[2011] UKFTT 314 (TC)

TC01175

Appeal number: LON/2007/0956

CASE MANAGEMENT – Exclusion of evidence and admission of late evidence – Principles applicable – O’Brien v Chief Constable of South Wales Police [2005] 2 WLR 1038, HL applied – Need for balancing exercise

FIRST-TIER TRIBUNAL

TAX 

	ATLANTIC ELECTRONICS LTD	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

			TRIBUNAL:  JUDGE THEODORE WALLACE

					

Sitting in public in London on 10 March and 18-19 April 2011

Abbas Lakha QC (on 10 March) and Edmund Vickers, instructed by Jeffrey Green Russell, for the Appellant

Karen Robinson, instructed by Howes Percival LLP, for the Respondents

© CROWN COPYRIGHT 2011

DECISION

1.	This decision concerns case management.  In particular it concerns whether ten witness statements by the Respondents should be admitted in evidence or be excluded.  The appeal is against the denial of input tax totalling £1,128,137.50 for periods 03/06, 04/06 and 05/06 on the grounds that the input tax was incurred in transactions connected with the fraudulent evasion of VAT and that the Appellant knew or should have known.  This type of appeal is known commonly as an MTIC appeal.

2.	There were six disallowed invoices, all from Headcom Ltd (“Headcom”) for Nokia mobile phones.  Customs contend that five of the invoices were for supplies traced back directly to traders acquiring from EU suppliers on which the UK acquirer defaulted.  It is contended that the other invoice dated 29 April 2006 was for phones supplied to Headcom by Morganrise Ltd (“Morganrise”) which was a contra trader masking chains traced back to defaulters by offsetting the output tax; this was Deal 4 on which the VAT claimed was £168,437.50.  Annex D to the Statement of Case, which was amended following a direction given at the hearing on 10 March, contains 14 deal sheets for Morganrise between 25 January and 10 May 2006.

3.	The original Statement of Case in respect of the initial decision denying £814,275 input tax was dated 28 June 2007.  A consolidated Statement of Case in respect of all the denied input tax was dated 8 August 2008 and comprised 29 paragraphs with annexes.  The Statement of Case dated 11 April 2011 following a direction was a substituted Statement of Case rather than an amendment and ran to 166 paragraphs with annexes.

4.	Customs’ first round of seven witness statements were served on 5 September 2008 with seven lever arch files and three ring binders.  There were statements by Robert Lamb, Olabode Ayoola, Susan Okolo, Jonathan Laing, Peter Cameron-Watson, Daniel O’Neill and Roderick Stone.  On 16 December 2008 the Appellant served a statement by Ashwin Patel with 1 lever arch file.

5.	On 6 November 2009, following production of documents by the Appellant, Customs served seven witness statements, two of which were from new witnesses, Jonathan Fletcher of KPMG and Jonathan Read, with 3 lever arch files and 6 ring binders.

6.	On 31 March 2010 the Tribunal received notice that the Appellant’s present solicitors were acting.

7.	On 2 September 2010, having been granted an extension of time to serve further statements, Customs served six further statements with 3 lever arch files and 6 ring binders; these included statements by Michael Downer dated 2 August 2010 and by Mr Lamb and Mr Ayoola dated 2 October 2010.

8.	On 14 October 2010 Customs served statements by Karen Cummins, Harilal Mandalia and Darren Jolly with 4 lever arch files.

9.	On 6 January 2011 Customs applied for permission to serve a second statement by Mr Mandalia and a fourth statement by Mr Ayoola.  On 20 January the Appellant objected.

10.	On 3 March 2011 the Appellant applied to exclude part of Mr Lamb’s statement of 2 September 2010, Mr Jolly’s statement dated 14 October 2010, Mr Downer’s statement dated 2 August 2010, that of Karen Cummins dated 13 October 2010, part of the third statement of Mr Ayoola dated 2 September 2010, that of Mr Stone dated 31 July 2008, that of Mr Fletcher dated 17 February 2009 and a statement by Mr Downer dated 10 February 2011.

11.	Apart from the statements which are the subject of this decision, Customs have served statements from ten witnesses with 8 lever arch files and 11 ring binders of evidence.

12.	Although no specific direction has been given to this effect, the standard practice in an appeal such as this is that the witness statements stand as evidence in chief subject to cross-examination.  The appropriate time to object to a statement is therefore before the appeal hearing.

13.	As long ago as on 18 December 2009 the Tribunal gave directions for service of witness statements including a direction that after service by the Appellant of witness statements in reply by 27 February 2009 no further evidence may be filed without leave of the Tribunal.  Successive extensions have been given, in particular for Customs’ statements in response to the Appellant’s initial statement.  There was no objection at the time of service to the statements subject to the application referred to at paragraph 10.

General principals as to exclusion of evidence
14.	Although the appeals started before 1 April 2009 when the Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009 took effect, those Rules apply in the absence of any direction under the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009.  There has been no such direction.

15.	Rule 5(1) and (2) gives the Tribunal power to regulate its own procedure and to give directions in relation to the conduct of proceedings.

16.	Rule 15 covers evidence without restriction on the general powers in Rule 5(1) and (2) and includes power to permit expert evidence and to limit the number of witnesses and the time at which any evidence is to be provided.  Under Rule 15(2)(a) the Tribunal may admit evidence not admissible in a civil trial: this is a power not a duty.  Rule 15(2)(b) gives power to exclude evidence otherwise admissible where it was not provided within the time allowed by a direction or where it would be unfair to admit it.
17.	Under Rule 2(3) the Tribunal must seek to give effect to the overriding objective to deal with cases fairly and justly.  Under Rule 2(2) this includes,

“(a)	dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties;
…
(c)	ensuring so far as possible that the parties are able to participate fully in the proceedings;
…
(e)	avoiding delay, so far as compatible with proper consideration of the issues.”
18.	I observe at this stage that the appeal involves a substantial sum of money and is clearly important to both parties; it involves complex issues both of fact and law, the costs of the parties are clearly substantial and under the 2009 Rules the successful party will only recover costs if the other party has acted unreasonably in the proceedings.  The Appellant is still trading but clearly has limited resources. Although the resources of Customs are obviously greater they are not unlimited and are subject to public expenditure constraints.

19.	It is impossible at this stage to estimate the length of the trial, however it will clearly require several weeks. This has a substantial effect on Tribunal resources.  It is unlikely that the appeal can be listed for hearing this year.  It concerns events already five years and more ago which will present a problem in relation to the recollection of witnesses which will increase as time passes.

20.	Miss Robinson placed considerable reliance on the observations of Lightman J in Mobile Export 365 Ltd v Revenue and Customs Commissioners [2007] STC 1794 at [20] where he said,

“The presumption must be that all relevant evidence should be admitted unless there is a compelling reason to the contrary.”
21.	That decision was at a time when the 1986 Rules applied, which did not contain an overriding objective or any equivalent to Rule 15 of the 2009 Rules, although they did contain a widely worded power under Rule 19(4) to give directions as to the conduct of an appeal.

22.	It is to be noted that the only case referred to by Lightman J was Kittel v Belgium [2008] STC 1537, ECJ which was not in any way concerned with case management.  He made no reference to the leading authority on whether evidence should be admitted or not, O’Brien v Chief Constable of South Wales Police [2005] 2 WLR 1038, HL.
23.	O’Brien concerned the admission of similar fact evidence but contains wider statements of principle.  Lord Bingham said that the first stage of the enquiry is whether the evidence is legally admissible.  That issue only arises here in relation to whether the evidence is relevant as being potentially probative of an issue in the sense of making a matter requiring proof more or less probable, see at [3] and [4].

24.	Lord Bingham then said,

“[5]	The second stage of the inquiry requires the case management judge or the trial judge to make what will often be a very difficult and finally balanced judgment: whether evidence or some of it (and if so which part of it), which ex hypothesi is legally admissible, should be admitted.  For the party seeking admission, the argument will always be that justice requires the evidence to be admitted … [T]he importance of doing justice is a factor the judge will always respect.  The strength of the argument for admitting the evidence will always depend primarily on the judge’s assessment of the potential significance of the evidence, assuming it to be true, in the context of the case as a whole.
[6]	While the argument against admitting evidence found to be legally admissible will necessary depend on the particular case, some objections are likely to recur.  First, it is likely to be said that admission of the evidence will distort the trial and distract the attention of the decision-maker by focussing attention on issues collateral to the issue to be decided.  Secondly, and again particularly when the trial is by jury, it will be necessary to weigh the potential probative value of the evidence against its potential for causing unfair prejudice: unless the former is judged to outweigh the latter by a considerable margin, the evidence is likely to be excluded.  Thirdly, stress will be laid on the burden which admission would lay on the resisting party: the burden in time, cost and personnel resources, very considerable in a case such as this, of giving disclosure; the lengthening of the trial with the increased cost and stress inevitably involved; the potential prejudice to witnesses called upon to recall matters long closed, or thought to be closed; the loss of documentation; the fading of recollections …  [T]he judge’s overriding purpose will be to promote the ends of justice.  But the judge must always bear in mind that justice requires not only that the right answer be given but also that it is achieved by a trial process which is fair to all parties.”
Lord Carswell specifically endorsed [5] and [6].
25.	At [8] Lord Bingham said that while it was desirable to obtain a proleptic (anticipatory) ruling in principle the final say should rest with the trial judge who could not be deprived of all discretion.

26.	Lord Phillips said at [11] that it was a consideration of general application that “evidence should not be admitted if its probative weight is insufficient to justify the complexity that it will add to the trial.”  At [43] he said,

“In each case, there is a need to exert disciplinary control to avoid unbalancing the proceedings by adducing evidence of only marginal relevance.”
At [56] he referred to “side issues which unbalance the trial and make it harder to see the wood from the trees.”

27.	I have no doubt that Lightman J would not have expressed himself as he did in Mobile Export 365 Ltd if O’Brien had been cited to him.  In particular he would not have used the word “compelling” given the reference at (5) of O’Brien to “what will often be a very difficult and finely balanced judgment.”  

28.	I turn now to consider the individual statements in issue in the light of the principles in O’Brien, starting with the Appellant’s application to exclude the statements by Mr Stone and Mr Fletcher.

Mr Stone

29.	His statement dated 31 July 2008 is a generic statement which makes no reference to this particular appeal.  At the relevant time he was MTIC deputy national coordinator for Customs and senior policy advisor.  His statement at section B covers “How MTIC fraud works”, including contra or off-setting MTIC fraud.  Section C covers “Typical Features of MTIC fraud” this section includes use of the First Curacao International Bank (“FCIB”) whose banking licence was revoked in October 2006.  Section D covers “HMRC’s measures against MTIC fraud” and includes validation at Redhill, joint and several liability, the Nemeses database which went live in February 2006 and the reverse charge which took effect from 1 June 2007.  Section E covers “The effect and extent of MTIC fraud” giving figures for losses of revenue and observations on the grey market.

30.	The statement contains 63 pages and was served with a ring binder of documents.  It is referred to at paragraphs 14 and 15 of the Amended Statement of Case.

31.	I remain of the same opinion as I expressed in Globaldis Distribution Ltd v HMRC [2020] UK FTT 557 (TC) that the statement contains very limited potential evidential value and a considerable amount of material which is irrelevant or potentially prejudicial.  Some of it is after the event, such as the revocation of FCIB’s licence and the reverse charge legislation.  It contains substantial expressions of opinion although Mr Stone does not purport to be an expert witness.  Unless ignored the evidence will take up time both in reading and cross-examination and distract the Tribunal from the direct evidence.  The appeal falls to be decided on the facts of this case, not on Mr Stone’s view of other cases.

32.	I accordingly direct that his statement is excluded.

Mr Fletcher’s statement
33.	As with Mr Stone’s statement, that of Mr Fletcher is a generic statement which makes no reference to the Appellant apart from the references under “instructions” at paragraph 1.1.1.  The instructions from Howes Percival were dated 11 February 2009; the statement of 40 pages of single spacing with approximately 550 pages of exhibits was dated six days later.  The statement is referred to at paragraphs 161 and 162 of the Amended Statement of Case.

34.	It is densely argued document requiring a considerable time to assimilate; it took two hours reading the statement without the exhibits.

35.	Mr Fletcher’s instructions were to assess the development and structure of the mobile handset industry generally and the size of the addressable market in the EU and the United Arab Emirates.  He was to assess the nature and scope of the authorised mobile market and to analyse the grey market in 2006, outlining the opportunities and scope for grey market trading, forms it might take and how it is possible to identify that it is likely.  He was instructed to state any conclusions on the extent of opportunities for grey market trading.

36.	Mr Fletcher’s statement is divided into three sections followed by conclusions.  Section 2 is background to the mobile industry; it records rapid growth over 15 years with more than one mobile per capita of the population of 21 European countries by 2006 and estimates of models of mobiles sold in March and April 2006.  Section 3 covers authorised (or white market) distribution and Section 4 covered the grey distribution market with opportunities including arbitrage, volume shortages and dumping.  In his conclusions he states that there is both an authorised distribution market and a grey market, the latter existing because of volume and price failures in the authorised market.  He identifies behaviours and characteristics for grey market opportunities arising from volume shortages, dumping, box-breaking and arbitrage.

37.	Mr Lakha said that the statement has marginal evidential value not being addressed to the Appellant.  It is ex post facto and contains much material which could not have been known either to the Appellant or to Customs.  It is a report dated in 2009 on the market in the first part of 2006.  Mr Fletcher addresses the size of the grey market in 2006; this might be relevant for a prolific trader but the Appellant’s level of trading was relatively low.  In Excel RTI v HMRC (2010) Decision TC000774 Mr Fletcher had accepted that Nokia did give volume discounts.

38.	Mr Lakha submitted that when considering whether Mr Fletcher’s evidence should be excluded the Tribunal should have regard under Rule 2 to proportionality.  If it was admitted in evidence, the Appellant would need to instruct an expert, whose cost was estimated at £25,000.  This was disproportionate given that Mr Fletcher’s report was only generic.

39.	Miss Robinson said that although expert’s reports of this type had been excluded because of lateness none had been excluded on grounds of relevance.  In Mobile Export 365 Ltd v Revenue and Customs Commissioners [2001] EWHC 797 (Ch) Sir Andrew Park had upheld the Tribunal’s decision to admit such evidence; although there the evidence was specific, she said that his decision was also relevant to generic evidence.   Here the Appellant’s case was that its trading was within the legitimate grey market; Mr Fletcher’s evidence was needed to challenge this.  She said that the question did not concern the quality of Mr Fletcher’s evidence but whether it should be excluded.  It was for the Tribunal to resolve any conflict between experts.  

40.	I have read Mr Fletcher’s evidence with care.  I am satisfied that it is of some potential relevance to the issues in this appeal both as to whether there were fraudulent defaults regardless of the Appellant’s knowledge and if so whether the Appellant had the requisite knowledge.

41.	However as O’Brien established that does not determine whether the evidence should be admitted.  In so far as the observation of Lightman J suggested otherwise, that must be disregarded.

42.	When deciding whether to exclude the evidence it is necessary to consider its potential significance in the context of the case as a whole and to consider the objections including proportionality.

43.	As pointed out by Lord Bingham the decision at this stage does not deprive the trial judge of all discretion.  This is particularly the case if the evidence is allowed in.  If the evidence is excluded at this stage, its readmission at the appeal hearing would however be exceptional not least because of the disruption which that would cause. 

44.	The potential significance of Mr Fletcher’s evidence is substantially reduced by the fact that it does not address the facts in this case at all.  The standard practice is for the Tribunal to direct that statements stand as evidence in chief with no supplementary questions without leave.  Mr Fletcher will be precluded from giving evidence in chief as to the facts of this case without leave although he can of course do so in response to cross-examination which is based on the facts of the case.  However if the Appellant introduces expert evidence as to matters covered by Mr Fletcher and such expert evidence does address the particular facts, it may be that Customs would obtain leave to serve a supplementary statement by Mr Fletcher.

45.	The exclusion of Mr Fletcher’s evidence would clearly shorten the trial considerably and reduce its complexity and the Appellant’s costs.  Its inclusions will inevitably delay the hearing still further; however this last factor arises out of the late stage at which the Appellant’s application to exclude it was made.

46.	In relation to Rule 2(2)(a) this is an important case for both parties particularly given the amount involved although this is less than in many MTIC appeals.  Its complexity is increased because of the contra-trading allegation in relation to Deal 4; MTIC appeals are complex in any event.  The costs incurred by both parties are clearly substantial and Mr Fletcher’s evidence undoubtedly adds considerably to those costs.  While those costs place a greater burden on the Appellant, since Mr Fletcher’s statement appears to replicate statements for other cases and thus involved little if any specific work, no evidence has been given to suggest that its inclusion will hamper the full participation of the Appellant in the appeal.

47.	Speaking for myself I would not derive great assistance from a generic statement such as this much of which is based on economic theory as to how traders might be expected to behave in the grey market rather than how traders do in fact behave.  This is not so much a criticism of Mr Fletcher as a reflection of the fact that trading on the grey market based on online platforms such as IPT is not inherently structured.  Traders may well react to price movements without knowing why they occur.  This is an inevitable problem in analysing the grey market.

48.	However notwithstanding my own reservations of the value of Mr Fletcher’s evidence, I recognise that others may take a different view.  This is an important and complex appeal.  It is inevitable that the Tribunal will have to consider the grey market if only because the Appellant relies on it.  Mr Fletcher’s evidence was served in 2009 without any objection until this year.  I do not grant the application that it be excluded.

Harilal Mandalia’s second statement
49.	Mr Mandalia’s first statement dated 14 October 2010 covers material from the records of FCIB and contains 891 pages of exhibits.  The Appellant did not have an account with FCIB however its supplier and customers for the transactions under appeal did and payments were made by and to the Appellant through FCIB.  There has been no application to exclude that statement.

50.	The Appellant does however apply to exclude the second statement by Mr Mandalia dated 6 January 2011 which contains additional material obtained by another officer, Emma Heywood, regarding Zemtex UK Ltd (“Zemtex”).  The statement is less than 3 pages but exhibits 125 pages of material, much of which is illegible.  Customs’ case is that Zemtex was a buffer within the transaction chains of Morganrise, an alleged contra trader.  Zemtex did not feature in any of the Appellant’s chains.  There is no reference to Zemtex in the Amended Statement of Case.

51.	Mr Lakha said that Zemtex could not be further removed from the Appellant: it was said that there were a discrepancies as to the spelling of the name of the director of Zemtex and to his date of birth but this was not relevant to the Appellant’s knowledge of fraudulent transactions.  He said that if the statement is allowed the Appellant would have to seek disclosure as to material based on Experian checks.  The material concerned tangential issues.

52.	Miss Robinson said that Zemtex featured in circular movements of money which included the Appellant; Mr Mandalia’s first statement contained Datastore material for Zemtex.  The material indicated that Zemtex was a fraudster; it would not involve much Tribunal time at the hearing.

53.	I accept the submission of Mr Lakha that this evidence is at best tangential.  Its relevance is limited to whether there were fraudulent defaults in contra chains involving Morganrise.  It has no relevance to the Appellant’s knowledge or means of knowledge of such defaults.

54.	A further problem is that the material involves hearsay on hearsay.  If such evidence was to be introduced it should have been by Emma Heywood.

55.	There is already a mass of material in this appeal.  I do not allow the application by Customs to admit it in evidence.

Olabode Ayoola’s fourth statements
56.	The statement dated on 6 January 2011 exhibits some missing deal documents for 11 transaction chains from 26 to 28 April 2006 involving Morganrise which were not in Mr Ayoola’s earlier statements.

57.	Mr Lakha’s objection was that the Tribunal had set a deadline on further statements which had been extended to 15 October 2010; he said that the production of this fourth statement was symptomatic of Customs’ approach.  In objecting he was putting down a marker.

58.	Miss Robinson said that Mr Ayoola was producing fuller deal packs rather than new deal packs.

59.	I consent to the application to serve this statement.  I observe that if cross-examined on the deal packs, Mr Ayoola could not be precluded from producing these even if they were initially excluded.   Morganrise’s deal chains are clearly relevant to the issue of whether it was a contra trader.

Other statements
60.	This leads me to the other statements which the Appellant seeks to exclude in its application of 3 March (see paragraph 10 above).  I have already covered Mr Stone and Mr Fletcher.

61.	Mr Lakha sought to exclude paragraph 36 of the statement of 2 October 2010 which relates to criminal proceedings due to be heard by Southwark Crown Court in July 2011 against the director of Morganrise.

62.	In my judgment, whereas evidence of a conviction may be relevant dependent on the counts in the indictment on which a conviction is obtained, the fact that a trial is pending is of no evidential value and should not have been included in the statement.  I direct that this paragraph should be excluded.  I further direct that the statement of Andrew Fearn dated 1 September 2010 that the director has been charged should be excluded and that paragraph 144 of the Amended Statement of Case which relates to the indictment be deleted.  Miss Robinson said that Customs no longer wish to rely on the statement of Mr Downer dated 10 February 2011.

63.	In the event that the director of Morganrise is convicted any application to admit evidence of the conviction should be made promptly following such conviction.

64.	Miss Robinson agreed to the exclusion of paragraph 2 and Exhibit RL3/1 of Robert Lamb’s statement dated 2 September 2010 which related to the conviction of two men for cigarette smuggling in October 2005.

Darren Jolly’s statement of 14 October 2010
65.	Mr Jolly gives evidence in relation to the two compact discs covered by Karen Cummins in her statement which I consider later, the discs being created on 29 January 2006.

66.	Mr Lakha said that the provenance of the discs and their contents will be in issue.  He said that the discs which were seized on 25 May 2006 predated all the transactions.

67.	The evidence as to their seizure is clearly second hand however Mr Lakha did not object to this.

68.	I have concluded that the statement should remain in evidence subject to certain deletions;

(a)	the second to fourth sentences of paragraph 1;
(b)	paragraphs 2 and 3;
(c)	the second “the” in paragraph 4 to read “a” and the last 14 words being deleted;
(d)	the first four sentences of paragraph 5;
(e)	the second sentence of paragraph 14 and 
(f)	paragraph 15.

Michael Downer’s statement of 2 August 2010

69.	This statement appears to add nothing which is not in Mr Jolly’s statement apart from the production of Exhibit MJD 1 from the discs: this can be done by Karen Cummins.  Much of the statement would need to be deleted in the same way as Mr Jolly’s, as being prejudicial even if relevant.  Further it contains pure opinion at paragraphs 9 and 10.  This statement is excluded.

Karen Cummins

70.	The statement of Karen Cummins dated 13 October 2010 comprises 78 paragraphs with 77 pages of exhibits.  The statement produces documents contained in two compact discs discovered by police during a search in May 2006.  The discs contained files and documents covering a period from April 2005 to January 2006.  At paragraph 145-6 of the Statement of Case it is pleaded that the material included a document containing FCIB account details including user IDs and passwords for many businesses and individuals including Morganrise the alleged contra trader in this case; it is pleaded that:

“The material contained on the discs is highly suggestive of there being contrived transaction chains as part of a fraudulent scheme being used to facilitate MTIC fraud … .  [T]he Appellant company features in some of those chains.”

Miss Cummins states that the Appellant referred to as “Atlantic”, “Atlantics” or “Atlantis” is mentioned six times in the discs.

71.	In addition to producing documents from the discs Miss Cummins produces material from the Electronic Folders maintained by Customs for various traders.  She analyses the documents; the analysis is a mixture of factual statements and expressions of opinion.

72.	Both parties produced skeleton arguments in respect of the statement.  The Appellant contended that the provenance of the discs and the material in them was questionable, that it did not relate to any of the transactions in the appeal, that there was no proven link to the Appellant and that it is “littered with comments and opinion”.  Mr Vickers submitted that the Appellant’s identity may have been hijacked and that its full name and VAT registration number did not appear on the discs.  He said that there was a danger of the Tribunal being sidetracked.  If the material was admitted the Appellant would need to make further requests for disclosure.

73.	Miss Robinson said that she would not be able to resist an application to view other material on the discs.  She said that the discs were indicative of a contrived scheme involving Morganrise even though the transactions were different.  The discs clearly indicated a contrived scheme: why else did they exist?  She said that Customs had to prove the fraudulent nature of the loss of VAT and also the Appellant’s knowledge or means of knowledge.  Circumstantial and similar fact evidence could be relevant.  Since the evidence was capable of having relevance to the issues in the appeal it should be admitted unless there is a compelling argument to the contrary.  The chains featured on the discs included not only the Appellant but also a number of its trading partners including Headcom.

74.	I am satisfied that the material contained in the documents reproduced from the discs is potentially relevant to issues in the appeal, both to whether the Appellant’s transactions were connected with fraudulent evasion regardless of the Appellant’s knowledge and also to the Appellant’s knowledge.  The issue whether the references to Atlantic, Atlantics and Atlantis are references to the Appellant will be a matter for submissions in the appeal hearing as will the inferences to be drawn from the material.

75.	I am mindful of the fact that the inclusion of Miss Cummins’ evidence will add to the length, complexity and cost of the hearing, however appeals of this type are intrinsically complex since the parties to a fraud naturally seek to camouflage it.  I do not consider that this evidence will add disproportionately to the complexity of the trial.

76.	The criticism that the statement is “littered with comment and opinion” is however justified.  It is clear that the witness either was not properly instructed as to what a statement should and should not contain or that she disregarded such instructions.  The inclusion of expressions of opinion by a witness of fact inevitably invites cross-examination on matters which should be covered by submissions by counsel.

77.	I exclude Miss Cummins’ statement in its present form.  I do however give the Respondents leave to serve within 21 days of a fresh statement by Miss Cummins, which excludes comment and opinion including in particular her conclusions at paragraphs 75 to 77.  This should exclude hearsay evidence from Mr Downer and the reference to the charges against Harbinder Singh Samura.  It should not include any new material and will therefore be shorter.

Directions

78.	I accordingly direct as follows:

(1)	The statement of Mr Stone dated 31 July 2008 is excluded;
(2)	The application to exclude Mr Fletcher’s statement dated 17 February 2009 is dismissed;
(3)	The application to admit Mr Mandalia’s statement dated 6 January 2011 is dismissed;
(4)	The application to admit Mr Ayoola’s statement dated 6 January 2011 is allowed;
(5)	The application to exclude the statement of Mr Fearn dated 1 September 2010 is allowed;
(6)	The application to exclude paragraph 36 of Mr Lamb’s statement dated 2 September 2010 is allowed and paragraph 2 and Exhibit RL3/1 are excluded;
(7)	The statement of Darren Jolly remains in evidence subject to the deletions in paragraph 68 above;
(8)	The application to exclude Mr Downer’s statement of 2 August 2010 is allowed;
(9)	The statement of Karen Cummins is excluded in its present form, however the Respondents have leave within 21 days of the release of this direction to serve a fresh statement by Karen Cummins in accordance with paragraph 77 above;
(10)	All witnesses who have served more than one statement shall serve composite statements which shall not introduce new material;
(11)	All statements shall before the hearing be cross-indexed to the page number in the trial bundle;
(12)	All statements shall stand as evidence in chief subject to cross-examination with no supplementary evidence in chief without leave;
(13)	The Appellant shall have leave within two months of the release of these directions to serve a statement by an expert witness in response to Mr Fletcher’s statement such statement to exhibit the instructions given;
(14)	Any application by the Appellant to serve any other statement shall be made within 42 days of the release of these directions accompanied by the statement;
(15)	Within two months the Appellant notifies the Tribunal and the Respondents of the issues in dispute;
(16)	Within two month the parties give notice of any applications to be made at the pre-trial review together with time estimate and dates to avoid for the pre-trial review;
(17)	At the pre-trial review each party shall provide a time estimate for the appeal hearing supported by a proposed timetable, the Respondents shall provide an estimate of the number of ring binders of documents and the parties shall state whether there will be a daily transcript.

THEODORE WALLACE
              TRIBUNAL JUDGE
              RELEASE DATE: 12 May 2011