PROVING THINGS 259: WHEN THE COURT REFUSES PERMISSION FOR THE EXPERTS TO GIVE EVIDENCE AT TRIAL: THESE ARE BASICALLY ISSUES OF FACT
In Rajan Marwaha v Director of Border Revenue & Anor [2025] EWHC 869 (KB) Jason Beer KC dismissed the claimant’s application that forensic accountants give evidence at trial. The experts had basically agreed that there were issues of fact to be determined by the trial judge. The judge rejected the argument that tax returns were a safe basis for assessing damages and held that the claimant’s bank statements were the best means of assessing any loss caused to the business. Unusually the judge held that the claimant’s tax returns were not the most reliable means of measuring the claimant’s turnover and profits.
KEY PRACTICE POINT
When experts largely agree on the issues it will be an uphill struggle to persuade a court that they should attend trial. The claim for damages here relied heavily on findings of fact. It was the fact that the judge preferred the evidence in the bank statements to tax returns that meant that (if damages had been awarded) they would have been assessed at a lower figure than that advocated by the claimant.
THE CASE
The claimant imported poppies. The defendants seized, forfeited and destroyed three consignments of poppies believing them to be illegal drugs. However these were dried poppy heads used for ornamental purposes and were not liable to forfeiture.
THE CLAIMANT’S CLAIM FOR DAMAGES
The claimant sought damages from the defendants. The defendant had already paid £174,072 – being the market value of the goods at the time of their seizure. However the claimant sought damages of £14 million – claiming that this was the true value of the loss to the business.
THE JUDGE’S FINDINGS
The judge found that the defendant had statutory protection and the claimant could not recover damages. However, in case he was wrong in that analysis, he went on to consider the claimant’s claim for damages in detail.
WHY EXPERT EVIDENCE WAS NOT ALLOWED AT TRIAL
Both parties had instructed expert accountants. They had prepared a joint report. The parties did not have permission for the experts to end trial. The judge refused the claimant’s application that experts be called. This judgment appears in a “Coda” to the judgment. In essence the experts agreed on all the fundamental issues. The question of which approach to use was one of fact for the trial judge.
THE JUDGMENT ON CALLING THE EXPERTS TO GIVE EVIDENCE AT TRIAL
“Coda
Ruling on application by the Claimant that forensic accountancy expert witnesses give oral evidence at trial
- By paragraph 4 of the Order of Master McCloud of 28th June 2022, the parties were given permission to rely upon the written evidence of expert accountants. One per side was allowed. No permission was given to call any expert as a witness to give oral evidence in this trial.
2.The Claimant and the Defendant have both instructed experts as to quantum. They have produced individual expert reports:
a. Mr Howard Sears of Price Bailey Chartered Accountants dated 28th April 2023 [HB/1134], with responses later to Part 35 questions served by the Defendants dated 28th July 2023 [HB/1195]; and
b. Mr Timothy Sture of Sture Forensic dated “August 2023” [HB/1210] (the Claimant did not ask the Defendants’ expert any Part 35 questions).
3. In accordance with the directions of the court, the experts met online on 3rd February 2025 and have produced a very helpful joint statement [SB/573]. This materially states:
[2] The Claimant has wished to advance his claims on the basis of tax returns including trading results for:
a. the years ended 31 March 2014 and 2015 as the key periods not affected by seizures, and
b. the years ended 31 March 2016, 2017, 2018, and 2019 as periods affected by the seizures, with losses continuing thereafter…
[4] There was a lack of business records available due to rat infestation for the parties to review. In addition, there were a lack of accounting working papers to back up the figures that were included within the returns.
[5] Due to the lack of records and plausible explanations we are unable to confirm whether the accounts and subsequent disclosures to HMRC are reliable….
[7] There were no business accounting records for sales to confirm accuracy. In reviewing the bank statements, there were a significant amount of banking’s, but this fell short of the total amount in sales for the years ended March 2014 to 2016 by at least £1.4m.
[8] The £1.4m gap was described as cash sales that the claimant undertook due to the pressure upon him following the seizure of the goods, which were from UK sources for sales completed in the US.
[9] We did not have any evidence to confirm that these cash sales were exports to the US or sales in the UK…
[17]We agree that for the reasons noted we cannot confirm whether the profits or loss included within the tax returns are correct…
[19] We agree that if the court accepts that the seizure of goods was responsible for the loss of the business and its decline and that they accept the figures filed within the tax returns to be the basis on which to calculate the loss of profits then we confirm that the maximum potential loss would be £3,688,503 after taking into account loss recovered following Mr Kark’s determination of £174,072.
Evaluation based on bank statements
….
[23] It is possible that the bank statements seen do not provide a complete list of all business sales receipts in the period covered – i.e., sales may be higher than shown by the bank statements…
[25] We agree that:
…
(h) No evidence has been provided to support either cash sales of £900,000 or £1,369,450.
(i) It is highly unusual, verging on implausible, that overseas customers would pay for exports in cash.
(j) The pattern of sales shown by the bank receipts does not support a claim for exponential growth in the business. The Quarterly Totals calculated at TS Joint Statement Appendix 6 suggest that the business was declining in the months leading up to the first and second seizures:
(i) The peak in annual sales was in the 12 months to May 2014 at £554,501.
(ii) In the last 12-month period before the first seizure (the calendar year 2014), sales of £526,419 were almost identical to those in the year ended March 2014 (£527,756), which is a 4% decline from the peak.
Which to prefer, and why: tax returns / accounts v bank statements
[28] Neither the tax returns nor the bank statement evidence provides enough information for us to be able to provide a definitive confirmation that one is more reliable than the other as a complete and accurate record of all business transactions….
[31] From a review of the bank statements we can see that the claimant transferred money between other bank accounts, statements for which we have not been provided with….
[33] Without the full suite of all bank accounts, it is impossible to confirm that the bank statements that we do have are reliable to provide any certainty over the level of trading.
[34] In principle, though, as the bank statements were prepared independently as a contemporaneous record of business transactions, they should inherently be more reliable than the tax returns which were prepared several years later by the Claimant with assistance from his business accountant….
The availability of cash in the bank to identify whether or not (a) RM could have bought replacement stock; (b) RM was continuing to trade
(a) ability to buy replacement stock
[48] The month end bank balances have been summarised at Joint Statement TS
Appendix. From those, it can be seen that the business had bank resources:
(a) in excess of £250,000 from January 2015 to November 2015. On that basis, for several months after the first and second bank seizures in January 2015, the Claimant had sufficient cash resources available to replace the stock seized;
(b) of more than £50,000 from November 2016 until October 2017. The third seizure was in November 2016 with a value of £47,572 per the Kark assessment. On that basis, it is not clear that the Claimant had sufficient cash resources to replace the full lost stock – the available balance would just about cover the value of the seized stock but some cash reserves would be needed to fund operations in general. However, some of the loss could have been replaced from existing funds…
Summary and conclusion
[53] We have faced considerable difficulties in obtaining sufficient evidence to confirm the Claimant’s actual trading income and expenses.
[54] We have prepared two illustrative calculations but wish to emphasise that we are not confident that either is an accurate representation of actual profit levels, but for the seizure profit levels, or loss suffered: there is a great deal of uncertainty regarding many of the figures, and we have been forced to rely on many assumptions.
4. It follows from a reading of the joint statement that the accountants set out a number of alternative approaches that the Court might make to calculating the alleged loss. Within each alternative, the accountants agree on everything. Deciding as between the alternative approaches – if it becomes necessary to determine the issue of quantum – will be a question for the Court rather than a matter of expert opinion. I note in particular that there is no dispute as between the experts as to which method of loss calculation should be adopted.
5. I therefore come to the same decision as HHJ Tindal did on 27th January 2025 when he refused the identical application that I have before – paragraph 5 of his Order was “The Claimant’s application for permission to call oral evidence from the experts at trial is refused, subject to any renewed application either party may make to the trial judge following receipt of the expert’s joint statement.”
6. I would add the following by way of supplemental reasoning. The background to the request to call oral evidence from both accountants was a very late application by the Claimant to adduce evidence from his expert witness in a supplemental report. It was very late because the claimant had 2 years to prepare such a supplementary report, and because it was made very shortly before trial. The application was also made in the context of the Claimant having failed to file his initial expert report in accordance with an Order made at a Case Management Conference on 28th June 2022, and the making of an Unless Order on 16th March 2023 by Mr Justice Lane and condemning him in costs. On 27th January 2025 HHJ Tindal dismissed the Claimant’s application to adduce additional expert evidence from his own expert accountant (there was no renewal of that application before me).
7. For all of these reasons, the application is dismissed.”
HOW THE EVIDENCE WAS TREATED AT TRIAL
The joint report gave two alternative options for assessing the claimant’s loss. If the court preferred tax returns then the loss was £3,688.503. If the bank statements were preferred the loss was £931.991. The issue in the case was which presented the most reliable basis for assessing damages. The judge preferred the bank statements. However even using those the claimant’s loss was discounted by 90%.
“118.On 6th February 2025, the experts filed and served a joint statement. They set out a number of different alternatives but agreed on every point within each of those alternatives. The headline figures are that:
a. If the Claimant’s tax returns are used as the basis for assessment, then the Claimant’s maximum potential loss would be £3,688,503.
b. If the Claimant’s bank statements are used as the basis for assessment, then the Claimant’s maximum potential loss is £931,991.
119. Both figures above are heavily caveated, for a range of reasons given in the Joint Statement.
120.It follows that two main issues arise in relation to the quantum of the consequential loss claim. Firstly, whether the court utilise the Claimant’s tax returns or his bank statements as the primary source of evidence for his income and outgoings. Secondly, what (if any) discounts to the headline figures fall to be made to reflect the heavy caveats identified by the accountants.
121.
In relation to the first issue, I have no doubt at all that no reliance ought to be placed on the Claimant’s tax returns as a basis for the calculation of losses (and instead his bank statements provide some evidence upon which to base the calculation of such losses):
a. First, the accountants agree that the bank statements are likely to be a more reliable basis for assessment than are the tax returns.
b. Second, the bank statements are in one sense a source of independent evidence as to the Claimant’s income and expenditure, whereas the tax returns were created without, it seems, recourse to any primary underlying material and at a time when this claim was in contemplation.
c. Third, the bank statements are contemporaneous evidence, whereas the tax returns were created years later for a different purpose.
122. The first point in paragraph 121 above speaks for itself; the second and third require explanation.
123. The Claimant explained to me in evidence that in the relevant period he had two bank accounts – the first a TSB account in the name of UKFP; and the second a Lloyds account in the name of the Developing World Air Ambulance (the Claimant gave a very unsatisfactory explanation as to why the account was in this name – essentially he said it was in this name because he was running a charitable project to buy air ambulances, and associated services, for developing countries, yet (i) this does not account for the fact that his poppy head import and export business was run through this account, (ii) there are no payments from the account to buy things that one would ordinarily associate with running a charitable project of this kind – like helicopters (albeit the Claimant claimed, in a moment of panic in the witness box, that he had written toDassault Aviation “…to see how much these things cost…”), and (iii) he ran this charity “as a personal appeal” (he said that the Charity Commission had advised him that there was no need to run the charity as a charity and instead run it as a “personal appeal” – albeit he had never made an appeal to anyone for any money) and was happy to forego the 25% gift aid tax relief that was available to him (“that’s for the accountant to work out, not me”)). Be that as it may, the bank accounts at least show money coming in and money going out of the accounts: these are events which I, and the accountants, can have faith in actually having occurred.
124. The tax returns, by contrast, are quite different:
a. The first tax return presented to me by the Claimant was for the tax year 6th April 2013 – 5th April 2014, but was dated 23rd May 2019. It shows one source of income, for UKFP, for this period. The Claimant said in evidence that this tax return was completed for him by Mr Butani. The tax return states on its face that “This re-presentation of information follows the letters sent by out accountant Amass BTC 11th April 2019 – 15th April 2019.” In his oral evidence the Claimant said that he agreed that this reasonably read as if UKFP was stating that the information in the tax return was simply a re-presentation of information that had been submitted in an earlier tax return. The Claimant said in evidence that he could not remember whether this was in fact the case and, if it was the case, why he would be re-submitting a tax return 5 years after the period to which it related. He said that he could not remember who was submitting his tax returns for him before Mr Butani came on the scene for the first time in 2019 (save to say that he was someone who happened to be walking past his business at Star House). The Claimant agreed in evidence that he had signed the tax return on 22nd May 2019 and agreed that the amount shown for turnover for that year – £650,000 – was an oddly round figure. Some “Notes to the Accounts” have been written on the tax return in an “Any other information” box – these state “The accounts have been prepared from past records, which are not kept in an orderly manner…” and “…the bank statements for that period have been mislaid.” The Claimant could not remember where Mr Butani had got that information from, and could not explain why Mr Butani had not gone to the bank to get historic bank statements from them in order to complete this tax return. But he did remember that this tax return was created, and filed, because he needed to secure a BRP Visa for his wife, who is from India, and therefore needed to show to the Home Office that he has an income. He said, finally on this issue, that he had not paid any tax for the year 2013-2014 in the years 2014 – 2019.
b. The second tax return presented to me was for the tax year 6th April 2014 – 5th April 2015. It was also dated 23rd May 2019, was also completed by Mr Butani, was also signed as true by the Claimant, also had a round figure for turnover (this time £1.6m), and also contained the same notes as before. The Claimant explained that this tax return was created for the purposes of facilitating a visa application, and that he could not explain why Mr Butani had not accessed his bank statements. He said that he had not previously paid tax on the income that he had received that year.
c. The third tax return presented to me was for the tax year 6th April 2015 to 5th April 2016. It was submitted by a tax adviser called Amass BTC (a company for who Mr Butani worked)– and so the Claimant said that it must have been submitted after 2019. A turnover of £795,000 was declared. The Claimant said that he could not remember filing a tax return for this year, nor having paid any tax for the year 2015 – 2016.
125. It was these three figures – £650, £1.6m, and £795,000, taken from the tax returns – that had been used as an underlying basis of sales in each of these three years to seek to calculate the Claimant’s consequential losses. Examination of the Claimant’s bank statements for those three years show, however, that the sales that went through the bank accounts were £527,756, £470, 316 and £97,802 respectively – i.e. they are very different.
126. The Claimant sought to explain the difference in his evidence by saying that there was a “cash element” to his business (which, when it came in, he kept in a box and then spent it – at one point he says that there was £880,000 in the box, which had been stolen during a robbery at his home). I am afraid to say that I cannot rely on this evidence which seeks to explain away the difference between the sums shown in the tax return and those shown in the bank accounts, because:
a. The accountants agree that “It would be highly unusual for export sales of this level to be made in cash in our experience” and “It is highly unusual, verging on implausible, that overseas customers would pay for exports in cash.”
b. There is no other evidence in the form of invoices, receipts or other records that confirms that exports were paid for in cash.
c. To the extent that Western Union, MoneyGram or a similar money transfer agent was used to transfer this cash to the Claimant, then records of such transactions from them would be an obvious port of call for assistance – the Claimant said that he had never considered asking any such provider for their records in order to seek to establish his losses.
127. The fourth and fifth tax returns presented to me – for the tax years 6th April 2016 – 5th April 2017 and 6th April 2017 to 6th April 2018 respectively – each declared that the Claimant declared no income whatsoever. But the bank accounts show income of over £300,000 in those two years. The Claimant had no real explanation for that in his oral evidence, other than to say that – in relation to all five sets of tax returns – “These are old returns, we cannot rely on them. There are further re-submitted tax returns, which I have not disclosed, but I think that they have been given to the experts.” The experts have not, I should say, been provided with any “re-submitted” tax returns beyond those mentioned in their reports and the joint statement (they would, on the Claimant’s account be “re-re-submitted tax returns”).
128. In the end, the Claimant is right, but not for the reason that he gave: I cannot rely on the tax returns that he has submitted to the Court.
129. For all of these reasons, if I had assessed quantum, I would have done so on the basis of the Claimant’s bank accounts. That would lead to a consequential loss at its highest of £931,991 – such loss representing all of the consequences of the Defendants’ conduct on the Claimant’s business i.e. the seizure of the goods (and the damage to the Claimant’s supply chain, damage to his business reputation and consequent loss of orders), their retention for the best part of two years in the case of the First and Second Seizures (again, putting that stock out of use for the Claimant, with a consequent effect on his ability to trade), and the destruction of those goods.
130. Turning to the second issue, I would have discounted that maximum loss by 90% by reason of (i) the fact that the evidence makes clear to me that even if, contrary to my findings above as to causation, that some consequential loss was caused by the destruction of the goods, the overwhelming majority of losses sustained by the Claimant were on this hypothesis (i.e. ignoring all of my other findings) caused by the seizure and retention of the goods, not their destruction; and (ii) on this hypothesis, the Claimant would have had returned to him in November/December 2016 some seriously perished poppy heads. The consequential loss would therefore have been assessed in the sum of £93,199.