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Foulser v HMRC: Where is my remedy?

25th Feb 2013
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Allegations of “abuse of process” in tax cases are rare but came up in a recent Upper Tribunal decision, explains John Flood.

Foulser & Another v HMRC [2013] UKUT 33 provides important guidance on the “fairness” and “supervisory” jurisdiction of the tribunals and helps practitioners avoid procedural traps.

The general doctrine of abuse usually takes one of four forms:

  1. Allegations that a person cannot get a fair trial, e.g. because of inordinate delay or defective disclosure
  2. Suggestion that the conduct of the state has been of a such a reprehensible nature that it should not be allowed to continue with the litigation
  3. Abuse of trying to re-litigate something already decided (Res Judicata)
  4. Misconduct during the course of litigation such as the suppression of evidence or witness threats

The first two categories are considered in this case, where the Foulsers had a long running tax dispute.

On the day fixed for a hearing their adviser was arrested and searches were conducted. The Foulsers alleged that the HMRC arrest and search exercises were intended to obtain access to confidential documents, to deliberately cause postponement of the hearing, to create embarrassment and to put improper pressure to settle. 

Before the FTT it was held that this tribunal had no inherent jurisdiction to hear the complaints made. Rule 8 of the tribunal procedure (2009, S.I. 273) expressly provides circumstances in which a strikeout or a stopping of a proceeding could occur and this precluded arguments based on powers from other more general rules.

On appeal, the UT looked at arguments on jurisdiction on a wider basis than the FTT. They drew a distinction between misconduct cases and fairness and remitted the case back to the FTT for a redetermination.

In cases of misconduct outside the immediate litigation, the UT confirmed that the remedy had to be given by a court or tribunal which was capable of exercising a supervisory jurisdiction. The traditional timely application had to be made for leave to proceed and if granted the proceedings would then have to progress consistent with the manner of judicial review proceedings in the High Court.

The FTT did not have supervisory jurisdiction but could use its general rules to ensure that the question of fairness was addressed and then relevant orders made.

Importantly, the UT did not accept that because rule 8 of the FTT dealt with a number of situations which justified the ending of proceedings that this deprived the other rules of their general effect and in particular, rule 5, to resist proceedings.

In the event that there is a wish both to stop proceedings but also to fight the merits, the safe procedure is to bring an application in the UT for the judicial review remedy of a prohibitory order but also to make an appeal within the FTT for consideration of the merits of the dispute. If the only issue is whether a fair trial can be obtained then the FTT has jurisdiction and can use the general terms of its rules of procedure to provide an effective remedy.

John Flood is a retired barrister and former deputy director of specialist investigations at HMRC.


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