Baljit Singh Bhandal v HM Revenue & Customs

Hearing dates: 24 th & 25 th May 2023

Approved Judgment

This judgment was handed down remotely at 10.00am on 21 st June 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Introduction

This is an application made by the defendants within this action which is a claim to set aside previous judgments on the footing that they were obtained by fraud. An outline of the circumstances is as follows.

On 18th July 2001 HMRC applied under section 77 of the Criminal Justice Act 1988 (“the Act”) for a criminal freezing order (“the restraint order”, or “RO”) against the claimant, Mr Bhandal, based an allegation that he was guilty of large scale duty and VAT evasion in relation to trade in alcoholic drinks and a prosecution against him was to be commenced. Such an order was made. By 2006 no trial had taken place, and indeed no warrant had ever been served to commence proceedings (and there is a dispute as to whether one was ever issued) because Mr Bhandal was abroad, and in that year the order was discharged. Mr Bhandal then commenced proceedings in the Chancery Division against HMRC and others (“the Chancery Proceedings”), claiming that the restraint order proceedings were improperly started and maintained. One of those others was a particular HMRC officer, Mr Broad. Those proceedings were stayed by an order of Master Moncaster on 1st May 2008 on the footing that the appropriate claim in relation to the making of the restraint order was in the Administrative Court under section 89 of the Act. Those proceedings were eventually brought and decided against Mr Bhandal by Collins J on 11th March 2015. Permission to appeal was refused. In 2018 HHJ Jarman KC (sitting as a judge of the High Court) heard and dismissed an application to revive and amend the old Chancery proceedings, and he made an order striking out those proceedings.

In the present action, commenced on 3rd October 2022, Mr Bhandal challenges those decisions (Master Moncaster, Collins J and HHJ Jarman) on the footing that the decisions fall to be set aside because the orders in them were caused or obtained by fraudulent conduct on the part of HMRC and Mr Broad. That fraudulent conduct (as pleaded) is a failure to present to the court the proper background to the restraint order and a failure to disclose that an arrest warrant against Mr Bhandal was never actually issued and what HMRC have relied on as such a document is in fact a forgery. What he apparently seeks to do is to revive the Chancery Division proceedings, presumably so that he can pursue them to a trial and do better in them than he managed to do before Collins J. The present application is made by the defendants, (HMRC and Mr Broad) to strike this action out as an abuse of process on the basis (putting it shortly) that it is an impermissible collateral attack on previous decisions, and in particular on the decisions of Collins J and HHJ Jarman.

That summary disguises a lot of factual complexity in this matter, which I will have to set out. In the interests of clarity I will set out the history in three phases, as will appear. I shall refer to the Revenue throughout as HMRC, even though in the earlier phases of the story it was known by the acronym HMCE. HMRC and Mr Broad were represented by Mr Michael Kent KC, and Mr Bhandal was represented by Mr Max Mallin KC. Both counsel have extensive historical experience of all this litigation.

The restraint order to Master Moncaster

In the first part of this section I refer to HMRC's investigations into, and prosecutions of, various VAT and excise duty frauds allegedly perpetrated in the 1990s, and how the prosecution of Mr Bhandal fitted into that. This account is a shorter version of events, which are fully described in the judgment of Collins J with the neutral citation number [2015] EWHC 538 (Admin), to which reference should be made for more detail where necessary.

In the late 90s HMRC was investigating VAT and excise duty fraud relating to the improper removal of large quantities of alcoholic drinks from two bonded warehouses in London and the sale of the drink without accounting for VAT. A number of prosecutions were initiated and some convictions were obtained, some on the basis of guilty pleas. However, in the course of an appeal against one of the convictions in November 2001 it was disclosed that one of HMRC's sources of information was an employee at one of the warehouses, a Mr Allington. It became apparent that his activities as an informant, and associated activities of an HMRC employee called Mr Small, were matters which ought to have been disclosed to the defence in the various prosecutions but which were not. As a result a number of appeals from convictions were allowed and a number of other prosecutions not proceeded with. In late 2001 Butterfield J was asked to prepare a report about how these matters came about and to make recommendations as to the future organisation of such things, and he duly reported in 2003. He found misconduct, and his findings have been accepted by HMRC.

In this period one of the individuals whose activities came under scrutiny was Mr Bhandal and by 2001 a decision was taken to prosecute him for excise duty fraud and money laundering. In 1998 he had been on bail awaiting retrial on a long firm fraud but left the country on a false passport, eventually ending up in Los Angeles. He did not return to the UK until 2005, and in June 2005 he was convicted of attempted kidnap and sentenced to 8 years imprisonment (and 10 months imprisonment for breaching his bail), being released in 2009. His absence from the country in and after 2001 was a significant part of the background to the events surrounding the restraint order.

The restraint order was sought and granted on 18 ^th July 2021 at a without notice hearing before Newman J. The order restrained the disposal of assets and appointed receivers over Updown Court, Chertsey Road, Windlesham, Surrey, owned by a BVI company of which Mr Bhandal was the beneficial owner. The mortgagee of that property then appointed its own receivers over that property and in due course sold it for some £14m. Mr Bhandal claims that that was a massive undervalue, and that at least part of that was attributable to the making of the restraint order.

The restraint order was made on the footing that criminal proceedings were to be commenced against Mr Bhandal. At the heart of the dispute in the present matter is the question of whether they were commenced or not (by the issue of a warrant by a magistrate's court). Because Mr Bhandal was not in the jurisdiction he was not served with any warrant for his arrest, though the documentation clearly indicates that consideration was given to extraditing him. Apparently the US authorities resisted extradition on the footing that the particular offences concerned were not within the extradition treaty. So the extradition proceedings went nowhere, but reference to a warrant in correspondence about them suggests that a warrant was in existence at that time.

One part of the investigation of the tax frauds involved a bonded warehouse known as London City Bond — the LCB frauds. In November 2002 the prosecution decided to offer no evidence against the defendants in those frauds. However, the view had been taken that the case against Mr Bhandal (part of something known as Operation Kitsch) was effectively a different strand and plans to continue his prosecution (and others) continued. That went on until June 2003 when it was concluded that the cases within Operation Kitsch were likely to be tainted with the same problems as affected the LCB frauds and a decision was taken (and implemented) to offer no evidence in those cases as well. Because Mr Bhandal's was not an active case (because he was not served with an arrest warrant or arrested, still being abroad) his case was not one of those formally abandoned. Nonetheless some sort of decision seems to have been taken not to pursue him.

In 2005 Mr Bhandal came back into the jurisdiction. As I have pointed out, he was convicted and sentenced to terms of 8 years and 10 months in prison, being released in 2009. During this time he applied for his restraint order to be discharged and on 6th April 2006 Burton J discharged it without opposition from HMRC because its basis (the potential charge of VAT and duty fraud) was not being pursued. In his order Burton J directed that “any application, and supporting evidence” by the defendant for compensation be filed and served by 4pm on 5th June 2006. When I asked what the jurisdictional basis of such an order was, counsel surmised it was a case management direction, because an application for compensation would be anticipated to be under section 89 of the Act and within the restraint order proceedings.

At this point it will be convenient to introduce the terms of that Act, because its terms are central to the debate in this matter. It provides (so far as material):

“89. Compensation

(1) If proceedings are instituted against a person for an offence or offences to which this Part of this Act applies and either—

(a) the proceedings do not result in his conviction for any such offence, or

(b) where he is convicted of one or more such offences—

(i) the conviction or convictions...