishonesty, that they had failed to take it and some kind of adverse inference could therefore be drawn from their silence… f a case of fraud had been alleged against MRH, they would have had to consider whether they should continue to act for Mr Yousaf. They may also have wished to apply to be joined as a Defendant to the action so that they could defend themselves (although even in those circumstances, the precise effect of legal professional privilege might have to be considered). Since fraud by MRH had not been pleaded, their omission to take any of these steps was of no significance.” (MRH Solicitors Ltd v. Manchester County Court [2015] EWHC 1795 (Admin), §36 – finding of fraud made against a party’s solicitor).
On the other hand, a party who had no such notice cannot be the subject of a serious finding unless first given the opportunity to rebut the allegation:
"It is, I regret to say, elementary common fairness that neither parties to the litigation, their counsel nor judges should make serious imputations or findings in any litigation when the person concerned against whom such imputations or findings are made have not been given a proper opportunity of dealing with the imputations and defending themselves." (Vogon International Ltd v. The Serious Fraud Office [2004] EWCA Civ 104, §29).
“Mr Knowles accepted that the Recorder would have been entitled (if he thought the evidence called for it) to voice his suspicions or concerns as to the conduct of MRH, but noting that he had not heard anyone from MRH give evidence. Any judge would be concerned if evidence heard in a trial cast real doubt on the integrity of solicitors as officers of the court. This may or may not have led the defendants in the County Court to seek a wasted costs order against MRH. What Mr Knowles submitted he should not have done in fairness to MRH was to make positive and unqualified findings that the solicitors had been fraudulent and dishonest…We agree.” (MRH Solicitors Ltd v. Manchester County Court [2015] EWHC 1795 (Admin), §§38…39).
The reason for this rule is that what may appear unanswerable sometimes turns out to be answerable:
“This is not only required because of fairness to the party affected but also to avoid the Court falling into error – see for instance Co-operative Group (CWS) Ltd v International Computers [2003] EWCA Civ 1955 at [38]” (MRH Solicitors Ltd v. Manchester County Court [2015] EWHC 1795 (Admin), §35).
"As everybody who has anything to do with the law well knows, the path of the law is strewn with examples of open and shut cases which, somehow, were not; of unanswerable charges which, in the event, were answered; of inexplicable conduct , which was fully explained…Nor are those with any knowledge of human nature who pause to think for a moment likely to underestimate the feelings of resentment of those who find that a decision against them has been made without their being afforded any opportunity to influence the course of events". (John v. Rees [1970] Ch 342, 402, Megarry J).
Allegation of tax avoidance purpose
Commonly vital to raise the issue in terms with the witness
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"[44] The principle that a witness's evidence should be challenged in cross-examination if the Court is to be asked to disbelieve him is plainly very important. In cases in which HMRC wish to contend that a company had a tax avoidance motivation in the face of evidence along the lines of that given by Mr Turner, it will always be wise, and must commonly be vital, to raise the issue in terms with the witness. It would, I think, have been better if the parts of Mr Turner's witness statement that I have quoted had been the subject of specific cross-examination." (Travel Document Service v. HMRC [2018 EWCA Civ 549, Newey LJ)
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But not always, for example, if it is the inescapable inference from other findings of fact
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"[45] In the particular circumstances of this case, however, I do not think that the absence of such a challenge precluded a finding of "unallowable purpose". Mr Peacock accepted that his objection would not avail him if we concluded, as I do, that it followed inevitably from the FTT's findings that securing a tax advantage must have been a main purpose for which TDS held the LGI shares during the relevant period. More than that, it seems to me that the FTT did not need to disbelieve Mr Turner to decide that TDS had an "unallowable purpose" for holding its LGI shares.
[46] Mr Turner's witness statement brought out the fact that TDS owned its LGI shares long before the Swap and Novations were thought of and that it continued to have ordinary business reasons for doing so. On the other hand, Mr Turner did not dispute that the Swap and Novations had as a main purpose securing a very large tax advantage that depended on TDS holding the LGI shares. While, therefore, there is no question of TDS having had the tax advantage in mind when it acquired the shares, it was evidently intending to use them in the tax avoidance scheme during the currency of the Swap. Had the tax advantage in view been small, there might have been scope for argument as to whether an intention to use the shares to achieve it implied that obtaining the advantage was now a main purpose of holding the shares. In fact, however, the hoped-for gain was large both in absolute terms (more than £70 million) and relative to the apparent value of TDS (some £280 million). That being so, I agree with Mr Ghosh that the inescapable inference was that securing the advantage had become a main purpose of holding the shares. The prospective advantage was of such significance in the context that gaining it must have become a main purpose of holding the shares as well as of the Swap and Novations.
[47] That conclusion is not, however, inconsistent with Mr Turner having considered, perfectly honestly, that TDS's "purpose" in holding the LGI shares was exclusively commercial. His evidence can be attributed to his taking a different view as to what counts as a "purpose" for holding shares. It reflected his use of language rather than any factual disagreement." (Travel Document Service v. HMRC [2018 EWCA Civ 549, Newey LJ)
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No objection to HMRC relying on avoidance purpose if obvious that was HMRC's case and full opportunity to meet it
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"[34] In the present case, the discovery assessments were made on the basis of the antiavoidance provisions in respect of the transfer of assets abroad. The Appellants knew that those provisions were the subject of an exemption which referred to the purposes for which the transactions were effected. The Appellants sought to rely on the exemption. In their statement of case before the FTT, HMRC addressed the exemption and asserted that the transactions were part of a wider scheme to avoid paying tax on the income generated from UK property transactions. The Appellants submitted a statement of case in response and stated that they would demonstrate that the avoidance of tax was not the purpose or one of the purposes of the transactions. HMRC’s skeleton argument before the FTT was that the evidence to be relied upon by the Appellants went nowhere near satisfying the burden on them pursuant to the terms of the exemption.
...
[36] ... a note of some of the things said in crossexamination could not in itself establish the negative proposition put forward by the 25 Appellants that they were not cross-examined at any point as to the purposes of the transactions.
[37] In fact, if one reads the written submissions on behalf of HMRC which were put to the FTT, it seems to us that the Appellants were cross-examined as to why they had entered into the transactions in the way in which they had and why they had not entered into possible other forms of transaction. Those questions appear to be about the purposes behind the transactions taking the form in which they did.
[38] In any case, the circumstances are very similar to those considered in the Travel Document Service case, which also involved an inquiry into the subjective purposes of the taxpayer. Much of the reasoning in that case applies also here. Here, there was a 35 strong case based on inference from the circumstances in which the transaction took place and from the way in which the transaction was structured for saying that at least one of the purposes of the transaction was to avoid tax. Further, it was not necessary to disbelieve the witnesses when they said that they wanted an investment which could be seen as their pensions. That, if true, did not prevent the FTT assessing and then making 40 findings as to what sort of investment and what sort of pension the witnesses wanted. The FTT found that the sort of investment and pension in question was one which involved the avoidance of tax which would otherwise be due.
[39] We also consider that there was nothing remotely unfair or inappropriate in the way in which HMRC presented their case and cross-examined the witnesses. The witnesses knew the case they had to meet and they had a full opportunity to meet it. Their evidence as to their purposes was essentially their argument as to the way in 5 which their conduct should be assessed. Their evidence as to their purpose being to obtain pensions did not gainsay a finding that the investments or pensions which they sought were ones which involved the avoidance of tax." (Davies v. HMRC [2020] UKUT 67 (TCC), Morgan J and Judge Andrew Scott)
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Tribunal entitled to limit irrelevant cross-examination
“The tribunal is entitled to limit what it sees as irrelevancies...I see nothing wrong in the Judge’s wish to move the evidence on from a point that had now been made at length and which he considered to be largely irrelevant.” (GSM Export (UK) Ltd v. HMRC [2014] UKUT 0529 (TCC), §86…§88, Proudman J);
Tribunal intervention during cross-examination
See N3: Tribunal Conduct and Q9: Unfair conduct of trial
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Tribunal should not intervene so much as to impede a party in putting his case
“A judge of acute perception, acknowledged learning, and actuated by the best of motives, has nevertheless himself intervened so much in the conduct of the case that one of the parties - nay, each of them - has come away complaining that he was not able properly to put his case; and these complaints are, we think, justified…Now, it cannot, of course, be doubted that a judge is not only entitled but is, indeed, bound to intervene at any stage of a witness's evidence if he feels that, by reason of the technical nature of the evidence or otherwise, it is only by putting questions of his own that he can properly follow and appreciate what the witness is saying. Nevertheless, it is obvious for more than one reason that such interventions should be as infrequent as possible when the witness is under cross-examination. It is only by cross-examination that a witness's evidence can be properly tested, and it loses much of its effectiveness in counsel's hands if the witness is given time to think out the answer to awkward questions; the very gist of cross-examination lies in the unbroken sequence of question and answer. Further than this, cross-examining counsel is at a grave disadvantage if he is prevented from following a preconceived line of inquiry which is, in his view, most likely to elicit admissions from the witness or qualifications of the evidence which he has given in chief. Excessive judicial interruption inevitably weakens the effectiveness of cross-examination in relation to both the aspects which we have mentioned, for at one and the same time it gives a witness valuable time for thought before answering a difficult question, and diverts cross-examining counsel from the course which he had intended to pursue, and to which it is by no means easy sometimes to return.” (Jones v. National Coal Board [1957] 2 QB 55 at 64 - 65, per Lord Denning MR).
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Tribunal questions
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- The purpose of Tribunal questions is to assist the witness in giving the evidence he wants to give
“It appears to us that the interventions by the judge while Mr. Mars-Jones was cross-examining went far beyond what was required to enable the judge to follow the witnesses' evidence and on occasion took the form of initiating discussions with counsel on questions of law; further, and all too frequently, the judge interrupted in the middle of a witness's answer to a question, or even before the witness had started to answer at all.” (Jones v. National Coal Board [1957] 2 QB 55 at 65, per Lord Denning MR).
“It is important that the obligations of a tribunal to deal sensitively with litigants in person and those who may be vulnerable for one reason or another, not least through mental illness, should not be confused with adopting an inquisitorial procedure. It is the role of the Judge to ensure, by making proper allowance, by ensuring that the form of questioning by one side or the other is appropriate, by controlling the amount of time that a witness is in the witness box and, as r 41 itself suggests, asking its own questions, that a witness gives the best evidence that that witness would wish to give. It remains, however, that witness's evidence. It is that witness's case. It is not the tribunal's case. It is not the tribunal's evidence.” (East of England Ambulance Service NHS Trust v. Sanders UKEAT/0217/14/RN, §30).
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- Not for the Tribunal to cross-examine a witness (even on behalf of litigant in person)
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"[59] At one stage Mr Burgess suggested that Judge Bowler could cross-examine the witnesses for him, but Judge Bowler made clear that neither she nor Ms Stott could do so. It was for the Tribunal to ensure that Mr Burgess’ participation was facilitated as much as possible, but that did not mean that they could act on his behalf or challenge witnesses on his behalf. The Tribunal would routinely ask witnesses to clarify matters where there was uncertainty and may ask a witness to address apparent inconsistencies, but that would be all." (Tradestar International Limited v. HMRC [2022] UKFTT 8 (TC), Judge Bowler)
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- Interventions carry the risk of the Judge descending into the fray
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"[57] In Southwark London Borough Council v Kofi-Adu [2006] EWCA Civ 281, [2006] HLR 33 ("Kofi-Adu"), Jonathan Parker LJ, giving the judgment of the Court of Appeal, observed at paragraph 142 that "a first instance judge is entitled to a wide degree of latitude in the way in which he conducts proceedings in his court" and at paragraph 145 that "[n]owadays, of course, first instance judges rightly tend to be very much more proactive and interventionist than their predecessors, and the above observations [i.e. those in Jones and Yuill v Yuill] (made, in the case of Lord Denning M.R., almost 50 years ago, and, in the case of Lord Greene M.R., more than 60 years ago) must be read in that context". Jonathan Parker LJ continued, however:
"That said, … it remains the case that interventions by the judge in the course of oral evidence (as opposed to interventions during counsel's submissions) must inevitably carry the risk so graphically described by Lord Greene M.R."
"The risk," Jonathan Parker LJ explained in paragraph 146, "is that the judge's descent into the arena (to adopt Lord Greene M.R.'s description) may so hamper his ability properly to evaluate and weigh the evidence before him as to impair his judgment, and may for that reason render the trial unfair."
[58] In a similar vein, in Michel v R [2009] UKPC 41, [2010] 1 WLR 879, Lord Brown, giving the judgment of the Privy Council, referred in paragraph 31 to "[t]he core principle … that under the adversarial system the judge remains aloof from the fray and neutral during the elicitation of the evidence". He went on to quote from "Denning LJ's celebrated judgment in Jones v National Coal Board"." (Keane v. Sargen [2023] EWCA Civ 141, Newey, Vos, Simler, LJJJ)
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- Tribunal should usually ask non-leading questions
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“So firmly is all this established in our law that the judge is not allowed in a civil dispute to call a witness whom he thinks might throw some light on the facts. He must rest content with the witnesses called by the parties . . . so also it is for the advocates, each in his turn, to examine the witnesses, and not for the judge to take it on himself lest by so doing he appear to favour one side or the other . . . the judge's part in all this is to hearken to the evidence, only himself asking questions of witnesses when it is necessary to clear up any point that has been overlooked or left obscure; to see that the advocates behave themselves seemly and keep to the rules laid down by law; to exclude irrelevancies and discourage repetition; to make sure by wise intervention that he follows the points that the advocates are making and can assess their worth; and at the end to make up his mind where the truth lies. If he goes beyond this, he drops the mantle of a judge and assumes the robe of an advocate; and the change does not become him well. Lord Chancellor Bacon spoke right when he said that: 'Patience and gravity of hearing is an essential part of justice; and an over-speaking judge is no well-tuned cymbal.'” (Jones v. National Coal Board [1957] 2 QB 55 at 64, per Lord Denning MR).
“A Judge who observes the demeanour of the witnesses while they are being examined by counsel has from his detached position a much more favourable opportunity of forming a just appreciation than a judge who himself conducts the examination. If he takes the latter course he, so to speak, descends into the arena and is liable to have his vision clouded by the dust of the conflict. Unconsciously he deprives himself of the advantage of calm and dispassionate observation. It is further to be remarked, as everyone who has had experience of these matters knows, that the demeanour of a witness is apt to be very different when he is being questioned by the judge to what it is when he is being questioned by counsel, particularly when the Judge's examination is, as it was in the present case, prolonged and covers practically the whole of the crucial matters which are in issue.” (Yuill v. Yuill [1945] 1 All ER 183 at 189 per Lord Greene MR).
“When a Judge does under r 41 ask questions to elicit the evidence – that is, not the evidence which the tribunal wishes to hear but the evidence which the witness wants to give, as best the tribunal can understand it – it is advisable that the tribunal asks those questions in a non-leading form. That is not because form should triumph over substance. It is because non-leading questions give rise to the most reliable answers. If a Judge suggests an answer to witnesses, they are much more likely to agree with it than they would if asked an open question about the same point, and the tribunal should be careful to avoid making a case for either party.” (East of England Ambulance Service NHS Trust v. Sanders UKEAT/0217/14/RN, §31).
- But leading questions may sometimes be more efficient
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“the FTT was entitled to ask questions and leading questions are sometimes more efficient than open ones. The questions that the Judge asked do not suggest bias. They are simply part and parcel of the judicial process.” (GSM Export (UK) Ltd v. HMRC [2014] UKUT 0529 (TCC), §74, Proudman J);
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Excessive interventions during evidence inappropriate and may render trial unfair
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"[59] On the other hand, excessive interventions by the judge during oral evidence will not necessarily render a trial unfair. Thus, in Shaw v Grouby [2017] 1 WLR 2455, Patten LJ, with whom Vos C agreed, considered that "the judge's interventions, whilst always courteous, were … excessive and … he should have attempted to postpone his questioning, particularly of the witnesses of fact, until after counsel had conducted his cross-examination except when it was necessary to ask the witness to clarify an answer so that the judge could understand the evidence that was being given" (paragraph 45), but "reached the conclusion that there was still a fair trial and a proper judicial determination of the main issues" (paragraph 46). "The allegation of unfairness," Patten LJ said, "requires one to look carefully at what were the real issues in the case and how the judge's conduct impacted on them" (paragraph 46)." (Keane v. Sargen [2023] EWCA Civ 141, Newey, Vos, Simler, LJJJ)
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- Interventions that prevent unbroken sequence of questions and answers
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"[63] As Denning LJ noted in Jones, "the very gist of cross-examination lies in the unbroken sequence of question and answer" and it "loses much of its effectiveness if the witness is given time to think out the answer to awkward questions". In the intervention set out in the previous paragraph, the Judge will not merely have given Mr Keane "valuable time for thought" (to use words of Denning LJ), but pointed him to where he might find an answer to Ms Anderson's question. It seems to me that it was inappropriate for the Judge to intervene in this way and thereby to run the risk of debilitating the cross-examination. This intervention and the questions asked by the Judge in the passage that followed also risked clouding his ability properly to weigh and evaluate the evidence." (Keane v. Sargen [2023] EWCA Civ 141, Newey, Vos, Simler, LJJJ)
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- Judge indicating view on veracity of evidence making cross-examination harder
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"[65] While a judge may of course form a provisional view as to the truthfulness of a witness while cross-examination is in progress, his role at that stage is not to arrive at a conclusion, let alone to voice one, but essentially to listen. To my mind, it was not appropriate for the Judge to state while Mr Keane's cross-examination was still in progress that "[i]t is not a question of not telling the truth". The Judge will here, I think, both have prevented Ms Anderson from asking a legitimate question and in all probability provided Mr Keane with reassurance as to how his evidence was being received and, hence, made Ms Anderson's task generally harder. Of course, there can potentially be occasions when it is not only legitimate but incumbent on a judge to intervene during cross-examination to prevent a witness from being subjected to unfair bullying, but there was no need for that in the present case. If, alternatively, a judge feels that a point has already been explored with a witness sufficiently, he can seek to move the cross-examiner on without expressing any view as to the veracity of what the witness has said." (Keane v. Sargen [2023] EWCA Civ 141, Newey, Vos, Simler, LJJJ)
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- Ultimate question is whether interventions made trial unfair​
"The ultimate question, however, is whether the Judge's interventions made the trial unfair. I have already indicated that the Judge intervened more often than was appropriate. He should have attempted to postpone his questioning of Mr Keane until after Ms Anderson had conducted her cross-examination, save when it was necessary to clarify the evidence being given. Judicial self-restraint is required to avoid the consequences referred to above and to ensure that the trial process is fair to all involved. That said, I do not consider that the interventions either prevented the appellants from fully presenting their case at trial or impaired the Judge's decision-making. There was a fair trial and Ms Anderson did not really suggest otherwise in her submissions to us. While the Judge may have intervened more than was appropriate, his conduct was nothing like that which led to appeals being allowed in Kofi-Adu and Serafin v Malkiewicz and, "look[ing] carefully at what were the real issues in the case and how the judge's conduct impacted on them", I am in no doubt that the trial remained fair." (Keane v. Sargen [2023] EWCA Civ 141, Newey, Vos, Simler, LJJJ)
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