QB-2020-004171 - [2025] EWHC 2773 (KB)

There is an artificiality at the heart of every aspect of the case of the Claimants. It concentrates on the applications for registration and Beer Duty. It is largely about rejecting applications in circumstances where it is said that there were mere administrative errors which should have been waved through. It emphasises the number of questions that were asked of the applicant for registration and contends that they went beyond the statutory scheme and were in any event excessive. The thrust of the case is that HMRC had a closed mind and was intent on failing the applicant and in destroying the business. All of this is said to contradict oral assurances and/or representations that trading could commence prior to registration, and in the context of VAT collection that colloquially, they would get through this together.

This narrative ignores the most critical aspect of the history, namely the non-payment of VAT and taxes other than beer duty. Even if there were questions to answer as to whether oral permission was given or whether HMRC ought to have accepted payments on account of Beer Duty prior to registration or whether excessive questions were asked, none of this confronts the central feature.

The search warrant was not in respect of Beer Duty or trading without registration, even if that was inserted in the application by way of background. It was about non-payment of VAT and other non-Beer Duty taxes of a vast sum of money over a period of almost two years. The arrears of over £727,000 were very large relative to the £25,000 or so paid on account. Since most of it was in the nature of VAT, there was a contrast between millions of pounds of turnover and paltry sums paid.

This is not the end of the matter. In the first half of the two-year period of contact between HMRC and C1 seeking accounts and other information in order to receive payments, there were numerous assurances given that such information was about to be provided. The leitmotif of the excuses was of an incompetent accountant and poor management accounting systems. Even towards the end, it was said that it was going to take until July 2015 to resolve matters.

There was good reason for HMRC to be at best sceptical and in the end, there was an RPC for HMRC to believe that the non-payment was not about cash flow but about fraudulent evasion. The information that it was an incompetent accountant would have been more plausible if there were urgent steps taken to rectify matters. Contact between the former accountant and HMRC was to the effect that the problem was caused by C1 and not by the accountant. Further, there should not have been problems about managements systems, but if this was the case, then HMRC was entitled to expect that there would be speedy overhaul. A small to medium sized brewery was not such a complex business that such a problem, if real, could not be resolved speedily.

The factual summary at the start of this judgment refers in detail to the numerous communications seeking resolution from HMRC. The fact that in the second half of the two-year period, there was little communication from HMRC does not excuse the taxpayer. The relevant businesses were VAT registered, there was PAYE to pay in respect of staff and there were student loans to be deducted from salaries and accounted for to HMRC. HMRC had reasonable cause to suspect that the problem was one of fraudulent evasion.

Against this background, there is no real prospect of success of a case which operates in the realm of registration and Beer Duty and ignores the VAT and other taxes. It was the latter which formed the basis of the application for the search warrant and for the arrest of C1 and which gave rise to the criminal prosecution.

Even if it were possible for the applications for registration and payment of Beer Duty to be sorted absent arrears of other taxes, the matter was different as regards the hundreds of thousands of pounds owed in respect of VAT and other taxes. Upon the seizure of beer, there was an immediate payment of tens of thousands of pounds so that beer would be returned. There was no immediate payment of the vast arrears of VAT and other taxes.

There did come a point in time when there was an offer of a conditional nature, namely, to forestall a criminal prosecution. That was years later. It was also following a matter which is unexplained, namely that the liquidator appears to have sold the business to a connected party, apparently controlled by C1’s father for a relatively modest sum, and shortly thereafter the business was sold to a third party for millions of pounds to Carlsberg of which £1.4 million was paid up front. It was this payment or a part of it which would form the basis of the conditional offer.

None of this provides any sensible explanation as to why the VAT and other taxes were not accounted for at the time or why reserves were not kept from the trading revenue in order to meet these payments when good accountants and good management systems were in place. Further, there was no attempt to make these large payments unconditionally or at all upon or immediately following the search warrant and the arrest.

In view of the above, the complaints about the registration process, about oral permission having been granted pending registration, the non-acceptance of Beer Duty in the meantime and the ultimate refusal do not provide a basis for concluding that the search warrant and the prosecution were without RPC or actuated by malice. Further, the case in negligence is eclipsed by the non-payment of VAT and other taxes other than Beer Duty. The case in negligence largely ignores those non-payments.

Instead, there is an attempt to say that there were assurances and representations made as regards the VAT. Such statements as were made do not bear that analysis. They were far too general and unspecific to tie the hands of HMRC in taking civil or criminal steps to deal with such large-scale non-payment of money.

In the face of long pleadings and so much having been said, the Court has taken into account that summary judgment and strike out applications should generally be about crisp issues. Mini-trials are to be avoided. The Court must exercise a considerable degree of caution before finding that there is no real substance in factual assertions on an interim application without a trial. That said, there are cases where however bulky the paperwork, the Court will recognise the absence of a case to go to trial. By way of example, that occurred in the six-day application leading to the claim in the above-mentioned case of King v Stiefel being struck out by Cockerill J. In Crown House Engineering v Amec Projects [1990] 6 Construction Law Journal 141, Bingham LJ used language which resonates, albeit that this is not a case about cheating or dishonesty, but rather a case where the bulk of the outer garments does not reflect the complexity of the case. The case also was not about reverse summary judgment or strike out of a claim. He said the following at p. 154:

“The procedure is entirely inappropriate where the plaintiff's entitlement to recover any sum is the subject of any serious dispute, whether of law or fact. This is not to say in either case that a defendant with no or no more than a partial defence can cheat a plaintiff of his just deserts by producing hefty affidavits and voluminous exhibits to create an illusion of complexity where none exists. Where the point at issue is at heart a short one the court will recognise the fact and act accordingly no matter how bulky its outer garments. But it does mean that were there are substantial issues of genuine complexity the parties should prepare for trial (perhaps, as here, with trial of preliminary issues) rather than dissipate their energy and resources on deceptively attractive shortcuts.”

Account has also been taken about novel causes of action in a developing area of law. This has no application in the instant case. First, the primary way in which the case is put is by reference to the established case law, and it has been rejected that this provides assistance on the facts of the case. Second, there has been considerable case law at Supreme Court level from which the case law has become established even if that was once not the case. Third, the propositions that there was a cause of action are very fact dependent and come off the rails in this case because of the matters set out above. They fail to give any or any adequate emphasis to the fact that this case is about non-payment of VAT and taxes other than Beer Duty. Further, any attempt to erect a duty by reference to something said regarding VAT does not have the consequences alleged. It therefore follows that the attempts to erect duties whether through a conventional and established route or a new and incremental route must fail.

In strike out applications, the Court is reminded that in the event that a case can be saved by amendment, this should generally be adopted. I am satisfied that this case cannot be saved. It is a case where there have been adjournments and amendments in its tortuous history since the strike out application was first made. There have been large scale amendments, but they have not saved the case. I am satisfied that there is no prospect of saving the case if there were a yet further opportunity to amend.

This is a case in which reverse summary judgment should be given on the basis that the case has no real prospects of success and there is no other compelling reason for the case to go to trial. Alternatively, this is a case where the claim should be struck out since the statements of case disclose no reasonable grounds for bringing the claim.

It remains to acknowledge the great amount of assistance provided to the court by the written submissions of all Counsel and for the oral submissions, and noting with approval that submissions for the Claimants were shared by Leading and Junior Counsel. A draft order should be prepared to reflect this judgment and such consequential matters as can be agreed.