R v Ahmad and another

JurisdictionEngland & Wales
JudgeLord Justice Hooper
Judgment Date02 March 2012
Neutral Citation[2012] EWCA Crim 391
Docket NumberCase No: 20104251 D1 & 201004252 D1
CourtCourt of Appeal (Criminal Division)
Date02 March 2012

[2012] EWCA Crim 391

IN THE COURT OF APPEAL (CRIMINAL DIVISION)

ON APPEAL FROM THE CROWN COURT AT NORTHAMPTON

FLAUX J

T20067108

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice Hooper

Sir Christopher Holland

and

Recorder of Nottingham

(Sitting as a Judge of the Court of Appeal Criminal Division)

Case No: 20104251 D1 & 201004252 D1

Between:
(1) Shakeel Ahmad
(2) Syed Mubarak Ahmed
Appellants
and
The Crown
Respondent

REX TEDD QC appeared for the Appellants.

SIR D. SPENCER QC and MR J. KINNEAR appeared for the Respondent.

Hearing date: 14 th July 2011

Lord Justice Hooper
1

This appeal concerns what is believed to be the largest confiscation orders ever made—two orders each in the same sum of £92,333,667. The confiscation proceedings were governed by the Criminal Justice Act 1988. Leave was granted by the Full Court.

2

The appeal concerns two principal issues. The first issue relates to benefit and the meaning of the words in "in connection with its commission" in section 71(4) which states that "a person benefits from an offence if he obtains property as a result of or in connection with its commission". Similar language is to be found in section 76(4) of the Proceeds of Crime Act 2002, which provides: "A person benefits from conduct if he obtains property as a result of or in connection with the conduct".

3

The second issue relates to realisable assets and the consequence of a conclusion that a defendant has hidden assets.

4

The statutory assumptions in section 72AA did not apply.

5

The judge, Flaux J, found that the prosecution had proved on the balance of probabilities that each appellant had benefited in the sum of some £72 million uplifted for changes in the value of money due to inflation to £92,333,667 being the sum that had passed through bank accounts under their control in furtherance of what was a massive carousel fraud 1. The judge also found that they had not proved on the balance of probabilities that they did not have realisable assets in that sum.

6

None of the money has been paid and any sum eventually realised is likely to be far less than the £184,667,334 owed. The unpaid sum is presumably represented in the reported £1.26 billion of unpaid confiscation orders shown as an asset in the accounts of the Ministry of Justice 2 and for which the Minister has received public blame (see e.g. The Sun 23/11/2011 under the headline "SOFT JUSTICE SCANDAL" "YOU KEN NOT BE SERIOUS" and 24/11/2011, under the headline "KEN FINES RAP").

7

Both appellants claim that they have no realisable assets, a claim which was unsurprisingly rejected by Flaux J in a very careful and necessarily lengthy judgment. He described the appellants as unscrupulous and deeply mendacious, particularly about their assets. The evidence that the appellants gave to the effect that they were penniless was described by the judge as "frankly ludicrous". In so far as revealing their assets the appellants were "complete liars". Both appellants were very

uncooperative throughout the confiscation proceedings. The judge comprehensively rejected submissions that the confiscation proceedings were an abuse of process. He was fully entitled to reach all of these conclusions.

Background

8

On 28 th March 2007 in the Crown Court at Northampton (H.H.J. Alexander Q.C. and a jury) the appellants were each convicted of conspiracy to cheat the public revenue (count 1). On 30 th March 2007 before the same constitution, they were each sentenced to seven years' imprisonment. Each was disqualified from acting as a company director for 12 years under section 2 of the Company Directors Disqualification Act 1986. To avoid confusion, the appellant Ahmad will be referred to as Shakeel and the appellant Ahmed as Syed.

9

On 11 th June 2007 in the Court of Appeal Criminal Division Shakeel's renewed application for leave to appeal against conviction was refused. His renewed applications for leave to appeal sentence and for an extension of time (two weeks and three days) were adjourned. On the same date Syed's renewed conviction application was abandoned with the leave of the Court and his renewed application for leave to appeal sentence was refused.

10

On 31 st October 2008 the Court of Appeal Criminal Division granted Shakeel the appropriate extension of time and leave to appeal sentence. The appeal was refused.

11

On 5 th July 2010 in the Crown Court at Leicester Flaux J, after a hearing which had lasted 31 days, gave a 110 page judgment in which he made a confiscation order (in identical terms for each appellant) under s.71 of the Criminal Justice Act 1988 in the sum of £92,333,667 to be paid within two months and in default to serve ten years' imprisonment consecutive to the sentence for the substantive offence. Having dispensed with his counsel Shakeel ultimately represented himself at the confiscation proceedings and Syed was ultimately represented under a representation order by Mr Ken Berry, an ex-police officer with no legal qualifications employed by Burton Copeland Solicitors. This made the judge's task even more difficult than it already was.

12

On 16 th June 2011 the full Court granted the appellants leave to appeal against the confiscation order on grounds relating to the benefit and realisable assets and referred to the Court the application for leave to appeal the order that in the event of non-payment of the total amount within two months, the 10 years' term of imprisonment would have to be served consecutively. The period of two months was not chosen because it was realistically expected that the full amount could be paid in that time but because it was feared that the appellants might abscond if released on licence.

13

Sir Derek Spencer QC submits, emphatically, that the confiscation orders made by Flaux J were the orders which he was required to make by virtue of the confiscation legislation and that the result corresponds to the intention of Parliament in passing that legislation. Mr Tedd QC disagrees.

The facts- a broad overview

14

The appellants were directors and shareholders (Syed 51% and Shakeel 49%) of MST (Associates) Limited (hereafter "MST") which was incorporated in 1997 and registered for VAT. It operated as a computer parts broker dealing mainly with central processing units (CPU's). The conspiracy concerned 32 transactions which took place between 13 th and 30 th April 2002, MST acting as a second line 'buffer' company. Unsurprisingly the judge held that MST had engaged in no lawful trade and "pierced the corporate veil".

15

The fraud involved five companies in Ireland purporting to export large quantities of CPU's to a "missing trader" (five in total) in the UK. The goods were zero rated on import to the UK. The missing trader was either a registered company which went "missing" or a genuine company the identity of which was hijacked by the fraudsters.

16

The missing trader then ostensibly sold the goods to GW224, the first line buffer company which then sold the goods to MST.

17

GW224 was an apparently genuine company interposed to make it more difficult for the authorities to identify the fraud. On paper the missing trader sold the goods to GW224 at a loss enabling everyone else in the supply chain ostensibly to sell on at a profit. The missing trader issued a VAT invoice to GW224 enabling it to deduct the amount shown as VAT as input tax from the amount due from GW224 to Customs in respect of output tax on the onwards sale to MST, a second line buffer company. Notwithstanding that GW224 was purporting to sell the goods to MST, on nine occasions MST paid the company in Ireland directly thus by-passing GW224.

18

MST then sold the goods on to an exporting company, usually Harringtons, for an amount which included VAT. The exporting company then exported the goods back to the company in Ireland which had originally sold the goods. In many cases the whole chain of transactions took place on the same day.

19

No VAT was payable on the export. The exporter however then reclaimed the VAT which it had paid to MST. The amount of the VAT which was fraudulently reclaimed by the exporter was £12,662,822 (which we shall call for convenience £12.6 million). If the transactions had been genuine and there had been no missing trader then there would have been no loss to HMRC. The fraudulently obtained £12.6 million was used to fuel the fraud or laundered through various accounts and withdrawn in cash or used to buy gold bullion, none of which could be traced.

The benefit

20

The judge having pierced the corporate veil held that the benefit obtained by MST was the benefit of the appellants and, following now well-established authority, that the benefit for each appellant was therefore the amount of the benefit obtained by MST. He was right to pierce the corporate veil.

21

It is undisputed (on the law as it now stands) that where a benefit is obtained jointly, each of the joint beneficiaries has obtained the whole of the benefit and may properly be ordered to pay a sum equivalent to the whole of it. See R. v. May [2008] 1 AC 1028, para. 43. This is subject to one possible exception which Lord Bingham referred to in paragraph 45:

"There might be circumstances in which orders for the full amount against several defendants might be disproportionate and contrary to article 1 of the First Protocol, and in such cases an apportionment approach might be adopted, but that was not the situation here and the total of the confiscation orders made by the judge fell well below the sum of which the Revenue had been cheated."

22

The total amount of VAT loss to HMRC on the 32 MST transactions was £12.6...

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