UT/2022/000157 - [2024] UKUT 00346 (TCC)

From a case management point there was, in theory, merit in deciding the place of supply issue before the control issue for the reason identified by the FTT. If the place of supply issue was decided in favour of Global, it was, in theory, not necessary to decide the control issue.

The problem with that approach was that it ran the risk of compartmentalizing the evidence, and thereby placing the FTT in breach of their duty to consider the totality of the evidence relevant to the place of supply issue, contrary to the Court of Appeal’s guidance in CCA and Davis & Dan.

Whatever the merits of the argument put by Mr McGuiness KC (FTT [600]-[602]) before the FTT and repeated by Mr Hayhurst before us, it is difficult to see how a finding that Mr Malde was in control of Global was not, at the very least, potentially relevant to the place of supply issue. If the FTT had considered this question, and concluded that Mr Malde was in control of Global, and so ought to have been able to produce trading records for Global, this had, at the least, the potential to damage the respondents’ case on the place of supply issue.

The FTT found, and we agree, that the burden of proof on the place of supply issue was on HMRC. But, it does not follow that a finding that Mr Malde was in control of Global was irrelevant to the place of supply issue. Such a finding would have involved rejection of Mr Malde’s assertion that he did not have control of Global. On any view of the matter, the rejection of Mr Malde’s assertion that he did not have control of Global would have been damaging to the credibility of Mr Malde, which itself was capable of having an effect on the place of supply issue.

We cannot accept the arguments of Mr Webster KC (recorded at FTT [603] – [604].

Consideration of the issue of control before the place of supply issue would not have had the effect of reversing the burden of proof. It was for HMRC to prove that Global was the supplier in the UK of the alcohol smuggled into the UK. The weight to be given to a finding that Mr Malde had control of Global, but had failed to produce any trading records, was a matter for the FTT. In order to decide what weight to give such a finding, the FTT had first to consider the evidence before it in relation to the issue of control.

It is unclear to us why it was either unfair or inappropriate for the FTT to consider the issue of control on the basis that a finding adverse to Mr Malde may allow an inference to be drawn that his failure to produce records showed that the companies did make supplies in the United Kingdom. We also cannot accept the argument that it was necessary for the FTT to avoid the issue of control because the drawing of this inference “undermines Mr Malde’s primary defence – that he did not control the companies and cannot produce any trading records”. This was the very point of considering the issue of control. It was for the FTT to decide whether to draw that inference and, if that inference was drawn, to decide what, if any weight should be attached to that inference in relation to the place of supply issue, taking into account where the burden of proof lay.

What the FTT was not entitled to do, given its duty to consider the totality of the evidence relevant to the place of supply, was to place the issue of control into a separate compartment, which was left unconsidered when the FTT came to consider the place of supply issue. The place of supply issue was not suitable to be treated as, in effect, a preliminary issue. There was no clear separation between the evidence relevant to place of supply issue and the evidence relevant to the issue of control. The evidence in relation to each issue, at the least, was capable of overlap.

In these circumstances, in our view, the FTT did make an error on a point of law, within the meaning of Section 12(1) of the Tribunals, Courts and Enforcement Act 2007 (“TCEA 2007”), in deciding that the issue of place of supply should be determined before the issue of control. The FTT could only make this decision if it was satisfied that there was no possibility of overlap in the evidence relevant to the two issues. Mr Webster KC (at FTT [604]) made the argument that the place of supply issue and the issue of control were separate issues, with no logical connection. The FTT did not however address this question. Its conclusions on the order in which to address the issues was based in its acceptance of the arguments of Mr Webster KC recorded at FTT [603]. The FTT left open the question which it needed to decide, if it was to take the place of supply issue before the issue of control; namely whether it was satisfied that there was no possibility of overlap in the evidence relevant to the two issues.

Although we have found an error of law in the FTT Decision, we will not set aside the FTT Decision on this ground. There are two reasons for this.

First, the FTT decided the place of supply issue, in relation to both Global and SA, on a basis which had little connection with the issue of control. In relation to Global, the FTT decided the place of supply issue on the basis that HMRC had failed to prove that Global was the owner of the goods supplied in the UK (FTT [644]). The main reasons for this failure were (i) the evidence of payments to Global by various companies for the alcohol supplied by Global (FTT [638]) and (ii) the evidence that other entities were involved in the supply chains that HMRC’s analysis ignored (FTT [643]-[644]). The FTT were not prepared to disregard that evidence, which in turn called into question the place of supply by Global. HMRC had failed to prove that these sales involved the supply of alcohol by Global in the UK, as opposed to on the continent. It is difficult to see how this result would have been any different if the FTT had decided that Mr Malde did or did not have control of Global before addressing the place of supply issue.

Second, it is clear that the FTT did not regard Mr Malde as a reliable witness (FTT [83]-[97]). The FTT regarded much of his evidence, including in relation to Global, as unreliable (FTT [83]). There is no reason to believe that the FTT’s failure to consider the control issue in advance of the supply issue had a material effect on the FTT’s view of the credibility of Mr Malde’s evidence in relation to the place of supply issue.