Mercy Global Consult Ltd ((in Liquidation)) v Mr Abayomi Adegbuyi-Jackson

Hearing dates: 16–17 November 2023

Written submissions: 20 November 2023

This judgment is handed down by email to the parties' representatives and release to The National Archives at 2 pm on Wednesday 13 December 2023

Approved Judgment

HHJJohnsKC:

A. Brief introduction

The claimant company, Mercy Global Consult Ltd ( Mercy), was in the business of supplying health workers to recruitment agencies. Those customer agencies would then provide the workers to end users, mostly NHS trusts. The fees payable by the customers to Mercy would be passed on to the workers after deduction of a commission for Mercy and PAYE and national insurance contributions. This case concerns VAT on the supply of these services by Mercy to its customers. According to assessments made by HMRC, there was a massive under-declaration of VAT by Mercy. Those assessments are in a total sum in excess of £21m. By these proceedings brought by Mercy in liquidation, it is alleged that this represented a major fraud by Mr Abayomi Adegbuyi-Jackson in the period from at least July 2015 into 2020. He was the director of, and sole shareholder in, Mercy. The unpaid VAT was, it is said, misappropriated or misapplied by Mr Adegbuyi-Jackson. Mercy seeks equitable compensation in a sum equivalent to the total liability to HMRC, being the unpaid VAT as assessed of over £21m and a penalty assessment of over £2m.

Claims in knowing receipt and dishonest assistance are also made against Mrs Adegbuyi-Jackson (the wife of Mr Adegbuyi-Jackson). And against a number of corporate defendants, all of whom have some connection to Mr Adegbuyi-Jackson and are said to have had a role in the fraud, as well as against Mr Somade — the director of one of them, being Dominion Payroll Solutions Ltd ( Dominion). Three of the other directors of Mercy are also sued for breach of duty, among other things. Further, there are proprietary claims made to assets acquired by Mr & Mrs Adegbuyi-Jackson, and by two of the corporate defendants, being Ojuolape Arcade Ltd ( Arcade) and Mercy Global Properties Solutions Ltd ( MGPS).

B. Trial and evidence

None of the defendants participated in the trial. Settlements had been reached with the Fourth Defendant, Mr Olunlade, and the Twelfth Defendant, Mr Adedire; the claim against Mr Olunade being discontinued by consent and a Tomlin order being made as between Mercy and Mr Adedire.

The remaining defendants had been debarred from defending for failure to comply with court orders. The failures included failure to give any disclosure or serve any witness statements for trial. The Second, Fourth and Fifth Defendants were debarred by order of HHJ Baumgartner, sitting as Judge of the High Court, made at the pre-trial review on 13 October 2023. The remaining defendants were the subject of a debarring order made by Mr David Halpern KC, sitting as a Deputy High Court Judge, at an adjourned further hearing of the pre-trial review on 16 October 2023; their Amended Defences or Defences being struck out at the same time.

Notwithstanding the debarring orders, it is still necessary to take care in assessing the extent, if any, to which Mercy has made out its claim. As was said by Mr Edwin Johnson QC, sitting as a Deputy Judge of the High Court, in Times Travel (UK) Limited v Pakistan International Airlines Corp[2019] EWHC 3732 (Ch) at [55], “ Where a debarring order does have the effect of preventing a defendant from participating in a trial, the position does not then go by default. At the trial the claimant must still demonstrate to the satisfaction of the court that the claimant is entitled to the relief sought in the relevant proceedings.”

That scrutiny at trial led to some concessions by Mercy. I will refer to those in what follows. And examine for the personal claims against each of the defendants, and for each of the proprietary claims, the extent to which those claims have been made out on the evidence.

So far as witness evidence is concerned, I heard from four witnesses called by Mercy.

Mr Marklew. He is an officer of HMRC working in HMRC's Fraud Investigation Service. He described the nursing agencies concession in respect of VAT; this concession being the principal plank in Mr Adegbuyi-Jackson's now struck out Amended Defence.

Mr English. He is another officer of HMRC working in HMRC's Fraud Investigation Service. He told me that “ In the absence of full business records HMRC's assessment against Mercy has been quantified as a matter of best judgment or an estimate or guess honestly made on such materials as are available to the commissioners.” – see his witness statement at [12]. He gave evidence of those assessments, being assessments of 20 October 2020, 21 January 2021, and of August 2021 covering the 15 VAT return periods from May 2017 to July 2020 totalling £21,984,621.70. And of a penalty issued on 5 July 2022 in the sum of £2,379,777.90 for the period 1 March 2019 to October 2020 comprising failure to notify and inaccuracy penalty assessments.

Mr Ainge. He is one of the two joint liquidators of Mercy, the other being Mr Paul Stanley. He said, among other things, that the liquidators expanded on the investigations HMRC had commenced by seeking further information from customers of Mercy. And by obtaining bank statements from some 26 bank accounts to which customer payments had been directed. The liquidators concluded that the VAT amounts were significantly higher than HMRC's initial assessments. He asked Mr Pughe to carry out a tracing analysis of what had become of Mercy's money representing the unpaid VAT and described the instructions he gave to Mr Pughe for that. He also told me that appeals against HMRC's initial assessments have not been pursued; there having been a lack of cooperation by Mr Adegbuyi-Jackson and his advisers with the liquidators in relation to the appeals. And that no appeal has been made against the latest assessment. He detailed those assets in respect of which a proprietary claim is made and gave evidence in support of those claims.

Mr Pughe. He is part of the forensic accounting team for Begbies Traynor Group plc (and therefore in-house so far as the liquidators are concerned). He carried out the tracing exercise and gave detailed evidence of that. His second witness statement contained some examples of his workings. He gave a further helpful description of his work to me orally.

Given that Mr Pughe's evidence relied on his expertise as a forensic accountant, I have considered whether it can properly be relied upon; it not having been given by way of expert report and there being no permission under CPR Part 35 for expert evidence.

In my judgment, it can properly be relied upon. There is a distinction to be drawn between two types of evidence which may be given by an expert relying on their expertise. It is a distinction between evidence of fact and evidence of opinion. That distinction is noted in Phipson on Evidence, 20th Ed. at 33–10, where the editors continue, “ Expert witnesses have the advantage of a particular skill or training. This not only enables them to form opinions and to draw inferences from observed facts, but also to identify facts which may be obscure or invisible to a lay witness.” Examples of identification of facts relying on expertise given in that textbook are a microbiologist spotting a microbe using a microscope, or a handwriting expert distinguishing parts of a letter.

The distinction seems to me important, as it is only opinion evidence which is generally inadmissible; a general rule to which expert evidence under CPR Part 35 provides an exception. The notes to the White Book 2023 at 35.0.1.1 under the heading “ Admissibility of Expert Evidence” begin, “ Expert evidence constitutes an exception to the general rule that only evidence of fact may be adduced”.

The evidence of Mr Pughe was evidence of fact, though of facts at least more readily discernible to someone with his expertise, namely in forensic accountancy.

Even if I am wrong to some extent and it could be said he strayed into opinion related to those facts, witnesses of fact are not excluded from offering opinions informed by their expertise. In Multiplex Constructions (UK) Limited v Cleveland Bridge UK Limited[2008] EWHC 2220 (TCC), Jackson J stated at [672] that, “ I conclude that in construction litigation an engineer who is giving factual evidence may also proffer (a) statements of opinion which are reasonably related to the facts within his knowledge and (b) relevant comments based upon his own experience.” That approach is not one confined to TCC cases, as was made clear by Beatson LJ in Globe Motors Inc v TRW[2016] EWCA Civ 396 at [92].

In receiving this tracing evidence, I am fortified by the example of two decisions in the case of Umbrella Care Limited v Nisa with neutral citation numbers [2022] EWHC 86 (Ch) ( Umbrella 1) and [2022] EWHC 3139 (Ch) ( Umbrella 2)....