HM Revenue and Customs v Cozens
| Jurisdiction | England & Wales |
| Judge | Mr Justice Floyd:,THE HON MR JUSTICE FLOYD |
| Judgment Date | 08 November 2011 |
| Neutral Citation | [2011] EWHC 2782 (Ch) |
| Docket Number | Case No: HC10C04556 |
| Court | Chancery Division |
| Date | 08 November 2011 |
[2011] EWHC 2782 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Rolls Building, London, EC4A INL
The Hon Mr Justice Floyd
Case No: HC10C04556
Mr Stephen Davies QC and Mr Jeremy Bamford (instructed by Howes Percival LLP) for the Claimant
Mr Philip Moser and Ms Julianne Stevenson (instructed by Day Sparkes) for the First Defendant
Hearing date: 6 th October 2011
Approved Judgment
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.
On 21 December 2010, I granted, on the application of HMRC, and without notice to the first defendant and respondent Mr John Cozens, a worldwide freezing order. The order had a return date for early January 2011, but in the event the parties agreed to successive adjournments of that date, with the order continuing in the meantime. Mr Cozens has now issued an application to discharge the order of 21 December 2010, and the parties have exchanged several rounds of evidence. The matter came back before me on 6 October 2011. The sole issue is whether the freezing order should continue against Mr Cozens. Mr Philip Moser argued the case for Mr Cozens; Mr Stephen Davies QC argued the case for HMRC.
The without notice applications
The matter first came before me on 16 th December 2010. Prior to the matter being called on in court, I was presented at very short notice with a draft affidavit from the HMRC investigating officer, Ms Susan Grimshaw, running to over 200 pages and supported by 27 volumes of documents. At that stage, HMRC sought freezing injunctions against both Mr Cozens, the first defendant, and Mr Price, the second defendant. The orders were sought in support of claims for unpaid excise duty for which HMRC claimed these defendants were liable. It is fair to say that the documents at that stage were not arranged as conveniently as the court might be entitled to expect, having regard to the fact that the application had clearly been in gestation for many months. The matter had been placed before the court as a matter of urgency because HMRC had set itself 16 th December as the deadline for making the application. The documents were not delivered to court in time for their contents to be adequately digested before the hearing. The timing of the application was prompted by the fact that a limitation period of one year for making the assessment under section 12(4)(b) of the Finance Act 1994 was said to be, in HMRC's view, rapidly approaching. Once the assessment was notified to the defendants, they would be on notice of the claims of wrongdoing against them, and it would be more difficult to justify the grant of a freezing injunction without giving notice to the defendants.
The proceedings involve an allegation of what is sometimes referred to as "inward diversion fraud". Duty-suspended alcohol leaves a bonded warehouse in Bordeaux by lorry, ostensibly destined entirely lawfully to a bonded destination warehouse in the UK. However the lorry-load of alcohol never arrives at the UK bonded warehouse, but is "slaughtered", to use the colloquial term, somewhere in the UK. In practice what this means is that the load is diverted, possibly with the connivance of the lorry driver to a destination other than the designated bonded warehouse. The alcohol is then sold on the black market in the UK without payment of any duty.
HMRC have been alerted to the alleged fraud in the present case by the French national customs intelligence investigations directorate, Direction Nationale du Renseignement et des Enquêtes Douanières ("DNRED"). I will refer to the alleged fraud as "the Scheme". HMRC say that pursuant to the Scheme, loads were despatched from the premises of a company called STTM Ziegler ("STTM") in Bordeaux. Despatch of the loads is recorded on the Accompanying Administrative Document ("AAD"). The loads were ostensibly held by STTM to the account of three companies: Recette, Overseas Trading and Robbie Hughes.
HMRC's case, as presented in their skeleton on 16 th December, was that Recette, Overseas Trading and Robbie Hughes were either fronts for Mr Cozens and Mr Price or had had their identities hijacked by them. They drew attention to the fact that Mr Price provided despatch instructions on behalf of Recette to STTM. They were not able to link Mr Cozens with any such despatch instructions, nor were they able to link either Mr Cozens or Mr Price with instructions given by Overseas Trading or Robbie Hughes.
HMRC relied in support of its case that this was an inward diversion fraud on the fact that the assessed loads despatched from Bordeaux consisted in the majority of cases of alcohol manufactured in the UK. There was accordingly no obvious commercial reason for the re-importation of that alcohol into the UK.
The AADs stated that the destinations of the loads were three bonded warehouses in England and one in Italy, called Magazzini SPA. Magazzini has particular relevance so far as the present allegations against Mr Cozens are concerned. In the case of Magazzini it is alleged that the goods originally set out with an AAD identifying the warehouse in Italy as the destination, but that this AAD was then substituted, whilst the vehicle was en route in France, by an AAD identifying Magazzini as the warehouse from which the goods were despatched, with a UK destination warehouse.
HMRC alleged in their skeleton argument that Mr Cozens was orchestrating the movement of the loads of alcohol on the ground. They pointed out that the evidence against Mr Cozens showed amongst other things that:
i) he was present when the lorries were being loaded at STTM;
ii) he was seen to liaise with drivers prior to their departure from France and to hand them paperwork;
iii) he was seen to post documentation to a Mr Warner at 63 Yeoman Gardens, which was Mr Cozens' address;
iv) lorry drivers had envelopes addressed to a business called "Pussy Cats" with which Mr Cozens was or is connected and where he had his office, at 27 Risborough Lane, Folkestone;
v) he had in his possession (left behind at a hotel in France for its collection) a briefcase containing fake Magazzini stamps and blank AADs such as could be used to make fake AADs identifying Magazzini as the warehouse of despatch.
Accordingly HMRC asserted that Mr Cozens had a "central role" in the Scheme. They said that they intended to raise assessments against him in the total sum of £6,128,138.68.
So far as Mr Price is concerned HMRC contended that the evidence showed amongst other things that:
i) he was a director of and directing mind of Recette, one of the consignors and had represented himself as acting on behalf of Recette;
ii) he may also have acted on behalf of Robbie Hughes;
iii) he had direct communications with transport providers to organise the importation of loads;
iv) he corresponded with HMRC about certain intercepted loads;
v) transport providers had confirmed that Mr Price contacted them to organise transportation of the loads;
vi) he corresponded with STTM about loads which were purportedly coming from Magazzini;
vii) he apparently did not care what goods were loaded at STTM.
Accordingly HMRC submitted that Mr Price was responsible for organising transport on a day to day basis and could be seen to have had considerable correspondence with the transport providers. At the hearing on the 21 st December 2010 Counsel submitted that Mr Cozens was "at the top of the tree as far as we know what the tree is" and that there was "no evidence that there is anybody above Mr Cozens". Ms Grimshaw's affidavit stated that HMRC contended that Mr Cozens and Mr Price were the directing minds behind the scheme. She pointed in particular to the fact that Mr Price was a director of Recette. At paragraph 8.1 and 8.2 she said that
"Mr John Cozens is the directing mind behind the Scheme, who is involved in the movement of loads in France from STTM Ziegler, liaising with the drivers, obtaining copy AADs from the drivers, falsifying the AAD3s obtained form the drivers and returning them to STTM Ziegler. In the case of the Magazzini loads Mr Cozens also supplied falsified AADs to the drivers".
"Mr Toby Price has acted or purported to act on behalf of Recette Limited, as a consignor of duty suspended goods, and was involved in the setting up of an account on behalf of Recette Limited with STTM Ziegler, the giving of instructions to STTM Ziegler to receive duty suspended loads into the Bordeaux warehouse and to release duty suspended loads from the Bordeaux warehouse to particular lorries. He has also been involved in entering into contracts with the transport providers and the giving of instructions to drivers as regards the movement of duty suspended loads from Bordeaux into the UK as part of the Scheme."
Such reading as I had been able to do prior to the initial hearing on 16 th December 2010 indicated to me that, so far as Mr Cozens was concerned, there was little by way of evidence of significant assets beyond a property said to be worth £146,000 at 33 Burley Hill, Church Langley, Essex ("the Burley Hill property"). The evidence showed that HMRC knew of bank accounts in the name of Mr Cozens but not about what they contained. Ms Grimshaw deposed to the relatively modest income disclosed to HMRC up to 2007, as income earned by Mr Cozens as a taxi driver. As to Mr Price, I pointed out that the evidence did not show he owned any assets at all. Paragraph 283 of Ms Grimshaw's affidavit merely asserted that
"HMRC believe that he must have some assets, whether in a bank account or otherwise. In particular...
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