The Rangers saga will make a number of exceptional case studies, covering numerous areas of law, together with PR, journalism, and even some football!
The comments which have flowed like lava from Krakatoa (which is west of Java, despite the film title) since the declaration of the FTT result are a fine example of the way in which people, on the Internet and in the media, fit the facts into their own narrative, rather than the other way about.
It is a human trait to do so, and I am sure I have been guilty of it myself.
One area of comment I have seen popping up over the last couple of days relates to the dissenting opinion from Dr Heidi Poon, and the status of that opinion.
The narrative which is being pushed and indeed is being believed runs as follows.
- The dissenting opinion was only published in an appendix and therefore is not part of the decision.
- It is therefore of no importance in the case and can be disregarded.
- The majority opinion ignored what Dr Poon had to say because her decision was in some way nonsensical and not worthy of analysis.
- Dr Poon is not a lawyer and therefore her opinion can be ignored because the two lawyers on the panel reached a different conclusion.
One of the confusing factors about judicial decision-making is that judges can reach the same conclusions but for different reasons, or even follow the same analysis but reach a different conclusion.
It is unusual for there to be a dissenting judgement in the FTT, but it is also unusual to have a case last as long as this one. The vast majority of FTT (Tax) Appeals are dealt with in one day before one or two panel members. It is rare for three such experienced individuals to make up a panel in a case at the FTT.
We need to look at the potential appeal process now. It would run as follows.
- From the First Tier Tribunal, with leave, and on a question of law only, the decision can be appealed to the Upper Tribunal.
- From there an appeal lies on a point of law to the Inner House of the Court of Session.
- Finally, the decision of the Inner House, on a point of law, can be appealed to the UK Supreme Court.
Normally the Upper Tribunal sits with one judge alone. In cases of importance or complexity, the Tribunal can be expanded. Bearing in mind the importance of the issues decided here, if HMRC decides to appeal, it is likely that a three member Upper Tribunal would be convened.
From there, the Inner House would have at least three judges hearing any appeal and finally the UKSC would consist of at least five members.
Therefore, if the case goes through all of its stages, the matter would have been considered by at least fourteen judges.
The question “what is the law” is one which has generated millions of pages of analysis. I do not propose to add much to that, but one simple (hah) analysis is that “the law is what the judges say it is”. That is fine at first hearing, but on the principles in this case, it would be possible for the results to go as follows.
- FTT – Rangers/MIH 2 – 1 HMRC
- Upper Tribunal – Rangers/MIH 3 – 0 HMRC
- Inner House – Rangers/MIH 3 – 0 HMRC
- Supreme Court – Rangers/MIH 2 – 3 HMRC
(I am not predicting the outcome of any of these appeals – this is designed as an illustration.)
If you were using the aggregate principles of football, HMRC would be on the end of a thumping 10 – 4 defeat.
But, in the legal world, and therefore in the real world, HMRC would have won, even if the three judges who found for it in the Supreme Court did so on entirely distinct and indeed inconsistent grounds!
What then would “the law” be on this issue? As for the particular case, it would be the majority verdict. However, if the Upper Tribunal overturns the decision, then the law will be, and will always have been what the Upper Tribunal decides. If the Inner House then overturned the Upper Tribunal, the law would be changed yet again, but equally would have been the same all along, and similarly with the Supreme Court.
As for future cases…it would need either legislation to clarify the issue, or more likely more cases where subsequent judges tried to make sense of the potential fourteen different decisions in this case.
No wonder people say that the law can be confusing.
As this case contained very detailed analysis of the “form over substance” v “substance over form” debate, as per the Ramsay case, it would not be surprising if there was a desire by HMRC for an authoritative ruling.
Imagine that, right now, you were a tax adviser (ignoring for a minute that the tax advantages of EBTs have been ended by primary legislation) how would you advise your client on the use and management of an EBT scheme? Follow the majority opinion and find, if overturned on appeal that you, as the adviser are being sued for giving bad advice, or follow the minority view, only to find that HMRC drops the appeal before a final hearing?
Issue like this show why, despite the attractions of the “legal realist” theory that “the law is what judges say it is”, the issues are never so simple.
Dr Poon’s decision is an integral part of the verdict. To a large degree, it would form the basis of any HMRC appeal, and is clearly on a matter of law, as Dr Poon disagreed with the majority on the interpretation and application of the legal issues in the case.
Judicial decision-making is a collaborative process too. The judges are not locked in sealed rooms, with no contact with each other, until they produce a decision. Instead they meet to discuss the case, and to test each other’s arguments. The aim is to reach a unanimous decision but that is not always possible, as we see here.
Because of the nature of the FTT, the decision is not binding as a precedent on any other FTT. One can well imagine, until there is an authoritative decision on the principles (not the facts) that the majority and minority opinions will be cited in any similar cases, and the judge or judges hearing them are free to follow one or other, or indeed to arrive at a third analysis.
This all leads to the specific narrative – Dr Poon is not a lawyer so no wonder she was “wrong”. Some of the comments I have read make it sound as if she was there on a YTS and somehow infiltrated the hearing room and joined the panel that way!
There was even a comment suggesting that Dr Poon was clearly the source for the alleged leaking of documents to the Rangers Tax Case blog because Dr Poon was the only member of the Tribunal to “agree” with RTC! There is a lot of nonsense spouted on the Internet, but that is up there for “the most ridiculous suggestion of the month award”.
Dr Poon is a distinguished Chartered Accountant with a legal background, including time spent working with one of the country’s leading legal firms. She is an experienced member of the FTT panel. She is a professional Judge.
Does anyone seriously think that, when deciding which three members were to make up the Tribunal, the thought process was as follows – “Well, we have a brilliant tax QC, an eminent tax lawyer, and let’s throw in a numpty to make up the numbers!” I suspect not.
However these “facts” are being repeated every minute on the web, and in the media. And they are not the only ones where what is being said is not “fact” but “fiction”…
Posted by Paul McConville