Crystal Mews Ltd v Metterick Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Lawrence Collins,MR JUSTICE LAWRENCE COLLINS |
| Judgment Date | 13 November 2006 |
| Neutral Citation | [2006] EWHC 3087 (Ch),[2006] EWHC 2653 (Ch) |
| Docket Number | Case No:1HC 302/06,Case No: 1HC302/06 |
| Court | Chancery Division |
| Date | 13 November 2006 |
[2006] EWHC 2653 (Ch)
Mr Justice Lawrence Collins
Case No:1HC 302/06
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
APPROVED JUDGMENT
Mr Peter Shaw (instructed by Boyes Turner) for the Claimant
Mr Julian Gun Cuninghame (instructed by Dean Thomas & Co) for the First Defendant
Mr William Hibbert (instructed by Dean Thomas & Co) for the Fourth Defendant
Hearing: October 19, 2006
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic
()
I Introduction
HM Revenue and Customs ("the Revenue") claims that the claimant, Crystalmews Ltd ("the Company"), has been the vehicle for missing trader intra-community VAT fraud. On February 13, 2006 the Revenue issued a winding up petition against the Company and applied before Peter Smith J for the appointment of Mr Timothy James Bramston ("Mr Bramston") as provisional liquidator. The order was made, and immediately following it Mr Bramston applied without notice for a Freezing Order ("the First Freezing Order") against the Company's de facto and de jure directors. The Order was made limited in amount to £200 million.
The Company was incorporated in February 2003 and commenced active trading at the end of 2004. Its de jure directors were Andrew Metterick and Ricky Metterick, the Second and Third Defendants. The active business of the Company was conducted by the First Defendant ("Mr Metterick"). Mr Metterick is the father of Andrew and brother of Ricky. The Fourth Defendant, Juliet Metterick ("Mrs Metterick"), is the wife of Mr Metterick and step-mother of Andrew Metterick.
The Revenue claims that in a short period of time the Company traded in a manner which bore many of the characteristics of participation in missing trader intra-Community VAT fraud: it engaged in high volume purchase and sale of mobile phones and computer goods; it engaged in a system of making (or passing on to its own purchasers instructions for making) third party payments of the entirety (or almost the entirety) of the purchase price of goods sold to it. The effect of such a system was to deprive either its immediate supplier or a supplier further up the chain of supply of the means with which to discharge its own VAT liability on its sales; the payments were to offshore parties seemingly unconnected with the transactions. Payments were all made to the accounts of various parties maintained at First Curacao International Bank in the Netherlands Antilles. Warnings which had been given by the Revenue about the risk of making third party payments and of the need to conduct checks (amongst other things) into the VAT status of its suppliers were ignored.
Over a period of 2 months (August/October 2005) the Company entered into 345 transactions in which it acquired goods from Vollitone Ltd and sold them on to a variety of purchasers. Vollitone Ltd was a company with no recorded director or secretary, which purported to trade from a non-existent address; had never been registered for VAT and provided an invalid VAT number on its VAT invoices to the Company.
As a consequence the Revenue disallowed the Company's VAT input tax claims in relation to its purchases from Vollitone Ltd and assessed the Company for VAT in the approximate sum of £31.7 million.
The claim in the particulars of claim as then formulated was that the Defendants, as actual or de facto directors, were in breach of duty in allowing the Company to incur VAT liabilities in excess of £31 million and in rendering it insolvent by directing customers to pay the entirety of its book debts to third parties.
Having reviewed the available Company's books and records, the provisional liquidator found that substantial sums had been paid by the Company to Mrs Metterick purportedly by way of dividend. £240,000 was paid to her between April and May 2005. Additionally €62,500 was transferred by the Company to a firm of Spanish lawyers in January 2006 in connection with the proposed acquisition of a property in Spain in Mrs Metterick's name.
In the light of evidence of Mrs Metterick having received very substantial sums out of the Company for which there was no apparent legitimate entitlement, the Company acting by its provisional liquidator applied on March 21, 2006 before Etherton J without notice for a Freezing Order against her limited in amount to £600,000 ("the Second Freezing Order").
On April 5, 2006 a winding up order was made against the Company, and on the following day Mr Bramston was appointed as liquidator by the Secretary of State.
II The Freezing Orders
The First Freezing Order
Peter Smith J's Order of February 13, 2006 contained the following provisions:
"5 Until the return date or further order of the court, the Respondents must not:-
(i) remove from England and Wales any of their assets which are in England and Wales up to the value of £200,000,000.
(ii) in any way dispose of, deal with or diminish the value of any of their assets whether they are in or outside England and Wales up to the same value.
6 Paragraph 5 applies to all of the Respondent's assets whether or not they are in his, her or its own name and whether they are solely or jointly owned. For the purpose of this order, the Respondent's assets include any asset which he has the power, directly or indirectly, to dispose of or deal with as if it were his own. The Respondent is to be regarded as having such power if a third party holds or controls the asset in accordance with his direct or indirect instructions.
7 The prohibition includes in particular the following assets:-
(i) any monies in any bank accounts in the name of Respondents or in any bank account over which the Respondents are a signatory or have control…
…
16 Effect of this order
It is a contempt of court for any person notified of this order knowing[ly] to assist in or permit a breach of this order. Any person doing so may be imprisoned, fined or have their assets seized.
…
Nothing in this Order shall, in respect of assets located outside England and Wales, prevent any third party from complying with:-
(1) What it reasonably believes to be its obligations, contractual or otherwise, under the laws and obligations of the country or state in which those assets are situated or under the proper law of any contract between itself and the Respondent …
…."
On March 6, 2006 the First Freezing Order was continued until trial or further order, by order of David Richards J at an inter partes hearing, at which Mr Metterick was represented by counsel.
The Second Freezing Order
Etherton J's Order of March 21, 2006 against Mrs Metterick contained the following provisions:
"4 Until the return date or further order of the court, the Respondent must not:-
(i) remove from England and Wales any of her assets which are in England and Wales up to the value of £600,000.
(ii) in any way dispose of, deal with or diminish the value of any of her assets whether they are in or outside England and Wales up to the same value.
5 Paragraph 4 applies to all of the Respondent's assets whether or not they are in her own name and whether they are solely or jointly owned. For the purpose of this order, the Respondent's assets include any asset which she has the power, directly or indirectly, to dispose of or deal with as if it were her own. The Respondent is to be regarded as having such power if a third party holds or controls the asset in accordance with her direct or indirect instructions.
6 The prohibition includes in particular the following assets:-
(a) any monies in any bank accounts in the name of Respondent or in any bank account over which the Respondent is a signatory or have control in particular:
Juliet Metterick
National Westminster Bank plc
Market Place
Chesterfield
Sort Code: 60–40–09
A/C No.: 43476309
Caja Rural Intermediterranea
Sociedad Cooperativa De Credito
Mijas-La Cala
IBAN: ES51 3058 0834 3127 7001 2859
Swift Code CCRIES2A
A/c No 2770012859 ("the Spanish Account") …
…
13 Effect of this order
It is a contempt of court for any person notified of this order knowing to assist in or permit a breach of this order. Any person doing so may be imprisoned, fined or have their assets seized."
The Order was continued at an inter partes hearing, at which Mrs Metterick was represented by counsel, by Lightman J on April 4, 2006. On that occasion the claim form and the particulars of claim were amended to join Mrs Metterick to the proceedings, and to make claims against her in respect of payments to her.
On June 7, 2006 the Company applied for an order that Mr and Mrs Metterick be committed for breaches of the First and Second Freezing Orders.
The alleged breaches of the Freezing Orders relate to: (1) a withdrawal by Mrs Metterick on March 24, 2006, of the sum of €250,589 out of a joint account held with Mr Metterick at the Spanish bank to fund the acquisition of a property in Spain; (2) the payment by Mrs Metterick of £20,000 to her brother on March 27, 2006.
III The facts
Following personal service of the First Freezing Order, Mr Metterick swore, on February 24, 2006, an affidavit of assets pursuant to paragraph 9 of the First Freezing Order, in which he stated:
"I have a joint bank account with my wife, Juliet Metterick, at CAJA Rural Intermediterranea, Sociedad Cooperativa De Credito, Mijas–La Cala, …with account number 2770012859, which had a balance of 263,542.23 euros as at 30 th January 2006."
On 10 March, 2006 Mr Metterick's solicitors, Dean Thomas & Co, wrote to the provisional...
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