UT (Tax & Chancery) UT/2025/000047 - [2025] UKUT 00362 (TCC)

On 29 November 2024 HMRC obtained from the High Court freezing orders against Ducas, Enix and FL Capital Holdings Limited (the parent company of Ducas and Enix) (the “Freezing Orders”) following an ex parte hearing before Thompsell J. In his judgment granting the Freezing Orders, Thompsell J concluded that “there is ample evidence of dishonesty in the form of Ducas providing fraudulent documents to its customers” (HMRC v Ducas Ltd and others [2024] EWHC 3132 (Ch) at [13]). There have been subsequent applications and directions in relation to these orders but the Freezing Orders remain in place.

HMRC issued the section 8 Decision on that same date.

At the time that HMRC obtained the Freezing Orders and issued the section 8 Decision, HMRC had not used their statutory powers to seek to obtain documents from Ducas.

Ducas appealed the section 8 Decision to the FTT on 17 December 2024. In its grounds of appeal at [3(e)] Ducas states that it “denies it provided the UK Agencies with “fraudulent documents”. Further and in any event, the Agencies were at all times well aware that the Enix workers were operating through PSCs”.

Both parties then made case management applications to the FTT relating to the onward conduct of the appeal.

On 14 February 2025 Ducas applied to the FTT for directions for case management of the appeal (the “Ducas CM Application”). At [25] Ducas set out its explanation of the directions sought, which included the following:

HMRC made an application to the FTT on 21 March 2025 (the “HMRC CM Application”). HMRC applied for directions as to the timing of the production of HMRC’s SOC, a direction for Ducas to produce amended grounds of appeal, for HMRC to be permitted to file a Reply and for certain issues to be determined on the basis of representative sampling. HMRC stated at [15] that they resisted Ducas’ application for an expedited trial in September 2025 for reasons that would be set out in their skeleton argument and stating:

“16.

HMRC therefore invite the Tribunal to direct each side to set out its case, agree the issues to be determined, and propose representative samples. At this point, both parties and the Tribunal will be able to estimate an appropriate hearing length. At a second case management hearing, the Tribunal may list the final hearing, with prompt steps to manage the case until that date, including deciding on the representative samples, directions for disclosure and witness statements.”

The HMRC CM Application included proposed draft directions dealing with the SOC, amended grounds of appeal, the Reply, the Statement of Agreed Facts and Issues and representative sampling, and provided for a second case management hearing and for listing information to be provided before that second hearing.

Both parties then provided skeleton arguments ahead of the CMH.

Ducas served its skeleton (the “Ducas FTT Skeleton”) on 24 March 2025. Ducas reiterated at [11] that it proposed that the hearing of the appeal be listed for September 2025, and at [12] Ducas listed its suggested further directions. Those further directions specified the date by which HMRC would serve its SOC and that HMRC would serve their evidence and material that assisted Ducas’ case or undermined HMRC’s case as the next step. The remaining suggested directions addressed service of evidence by both parties, and the provision of hearing bundles and skeletons. There was no provision for Ducas to serve amended grounds of appeal in these suggested directions, and, moreover, there was no provision for Ducas to serve evidence and material that assisted HMRC’s case or undermined Ducas’ case.

The Ducas FTT Skeleton addressed the evidence each party should disclose in the following terms:

“37.

The usual order (r. 27) is for both parties to produce documents on which they rely. This case differs from the norm. First, HMRC bear the burden of proving the serious allegation of fraud/dishonesty. Further, HMRC purport to have conducted extensive investigations with the Appellant’s clients such that it is likely that HMRC will have access to many documents of which the Appellant is unaware. This differs from the common position in the FTT, when most if not all of the material relied upon by HMRC will have been provided by the taxpayer.

38.

In those circumstances, HMRC should be required to disclose any documents that assist the Appellant’s case or undermine HMRC’s case (see paragraph 94 of E Buyer UK Ltd v HMRC [2017] EWCA Civ; [2018] 1 WLR 1524; and paragraph 53 of HMRC v Smart Price Midlands Ltd [2019] EWCA Civ 841; [2019] 1 WLR 5070).

39.

HMRC appear to accept that they should provide disclosure as set out above, but argued in correspondence that the Appellant should be subject to the same requirement. That simply does not follow. The Appellant refers to and adopts the reasoning of the Tribunal in Horizon Contracts Ltd v HMRC [2024] UKFTT 348 at paragraphs 21-23.”

HMRC also served its skeleton (the “HMRC FTT Skeleton”) on 24 March 2025. HMRC’s response to Ducas’ application is set out at [8] and challenges the reasons for seeking an expedited hearing, the consequences for Ducas of the Freezing Orders and the statements which Ducas had made about the survival of its business. HMRC submitted at [9] that Ducas was seeking to railroad HMRC “into a one-sided appeal process”, and one factor cited in support of this was that Ducas “does not propose to adduce any documentary evidence” (referring to Ducas’ proposed directions which made no provision for disclosure of documents except as may be exhibited to a witness statement).

HMRC’s response to Ducas’ proposed directions addressed the burden of proof (with HMRC submitting that allegations of fraud do not reverse the burden of proof on all matters) and continued:

“61.

Thus, even if the Tribunal were (contrary to HMRC’s submissions) to be persuaded that it is possible to list a final hearing and give all appropriate directions now, it would still not be right to dispense with directions for disclosure or to reverse the usual order of directions.

62.

As set out further below, HMRC’s primary position is that disclosure directions should not be issued at this juncture, until the issues to be determined have been identified and it is thereby clear what evidence is required in respect of each issue in dispute.”

In the context of explaining HMRC’s position that the grounds of appeal were manifestly insufficient HMRC stated:

“69.

Thirdly, whilst HMRC will set out their case on the provision of fraudulent documents in their Statement of Case, despite the fact that the Appellant knew what HMRC alleged (by reason of Mr Siddle’s Affirmation and HMRC’s skeleton argument for the freezing injunction), the Appellant has chosen to keep its case on this issue opaque.

…

70.

This is no way to progress an appeal such as the present. The Appellant cannot sensibly at the same time seek to insist on an expedited determination of its appeal and also withhold important information about its own case which is necessary to identify the issues, work out what documents and evidence will be required, and ascertain the appropriate length of the final hearing.”

HMRC then addressed representative sampling before reverting to disclosure:

“77.

This approach has the additional benefit of resolving the current disclosure dispute between the parties. The Appellant proposes removing the typical direction for Rule 27 disclosure and insists that HMRC should go first on all matters. HMRC disagree with both of these approaches. But the correct approach to disclosure, in relation to each of the issues which will ultimately arise, is not a matter that can yet sensibly be determined.

78.

Once the sampling approach has been identified, each side can make submissions to the Tribunal at a return case management hearing date, as to what directions for disclosure and witness statements would be most appropriate in this case. The directions can be suitably tailored to the issues which will, by then, have crystallised.”

HMRC then set out areas for further directions which would need to be determined at a subsequent case management hearing. These included:

“79.

…

(3)

Disclosure cannot take place (on either Rule 27 or CPR-principles) until the issues between the parties have been determined. Only then can the proper basis of disclosure be ascertained and ordered. Directions as to whether there should be sequential or simultaneous exchange, and who should go first, cannot be made until the Appellant pleads its case properly and, consequently, there is sufficient clarity about the scope of the matters in dispute which will require evidence for their resolution.”

The CMH was held on 26 March 2025, and the Directions record that Mr Stone and Mr Bedenham appeared for Ducas (as they did at the rolled-up hearing) and Mr Tolley, Ms Hicks and Ms Inglis appeared for HMRC (of whom Mr Tolley and Ms Inglis appeared for HMRC at the rolled-up hearing, as well as Mr Watkinson). The Directions were given orally at the CMH and endorsed on 2 April 2025.

HMRC applied to the FTT, inter alia, for reasons and permission to appeal on 16 April 2025. HMRC was thus applying for permission to appeal at a time when it did not have the FTT’s written reasons for its decision. Nevertheless, that application sets out the grounds of appeal in similar terms to [9] of the subsequent PTA Application, and the reasons given are largely based on the Heightened Disclosure Direction being imposed “only” on HMRC.

The FTT released the Written Reasons on 22 May 2025 which included the following:

The FTT refused permission to appeal on the same date on which it released its Written Reasons and HMRC then made the PTA Application to the UT.

In the UT Papers Refusal Judge Scott set out at [17] (as set out above) the three bases on which he considered HMRC was seeking permission to appeal, the third of which was that the FTT erred in law in not ordering the same level of disclosure against both parties, which Judge Scott termed “reciprocal disclosure”, and explained his reasons for refusal:

“22.

I do not consider it to be arguable that the FTT erred in law by not applying a principle or presumption that disclosure must necessarily be reciprocal in its terms. While general disclosure ordered in the FTT will normally be reciprocal in practice, that is because disclosure is normally ordered against both parties under Rule 27, not because of some free-standing principle which would prevent a different form of order from being made against one party without it being made simultaneously against all other parties. The PTA Application refers to Taylor v Anderton and Shah as authority that “the same standard of disclosure should apply to both sides in litigation unless there is good reason to depart from the principle”. In fact, those authorities (and others on the topic) are discussing the purpose and limits of extended disclosure (or what CPR called “standard” disclosure), and they do not support that proposition. While the purpose of extended disclosure may be equality of access to a document and the avoidance of the litigation disadvantage which would flow from unequal access, that says nothing about the separate question of whether extended disclosure should or must be made to all parties or not at all.

23.

The principles applicable to disclosure in the FTT are relatively well-established, and HMRC have not identified any authority to support the proposition, or even assumption, that extended (CPR-style) general disclosure cannot be ordered against one party without it being ordered against all parties. Since a general disclosure order must be informed by the overriding objective and the need for the issues in the proceedings to be properly considered by the FTT, it logically falls to be assessed on the merits on a separate basis for each party.

…

26.

Under Ground 1, HMRC argue in the alternative that the FTT erred in law in any event by not ordering extended disclosure against Ducas, as requested by HMRC.

27.

I accept that such an order would have been arguably justifiable. Certain of the factors referred to in the PTA Application do not, in my opinion, carry much weight in favour of extended general disclosure against Ducas. The FTT did not refer to HMRC’s status as a public body as relevant. Nor is it arguable that the FTT failed to take into account as a factor the importance of the case to the public purse: the Decision refers as a separate factor to “£171m at stake”. I do not consider that of itself the allegation of fraud (and the High Court findings) necessitates extended general disclosure against Ducas. However, the pleadings by Ducas in relation to the knowledge of the Agencies would, in my view, be a factor pointing towards extended general disclosure.

28.

However, the question of whether a direction for extended general disclosure against Ducas would have been reasonable, or whether I might have ordered it, is not the enough for permission to appeal to be granted. HMRC do not suggest that the FTT misdirected itself in law. Therefore, in order for permission to be granted I must be satisfied that it is arguable (with a realistic prospect of success) that in refusing HMRC’s application for disclosure against Ducas, the FTT took account of irrelevant factors, failed to take into account relevant factors, or reached a decision which was “plainly wrong” as being outside its generous ambit of discretion.

29.

I have concluded that it is not so arguable. The FTT heard the parties over a day, with the benefit of documents, authorities and skeleton arguments. HMRC had ample opportunity to argue its case for extended general disclosure against Ducas. The FTT considered but did not accept that case.

30.

I consider that it is not arguable with a realistic prospect of success that the FTT’s decision was outside the generous ambit and plainly wrong. In reaching this conclusion, I have taken into account the context, timing and nature of the FTT’s decision. The context was a package of case management directions intended to keep the appeal on track for its lengthy listing window. Those directions include a direction that HMRC serves its evidence in reply, having seen the evidence from Ducas. There is nothing to prevent HMRC at a future date from making an application to the FTT for specific disclosure, as the FTT pointed out at [23] of the Decision. As HMRC point out in the PTA Application (at paragraph 34) the Reply was not before the FTT. Of course, the FTT would consider any such application on its merits and in light of the position and pleadings as at the time of consideration of that application.”

In the HMRC UT Skeleton HMRC’s submissions included at [20] that the UT Papers Refusal appeared “to have misunderstood the material circumstances” of the disclosure direction and the essential premises of the appeal. In the course of setting out their submissions on Ground 1 HMRC responded directly to some of the reasons given by Judge Scott for refusing permission as follows (with footnote 1 below being the footnote included by HMRC):

“22.

The consequence of the Disclosure Direction in this case is that, in relation to the Fraudulent Documents Issue, HMRC must disclose all documents which support Ducas’ case or undermine their own, whilst Ducas, the party alleged to have provided fraudulent documents and which alleges that the Agencies were complicit, is under no obligation to disclose documents that either undermine its case or support that of HMRC (including in respect of the fraudulent documents it provided or its allegation of complicity on the part of the Agencies). That outcome is contrary both to natural justice and established legal principle, as follows.

23.

Contrary to UT PTA ¶17(1) (HB/299), HMRC do not contend that the FTT erred in law in ordering ‘heightened disclosure’ against HMRC in relation to the Fraudulent Documents Issue. On the premise that any orders for disclosure were to be made at that stage, such an order was within the FTT’s broad case management discretion. Nor, contrary to UT PTA ¶17(2) (HB/299), do HMRC contend that the FTT erred in law in failing to order ‘heightened disclosure’ against Ducas, regardless of the level of disclosure ordered against HMRC (viz. that the FTT should have ordered heightened disclosure against Ducas whether or not it did so against HMRC) (Footnote: ¹). Indeed, HMRC never asked the FTT to make any such order. Rather, HMRC’s submission is (as accurately summarised at UT PTA ¶17(3) (HB/299)) that, having decided in Ducas’ favour that it should proceed to make orders for disclosure and evidence, the FTT erred in law as a matter of principle by failing to order the same level of disclosure against both parties in relation to the Fraudulent Documents Issue.

24.

At the heart of HMRC’s argument is the proposition that, as a matter of general principle, disclosure in the courts in civil litigation, and in the FTT in its full appellate jurisdiction, is or should be regarded as a matter of reciprocal obligation. That reciprocal obligation furthers the overriding objective of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (“FTT Rules”) of dealing with cases fairly and justly, including by (i) ensuring that parties are placed on an equal footing and are thus able to participate fully in the proceedings, and (ii) enabling the Tribunal to determine the appeal justly, in light of all the relevant material.

25.

Having decided to give directions for disclosure and evidence and ordered HMRC to provide heightened disclosure on the Fraudulent Documents Issue, the FTT should have started from the point of making a reciprocal order for heightened disclosure against Ducas. That starting point should, absent some extraordinary countervailing factor (of which there was none here, and none was identified), also have been the end point. The FTT’s conclusion to the contrary involved an error in principle.

26.

Alternatively and in any event, in the specific circumstances of this case, on the premise that the FTT made any directions for disclosure, the FTT could rationally proceed only by ordering reciprocal heightened disclosure. HMRC necessarily made a positive case on the Fraudulent Documents Issue. But it was by the time of the CMH already apparent that Ducas intended to advance its own positive case, alleging knowledge and complicity on the part of the Agencies. Even if this could have been said to be uncertain, there was certainly no basis for assuming that Ducas would not do so. That marked imbalance of approach has produced a correspondingly skewed treatment of the parties: HMRC allege the provision of fraudulent documents and so are obliged to provide heightened disclosure; Ducas alleges knowledge and complicity on the part of the Agencies but is free to withhold documents adverse to its case, including known adverse documents.”

In response, the Ducas UT Skeleton set out Ducas’ submission that HMRC’s case was “hopeless” and unarguable, submitting that HMRC’s application for permission to appeal should be refused; but if permission were granted, the appeal should be dismissed. The Ducas UT Skeleton set out Ducas’ characterisation of HMRC’s position, including stating that HMRC had said that they did not apply for an extended disclosure direction against Ducas. Ducas’ submissions included that there is no “general principle” that disclosure should be regarded as a matter of reciprocal obligation in the FTT, and that in any event (if this was being said by HMRC) it could not be said that the FTT’s decision in this case was “plainly wrong”.