UT/2023/000069 - [2024] UKUT 00278 (TCC)

In the absence of any misdirection in law (and there was no dispute that the FTT had not applied the correct test), to reach a conclusion that a fact-finding tribunal has made a decision which no reasonable tribunal could have reached requires surmounting a very high hurdle indeed. In particular, it is well established that assessment of the weight to be given to factual findings is a matter for the fact-finding tribunal. In our view, HMRC have not surmounted that very high hurdle in this case.

HMRC’s case was, as we explain above, an Edwards v Bairstow ‘perversity’ challenge, which, in substance, amounted to a complaint that the FTT wrongly gave weight to the documentation and gave insufficient weight to the finding of illicit activity. Although HMRC set out two separate errors of law, we do not consider that the second alleged error of law advances matters if, as we consider to be the case, there was no error of law in relation to the weight (or absence of weight) given to the documentation or finding of illicit activity.

Turning first to the issue of the documentation, we note that HMRC’s case did not make any pleadings as to sham. This does not, of course, mean that the documentation upon which the FTT relied, both in the FTT 2021 decision and the FTT 2023 decision, must be accepted as proving any facts according to its terms. An absence of an intention to mislead does not mean that the facts necessarily occurred according to the terms of the documents. For example, the party to a transaction may, to a greater or lesser extent, not implement one or more steps in a transaction strictly in accordance with the documentation, for commercial convenience (or in being simply careless).

It appears, though, that, despite not pleading that the documents were shams, HMRC’s case is that the documentation should, in effect, have been entirely disregarded by the FTT: no other conclusion in relation to the documentation could, in HMRC’s submission, have been rationally supported. In our view, the key reason relied upon by HMRC in that respect is that, as per their skeleton argument before us, the FTT had found that Mr Zaman was not truthful. But, as we note above, that is not what the FTT had found. It is plain that the FTT had not discounted Mr Zaman’s evidence entirely. It is true that the FTT was sceptical about Mr Zaman’s evidence but that falls well short of a decision by the tribunal that it considered that no reliance whatever should be placed on his evidence.

The FTT very carefully considered in the 2021 FTT decision a range of matters in relation to the documentation to assess its reliability. Clearly, HMRC would have preferred the FTT to have placed no weight on either Mr Zaman’s evidence or on the documentation but the question before us is whether the totality of the evidence before the FTT led to one conclusion, and one conclusion only, namely, that the documentation was, in effect, fabricated. While we would accept that this was a conclusion open to the FTT, that is nothing to the point for the purposes of this appeal. The issue is whether it was also open to the FTT to find as it did. And, alive as we are to the multiple warnings over many years at the very highest level about the dangers of appellate courts ‘second-guessing’ the fact-finding of first-instance tribunals in the absence of compelling reasons to do so, we do not consider that there is any proper basis for us as an appellate tribunal to say that the FTT could not approach the weight to be given to the documentation in the way that it did.

So far as the finding of illicit activity is concerned, we are also unable to see the basis on which an appellate tribunal can interfere with the way in which the FTT approached its decision-making in the light of its finding at [91] in the 2021 FTT decision of illicit activity. It is worth setting out what the FTT actually said at that paragraph:

“91.

Based on the above, as well as the text messages found on Mr Ahmed’s phone in May 2016, we find it likely that there was illicit activity in the supply chains with which Zamco was involved. On the evidence before us, however, we are unable to say with specificity what (apart from money laundering) the illicit activity was, or exactly where in the supply chain it took place.”

In other words, the FTT expressly found two things: (1) that there was illicit activity; and (2) that they were unable to say “with specificity” where that activity took place. What the FTT said at [91] of its decision has then to be read in the light of the other findings it subsequently goes on to make.

In relation to the FTT’s findings in the FTT 2021 decision at [92], dealing with the location of the goods at the time of acquisition, we have already noted that the FTT observed (at [37] of the FTT 2023 decision) that the documentation was generally credible, Zamco Ltd had no premises in the United Kingdom to store alcoholic goods, and the notion of a relocation of goods to the United Kingdom (“smuggling”) presupposes that the goods were located outside the United Kingdom at some point. The first two points seem to us to be plainly relevant to the decision and open to the FTT to have regard to. The last observation about smuggling is a little more puzzling but if what the FTT meant (and we consider that it did) was that it was common ground that the alcoholic goods in this case must have started life outside the United Kingdom and so the evidence must identify a point at which they entered the United Kingdom, as to which there was an absence of evidence, that was also, in our view, an approach open to the FTT.

As to the location of the alcoholic goods at the time of their on-sale to Zamco Ltd’s customers, the FTT, in the FTT 2023 decision, re-affirmed the FTT’s conclusions at [95] of the FTT 2021 decision, on the balance of probabilities. We make the same observation in relation to this finding as we do in relation to the FTT’s conclusions on [92] of the FTT 2021 decision. While the FTT could have reached the opposite conclusion (with which we could not have interfered), we do not see that the FTT made any error of law in reaching the conclusion that it did.