[2023] UKUT 132 (AAC)

I shall not describe here the arguments on sub-ground (a) because, in my opinion, it duplicates Ground 2.

At the hearing of this appeal, Mr Coppel KC for the Appellant argued that Grounds 1 to 3 were linked, and their cumulative effect was greater than the sum of their parts. He also argued that, over the last 25 years or so, regulatory powers have shifted away from conferring power on a regulator to bring a criminal prosecution as a means of dealing with regulatory breaches. That ‘time-honoured’ approach, both in this country and abroad, supplied important protection against an ‘overbearing state’. The modern preference, however, is for regulatory systems under which a regulator imposes a financial penalty so that, if the penalty is disputed, the onus is on the penalised person to instigate proceedings. The resultant ‘fairness downgrade’ is sometimes tempered by relatively modest and/or fixed penalty amounts as well as the opportunity afforded to avoid the adverse publicity that might accompany formal legal proceedings. But that is not the case with a MPN, which is why the First-tier Tribunal’s role is so important. In this case, the Tribunal failed to provide the Appellant with the level playing field to which it was entitled.

The Tribunal was required, submits the Appellant, to consider for itself whether the material relied on by the Commissioner rendered the MPN both right (statutory conditions met) and just (appropriate, as regard imposition of a MPN and amount of penalty). This involves more than simply ‘marking the Commissioner’s homework’; it places the Commissioner is under both a legislative and evidential burden.

The Commissioner argues that the Tribunal’s approach to the burden of proof was consistent with the Court of Appeal’s judgment in Khan v Customs and Excise Commissioners [2006] EWCA Civ 89, [2006] STC 1167. In Khan, a VAT penalty case, it was accepted that the first instance tribunal correctly placed on HM Revenue & Customs the burden of proving that the appellant had acted for the purpose of evading VAT and that his conduct involved dishonesty (I note that section 60(7) of the 1994 Act expressly provided that “…the burden of proof as to [these matters] shall lie upon the Commissioners”). On appeal to the High Court, the dispute concerned other aspects of the penalty-setting exercise including whether the burden was on HMRC to show, as the Court put it at [63], that “the best of judgment assessment (by reference to which the penalty was calculated) was correct”. Before the Court of Appeal, HMRC conceded that the burden was on them to prove “the quantum of tax evaded” ([67]). The Court of Appeal, however, was “reluctant to allow this judgment to rest simply on concessions” ([68]). Carnwath LJ said:

“70…the general principle, in my view, is that, where a statute gives a right of appeal against enforcement action taken by a public authority, the burden of establishing the grounds of appeal lies on the person appealing….

71.

That principle is well-established in other statutory contexts, particularly where the relevant facts are peculiarly within the knowledge of the person appealing. For example, a local planning authority may serve an enforcement notice if it "appears" that there has been a breach of planning control. The owner can appeal against the notice on various grounds, which may, for example, include a denial of the acts complained of, or a claim that permission is not required. It has long been clear law that the burden of proof rests on the appellant. That was confirmed recently in this court in Hill v Secretary of State for Transport [2003] EWCA Civ 1904. Buxton LJ said:

"43.

The appellant accepted that there is a longstanding decision in planning law, Nelsovil Ltd v Minister of Housing and Local Government [1962] 1 WLR 404, which has been generally regarded as placing the burden of proof on the appellant in an enforcement notice appeal. That view was developed in the leading judgment of Widgery J and pungently summarised by Slade J at page 409 of the report:

"It is a novel proposition to me that an appellant does not have to prove his case."

44… The general principle that the appellant must prove his case seems to be unassailable…"

72.

It is true that both Nelsovil and Hill were planning cases, but the statements in the former were expressed quite generally. There may of course be something in the nature of the appeal, or the statutory context, which requires a different approach. For example, under the jurisdiction of the Transport Tribunal, it was held that, whereas on appeal against refusal of a licence the burden lay on the appellant, that was reversed on an appeal against revocation of a licence (see Muck It Ltd v Secretary of State [2005] EWCA Civ 1124). That decision turned on the construction of the particular regulations and the European Directive on which they were based.

73.

The ordinary presumption, therefore, is that it is for the appellant to prove his case. That approach seems to me to be the correct starting-point in relation to the other categories of appeals with which we are concerned under section 83, including the appeal against a civil penalty. The burden rests with the appellant except where the statute has expressly or impliedly provided otherwise. Thus, the burden of proof clearly rests on Customs to prove intention to evade VAT and dishonesty. In addition, in most cases proof of intention to evade is likely to depend partly on proof of the fact of evasion, and for that purpose Customs will need to satisfy at least the tribunal that the threshold has been exceeded. But, as to the precise calculation of the amount of tax due, in my view, the burden rests on the appellant for all purposes.”

At the hearing, Mr Coppel argued that Khan was ‘inspired’ by planning case law and should be confined to that and tax penalty contexts.

The Commissioner submits that the First-tier Tribunal’s approach to the burden of proof – that it is of secondary importance in the context of a full merits review – was consistent with authorities under section 136 of the Equality Act 2010, even though section 136 expressly provides for a shifting of the burden of proof. And, as the Supreme Court has said, “it is important not to make too much of the role of the burden of proof provisions” (Hewage v Grampian Health Board [2012] UKSC 372). The burden of proof in MPN proceedings is broadly neutral, with the same initial burden faced by both Commissioner and Appellant. At paragraph 38 of its reasons, the Tribunal made the straightforward point that, if the Commissioner cannot point to any evidence of infringement, there is no basis on which to find an infringement, which is consistent with the DPA 2018’s requirement, in sections 149(1) and 155(1), that the Commissioner must be “satisfied” of certain matters. While the Commissioner is not required to ‘show’ or ‘prove’ relevant matters, he must act rationally in reaching his conclusions and accepts that he bears an ‘initial evidential burden’ of “gathering evidence of the infringement” and must also set out the evidence relied on when imposing a MPN.

The Appellant submits that the Commissioner effectively argues that, provided that he acts rationally in finding an infringement, the evidential burden shifts to the Appellant who is required to prove there was no infringement. This argument would amplify the Tribunal’s mistaken approach. It would relieve the Commissioner of any requirement to prove a breach of data protection legislation. All the Commissioner would be required to do was show that he acted rationally in reaching his conclusions. At the hearing, Mr Coppel argued that this was the difference between the Commissioner having to produce sufficient or only ‘some’ evidence to support a MPN. He also argued that, if the Commissioner were able to discharge his evidential burden simply by reference to the MPN under appeal, any semblance of fairness would be destroyed and the Commissioner could succeed without ever going to the trouble of calling witnesses. Mr Coppel further argued that, on the Commissioner’s submission, a full merits review would be degraded into no more than a judicial review. The argument that the Commissioner’s submission simply reflects the ‘standard approach to the burden of proof in adversarial proceedings’ is seriously misguided.

The Commissioner rejects the argument that his submissions describe a judicial review-type role for the First-tier Tribunal. The Tribunal conducts a re-hearing of the facts rather than a review of the MPN in a narrow public law sense (see Central London Community Healthcare NHS Trust v The Information Commissioner [2013] UKUT 551 (AAC) at [49]). The Appellant misunderstands the Commissioner’s case. It is obvious that the Commissioner must present a factual case to the Tribunal which may be done, at a minimum, by reference to the notice under appeal. At the hearing, Mr Lockley confirmed that he did not argue that this was the approach taken by the present tribunal but, instead, he sought to identify the qualitative minimum necessary to discharge the Commissioner’s evidential burden.

The Commissioner argues that the Tribunal’s function under section 162 of the DPA 2018, of carrying out a full merits review, comprises a quasi-investigative role such that the Tribunal may, of its own accord, decide that the evidential case for an infringement is not made out. Typically, however, it is for an appellant to show why the Commissioner got it wrong, and in this sense an evidential burden falls on an appellant. This is the standard approach to the burden of proof in adversarial proceedings, as confirmed in Khan. In the absence of contrary statutory provision, it is for a claimant / appellant to prove its case. The proposition of law set out in Khan, at [70], was clearly intended to be of general application. While that case concerned civil penalties under VAT legislation, the Court considered “other statutory contexts”, at [70], and cited statements of principle that were “expressed quite generally”, at [72].

The quasi-investigative role ascribed to the Tribunal by the Commissioner does not really exist, argues the Appellant. It is not reflected in any legislative provision, and, in practice, the Tribunal lacks the necessary administrative apparatus. The investigative role is vested in the Commissioner, and it follows that he bears the burden of putting before the Tribunal evidence of the results of his investigation and whatever other evidence he relies on. For the Commissioner to succeed, argues the Appellant, that evidence must be sufficient to satisfy the Tribunal of an infringement for which a penalty is a just sanction.

The significance given to Khan by the Commissioner is based, argues the Appellant, on a contextual misunderstanding. Khan concerned a penalty imposed under legislation which provided for a purely arithmetical means of fixing a penalty amount. Khan referred, at [9], to the avoidance of the stigma associated with, as hitherto, criminal prosecution for an offence involving dishonesty. The Commissioner, however, publishes MPNs on his website. The Court of Appeal was also influenced by the Value Added Tax Tribunals Rules 1986 which made special provision for evasion penalty appeals and afforded procedural protections absent under the present Tribunal’s rules.

The Appellant argues that Khan, at [72], recognises that a different approach is appropriate depending on whether regulatory action confers or removes a benefit. Where a regulator imposes a dis-benefit, the regulator should be required to satisfy a tribunal that all necessary conditions are satisfied. It follows that, in relation to a MPN, the Commissioner’s burden extends to persuading the Tribunal that the penalty amount is appropriate. The Commissioner disagrees and argues that Khan, at [72], where the Court identified cases in which a different approach is required, does not undermine the ordinary presumption in [73]. The presumption applies in the absence of contrary statutory provision. There is clearly no express provision in the DPA 2018, nor may such properly be implied. The DPA 2018 speaks only of the need for the Commissioner to be ‘satisfied’ of certain matters. On appeal, the Tribunal must satisfy itself “independently and afresh” that the conditions for a MPN are made out (Information Commissioner v Home Office [2011] UKUT 17 (AAC) at [59]. Furthermore, the GDPR, in Articles 5(2) and 24(1), requires a controller to be able to demonstrate compliance. In those circumstances, there is nothing objectionable in requiring the appellant, in proceedings before the Tribunal, to show why a penalty imposed for breaching that legislation was wrong.

The Commissioner argues that the fair trial guarantees in Article 6 of the European Convention on Human Rights make no material difference, even if a MPN amounts to a criminal charge for Article 6 purposes. The important issue is whether the MPN scheme, as a whole, is consistent with Article 6’s guarantees. The Appellant’s submissions on Euro Wines (C&C) Ltd v HMRC [2016] UKUT 359 (TCC) ended with the Upper Tribunal’s finding, at [29], that the penalty in that case was criminal in nature for the purposes of Article 6. The Appellant overlooked, argued Mr Lockley at the hearing, the Upper Tribunal’s subsequent discussion of the consequences which, at [34] to [38], explained why reversal of the burden of proof is not necessarily incompatible with Article 6’s requirement for a presumption of innocence for a person facing a criminal charge. In Euro Wines, at [40], the Upper Tribunal also acknowledged that the penalised person may, in that case, have found it difficult to ascertain whether duty had been paid on a chain of transactions. It is noteworthy, submits the Commissioner, that this consideration was not decisive and it strengthens his case because it should not have been unduly difficult for the present Appellant to have obtained the information necessary to show GDPR compliance.

The Commissioner also relies on Janosevic v Sweden (2004) 38 EHRR 22 in which a taxpayer argued that the Swedish tax surcharges system, under which an administrative court carried out a full merits review of a tax authority’s decision, contravened Article 6’s presumption of innocence. Mr Lockley draws my attention to the European Court of Human Rights’ description, at [98], that “it is for the [Swedish] Tax Authority to show that there are grounds, under the relevant laws, for imposing the tax surcharges” and asks me to note that, at [100], it went on to say this about the Swedish tax legislation’s provision for remission of surcharges:

“…as the duty to consider whether there are grounds for remission only arises in so far as the facts of the case warrant it, the burden of proving that there is reason to remit is, in effect, on the taxpayer.”

The Commissioner submits that, in Janosevic, the Court did not propound a general rule to the effect of ‘the taxpayer must show’. Its analysis arose out of the natural role of the parties in the type of case under analysis. The Court’s remarks were very similar to those of the Tribunal, at paragraph 38 of its reasons, that an initial evidential burden falls on the Commissioner which effectively shifts to the appellant once evidence of the infringement has been introduced.

By reference to the criteria identified by Lord Bingham in Sheldrake v Director of Public Prosecutions [2005] 1 AC 264, at [21], for determining whether a presumption of fact or law is compatible with Article 6’s criminal fair trial guarantees, the Commissioner submits:

in MPN proceedings before the Tribunal, the appellant has the opportunity to rebut the case against it, given that the proceedings involve a full merits review, the appeal is of right and cost free;

the Tribunal has its own power to assess the evidence;