Imran Ahmed v HM Commissioners for Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Carr |
| Judgment Date | 28 June 2013 |
| Neutral Citation | [2013] EWHC 2241 (Admin) |
| Docket Number | CO/12049/2012 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 28 June 2013 |
[2013] EWHC 2241 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT
Royal Courts of Justice
Strand
London WC2A 2LL
Mrs Justice Carr
CO/12049/2012
Mr S Farrell QC and Ms K St. Aubyn (instructed by Brabners Chaffe Street LLP) appeared on behalf of the Appellant
Mr GA Russell (instructed by Her Majesty's Revenue and Customs) appeared on behalf of the Respondent
Introduction
This is an appeal by way of Case Stated by the appellant, Mr Imran Ahmed, against the decision of District Judge McGarva dated 6 September 2012. By that decision, the District Judge allowed the application of Her Majesty's Commissioners for Revenue and Customs ("HMRC"), the respondent, for the forfeiture under section 298 of the Proceeds of Crime Act 2002 ("the Act") of just under £227,000 out of a sum of some £325,400 in detained cash seized from properties at 133 Wake Green Road and 193 Liverpool Road in Birmingham as being "recoverable property" as defined by section 304 of the Act. With the exception of some £460, the cash was all seized from the property at Wake Green Road. The cash was secreted in that property in separate bundles, some contained in sealed plastic containers.
It was the respondent's case below that the cash seized represented undeclared profits of the business of Khushboo Textile Limited ("Khushboo"). It represented the dishonest suppression of sales made during the course of what was accepted to be a legitimate business. The cash was taken by and stored at the home of the appellant. The appellant was, so it was said, cheating the Revenue. That was the conduct element of the common law offence. I am told that no criminal prosecution of the appellant has taken place because the view was taken by the CPS that he was not fit for trial.
Two questions are posed for this court by way of Case Stated. Firstly, whether the learned judge was right to rule that the cash removed by the appellant from the company's premises and concealed at his home was obtained through unlawful conduct and therefore "recoverable property" for the purpose of Part 5 of the Act. Secondly, whether the learned judge was right to have ruled that the whole amount of the concealed undeclared monies was recoverable property or whether the figure should have been restricted to the amount of tax evaded.
Background and Findings of Fact from the Case Stated
The appellant is the occupier of 133 Wake Green Road. He was the sole director and shareholder of Khushboo, which traded from Ladypool Road. Khushboo is a company limited by shares which was registered at Companies House on 7 March 2001. It is and was in the business of wholesale fabrics.
On 6 January 2009, approximately £325,500 in cash was seized from the appellant's home at Wake Green Road. On 10 December 2010, a form G application was made by HMRC under section 298(1) of the Act and Rule 771, as amended, of the Magistrates' Courts (Detention and Forfeiture of Cash) Rules 2002.
A 4 day hearing took place. Evidence was given on both sides, although the appellant himself did not give evidence. At the end of that hearing, District Judge McGarva ordered the forfeiture of £226,982. In so doing, he rejected the evidence of HMRC as to the gross profit ratio of the appellant. In effect, the £226,000 represented 7 years of understated gross profits of the business. By way of defence to those proceedings, the appellant raised a multitude of points, including abuse of process and the fact that he was not fit to stand trial at the hearing. He argued that the monies in question partly consisted of inheritance monies. He also argued that this was just a situation where there was unpaid tax for which the more appropriate route of recovery was tax assessment.
In his judgment, the District Judge found that the figures in the diaries of the appellant entered under the letter "S" represented cash sales received by the appellant on behalf of Khushboo in respect of legitimate sales. He found that the appellant had removed from the premises of Khushboo the "S" figures in cash, being the proceeds of undeclared sales, and had stored them at his home at Wake Green Road. He had lied about not trusting banks. These sums had never been declared either in company records, in corporation tax returns or VAT returns or personal tax returns, despite the clear warnings on those documents. In removing the cash the District Judge found the appellant to be concealing these monies, dishonestly concealing the sales from the Revenue with the intention of cheating the Revenue and he had removed the cash from the company premises as part of the process of concealing the cash from the Revenue.
From the Case Stated, I refer in particular to paragraphs 4 and At paragraph 4 the District Judge recorded his findings of the following facts:
"(a)Throughout the relevant time, Khushboo Textiles Limited ("the company") was a limited company trading in textiles from 197 Ladypool Road. The appellant was the sole director and shareholder of the company.
(b)Sales made on behalf of the company during the trading year of 2008 were recorded in a personal diary kept by the appellant. Each week he recorded in the diary a "B" figure representing credit card sales and some cash sales, a "T" figure representing total sales and an "S" figure representing the majority of the cash sales. These all represented legitimate sales made on behalf of the company and the sums of money (whether credit card or cash), were received by or on behalf of the company in its normal course of business.
(c)Although the "S" figure in the appellant's diaries represented sums of money received by him on behalf of the company in respect of its legitimate sales, the appellant did not pay these sums into any of the company's bank accounts nor credit them in any other way to the company's accounts and they did not appear anywhere in its accounting records for which the appellant was responsible. Further, the appellant did not declare these cash sales in the records of the company in its corporation tax returns, its VAT returns or in his personal tax returns.
(d)Instead, the appellant removed these sums (as cash) from the company's premises and stored and concealed them at his home address at 133 Wake Green Road. He did so dishonestly and with intent to conceal the sales from HMRC to reduce the company's and his tax liabilities."
At paragraph 8 the District Judge confirmed his opinion as follows:
"(a)The appellant had over a period of years been involved in a dishonest scheme to cheat the Revenue.
(b)That scheme involved him under-declaring his profits. He did this by making cash sales which were not included in the formal records of the company or shown in any of his returns to the respondent and by removing the cash from the premises of the company rather than storing it there or paying it into one of the company's bank accounts.
(c)The act of storing the cash at home was with the intention of concealing the money from the Revenue (and therefore tantamount to money laundering) and was part of the unlawful conduct which comprised the offence of cheating the Revenue.
(d)Having formed this opinion, I looked at the definition of "recoverable property" in section 304 of the Proceeds of Crime Act 2002, which provides that "property obtained through unlawful conduct is recoverable property".
(e)The money was undeclared sales income belonging to the company. The appellant obtained it from the company with the intention of concealing it from the Revenue to evade tax and in so doing he acted unlawfully. It therefore amounted to property obtained through unlawful conduct, the unlawful conduct being the removal and concealment of the cash to cheat the Revenue.
(f)I rejected the appellant's argument that the reality of a small company was that the defendant would use the company's cash as his own; the argument ignores the appellant's failure to record the cash in his formal company records and the legal principle that the company is a separate legal entity.
(g)In relation to the second argument, that the measure of recoverable property was the amount of unpaid tax not including interest and penalties, I again looked to the wording of section 304 and concluded that the total amount of cash which had been unlawfully removed from the company must be the value of the recoverable property. Having accepted a gross profit ratio of 34 per cent, the figure was therefore calculated at £226,982."
In the course of his judgment, the District Judge accepted that section 304 of the Act does not import the word "retain" into the word "obtain" on the basis of the very different wording between Part 5 and Part 2 of the Act.
Finally, so far as the background and facts are concerned, I record that at no time was it alleged that the appellant had stolen money from the company or used money concealed in his home for his own personal gain.
The Law
The application below and under consideration here was an application made under Part 5 of the Act. Part 5 of the Act governs the civil recovery of the proceeds of unlawful conduct. The appellant draws attention to the clear contrast between Part 5 and Parts 2 and 7 of the Act, those latter parts dealing with confiscation following the conviction of criminal offences. Part 5 of the Act deals with recovery in rem, not in personam. That is the key distinction. In Part 5 there is no concept of obtaining a pecuniary advantage. One sees by contrast section 76(5) of Part...
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