The Good Law Project Ltd v Commissioners for Her Majesty’s Revenue & Customs & Uber London Ltd [2019] EWHC 3125 (Admin)

The Good Law Project Ltd v Commissioners for Her Majesty’s Revenue & Customs & Uber London Ltd [2019] EWHC 3125 (Admin) concerned an application by HMRC for a court order authorising limited disclosure of information about the Interested Party, Uber London Ltd, during judicial review proceedings. Mrs Justice Lieven held that HMRC could lawfully make such disclosure under section 18(2)(c) of the Commissioners for Revenue and Customs Act 2005, that no further order restricting disclosure to the Claimant was necessary beyond that already provided by the Civil Procedure Rules, and that no non-party could obtain a copy of HMRC’s Acknowledgement of Service without first applying to the court.

Good Law Project Ltd had brought judicial review proceedings challenging HMRC’s failure to raise a protective assessment on Uber for VAT. Before filing their Acknowledgement of Service and Summary Grounds, HMRC applied for an order permitting them to disclose to GLP whether or not HMRC had decided to assess or not to assess Uber for any particular prescribed accounting period, subject to restrictions on onward disclosure by GLP. GLP resisted the application on the basis that disclosure was unnecessary and opposed the proposed restrictions. Uber argued that no disclosure should be made and that if any disclosure occurred it should be subject to further conditions and controls, including a penal notice.

The application turned on the proper interpretation of section 18 of the 2005 Act. Section 18(1) prohibited Revenue and Customs officials from disclosing information held in connection with their functions. Section 18(2) provided exceptions, including disclosure made for the purposes of a function of HMRC, disclosure made for the purposes of civil proceedings relating to a matter in respect of which HMRC had functions, and disclosure made in pursuance of a court order. Section 19 made contravention of section 18 a criminal offence, subject to a defence of reasonable belief that the disclosure was lawful or that the information had already lawfully been made public.

HMRC, represented by Mr Nigel Pleming QC and Ms Eleni Mitrophanous, submitted that the application was made to ensure there was no risk that HMRC would commit an offence under section 19 and to give Uber an opportunity to object to the limited disclosure HMRC wished to make. HMRC wished to disclose only the fact of whether or not a protective assessment had been raised. Mr Pleming argued that the test under section 18(2)(c) or (e) was not one of necessity but rather a judgment for HMRC or the court as to whether disclosure was considered expedient or appropriate. He contended that a strict necessity test would be inconsistent with the words of section 18(2)(c) and with the defence of reasonable belief in section 19. In HMRC’s view it was appropriate to disclose in the Summary Grounds whether or not a protective assessment had been raised, as this would either provide a complete answer to GLP’s case or be a fact to which HMRC were entitled to refer and which GLP were entitled to know. Mr Pleming argued that HMRC could not defend the challenge wholly on the issue of standing or as a pure question of law without reference to any confidential information.

Uber, represented by Mr Sam Grodzinski QC, argued that the court should only order disclosure if satisfied it was necessary for HMRC to defend the challenge and that the burden of showing necessity was on HMRC. The fact that HMRC viewed disclosure as expedient was insufficient to outweigh Uber’s right to confidentiality. Mr Grodzinski relied heavily on the Supreme Court’s decision in R (Ingenious Media) v HMRC [2016] 1 WLR 4164 and submitted that without a necessity test for disclosure the court would be making the same error of law as identified in that case. He argued that accepting HMRC’s approach would wholly undermine the principle of taxpayer confidentiality because any party could bring a judicial review relating to a third party and HMRC could decide it was expedient to disclose that party’s tax information even before the claimant had established standing or before an arguable case had been found. Mr Grodzinski referred to HMRC’s pre-action protocol response letter, which had stated it would be objectionable to give a view on another party’s tax liability and had responded to the claim on the basis of a legal analysis of the case law. He therefore argued that the claim could be answered on a purely legal basis without any necessity to make disclosure, at least at this stage. He also relied on Article 8 of the European Convention on Human Rights, arguing that any order for disclosure would interfere with Uber’s Article 8 rights and that unless the test was one of necessity any order would not be proportionate under Article 8(2). Mr Grodzinski supported the imposition of conditions if disclosure was made but argued they would not work in practice because once HMRC had referred to whether or not there was a protective assessment GLP could respond in a Reply or Amended Claim and bring the fact into the public domain. He argued that a penal notice was appropriate to protect Uber’s confidentiality.

GLP, represented by Mr Christopher Knight, supported most of Mr Pleming’s submissions. Mr Knight argued it was unnecessary to make an order under section 18(2)(e) because the matter was fully dealt with under section 18(2)(c). He submitted that the proposed restriction on disclosure in limb (b) of HMRC’s proposed order simply repeated the restrictions in CPR 31.22 and was unnecessary. Mr Knight also queried how confidential the information actually was, noting that Uber had already set out in their accounts a contingent liability for the possibility of having to pay UK VAT, so the contingency was already in the public domain. He pointed out that if a wholly unmeritorious or fishing claim was brought with the simple intent of exposing confidential information, HMRC would not need to provide any confidential information, and argued that the statutory scheme in section 18 showed that Parliament had struck the relevant balance and fully considered taxpayer confidentiality.

Mrs Justice Lieven reviewed the authorities on taxpayer confidentiality. In Inland Revenue Commissioners v National Federation of Self Employed and Small Businesses [1982] AC 617, the House of Lords had emphasised the importance of confidentiality between the taxpayer and HMRC, with Lord Wilberforce stating that the total confidentiality of assessments and negotiations between individuals and the revenue was a vital element in the working of the system. Her Ladyship noted that the law on standing in judicial review had much developed since that case. In R (Ingenious Media) v HMRC, the Supreme Court had addressed the duty of confidentiality owed by HMRC to individual taxpayers as a well established principle of the common law of confidentiality, sometimes referred to as the Marcel principle. Lord Toulson had held that where information of a personal or confidential nature was obtained or received in the exercise of a legal power or in furtherance of a public duty, the recipient would in general owe a duty not to use it for other purposes, but that the Marcel principle might be overridden by explicit statutory provisions. The Supreme Court had emphasised that to construe section 18(2)(a)(i) broadly would run counter to the principle of legality. Mrs Justice Lieven emphasised that the issue in Ingenious concerned how the Marcel principle applied to the broad words in section 18(2)(a)(i) and Lord Toulson’s comments as to disclosure being permitted to the extent reasonably necessary for HMRC to fulfil its primary function had to be read in that context.

Mrs Justice Lieven noted that there was necessarily a balance in the case between the importance of open justice and that of maintaining taxpayer confidentiality. In HMRC v Banerjee [2009] STC 1930, Henderson J had held that the fundamental principle of public justice enshrined in Article 6(1) of the Convention and long established in the common law would decisively outweigh the very limited interference with a taxpayer’s right to respect for private life where a public hearing was concerned. Henderson J had emphasised that it would only be in truly exceptional circumstances that a taxpayer’s rights to privacy and confidentiality could properly prevail in the balancing exercise the court had to perform. Henderson J had observed that taxation was an area where public and private interests intersected and for that reason there was nearly always a wider public interest potentially involved in even the most mundane-seeming tax dispute. The Supreme Court had recently considered the importance of open justice in Dring v Cape Intermediate Holdings [2019] 3 WLR 429, with Baroness Hale emphasising that the guiding principle was the need for justice to be done in the open and that the purpose of open justice was to enable the public to understand and scrutinise the justice system.

Mrs Justice Lieven held that in the present case the balance between maintaining taxpayer confidentiality and the importance of open justice had been struck by Parliament in section 18(2)(c) of the 2005 Act. That provision provided that where a disclosure was made for the purpose of civil proceedings the prohibition in section 18(1) did not apply. The decision as to whether or not disclosure was made for the purpose of civil proceedings must under the statute be one for the Defendant making disclosure, and not, at least in the first instance, for the court. If it was not a matter for the Defendant, then subsection (c) would be otiose because it would always be necessary for the court to make an order under subsection (e). Mrs Justice Lieven rejected Mr Grodzinski’s argument that the test under section 18(2)(c) was one of necessity. Firstly, that would involve reading words into the sub-section that simply were not there. If Parliament had intended that there would be a test of necessity it was highly likely it would have said so. Further, to apply such a test was not consistent with the defence in section 19, which was one of reasonable belief. The fact that there was a criminal sanction attached to a breach of section 18 meant it was particularly important to read the words strictly and not start incorporating words or principles that were not in the statute. Secondly, Mrs Justice Lieven did not accept the reliance placed on Ingenious Media. Critically, that case concerned section 18(2)(a) and the language of that provision was in a very different form to subsection (c). In Ingenious Media, Lord Toulson had been strongly influenced by the vagueness of the words in sub-section (a) and the breadth of the interpretation being advanced by HMRC. That breadth would have made other sub-sections otiose and seriously undermined the right to confidentiality. However, those points could not be applied by analogy to subsection (c). The words in subsection (c) were not vague, they referred specifically to civil proceedings. This was a discrete and well understood area of exception to principles of confidentiality. HMRC’s interpretation did not conflict with a sensible reading of any of the other sub-sections, let alone render them otiose. Most importantly, subsection (c) involved considerations of fair and open justice which simply did not arise in Ingenious Media. When Lord Toulson in paragraph 23 of Ingenious Media referred to an exception by permitting disclosure to the extent reasonably necessary for HMRC to fulfil its primary function, he was clearly referring to sub-section (a) and the necessary implication of those words in that sub-section, not to the entirety of section 18(2).

Mrs Justice Lieven also rejected Mr Grodzinski’s argument that HMRC’s approach would undermine taxpayer confidentiality because any third party could judicially review HMRC and then seek disclosure of the taxpayer’s affairs. Plainly, if HMRC thought that a claim was being brought as a fishing expedition or simply to obtain confidential information, then it could and doubtless would defend the claim on that basis without disclosing anything confidential. Her Ladyship accepted, whilst taking no view on arguability, that the claim raised serious grounds and there was nothing to suggest it was simply a mechanism to obtain confidential information. Mrs Justice Lieven added, although she did not need to find this, that if she had to weigh up confidentiality against open justice on the facts of the case she would find that the intrusion into Uber’s confidentiality or Article 8 rights was actually rather slight. The only information which at that stage HMRC wanted to disclose was whether or not they had made a protective assessment. If they had not, then that was the position as it stood in 2017 and was known to the public. If there was now a protective assessment, then that fact alone had a limited impact on taxpayer confidentiality and was in any event a possibility which Uber had contemplated both in their contingent liabilities in the accounts and in responses to the US Securities and Exchange Commission. Mrs Justice Lieven observed that if GLP speculated on figures for the likely amount of assessment based on the fact of a protective assessment, that would not be a case of HMRC disclosing confidential material but GLP speculating on figures, albeit based on information which was in the public domain.

For all these reasons, Mrs Justice Lieven held that it was lawful for HMRC to make disclosure of the fact or otherwise of a protective assessment. It was not in her view necessary for the application to be made. Section 18(2)(c) was rendered pointless if an application was made under subsection (e) because HMRC were not prepared themselves to make the decision under subsection (c). However, her Ladyship could see why on the facts of the case HMRC had decided it was best to be sure of the position by making the application and she did not criticise them for doing so. But in future, they should make the decision themselves as to whether subsection (c) applied. If they wished to give the taxpayer a chance to challenge such a decision they could always give advance notice so that the taxpayer could apply for an order prohibiting disclosure if so advised. In respect of limb (b) of the order restricting onward disclosure by GLP, Mrs Justice Lieven did not consider it necessary. The restriction on wider disclosure was contained within CPR 31.22 and that was necessarily binding on GLP. There were no grounds to believe that GLP would not comply with that restriction. To the degree that there was some lack of clarity as to precisely who within GLP would be allowed to see the material, the order would be limited to the director and officers of GLP, which her Ladyship understood to be approximately five people. Mrs Justice Lieven did not consider it appropriate to attach a penal notice to the order. It was not normal in a judicial review to attach penal notices to orders and Mr Grodzinski could point to no precedent for doing so. Although there was a strong principle of taxpayer confidentiality, there were many situations in the Administrative Court where highly sensitive material was disclosed in proceedings subject to CPR 31.22 and the court had not found it necessary to attach penal notices. Mrs Justice Lieven was content to order that no non-party could obtain a copy of HMRC’s Acknowledgement of Service without making an application to the court under CPR 5.4C, which would ensure that the press could apply if they so wished but there was no automatic right for them to see the confidential information.

In short, HMRC were entitled under section 18(2)(c) to disclose the fact of whether or not a protective assessment had been raised without a court order, restrictions on onward disclosure beyond CPR 31.22 were unnecessary, and

Commissioners of Inland Revenue v National Federation of Self-Employed and Small Businesses Ltd [1982] AC 617; [1981] 2 WLR 722
Burmah Oil Co. Ltd. v. Governor and Company of the Bank of England [1980] A.C. 109
Marcel v Com missione r of Police of the Metropolis [1992]Ch 225
Secretary of State for the Home Department Ex Parte Simms [2000] 2 AC 115
R (Privacy International) v HMRC [2015] 1 WLR 397
HMRC v Banerjee [2009] STC 1930
Cape Intermediate Holdings Ltd v Dring [2019] UKSC 38, [2020] AC 629, [2019] 4 All ER 1071, [2019] 3 WLR 429, [2020] 1 All ER (Comm) 95, 169 NLJ 7852, [2019] All ER (D) 161 (Jul)