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Wired Orthodontics – Tribunal expresses concern about potential inappropriate interference by HMRC's solicitor with the evidence of an independent expert witness

21 October 2020

In Wired Orthodontics Ltd and others v HMRC [2020] UKFTT 290 (TC), the First-tier Tribunal (FTT) refused an application for disclosure of documents and information passing between the solicitors for HMRC and their appointed expert witness.


Wired Orthodontics Ltd (Wired) and the other two appellants, Ian Hutchinson and Susan Bessant (together the Employees) entered into a tripartite agreement with an employee benefit trust (the Trust). Pursuant to that agreement, Wired agreed to purchase an asset for the relevant Employee, subject to the Employee undertaking to pay the value of the asset to the Trust. These arrangements were challenged by HMRC and Wired and the Employees appealed to the FTT. 

One of the issues in the appeal was whether Wired was entitled to a corporation tax deduction in relation to expenditure it had incurred in purchasing the assets for the Employees and in determining that issue it was necessary to consider whether the relevant expense in Wired's profit and loss account was in accordance with generally accepted accounting principles (GAAP).

Wired and HMRC appointed independent exports to prepare reports for the benefit of the FTT. Having produced their reports, and in accordance with directions issued by the FTT, the exports were required to meet and produce a statement of areas on which they agreed and on which they disagreed, with reasons for any such disagreement (the Joint Statement).

During the course of communications between the parties' experts in relation to the Joint Statement, the experts appeared to agree the inclusion of a statement to the effect that a reasonable accountant might reach two alternative interpretations under GAAP as to whether an asset should, or should not, be recognised by Wired. However, HMRC's expert then suggested revised wording which removed this statement, apparently on the suggestion of his instructing solicitor.

Following further communications in relation to this issue, the appellants' expert sought to amend the Joint Statement to reflect the fact that HMRC's expert had amended his position after the meeting of experts. HMRC's expert objected to the inclusion of such wording in the Joint Statement, relying on 'without prejudice' privilege (WPP). 

Wired made an application to the FTT, pursuant to rule 5(3), Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, for disclosure of documents and information passing between HMRC's solicitors and their appointed expert witness.

FTT decision

The application was dismissed.

Wired argued that WPP should be overridden in the circumstances of the instant case for the following principle reasons:

a) the 'Family Housing Association' exception (formulated in  Family Housing Association (Manchester) Ltd v Michael Hyde and Partners et al [1993] 1 WLR 354), enables a party in litigation to reference WPP material in an interlocutory application where the purpose for which the WPP material is to be used is something other than as evidence of the content of the discussion; and

b) the 'unambiguous impropriety' exception.

In the view of the FTT (Judge Amanda Brown), although the application was strictly an interlocutory application, its focus was ultimately to rely on the material disclosed at trial if it substantiated the appellants' concern of undue influence. The appellants wished to rely on the fact and content of the admissions initially made and then reversed, in order to limit the weight placed on HMRC's expert's evidence at the substantive hearing. Accordingly, the FTT concluded that the Family Housing Association exception could not apply.

Although the available material gave real cause for concern that there had been an impropriety, the FTT was unable to determine that HMRC's expert had deliberately behaved in a way that abused the WPP nature of the discussions between the parties' experts. Accordingly, the unambiguous impropriety exception did not apply.

Wired argued, in the alternative, that if none of the general exceptions applied, it was nevertheless entitled to access the material on the grounds that the exchanges between HMRC's expert and his instructing solicitor were instructions, the material substance of which had not been disclosed. The FTT rejected the appellants' submission that all communications between the instructing solicitor and the expert, whilst the experts were endeavoring to agree the wording of the Joint Statement, were open. In the circumstances, there was no basis on which to lift the protection provided by WPP.


Although the application was ultimately unsuccessful, in dismissing the  application, the FTT noted its "considerable concern" regarding the circumstances which had given rise to the application. The strength with which the learned judge expressed her concerns is striking. The judge noted that there was evidence of, at the very least, potential inappropriate interference by HMRC's solicitor with the independent evidence of an expert witness. The judge commented that the perception given is that there was a "serious transgression" and that such a perception is "seriously prejudicial to HMRC's position in cases such as these and should be avoided at all costs".

A copy of the decision can be viewed here.