Expert View: Justice is the loser as the taxman insists on tribunal secrecy

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The Independent Online

When the principles of justice become inconvenient, they are easily forgotten. To decide a case fairly, a judge must hear both sides of the argument and each side must know the arguments that the other has made. This might seem obvious. "I cannot at the moment visualise any circumstances", said Lord Donaldson the former Master of the Rolls, "in which it would be right to give a judge information not disclosed to the other side." That was how it seemed in 1983.

The Human Rights Act affirms the "right to a fair hearing". And a fair hearing, according to the European Court of Human Rights, demands that each party must hear all the evidence and arguments from the other side. There are exceptions borne of necessity national security may make disclosure impossible. But these are rare and extreme cases.

Tribunals in England have now decided to accept secret evidence and arguments from Her Maj- esty's Revenue and Customs in run-of-the-mill cases that have nothing to do with national security. My own case, Kessler v HMRC, is an example of this worrying trend. This case rose out of a decision to change a technical aspect of tax law concerning trustee residence. This had to be changed, said HMRC, because a civil servant in (what was then) the Department of Trade and Industry had advised HMRC the tax law was in breach of EU law.

Was that advice right? Was a change in our tax law required? Chris Vajda QC, a leading European lawyer, did not agree. Perhaps the DTI advice was wrong? Perhaps it was just a pretext? The way to find out was to see the DTI's advice, so I asked for it. The point is important (though HMRC implausibly denied that) and I was supported by the Chartered Institute of Taxation and the Society of Trust and Estate Practitioners.

Under the Freedom of Information Act, were we entitled to see it? No, replied HMRC. The document contained legal advice so it was privileged.

Under the Freedom of Information Act, privilege is not a defence to disclosure. Disclosure can only refused if a document is not just privileged but "the public interest in maintaining the exemption outweighs the public interest in disclosing the information". In this case, there is a public interest in disclosure and no reason at all that I could see against disclosing it. I confess I thought that the matter would be straightforward.

It is a good thing for a barrister to be personally involved in litigation occasionally. We should all know from first-hand experience what it is to be a litigant. It is surprisingly hard to argue one's own case, but I was represented by Jonathan DC Turner, an eminent barrister.

Signs that it was not going to be easy appeared at an early stage. Dave Hartnett, now acting head of HMRC, argued in his statement that the department must obey the law; in order to do so, it needs to ask lawyers what the law is; and this could not be done if any advice it ever received had to be disclosed. This non-sequitor is the so-called "candour argument", and if it is accepted we may as well tear up the Freedom of Information Act at least so far as privileged documents are concerned.

HMRC refused to allow even Mr Hartnett's bland witness statement to be published. Freedom of information is not, it is apparent, a value much appreciated in the civil service. As the application progressed, matters went from bad to worse, and HMRC was allowed to put in secret submissions to the tribunal.

For all that, the result was an embarrassment to HMRC. The tribunal found that its actions were "bald and substantially unexplained", and it was urged "to produce an updated and fuller public statement of reasoning and conclusions on the state aid point". However, the tribunal did not order disclosure of the DTI advice itself.

Was that decision right? I doubt it. But there is no doubt that the trial was not a fair one. When the matter comes to appeal, I hope that the High Court will stamp out the practice of secret submissions.

James Kessler QC is a leading tax barrister J.Kessler@kessler.co.uk

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