R (Newcastle United Football Club Ltd Newcastle United Ltd Newcastle United Football Company Ltd) v The Commissioners for HM Revenue & Customs (First Defendant) The Crown Court at Leeds (Second Defendant)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Beatson,Mrs Justice Whipple |
| Judgment Date | 04 October 2017 |
| Neutral Citation | [2017] EWHC 2402 (Admin) |
| Docket Number | Case No: CO/2300/2017 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 04 October 2017 |
and
[2017] EWHC 2402 (Admin)
Lord Justice Beatson
and
Mrs Justice Whipple
Case No: CO/2300/2017
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Richard Lissack QC, Robin Barclay, Giles Robertson (instructed by RPC) for the Claimant
Stephen Nathan QC, Andrew Bird (instructed by HMRC) for the Respondent
Hearing dates: 27 – 28 July 2017
Further submissions in writing received on 31 July 2017
Judgment Approved
Lord Justice Beatson and
This is the judgment of the court to which we have both contributed.
I. Overview:
The claimants in this judicial review, filed on 7 June 2017, are three companies involved in the activities of Newcastle United Football Club ("NUFC"). Newcastle United Football Club Limited, the first claimant, is a dormant company. Newcastle United Limited, the second claimant, is the holding company which owns the shares in the first and third claimants, and Newcastle United Football Company Limited, the third claimant, is the company that operates the football club and employs professional footballers who play for the club. Save where it is necessary to refer to an individual company, we refer to the claimants as "NUFC".
The claimants challenge the legality of decisions taken by the Commissioners for Her Majesty's Revenue and Customs ("HMRC") on 19 April 2017 to apply for search and seizure warrants under the Police and Criminal Evidence Act 1984 ("PACE") in connection with a criminal investigation of suspected evasion of Value Added Tax ("VAT"), income tax and National Insurance Contributions ("NICs") by NUFC in relation to payments made to and via football agents, and the decision of HH Judge Jameson QC at the Crown Court at Leeds on 20 April 2017 to issue the warrants. The warrants were executed by HMRC on 26 April 2017 at three premises linked with NUFC: its main office premises at St James' Park, its training ground at Darsley Park, and the home of Mr Lee Charnley, its Managing Director. The warrants authorised access to eight other premises connected with football agents and players associated with NUFC, but there is no challenge in relation to HMRC's access to those premises.
HMRC has been investigating whether arrangements between NUFC, football agents and players allow the player to evade liability for income tax and employee's NICs, and NUFC to evade liability for employers' NICs and to claim inflated VAT refunds. The investigation is known as "Operation Loom". One of its objects is to ascertain whether payments made by NUFC to football agents purporting to act for NUFC were in fact being made or secretly transferred with the knowledge of NUFC to intermediate and ultimate recipients so as to benefit the player or the player's agent. In such cases, that payment may be a benefit in kind to the player, an employee of NUFC, which NUFC must declare on a form P11D, and in respect of which NUFC must pay employer's NICs, and the player must account for income tax and employee's NICs (for which in many cases the club would in fact account pursuant to its contract with the player). Specific aspects of Operation Loom involved investigating whether the arrangements were structured so that a smaller fee appeared to be paid to the player's agent and a larger fee to be paid to NUFC's agent or, where a single agent represents both NUFC and the player, whether there has been a false attribution of the agent's work such that an unjustifiable proportion of the fee is allocated as undertaken for NUFC; or whether NUFC secretly pays the player and/or his agent out of that larger fee.
Permission to apply for judicial review was granted by Supperstone J on 22 June 2017. By that date there was already in place an order for interim relief enjoining HMRC from examining the material that was seized from NUFC. Supperstone J continued the interim relief pending the hearing before us. We have continued the interim relief in materially identical terms, pending the delivery of this judgment (or further Order of the Court). As matters currently stand, therefore, HMRC is holding a large volume of information seized from NUFC and Mr Charnley, which information HMRC has not yet examined.
Supperstone J also ordered that the hearing of this judicial review be expedited given the need for an early decision about the status of the information seized, and the use (if any) to which it could be put by HMRC. In consequence, this hearing was listed for two days towards the very end of the Trinity Term. We have endeavoured to produce this judgment with all appropriate speed during the summer vacation.
The evidence on behalf of NUFC consists of 6 statements of Adam Craggs, a partner at Reynolds Porter Chamberlain LLP, the claimants' solicitors, dated 15 and 23 May, 7, and 22 June, and 21 and 27 July 201The evidence on behalf of HMRC consists of statements of the following members of the Fraud Investigation Service Directorate of HMRC: Richard Stretton, who executed the search warrant at St James' Park and was the senior HMRC officer present at the search; Steven Blackburn, the senior HMRC officer in charge of Operation Loom, both dated 16 June 2017; Lee Griffiths, the HMRC officer who swore the application for search warrants before the Crown Court, dated 13, 24 and 26 July 2017; and Eloise Konieczko, a legal trainee in HMRC's Enforcement and Insolvency Team, dated 16 June and 6 July 201The first witness statement of Mr Griffiths (dated 13 July 2017) attached a large number of documents, running to two lever arch files. He explained in his witness statement that these were among the documents in HMRC's possession at the time of the application for the warrants. None of these documents were produced for the judge, although we were shown a number of them.
At the hearing before us, HMRC sought permission to rely on the witness statement of Christopher Allen dated 13 July 2017. Mr Allen gave evidence about matters which post-dated the issue and execution of the warrants, namely an interview by HMRC officers of Mr Simon Stainrod, a football agent, on 4 May 2017, and exhibited certain emails, handwritten notes and a letter which were seized during a search of the London Stadium (home to West Ham United Football Club, "WHU") on 26 April 2017, in execution of different warrants issued by HHJ Jameson QC on the same day against that club. NUFC formally objected to the admission of Mr Allen's witness statement and the exhibited documents. We reserved our decision on HMRC's application, and (with the consent of NUFC) considered the contents of Mr Allen's witness statement and exhibits de bene esse during the course of the hearing.
The remainder of this judgment is organised as follows. Part II sets out or summarises the material primary and secondary legislation, and practice and procedure. Part III summarises the facts, the judge's decision, and the execution of the warrants. Part IV summarises the grounds of challenge and gives an overview of the parties' cases. Parts V and VI respectively contain the submissions on the procedural failings and substantive errors alleged by NUFC, and our analysis and conclusions on them. The challenge to the issue of the warrants on the ground that no reasons were given is dealt with at [43] – [61]. We have concluded that, although the procedure before the judge could certainly have been improved upon, the various procedural points taken by NUFC should be rejected. We also reject the substantive challenges to the warrants, which we have concluded were lawfully issued. In the light of our conclusions, the arguments relating to relief do not arise, and we do not address them. In Part VII, we, however, briefly record our view that, had the warrants not been lawfully issued, the submissions of HMRC as to why any relief beyond quashing them should be refused, appeared to us to have considerable force. Part VIII draws together our conclusions and gives references (at [109]) to the paragraphs containing our reasons for rejecting the various procedural and substantive challenges.
II. Legislation, and Practice and Procedure:
In this section, we set out or summarise the material provisions of the Police and Criminal Evidence Act 1984 ("PACE"), the Criminal Procedure Rules, SI 2015 No 1490 as amended by 2016 SI 2016 No 120 ("Crim PR"), and the Criminal Practice Directions made (see [2015] EWCA Crim. 1567) by the Lord Chief Justice pursuant to section 74 of the Courts Act 2003 ("the 2003 Act") and Part 1 of Schedule 2 to the Constitutional Reform Act 2005. A central issue in this case concerns the impact of amendments to the Crim PR which came into force on 5 October 2015 and of the Criminal Practice Directions which came into effect at the same time.
(a) The Police and Criminal Evidence Act 1984 ("PACE"):
Section 9 of PACE establishes a "special procedure" by which access can be obtained to confidential business documents, by making an application under Schedule 1 of PACE for a warrant. The application must be made in writing and supported by information, and questions relating to it must be answered on oath or affirmation. Section 15 of PACE sets out the information which must be set out in any such application.
By Schedule 1, paragraph 1, a circuit judge may make a production or access order under paragraph 4 if he is satisfied that one or other of the sets of access conditions is satisfied. In the case of a warrant, however, there is a further requirement. As well as being satisfied that one or other of the access...
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