Capewell v HM Revenue and Customs

JurisdictionUK Non-devolved
JudgeLORD NICHOLLS OF BIRKENHEAD,LORD HOFFMANN,LORD MANCE,LORD WALKER OF GESTINGTHORPE,LORD RODGER OF EARLSFERRY
Judgment Date31 January 2007
Neutral Citation[2007] UKHL 2
CourtHouse of Lords
Date31 January 2007
Capewell
(Respondent)
and
Her Majesty's Revenue and Customs
(Appellants)

and another

[2007] UKHL 2

Appellate Committee

Lord Nicholls of Birkenhead

Lord Hoffmann

Lord Rodger of Earlsferry

Lord Walker of Gestingthorpe

Lord Mance

HOUSE OF LORDS

Appellants:

David Perry QC

Mark Sutherland Williams

Rupert Jones

(Instructed by Revenue and Customs Prosecutions Office)

Respondents:

Andrew Mitchell QC

Abigail Barber

(Instructed by Olliers)

LORD NICHOLLS OF BIRKENHEAD

My Lords,

1

I have had the advantage of reading in draft the speech of my noble and learned friend Lord Walker of Gestingthorpe. For the reasons he gives, with which I agree, I would allow this appeal.

LORD HOFFMANN

My Lords,

2

I have had the advantage of reading in draft the speech of my noble and learned friend Lord Walker of Gestingthorpe. For the reasons he gives, with which I agree, I would allow this appeal.

LORD RODGER OF EARLSFERRY
3

I have had the advantage of reading in draft the speech of my noble and learned friend Lord Walker of Gestingthorpe. For the reasons he gives, with which I agree, I would allow this appeal.

Introduction

LORD WALKER OF GESTINGTHORPE

My Lords,

4

In R v Rezvi [2003] 1 AC 1099, 1146, 1152, Lord Steyn said:

"It is a notorious fact that professional and habitual criminals frequently take steps to conceal their profits from crime. Effective but fair powers of confiscating the proceeds of crime are therefore essential."

Parliament's determination that criminals should not profit from their crimes (and especially not from serious organised crimes) led to the enactment of Part VI of the Criminal Justice Act 1988 (" CJA 1988"), the Drug Trafficking Act 1994 ("DTA 1994"), the Proceeds of Crime Act 1995 (" POCA 1995," heavily amending CJA 1988) and Part III of the Terrorism Act 2000. The relevant provisions of these statutes have been replaced by Part 2 of the Proceeds of Crime Act 2002 (" POCA 2002"), which came into force on 24 March 2003, but the earlier legislation is still relevant to criminal proceedings initiated before that date. This appeal by the Commissioners for HM Revenue and Customs, formerly HM Customs & Excise ("Customs") is concerned with the remuneration of a receiver appointed on 30 January 2003 under a restraint order made on 9 October 2002 in respect of the assets of the respondent, Mr Robert Capewell.

The facts

5

Mr Capewell was arrested on 11 April 2002 and on 24 September 2002 he was charged with conspiracy to cheat the public revenue and conspiracy to contravene the Value Added Tax Act 1994. He was charged jointly with thirteen other defendants. The gist of the allegation is what is often called "carousel fraud." The amount of value added tax evaded is said to be of the order of £18m. His criminal trial is at present in progress and is not expected to end for some months. The respondent is of course presumed to be innocent, unless and until he is convicted, of the serious offences with which he is charged.

6

On 9 October 2002 Lightman J made the restraint order already mentioned. This was made under sections 76 and 77 of CJA 1988. On 17 January 2003 Customs applied for the appointment of a receiver in respect of the respondent's assets. The application was opposed but on 30 January 2003 Jackson J made an order appointing Mr Nigel Sinclair of Kroll Buchler Phillips as management receiver of the respondent's realisable property (as defined in section 74 of CJA 1988). This order was made under section 77(8) of CJA 1988. Paragraph (3) of the order provided:

"The costs of the Receivership shall be paid in the Receivership in accordance with the letter of agreement as exhibited to the witness statement of Colin Jones made on this the 23rd day of January 2003."

7

The letter in question (dated 21 November 2002, and sent to Mr Sinclair by Mr Colin Jones of Customs' Asset Forfeiture Unit) contained (in para 6, headed "Remuneration") provisions about the Receiver's remuneration and expenses. Para 6(a) was the basic provision:

"It is proposed to seek an order from the Court that your costs in this matter should be costs in the Receivership ie your costs should be paid out of the monies you bring in during the course of this Receivership."

Para 6(d) contained a limited indemnity given to the receiver by Customs. I should perhaps say at once that this letter, and some other documents in the appeal, are far from precise in their use of the expressions "remuneration", "costs" and "expenses". It makes for clarity to confine "remuneration" to professional fees (for the receiver himself and his own staff), to confine "costs" to litigation costs, and to use "expenses" for all other expenditure necessarily or properly incurred by the receiver in the performance of his duties.

8

The respondent's principal assets, so far as within Customs' knowledge, were set out in a schedule to the order appointing the receiver. They were a diverse portfolio: a large country house in Staffordshire, half of which is said to belong to the respondent's wife; some expensive cars and personalised number plates; some bank accounts in this country and elsewhere; and some business assets including an unincorporated financial services business run by the respondent trading as John Ashley Associates. This business seems to have depended largely on the respondent's personal input and contacts, and to have been less profitable in recent years. Indeed the respondent was at the commencement of the receivership involved in some fifty legal actions against clients or former clients. In his first report the receiver stated that the respondent's terms of business entitled him to claim for lost commissions if his clients cancelled policies which they had effected through him, and that he pursued them through the courts, if necessary to bankruptcy.

9

The receivership led to a great deal of friction between the receiver and the respondent. There is copious documentary evidence before your Lordships in relation to the difficulties that arose, but it is unnecessary to go far into it. The receiver complained of non-cooperation (and possible contempts of court) on the part of the respondent; the respondent complained of the size of the amounts which the receiver claimed, in successive reports to the court, for his remuneration. In round figures the total remuneration claimed (inclusive of value added tax) mounted up as follows:

These figures may be compared to the receiver's estimate (in the first appendix to his second report) of an eventual net realisation of less than £400,000 (there is no estimate in his third report, but there are some later figures in paras 22 and 23 of the judgment of Lindsay J mentioned below).

The course of the litigation

  • (1) First report (26 April 2003) £74,000

  • (2) Second report (31 March 2004) £132,000

  • (3) Third report (2 June 2004) £182,000

10

The reason why it is unnecessary to go into any of these contentious issues is because the amount of the receiver's remuneration has not yet been quantified by the court, and is not an issue in this appeal. The point at issue in this appeal is whether the Court of Appeal, exercising its discretion in place of the trial judge, was right to order part of the receiver's remuneration to be paid, not out of assets subject to the receivership, but by Customs.

11

To explain how that issue has emerged I must go back to Jackson J's order of 30 January 2003 appointing the receiver. At that time it was envisaged that an application to discharge the receiver might be made at an early date, as soon as the respondent's counsel had prepared further evidence directed at demonstrating that the receivership was unnecessary (this appears from the part of the order headed "Duration of this Order"). In the event there was no early application. But on 5 February 2004 the respondent applied for the receiver to be discharged on the grounds that his "costs" were disproportionate and excessive. Customs opposed the application. It was dismissed by Lindsay J on 6 April 2004. At the time of his judgment the expected date for the commencement of the criminal trial had slipped from 2004 to 2005; it was to slip again to 2006.

12

Lindsay J's reasons for dismissing the application appear from para 28 of his judgment. After stating that he was not satisfied that the purposes of the receivership had been achieved, he continued:

"But more importantly, as it seems to me, no costs have yet been paid out of the estate and none have yet been approved by the court. It has all along been open to Mr Capewell, and, indeed, open to the Customs and Excise and the Receiver himself, to seek an assessment of costs, the assessment to be undertaken by the court. There is provision in CPR 69.7 which no one has yet brought into use. It has not been done yet by anyone. How can costs be said to be disproportionate when one does not know what they are? Indeed, a blunt answer to the application notice which seeks discharge on the grounds of excessive costs is that excessive costs are not themselves a ground for discharge, but are a ground, if an argument can be made out, for an assessment downwards of the receiver's bill. So I will not at this stage discharge the receivership on the grounds of disproportionate or excessive costs either, because one does not know yet what the figure that the court would be likely to authorise would be."

The judge proceeded to give directions as to the quantification of the receiver's remuneration (though the ensuing appeals have delayed that process). His reference to " CPR 69.7" is to paragraph 7 in Part 69 of the Civil Procedure Rules 1998 ("CPR") as inserted by the Civil Procedure (Amendment) Rules 2002 (SI 2002 No. 2058, made under section 2 of the Civil Procedure Act 1997) which came into force on 2 December 2002...

To continue reading

Request your trial
53 cases
  • Dagarmo Holdings Ltd v Avonwick Holdings Ltd
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 1 January 2021
  • Heath Sinclair v 1. Louis Glatt and Another 1. Leslie Glatt and Rita Glatt (as executors of the estate of Chaja Glatt) and Others (Interveners)
    • United Kingdom
    • Queen's Bench Division (Administrative Court)
    • 24 June 2015
    ...parties to these proceedings accepted that the test in a claim for a common account was that stated in Capewell v Revenue and Customs [2007] UKHL 2 [2007] 1 WLR 386 at [21] per Lord Walker approving the dictum of Warrington J in Boehm v Goodall [1911] 1 Ch 155 at 161: "The court cannot itse......
  • Algosaibi v Saad Invs
    • Cayman Islands
    • Grand Court (Cayman Islands)
    • 6 July 2011
    ...the defendants. Cases cited: (1) Boehm v. Goodall, [1911] 1 Ch. 155; [1908–10] All E.R. Rep. 485, followed. (2) Capewell v. H.M.R.C., [2007] 1 W.L.R. 386; [2007] 2 All E.R. 370; [2007] UKHL 2, followed. (3) Mirror Group Newspapers Plc v. Maxwell, [1998] BCC 324; [1998] 1 BCLC 638, considere......
  • Serious Organised Crime Agency v Gale and another
    • United Kingdom
    • Supreme Court
    • 26 October 2011
    ...the judgment of the Northern Ireland Court of Appeal in SOCA v Wilson, as well as the decisions in Capewell v Revenue and Customs Comrs [2007] UKHL 2, [2007] 1 WLR 386, Boehm v Goodall [1911] 1 Ch 155, Hughes v Customs and Excise Comrs [2002] EWCA Civ 734, [2003] 1 WLR 177, In re Andre......
  • Request a trial to view additional results
1 books & journal articles

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT