TC09655 - [2025] UKFTT 01206 (TC)

He asked her to make the reinstatement application which she did.

Mr Paulin had (wholly correctly in our view) accepted that Mr Borthwick had waived legal privilege as regards advice given to him by his representatives in relation to withdrawing the appeal. Mr Borthwick was therefore asked a number of questions by Ms Brown, as well as ourselves, regarding that advice.

In his oral evidence Mr Borthwick provided the following evidence of fact:

Although he had conduct of the appeal on behalf of the company, he did not consult either his fellow directors or the shareholders regarding withdrawing the company’s appeal. He did not share the advice it had received from the legal team with them and took responsibility for instructing counsel to withdraw without discussing the position with them.

Nor did he discuss the impact of withdrawing on the sales process with his business consultants. Indeed, he has not discussed the ramifications of the reinstatement application with them and its impact on the ongoing sales process.

The potential tax and penalty liability has not been disclosed in the information prepared by the business consultants. He expects a purchaser would discover that liability through its due diligence.

His view that failure to reinstate would be catastrophic to the sale process is his view not that of his business consultants.

At the end of the Monday, his counsel had expressed the view that he had a 60:40 chance of success in his favour in the appeal. He denied that this meant that there was no sense in withdrawing.

He accepted that his counsel had thought that LP’s evidence had not come across as it should have done. However he denied that that evidence had significantly weakened the company’s appeal and that counsel had suggested that he should withdraw because of this.

He had been advised before the hearing that there was a prospect of losing. He accepted that he had been advised that HMRC might appeal if they lost. But he had not been advised that if HMRC lost, there was a prospect of ongoing litigation as HMRC would continue to appeal until they were successful.

The reason for withdrawing was, as set out in his written statement, that he had panicked and come to an irrational decision to withdraw on the basis of the prospect of this ongoing litigation.

It was not because he had been advised by counsel that his chances of success were slim and he has now received a more bullish opinion from Dr Willets and wants to have a second bite at the cherry.

He thought that if the company was successful, that would be it. He did not realise that there could be a continuous process of litigation lasting some years.

He wishes to reinstate the appeal as he thinks he will now get the right outcome (which we take to mean that the company will be successful in its appeal). His view, based on advice given to him by Dr Willets, is that the company has a strong case.

He confirmed (in response to an oral comment to this effect made by Dr Willets) that she had, for a number of years prior to the hearing, provided advice to the company as regards environmental audits. He had a pre-existing relationship with Dr Willets at the time of the hearing.

He said that while he discussed the way in which the case was going after the end of the hearing on the Monday ( at which time counsel provided him with the 60:40 chance of success) the prospect of ongoing litigation with HMRC was first raised on the Monday by the paralegal (and not counsel) at the hotel where they were both staying. This was the first time that he realised that there could be continuing litigation and caused him to panic.

He then discussed this continuing litigation with counsel on the Tuesday morning, as a consequence of which he instructed counsel to withdraw the appeal.