In judicial review, there is no duty of standard disclosure under the Civil Procedure Rule 31. A defendant, whose decision or action is challenged by way of judicial review, owes a duty of candour to give a true and comprehensive account of the decision-making process (Secretary of State for Foreign & Commonwealth Affairs v Quark Fishing Ltd  EWCA Civ 1409) and, as a matter of good practice, a public authority will ordinarily exhibit a document that is significant to its decision as the primary evidence.
This post considers the High Court decision in Mehan and others v Commissioners for HM Revenue & Customs  EWHC 2569 (Admin) and how the court applied the existing judicial review principles relating to disclosure in judicial review claims.
The duty of candour means that defendants must make full and frank disclosure and conduct judicial review proceedings with “all their cards face up on the table”, having regard to the fact that “the vast majority of the cards will start in the [public] authority’s hands” (R v Lancashire County Council, ex p Huddleston  2 All ER 941). Unlike other litigation proceedings, the facts in a judicial review are not in issue and the decision that is challenged is being reviewed for its legality and not for its merits.
This means that an order for disclosure, enabling a claimant to go behind the contents of a defendant’s statement setting out the relevant events will only be made where there is some material before the court that suggests the statement is inaccurate, inconsistent or incomplete in a material respect. As Lord Bingham stated in Tweed v Parades Commission for Northern Ireland  UKHL 53, a case where the House of Lords considered there may be a minority of judicial review applications where the precise facts of the case are significant and where orders for specific disclosure could be made, orders for disclosure in judicial review should not be automatic. The test will always be whether, in a given case, disclosure appears to be necessary in order to resolve the matter fairly and justly.
In Mehan and others v Commissioners for HM Revenue & Customs  EWHC 2569 (Admin), the High Court considered the claimants’ application for a further response to a request for information and a request for specific disclosure. The decision confirms the law that applies to specific disclosure and responses to requests for further information and the fact that a court will only order such further information or disclosure as is necessary to resolve the matter fairly and justly (as per Dingemans J in Bredenkamp v Secretary of State for Foreign and Commonwealth Affairs  EWHC 2480 (Admin)) (although the court will not countenance a request that involves a disproportionate amount of work).
The three claimants, who were not UK domiciled, wanted to sell their shareholding in a company, Visage Group Form (VGF), by way of transactions that would involve the issuing by the buyer of bonds to be issued by an offshore entity. As the claimants were not domiciled in the UK, their advisers made an application on behalf of VGF for advance clearance under section 138 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992). That application is made by the company whose shares are being sold, rather than the shareholder, but the shareholder’s position is of vital importance as the advance procedure process in section 138 is designed to combat transactions by way of sale or exchange which are not bona fide, where the main purpose, or one of the main purposes, is tax avoidance. The application made on behalf of VGF referred not only to the company but also to the three claimant shareholders, including their tax references, tax districts and addresses.
On 2 December 2009, in response to the application, HMRC gave VGF advance clearance. However some years later, following further investigation, HMRC informed the claimants by a letter dated 13 March 2014 that it had determined the clearance should be void under the provisions of section 138(5) of the TCGA 1992. This was on the basis that the particulars that had been furnished did not fully and accurately disclose all facts and considerations that were material for the decision of the Board as the domicile status of the claimants had not been disclosed in the clearance application. The claimant’s sought to judicially review HMRC’s decision on the grounds that:
- There was no requirement to disclose something that was already known to HMRC. The fact the claimants were not UK domiciled was evident from their tax returns and tax files. If HMRC had looked at these documents, the claimants’ domicile status would have been ascertained.
- Authority exists for the proposition that it is not necessary to expressly disclose matters, and that it is enough to disclose things by reference as the claimants did.
In its detailed grounds of defence to the claim, a witness (T) on behalf of HMRC made clear that the decision as to whether there should be clearance was his only and that, when deciding whether there should be clearance, a search of HMRC’s database was not carried out as matter of routine. In his statement, T made it clear that he had not contacted any other part of the Revenue as he saw no reason to carry out further research or seek additional particulars and he was not aware, nor was it apparent, that the claimants were not domiciled in the UK. However, from documents disclosed by HMRC, it was evident that, before substantive consideration was given by T to the application for clearance, a risk assessment was conducted by two other individuals whose initials appeared on the document disclosed, which made reference to the High Net Worth Unit of the Revenue being something for reviewing. When asked why he thought the shareholders’ tax information was being given, T replied that he considered it was part of the process of full and frank disclosure but he had not looked at that information. The claimants’ case was that it was obvious that it was relevant as part of the process of full and frank disclosure and had T looked at the information he would have realised there was no failure on the part of the claimants to disclose their status in the UK.
As part of the claim, the claimants made various requests for further information and for disclosure, of which eight requests for information and one request for disclosure remained at the time of the disclosure application.
The court’s consideration of the claimants’ requests for information and for disclosure
Having considered each of the requests for information and disclosure in turn, the High Court held that the defendant should answer the following requests for information.
- A request as to whether an agreement or understanding existed between the Revenue’s clearance team and any other part or team within HMRC providing for or relating to a coordinated customer service. The answer to this request was clearly a relevant matter regardless of whether the agreement or understanding was complied with. In the court’s view, this request should be answered and on the evidence it did not appear to be too onerous a request for the defendant to comply with. If the defendant’s response to this question was that it would involve too much effort to actually find out this information in respect of every team and every person in every part of HMRC, the court considered that would be the end of the matter.
- The process that an officer in clearance would have to go through, and the difficulties that would be faced in that process, in order to establish the domicile status of an individual who had disclosed that information on previous tax returns. The court’s view was that this request was at the heart of the case since the position of shareholders is plainly relevant even if the company makes the clearance application and that answering this question would not give rise to any problems for the defendant.
In connection with disclosure, the claimants had requested any document, such as a checklist or training paper, relating to the way in which statutory clearance applications were handled or decided that refers to the shareholder’s domicile. The court’s view was that this request went to the core of the matter to be decided, the request had not been answered and should be. Therefore, the court ordered the defendant to provide the information by a specified deadline and before the substantive hearing of the case.
The court’s decision on this application reflects the principle that orders for disclosure in judicial review cases are not automatic but will depend on whether it is necessary to resolve the matter fairly and justly. For more information on disclosure in judicial review, see Practice note, Disclosure in judicial review.