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

Mr Hayhurst for HMRC acknowledges that this ground of appeal is an Edwards v Bairstow (Footnote: ⁵) challenge. It is HMRC’s case that no tribunal properly instructed as to the relevant law could have come to the determination under appeal on the basis of the evidence before it.

As a starting point, Mr Hayhurst says that there is no evidence that Adrena (and not Global) supplied the alcohol that was the subject of the mirror loads in the UK as suggested by the FTT (at FTT [643]). The FTT failed properly to distinguish between the cover loads (imported by Adrena) and the mirror loads. Before the FTT, neither party was advancing a positive case that Adrena imported the alcohol that formed the mirror loads. It was HMRC’s case that the mirror loads were smuggled into the UK by Global. It was the respondents’ case that the alcohol may have been smuggled into the UK by the participants in Operation Banjax or that it may have been owned by Corkteck when it was imported into the UK.

Mr Hayhurst says that the overwhelming evidence points to the mirror loads being smuggled into the UK by Global. He took us to large parts of the evidence that was before the FTT relating to the supply chains for the transactions in which Global was involved in support of this submission. In summary, he made the following points.

The FTT found that SA smuggled alcohol into the UK by means of inward diversion fraud over a period of up to eight years (FTT [626]-[637]). Global was the undisputed “successor” to SA’s trade (FTT [300], [600]).

The FTT found, and the respondents conceded, that Global owned significant amounts of alcohol that it had purchased from various companies in continental Europe, (FTT [303], [304], [308]). These purchases included purchases of alcohol from Adrena to the value of £8.1 million. There was no evidence that Global sold alcohol to Adrena, with the exception of £970,000 of alcohol, which Mr Hayhurst asserted, related to the cover loads.

The evidence did not support Global’s claims that it sold alcohol to a variety of EU-based wholesalers and traders (FTT [310]-[318]). Whilst the transportation documentation suggested that such sales may have taken place, there was no evidence of Global having received payments from such wholesalers and traders.

The FTT was aware of evidence of the movement of lorries transporting alcohol which, in accordance with the relevant documentation, should have been delivered by Global to wholesalers and traders in the EU, but, in fact, showed that those lorries were in the UK at relevant times (FTT [312]-[317]).

Global received substantial payments from persons associated with the organized crime group responsible for Operation Banjax, an organized crime group involved in the laundering of money derived from alcohol diversion fraud (FTT [421]). The paperwork suggested that Global sold non-alcoholic goods for payment to traders controlled by participants in Operation Banjax. The likelihood was that these payments represented the laundered proceeds of inward diversion fraud in which Global was involved.

The evidence showed that Adrena played a limited role in the inward diversion fraud. Adrena’s only roles were (i) to sell alcohol to Global in the EU (see above) and (ii) to act as a “buffer” company in relation to the cover loads, the mirror loads for which were sold by Global in the UK. There was no evidence that Global sold the alcohol for the mirror loads to Adrena in the EU and that Adrena smuggled those goods into the UK (as the FTT’s reasoning suggested).

Mr Webster KC for the respondents says that this ground of appeal represents a challenge to the FTT’s findings of fact. He referred to the guidance of Lewison LJ in Volpi v Volpi [2022] EWCA CIV 464 (“Volpi”) at [2], which highlighted the difficulties for an appellate court or tribunal in reassessing the findings of fact made by the fact-finding tribunal, and the dangers for an appellate court of interfering with a decision of the fact-finding tribunal on these grounds.

Mr Webster KC said that, in any event, HMRC’s argument was misplaced. The FTT did not make a definitive finding that Adrena (and not Global) had sold alcohol in the UK. The FTT’s only conclusion was that there was insufficient evidence before it that Global owned goods in the UK (FTT [644]). The reference to Adrena owning goods in the UK (FTT [643]) was merely a reference to the possibility that Adrena might have held the goods. It was not a finding of fact.

Mr Webster KC also pointed to various deficiencies in HMRC’s case before the FTT including the following.

HMRC’s case was plagued with difficulties derived from an inadequate investigation and the case officers’ failure to appreciate the implications of the separate legal personality of the companies that were involved. HMRC had failed properly to identify the basis on which it was said that Global made supplies in the UK.

The argument that Adrena was a buffer company only in relation to the cover loads on the basis that it appeared as the consignor on the paperwork for the loads that were intercepted by the Border Force was flawed. The ownership of the goods at the UK border could not be determined by what happened at the border. The argument failed to address the fact that Adrena would have had to appear on the paperwork for all the loads (including the mirror loads) if the fraud was to be effective.

It did not follow from the fact that Global owned alcohol in the EU that it must be the supplier of the alcohol in the UK. The evidence presented by Mr Hayhurst – in relation to the transportation of alcohol owned by Global, the extent of Operation Banjax and the sources of funds of Global – was not conclusive of Global having made supplies of alcohol in the UK.

Mr Webster KC submitted that the FTT’s conclusion on the facts was one that was well within the bounds of reasonable decisions open to the FTT and one that it was entitled to reach on the evidence before it.