In Cider of Sweden Ltd v HMRC (Ernst & Young LLP, Third Party) [2022] UKFTT 76 (TC), Cider of Sweden Ltd and its parent company Kopparbergs Bryggeri AB (together ‘Cider of Sweden’) were engaged in a dispute with HMRC concerning the excise duty post duty point dilution (PDPD) regime. Cider of Sweden claimed the PDPD regime had failed to comply with, inter alia, article 110 of the Treaty on the Functioning of the European Union (TFEU) which prohibits imposition of all taxation procedures which, directly or indirectly, undermine the equal treatment of domestic products and imported products. Cider of Sweden issued proceedings claiming damages arising from the alleged breaches of EU law in the High Court pursuant to Francovich v Italian Republic (joined Cases C-6/90 and C-9/90).
Ernst & Young LLP as an interested third party (the ‘applicant’) became aware of the High Court claim from press coverage, including an article in the Financial Times. Given that the applicant had clients that might be affected by the same or similar issues arising from the PDPD regime, obtained copies of the High Court claim form, particulars of claim, defence and HMRC’s response to a request for further information. Pursuant to CPR rule 5.4C(1), these High Court pleadings were readily available to download using the publicly accessible HM Courts & Tribunals e-filing service.
Within the particulars of claim, reference was made to the fact that Cider of Sweden had, in parallel to the High Court proceedings, also notified an appeal to the First-tier Tribunal (providing details of the relevant tribunal appeal reference number), as the same background facts and issues had given rise to a statutory claim for repayment of excise duty which had been refused by HMRC.
The applicant therefore wrote to the FTT as an interested third party to request copies of both parties’ written pleadings filed with the tribunal so that it could review the parties’ arguments in order to inform its clients’ arguments in their own potential disputes. The application relied on the FTT’s decision in Hastings Insurance Services Ltd v HMRC (KPMG LLP, third party) [2018] UKFTT 478 (TC), in which Judge Sinfield had stated in respect of a similar third party disclosure application made by KPMG that the tribunal had an inherent jurisdiction to allow a non-party to inspect documents in its records that are the equivalent of the documents in CPR rule 5.4C(1) (the notice of appeal, the statement of case and any reply, amongst other documents).
The FTT wrote to KPMG as Cider of Sweden’s representatives and HMRC stating that, in light of the FTT’s decision in Hastings and the Supreme Court decision in Dring v Cape Intermediate Holding Ltd [2020] AC 629, it was minded to grant the application but gave the parties an opportunity to object. Both parties did object and following further representations from the applicant, directions were given for the application to be decided at a hearing, which came before Judge Poole on 22 January 2022.
At the hearing, the applicant submitted that the FTT should follow the approach adopted in Hastings, following the Upper Tribunal’s decision in Aria Technology Ltd v HMRC (Situation Publishing Ltd, third party) [2018] UKUT 111 (TCC), approved and adopted by the FTT in Fastklean Ltd v HMRC (Keith Gordon, third party) [2020] UKFTT 511 (TC). That approach relied on a reference to CPR rule 5.4C(1) as being an expression of the principle of open justice. Ensuring that the public could look at and see why claims have been brought was an important open justice goal which could be engaged without the need for a hearing (citing Baroness Hale at paras 42–43 of Dring and Corner House Research and another v Director of Serious Fraud Office [2008] EWHC 246 (Admin)). Accordingly, for basic case materials, such as those sought by way of the application, it would be inimical to open justice if the pleadings were not disclosed before a hearing and this was, in any event, the approach adopted by the High Court. It was moreover preferable if the same basic approach was adopted by all UK courts and tribunals, as part of a logical and coherent justice system (as reflected in HMRC v BPP Holdings Ltd [2017] UKSC 55). In conclusion, there was a presumption of disclosure in relation to the pleadings subject to the ability of a party to object (as reflected in CPR rule 5.4C(1), (4)). In any event, the applicant had shown a legitimate interest in the documents it was seeking, being an interest in other contemplated related litigation.
HMRC argued that the open justice principle did not apply at this early stage of the proceedings and that the FTT therefore had no jurisdiction to grant access to the documents sought. Even if that was wrong, HMRC argued that the applicant had not demonstrated that they had a legitimate interest in the material sought and had therefore not shown any good reason why they should be provided with access. Cider of Sweden broadly supported the submissions made primarily by HMRC and went on to submit that the case law demonstrated that, for the principle of open justice to be engaged at all, there must be some kind of ‘judicial involvement’ in the case (although not necessarily a full final hearing of the FTT appeal) and the present case had not yet reached that point. Further, even if it were accepted that the open justice principle applied at this stage, the applicant had not produced any evidence to show how public understanding of the judicial process would be advanced by providing access to the documents, nor as to the clients whose cases would be assisted by such access.
In rejecting the applicant’s argument that CPR rule 5.4C(1) applied in the FTT by analogy so as to allow access to the pleadings, Judge Poole found that there was no general right of access before the FTT that should be derived from this rule. Judge Poole did not consider this conflicted with what was said in Aria considering that Judge Sinfield was careful to limit his comments specifically to the Upper Tribunal. Further, in Hastings, the context was materially different to the present case and, in any event, the principles were subsequently clarified by the Supreme Court in Dring. Accordingly, CPR rule 5.4C(1) did not have the effect contended by the applicant, whether applied by analogy, or by way of ‘guidance’ for the FTT, or because it expressed a general underlying right to such access, applicable to the FTT, deriving from the principle of open justice.
Following Dring, the FTT considered that there were two main facets to the principle of open justice:
1. ‘to enable public scrutiny of the way in which court (and tribunals) decide cases’; and
2. ‘to enable the public to understand how the justice system works and why decisions are taken’.
Judge Poole did not consider that access to the pleadings would assist the public to further this first facet before a hearing had taken place or was imminent.
In relation to the second facet, Judge Poole did not consider that the second limb (why decisions are taken) was engaged where no decision had been or was about to be taken. The first limb (public understanding of how the system works) also did not apply in the present circumstances: reading the pleadings in advance of an effective hearing would not enable a third party to monitor how the system of justice in the FTT worked. Standing back and considering the overarching purpose of the principle, Judge Poole could see no basis upon which access to the pleadings at this early stage of the proceedings would further the applicant’s ability to understand or scrutinise the justice system, as opposed to enabling it to understand the legal arguments deployed by the parties (being the stated purpose for making the application).
The FTT went on to find that, if wrong on these two issues, the applicant’s wish to understand the legal basis of the arguments being advanced was a legitimate interest; however, this would need to be weighed against the interests of the parties to the appeal in the confidentiality of the documents. Having carried out that balancing exercise, Judge Poole considered the parties’ interests outweighed any interest that the applicant had at this stage of the proceedings and would, therefore, still refuse access to them.
The FTT clearly emphasised that its decision to deny the applicant’s request for access to the pleadings was heavily influenced by its early timing, both when considering if the principle of open justice was being advanced, and when balancing the interests of the third-party applicant and the parties to the appeal. However, what the FTT decision was rather less clear on is exactly when such a request should be made and for what categories of documents.
In light of the present decision, a third party’s ability to access filed documents in FTT proceedings appears to be limited to appeals where a hearing has either taken place or is imminent and will also need to be assessed in light of any objections received from the parties to the appeal (for example, confidentiality concerns). This does not sit easily alongside the position taken by the High Court where written pleadings filed by the parties (including proceedings against HMRC) are generally accessible by interested third parties early in the litigation.
The FTT’s decision, if followed, would also create parallel regimes for third party access to pleadings relating to tax disputes pursued in the Administrative Court (by way of a judicial review) and those appealed to the FTT. As taxpayers may need to issue proceedings in both forums, this appears to introduce unwelcome inconsistency. If the Administrative Court in R (Corner House Research & another) v Director of Serious Fraud Office [2008] EWHC 246 (Admin) considered that it was even more important for the public to have access to the pleadings in judicial review proceedings than in private litigation under CPR rule 5.4C(1), because they are more likely to concern matters of genuine public concern (see Collins J at para 18), should that same rationale not apply in the FTT?
In practice, applications by third parties of the precise nature considered in the present case are rare. Unlike the High Court, the FTT does not have a publicly accessible register of tax appeals. Without one of the participants to the appeals process actively sharing specific information, third parties will remain unaware of the existence and nature of most tax appeals before they reach a final hearing before the FTT (and a proportion of those appeals will be withdrawn or settled by agreement and may therefore never see the light of day).
The current uncertainty could perhaps be clarified by an update to the FTT rules (which are silent on the process) or the release of a practice statement. Such guidance could help clear up, for instance, what type of hearing would engage the open justice principle, what an ‘imminent’ hearing means (and how a third party is to know that there is a hearing due, perhaps by reference to published listing information), identify those categories of documents which are accessible, and set out how the principles of confidentiality apply in the FTT which might outweigh a request to access the documents. The FTT may also wish to clarify whether the approach should be the same between different categories of appeal; a complex category case where the parties will often be legally represented may carry different considerations to other categories where a taxpayer might be unrepresented.
In Cider of Sweden Ltd v HMRC (Ernst & Young LLP, Third Party) [2022] UKFTT 76 (TC), Cider of Sweden Ltd and its parent company Kopparbergs Bryggeri AB (together ‘Cider of Sweden’) were engaged in a dispute with HMRC concerning the excise duty post duty point dilution (PDPD) regime. Cider of Sweden claimed the PDPD regime had failed to comply with, inter alia, article 110 of the Treaty on the Functioning of the European Union (TFEU) which prohibits imposition of all taxation procedures which, directly or indirectly, undermine the equal treatment of domestic products and imported products. Cider of Sweden issued proceedings claiming damages arising from the alleged breaches of EU law in the High Court pursuant to Francovich v Italian Republic (joined Cases C-6/90 and C-9/90).
Ernst & Young LLP as an interested third party (the ‘applicant’) became aware of the High Court claim from press coverage, including an article in the Financial Times. Given that the applicant had clients that might be affected by the same or similar issues arising from the PDPD regime, obtained copies of the High Court claim form, particulars of claim, defence and HMRC’s response to a request for further information. Pursuant to CPR rule 5.4C(1), these High Court pleadings were readily available to download using the publicly accessible HM Courts & Tribunals e-filing service.
Within the particulars of claim, reference was made to the fact that Cider of Sweden had, in parallel to the High Court proceedings, also notified an appeal to the First-tier Tribunal (providing details of the relevant tribunal appeal reference number), as the same background facts and issues had given rise to a statutory claim for repayment of excise duty which had been refused by HMRC.
The applicant therefore wrote to the FTT as an interested third party to request copies of both parties’ written pleadings filed with the tribunal so that it could review the parties’ arguments in order to inform its clients’ arguments in their own potential disputes. The application relied on the FTT’s decision in Hastings Insurance Services Ltd v HMRC (KPMG LLP, third party) [2018] UKFTT 478 (TC), in which Judge Sinfield had stated in respect of a similar third party disclosure application made by KPMG that the tribunal had an inherent jurisdiction to allow a non-party to inspect documents in its records that are the equivalent of the documents in CPR rule 5.4C(1) (the notice of appeal, the statement of case and any reply, amongst other documents).
The FTT wrote to KPMG as Cider of Sweden’s representatives and HMRC stating that, in light of the FTT’s decision in Hastings and the Supreme Court decision in Dring v Cape Intermediate Holding Ltd [2020] AC 629, it was minded to grant the application but gave the parties an opportunity to object. Both parties did object and following further representations from the applicant, directions were given for the application to be decided at a hearing, which came before Judge Poole on 22 January 2022.
At the hearing, the applicant submitted that the FTT should follow the approach adopted in Hastings, following the Upper Tribunal’s decision in Aria Technology Ltd v HMRC (Situation Publishing Ltd, third party) [2018] UKUT 111 (TCC), approved and adopted by the FTT in Fastklean Ltd v HMRC (Keith Gordon, third party) [2020] UKFTT 511 (TC). That approach relied on a reference to CPR rule 5.4C(1) as being an expression of the principle of open justice. Ensuring that the public could look at and see why claims have been brought was an important open justice goal which could be engaged without the need for a hearing (citing Baroness Hale at paras 42–43 of Dring and Corner House Research and another v Director of Serious Fraud Office [2008] EWHC 246 (Admin)). Accordingly, for basic case materials, such as those sought by way of the application, it would be inimical to open justice if the pleadings were not disclosed before a hearing and this was, in any event, the approach adopted by the High Court. It was moreover preferable if the same basic approach was adopted by all UK courts and tribunals, as part of a logical and coherent justice system (as reflected in HMRC v BPP Holdings Ltd [2017] UKSC 55). In conclusion, there was a presumption of disclosure in relation to the pleadings subject to the ability of a party to object (as reflected in CPR rule 5.4C(1), (4)). In any event, the applicant had shown a legitimate interest in the documents it was seeking, being an interest in other contemplated related litigation.
HMRC argued that the open justice principle did not apply at this early stage of the proceedings and that the FTT therefore had no jurisdiction to grant access to the documents sought. Even if that was wrong, HMRC argued that the applicant had not demonstrated that they had a legitimate interest in the material sought and had therefore not shown any good reason why they should be provided with access. Cider of Sweden broadly supported the submissions made primarily by HMRC and went on to submit that the case law demonstrated that, for the principle of open justice to be engaged at all, there must be some kind of ‘judicial involvement’ in the case (although not necessarily a full final hearing of the FTT appeal) and the present case had not yet reached that point. Further, even if it were accepted that the open justice principle applied at this stage, the applicant had not produced any evidence to show how public understanding of the judicial process would be advanced by providing access to the documents, nor as to the clients whose cases would be assisted by such access.
In rejecting the applicant’s argument that CPR rule 5.4C(1) applied in the FTT by analogy so as to allow access to the pleadings, Judge Poole found that there was no general right of access before the FTT that should be derived from this rule. Judge Poole did not consider this conflicted with what was said in Aria considering that Judge Sinfield was careful to limit his comments specifically to the Upper Tribunal. Further, in Hastings, the context was materially different to the present case and, in any event, the principles were subsequently clarified by the Supreme Court in Dring. Accordingly, CPR rule 5.4C(1) did not have the effect contended by the applicant, whether applied by analogy, or by way of ‘guidance’ for the FTT, or because it expressed a general underlying right to such access, applicable to the FTT, deriving from the principle of open justice.
Following Dring, the FTT considered that there were two main facets to the principle of open justice:
1. ‘to enable public scrutiny of the way in which court (and tribunals) decide cases’; and
2. ‘to enable the public to understand how the justice system works and why decisions are taken’.
Judge Poole did not consider that access to the pleadings would assist the public to further this first facet before a hearing had taken place or was imminent.
In relation to the second facet, Judge Poole did not consider that the second limb (why decisions are taken) was engaged where no decision had been or was about to be taken. The first limb (public understanding of how the system works) also did not apply in the present circumstances: reading the pleadings in advance of an effective hearing would not enable a third party to monitor how the system of justice in the FTT worked. Standing back and considering the overarching purpose of the principle, Judge Poole could see no basis upon which access to the pleadings at this early stage of the proceedings would further the applicant’s ability to understand or scrutinise the justice system, as opposed to enabling it to understand the legal arguments deployed by the parties (being the stated purpose for making the application).
The FTT went on to find that, if wrong on these two issues, the applicant’s wish to understand the legal basis of the arguments being advanced was a legitimate interest; however, this would need to be weighed against the interests of the parties to the appeal in the confidentiality of the documents. Having carried out that balancing exercise, Judge Poole considered the parties’ interests outweighed any interest that the applicant had at this stage of the proceedings and would, therefore, still refuse access to them.
The FTT clearly emphasised that its decision to deny the applicant’s request for access to the pleadings was heavily influenced by its early timing, both when considering if the principle of open justice was being advanced, and when balancing the interests of the third-party applicant and the parties to the appeal. However, what the FTT decision was rather less clear on is exactly when such a request should be made and for what categories of documents.
In light of the present decision, a third party’s ability to access filed documents in FTT proceedings appears to be limited to appeals where a hearing has either taken place or is imminent and will also need to be assessed in light of any objections received from the parties to the appeal (for example, confidentiality concerns). This does not sit easily alongside the position taken by the High Court where written pleadings filed by the parties (including proceedings against HMRC) are generally accessible by interested third parties early in the litigation.
The FTT’s decision, if followed, would also create parallel regimes for third party access to pleadings relating to tax disputes pursued in the Administrative Court (by way of a judicial review) and those appealed to the FTT. As taxpayers may need to issue proceedings in both forums, this appears to introduce unwelcome inconsistency. If the Administrative Court in R (Corner House Research & another) v Director of Serious Fraud Office [2008] EWHC 246 (Admin) considered that it was even more important for the public to have access to the pleadings in judicial review proceedings than in private litigation under CPR rule 5.4C(1), because they are more likely to concern matters of genuine public concern (see Collins J at para 18), should that same rationale not apply in the FTT?
In practice, applications by third parties of the precise nature considered in the present case are rare. Unlike the High Court, the FTT does not have a publicly accessible register of tax appeals. Without one of the participants to the appeals process actively sharing specific information, third parties will remain unaware of the existence and nature of most tax appeals before they reach a final hearing before the FTT (and a proportion of those appeals will be withdrawn or settled by agreement and may therefore never see the light of day).
The current uncertainty could perhaps be clarified by an update to the FTT rules (which are silent on the process) or the release of a practice statement. Such guidance could help clear up, for instance, what type of hearing would engage the open justice principle, what an ‘imminent’ hearing means (and how a third party is to know that there is a hearing due, perhaps by reference to published listing information), identify those categories of documents which are accessible, and set out how the principles of confidentiality apply in the FTT which might outweigh a request to access the documents. The FTT may also wish to clarify whether the approach should be the same between different categories of appeal; a complex category case where the parties will often be legally represented may carry different considerations to other categories where a taxpayer might be unrepresented.
