Upper Tribunal Rules in Favor of Open Justice Over Privacy in Tax Litigation

Introduction

The case of The Commissioners for HM Revenue and Customs v The Taxpayer (Neutral Citation: [2024] UKUT 00012 (TCC)) provides a significant examination of the tensions between open justice and the right to privacy in tax litigation. It specifically addresses the circumstances under which preliminary proceedings can be heard in private and the subsequent anonymization of tribunal decisions. The case presents the Upper Tribunal’s review of a direction granted by the First-tier Tribunal pursuant to Rule 32(2)(e) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, and the application of legal principles related to open justice and case management.

Key Facts

The Taxpayer appealed against HMRC’s denial of certain tax deductions, resulting in the Privacy and Anonymity Application, requesting that the appeal and other proceedings be anonymized and conducted in private. The FTT acceded to some of these requests, issuing directions that preliminary proceedings should be in private and deciding on anonymity at the substantive hearing (Directions 3 and 4). HMRC appealed against these directions, arguing that they contravened the principle of open justice. The Upper Tribunal agreed with HMRC, setting aside Direction 3 on the basis that it was made in error.

Legal Principals

The Upper Tribunal’s analysis is grounded in several legal principles, mainly the presumption of open justice, the right to fair and public hearings under Article 6 of the European Convention on Human Rights, and the procedural rules contained within the FTT Rules, specifically Rule 32.

Open Justice

A core tenet of the case is the principle of open justice, as entrenched in Scott v Scott [1913] AC 417 and reaffirmed in Global Torch Ltd v Apex Global Management Ltd [2013] EWCA Civ 819. The Upper Tribunal underscored that excluding the public from hearings is an exception that must be justified out of necessity, rather than convenience.

Case Management Discretion

The case refers to BPP Holdings v HMRC [2017] UKSC 55, where it was established that appellate courts should only interfere with case management decisions where the lower tribunal has applied incorrect principles or where the decision is outside the ambit of reasonable discretion.

Human Rights Considerations

When considering a direction for private hearings, the balance between the public interest and individual rights under Articles 6 (right to a fair trial) and 8 (right to respect for private and family life) of the European Convention on Human Rights was pivotal. The necessity for privacy must be weighed against the principle of open justice.

Tribunal Procedure Rules

The Tribunal Procedure Rules, particularly Rule 32, outline the conditions under which a private hearing may be justified. The conditions under Rule 32(2) include the interests of public order or national security, protecting a person’s private life, maintaining the confidentiality of sensitive information, avoiding serious harm to public interest, or preventing prejudice to the interests of justice.

Outcomes

The Upper Tribunal found that the FTT had erred in law by granting Direction 3 without substantive evidence or consideration of whether the direction was necessary or proportionate. Crucially, it was ruled that open justice could not be derogated from through case management decisions without compelling justification. The Tribunal was persuaded that the decision to hold preliminary proceedings in private would render the Taxpayer’s anonymity application for the substantive hearing futile (Rule 32(2)(e)) was flawed. Furthermore, no proper balancing exercise had been performed to justify that privacy was necessary. Consequently, Direction 3 was set aside.

Conclusion

In conclusion, The Commissioners for HMRC v The Taxpayer clarifies the judicious application of open justice in tax litigation and reinforces that privacy in preliminary tax proceedings requires strong justification, aligning with the fundamental principle of open justice. The decision emphasizes that any deviation from the public scrutiny of court proceedings must be convincingly warranted, and open justice should not be compromised in the absence of such necessity. Legal professionals must understand that anonymization and privacy applications should be made with adequate evidence and should not be deferred unnecessarily, as this stands contrary to the principle of open justice. The case sets a clear precedent for the handling of similar applications in future tax appeal proceedings.