Lee Qualter Commercial Reduction Services Ltd v The Crown Court at Preston
| Jurisdiction | England & Wales |
| Judge | Lord Justice Hamblen,Mr Justice Stuart-Smith |
| Judgment Date | 11 April 2019 |
| Neutral Citation | [2019] EWHC 906 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | Case No: CO/130/2019 |
| Date | 11 April 2019 |
[2019] EWHC 906 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Hamblen
and
Mr Justice Stuart-Smith
Case No: CO/130/2019
and
and
Christopher Daw QC (instructed by Farleys Solicitors LLP) for the Claimants
The Defendant is not taking part in any part of the proceedings
Andrew Thomas QC and Anna Pope (instructed by Adkirk Law) for the Interested Party
Philip Marshall QC and Matthew Morrison (instructed by Weightmans LLP) for the BES Parties
Hearing date: 2 April 2019
Approved Judgment
Introduction
This is a renewed application made by the Claimants for permission to bring proceedings for judicial review of the decision of the Recorder of Preston, HHJ Brown, to make Production Orders relating to the Claimants' banking records, pursuant to ss. 345 and 346 of the Proceeds of Crime Act 2002 (“ POCA”).
Permission was refused by Ouseley J by Order dated 8 February 2019.
The Claimants also seek an order for disclosure and for permission to amend the Claim Form to join various parties as interested parties.
The factual background
Trading Standards North West (“TSNW”) is conducting an investigation into alleged offences of fraud relating to a number of businesses based in Fleetwood and Blackpool, Lancashire. The investigation is known as “Operation Best”.
The Interested Party, Cheshire West and Chester Council (“CWAC”), acts as the lead authority for TSNW in connection with its investigations and prosecutions. TSNW operates by virtue of a Protocol Agreement between the participating local authorities in the region.
Mr Christopher Jeffs is an accredited Financial Investigator for the purposes of ss. 345(1) and 378 of the Proceeds of Crime Act 2002. He is employed by CWAC and seconded to TSNW.
Mr Jeffs is conducting a money laundering investigation arising out of the Operation Best fraud investigation. The applications for Production Orders which are the subject of challenge were made by Mr Jeffs on 23 April 2018.
The businesses which are under investigation are, in various capacities, involved in selling energy supply contracts to small business customers. Although the businesses are all based in Fleetwood and Blackpool, Lancashire, they have customers across the UK.
There are three groups of companies under investigation.
First, there are the energy supply companies. These are BES Commercial Electricity Limited and Business Energy Solutions Ltd (which trade together as BES Utilities and will collectively be referred to as “BES”) which supply non-domestic energy. The directors of these companies are Mr Andrew Pilley and his sister Ms Michelle Davidson. BES are based in offices at Fleetwood Town Football Club, which is also controlled by Andrew Pilley. These are relatively large and profitable companies. Their annual turnover in their latest filed accounts was (respectively) £69.9 million and £21.1 million.
Secondly, there are the broker companies. These companies employ a telephone sales force who market and sell energy supply contracts. It is alleged that nearly all of their business is placed with BES. The principal broker companies under investigation are:
(1) Commercial Reductions Services Limited (the Second Claimant). This company has ceased trading and was struck off the register of companies in February 2018.
(2) Commercial Energy Limited (the Third Claimant). This company has also ceased trading and was struck off the register of companies in August 2015.
(3) Energy Search Limited (the Fourth Claimant). This company is still trading, essentially continuing the same business as the previous broker companies.
In each case, the First Claimant, Mr Lee Qualter, is (or was) the sole director and shareholder of the broker companies. He is a former employee of BES. The Production Order was also made against Mr Darren Martindale, a director of Commercial Reductions Services Limited. He does not seek to challenge the decision made.
The broker companies operated from premises at Darwin Court, Blackpool. It is said that those premises are controlled by Andrew Pilley and/or his companies. From HMRC records, the broker companies each had turnovers in the region of £1.2 to £2.1 million. They do not appear to hold any significant assets.
Thirdly, there is the aggregator, Commercial Power Limited. The aggregator operates as an intermediary between brokers and energy supply companies. Amongst other roles, it provides back office support relating to the contracts. The directors of Commercial Power Limited are Andrew Pilley and Michelle Davidson. It operates from Darwin Court, Blackpool (the same premises as the broker companies).
The individuals under investigation are Andrew Pilley, Michelle Davidson, Lee Qualter, Darren Martindale and various individual sales representatives employed by the broker companies.
In outline, the allegations which are being investigated are that sales representatives employed by the Claimants (i.e. the broker companies operated by Lee Qualter) have systematically mis-sold energy contracts on behalf of BES by lying to potential customers in telephone sales calls. It is alleged that these include lies about price, price comparisons and contract terms. It is alleged that the fraud is targeted at small business customers, such as independent shops, pubs and hairdressers.
It is alleged that the apparent separation between BES and the broker companies is a sham. The separate companies are used as a device to give the false impression that the brokers are independent when in reality they are operating as a direct salesforce for BES. This sham arrangement also distances BES and Andrew Pilley from the fraudulent activity of the sales representatives. It is alleged that in reality Andrew Pilley maintains overall control of the activities of the broker companies.
The investigation was initiated by Lancashire County Council Trading Standards in 2014. When the potential scale of the investigation became apparent, it was passed on to the regional team, TSNW.
Search warrants were executed at premises belonging to the companies and also at the homes of Lee Qualter and Darren Martindale on 28 and 29 July 2016.
The evidence which was relied upon in support of the warrants included a number of statements of complaint by aggrieved customers, evidence from a ‘whistleblower’ which was said in certain respects to be corroborated by the findings of a previous Ofgem investigation and an investigation by a BBC journalist.
The fraud investigation has moved on since the warrants were obtained. In particular, the investigation team have now had the opportunity to review sample recordings of the initial telephone calls made by the sales representatives. It is alleged that these provide clear evidence of fraud, thereby corroborating the original allegations made by complainants and by the whistleblower. There is evidence in internal documents which is said to provide strong support to the suggestion that the broker companies are in fact controlled by Andrew Pilley.
The evidence obtained as a result of the search warrants was relied upon for the purposes of the Production Order applications. The material was placed before the Court by way of additional statements from the financial investigator, Mr Jeffs, and the senior investigating officer Mr John Pierce.
The requirements for the making of a Production Order under POCA are as follows:
“ 345 Production orders
(1) A judge may, on an application made to him by an appropriate officer, make a production order if he is satisfied that each of the requirements for the making of the order is fulfilled. …..
346 Requirements for making of production order
(1) These are the requirements for the making of a production order.
(2) There must be reasonable grounds for suspecting that—
.…
(a) in the case of a confiscation investigation, the person the application for the order specifies as being subject to the investigation has benefited from his criminal conduct;
.…
(c) in the case of a money laundering investigation, the person the application for the order specifies as being subject to the investigation has committed a money laundering offence.
.…
(3) There must be reasonable grounds for believing that the person the application specifies as appearing to be in possession or control of the material so specified is in possession or control of it.
(4) There must be reasonable grounds for believing that the material is likely to be of substantial value (whether or not by itself) to the investigation for the purposes of which the order is sought.
(5) There must be reasonable grounds for believing that it is in the public interest for the material to be produced or for access to it to be given, having regard to—
(a) the benefit likely to accrue to the investigation if the material is obtained;
(b) the circumstances under which the person the application specifies as appearing to be in possession or control of the material holds it.”
The judge's decision
The application for the Production Orders was heard by the judge over two days, 17 and 18 December 2018.
The judge considered first whether CWAC had the power to pursue the investigation and to prosecute offences linked to that investigation, it being contended that it “does not have the power to conduct a freestanding investigation...
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