- Litigation Futures - https://www.litigationfutures.com -

CA: Litigants do not owe duty of care to opponents

Asplin: No duty of care

Litigants do not owe a duty of care to their opponents, the Court of Appeal has made clear.

Lady Justice Asplin said this included checking the accuracy of the other side’s evidence where it is based on their own documents.

“Not only would that create an intolerable and costly burden upon all litigants, it would also have profound effects for the court system.

“It would have the opposite effect to the overriding objective: CPR rule 1.1. If each party were required to file and serve its best evidence on each and every issue, it would prevent the court from dealing with cases at proportionate cost, allotting an appropriate share of court resources and saving expense, amongst other things.

“To the contrary, all litigation would become unnecessarily lengthy and additionally expensive.”

Asplin LJ said it was for the parties to litigation to “determine what evidence they will deploy and in what way and to decide how best to conduct litigation”.

The appeal in Revenue and Customs v Charles (t/a Boston Computer Group Europe) [2019] EWCA Civ 2176 [1] concerned whether HM Revenue & Customs (HMRC) owed a common law duty of care to verify the factual accuracy of evidence relied upon in proceedings in the tax tribunals.

The respondent Ian Charles was bringing a claim for damages alleging that HMRC was liable for breach of contract, breach of statutory duty and/or negligence in relation to matters arising from an HMRC investigation into a VAT ‘missing trader’ fraud, and the conduct of subsequent litigation.

Asplin LJ explained: “[The claim] results, in particular, from the omission of the name of a supplier from one of the chains of supply recorded in a report compiled by HMRC officers when investigating VAT fraud (the visit report) which was subsequently relied upon by the respondent to this appeal in the First-tier Tribunal (Tax Chamber) in support of his statutory appeal against HMRC’s disallowance of input tax for the purposes of VAT.”

Earlier this year, His Honour Judge Jarman QC struck out Mr Charles’s claims in contract and breach of statutory duty. However, he declined to do so in relation to the claim based upon a duty of care in negligence.

The judge held that, on the unusual facts of this case, there was a realistic prospect of establishing a narrow duty of care on the part of HMRC, once Mr Charles’ reliance on the omission from the visit report became clear, to contact the visiting officers and to verify the visit report and, if necessary, to rectify it, particularly when that rectification would assist HMRC in carrying out its general duties and would have supported its case against Mr Charles.

Counsel for Mr Charles accepted that HMRC did not seek to rely on the visit report, and that the alleged duty did not arise when the report was compiled, because it was “merely a document produced in the course of HMRC’s investigations into VAT fraud and Mr Charles was not in HMRC’s contemplation”.

Instead he argued that the alleged duty of care arose “in the context of the litigation”, and HMRC, as a public body in the context of a statutory appeal, should, as soon as it became aware that Mr Charles was relying on the visit report, have informed him that it was incorrect.

Asplin LJ said that although the onus was on the HMRC to defend the disallowance before the tribunal, it was difficult to see that as a result HMRC assumed a duty “to verify all evidence relied upon”, whether by it or by Mr Charles.

“Of course, HMRC, like any other litigant, must not wilfully or recklessly mislead the court. They are not required, however, to ensure that only the best evidence is relied upon.

“Like any other litigant, HMRC takes the risk that the tribunal or court will consider a matter not to have been proved to the appropriate standard and will be subject to points which will be taken against it in relation to weaknesses in its evidence.”

Asplin LJ concluded that there was no real prospect of establishing that a duty of care arose to verify and rectify the visit report.

“It has been decided that parties do not owe each other a duty of care in litigation. There was no need therefore to go any further.”

Lord Justices Newey and Lewison agreed.