R v Commissioners of Inland Revenue, ex parte Mead and Cook

JurisdictionEngland & Wales
CourtQueen's Bench Division
Judgment Date20 Mar 1992

Queen's Bench Division (Crown Office List).

Stuart Smith LJ and Popplewell J.

Inland Revenue Commissioners, ex parte Mead and Cook

Michael Beloff QC, Robert Rhodes QC and David Pannick (instructed by Berwin Leighton) for the applicants.

Alan Moses QC, Rabinder Singh and Jonathan Fisher (instructed by the Solicitor of Inland Revenue) for the Crown.

The following cases were referred to in the judgments:

HTV v Price Commission ICR[1976] ICR 170

R v Chief Constable of Kent & Anor, ex parte L UNK(1991) 93 Cr App R 416

R v Commr of Police of the Metropolis, ex parte BlackburnELR[1968] 2 QB 118

R v Crown Court at Norwich, ex parte Belsham UNK[1992] 1 All ER 394

R v Derby Crown Court, ex parte Brooks UNK(1985) 80 Cr App R 164

R v General Council of the Bar, ex parte Percival ELR[1991] 1 QB 212

R v Humphrys ELR[1977] AC 1

R v IR Commrs, ex parte National Federation of Self-Employed and Small Businesses Ltd ELR[1982] AC 617

R v IR Commrs, ex parte Preston ELRTAX[1985] AC 835; [1985] BTC 208

R v Panel on Take-overs and Mergers, ex parte Datafin plc & AnorELRUNK[1987] QB 815; (1987) 3 BCC 10

R v Race Relations Board, ex parte Selverajan WLR[1975] 1 WLR 1686

R v Telford Justices, ex parte Badhan UNK[1991] 2 All ER 854

This was an application for judicial review by the two applicants seeking to quash a decision by the Board of Inland Revenue to prosecute them for criminal offences relating to schemes intended dishonestly to evade tax, while others who participated in similar schemes were not prosecuted.

The applicants and an accountant ("S") were charged with offences alleged to have been committed between 1981 and 1985 when they owned and controlled a company ("Protech"). The charges involved fraudulent extraction of funds from Protech by forged invoices and false accounting and private building work charged to Protech. The total amount involved was over £200,000 paid into foreign accounts.

The applicants were advised by S who was also charged with offences relating to the affairs of six other clients. The matter arose out of a long running, and still continuing, investigation of S's activities involving many clients.

None of the other six taxpayers whose affairs were the subject of charges against S was prosecuted although some were alleged to have been knowingly party to and to have benefited from significant and protracted dishonesty.

The policy of the Board of Inland Revenue was to utilise the system of financial penalties provided by the Taxes Management Act 1970 in many cases rather than bringing criminal prosecutions. However, the ultimate weapon of prosecution was a deterrent to potential tax evaders. The Board recognised the possible pitfalls of selectivity but sought to avoid them by reserving the decision to prosecute to officials at Under Secretary or Deputy Secretary level. In the present case the decision to prosecute was taken by an Under Secretary. He considered reports by senior officials concerned with the case and was aware that other clients of S who had participated in tax evasion schemes on his advice were not recommended to be considered for prosecution. The Under Secretary had considered the cases of the applicants on their merits and not in comparison with others.

The applicants did not challenge the lawfulness of the Board's selective policy but complained of the manner of its application. The applicants contended that their cases should have been compared with the other six taxpayers or even with the large number of S's clients under investigation. Only if there were distinguishing features which made their cases more serious than the others could the decision to prosecute be justified. In the absence of such a comparative exercise and in the light of the evidence that other clients of S had been engaged in similar schemes could the decision to prosecute be lawful. The decision was unfair since it led to inconsistent treatment of the applicants who had a legitimate expectation that they would be treated equally with other taxpayers.

The Revenue contended that a decision to proceed taken by the relevant prosecuting authority was not amenable to judicial review in the case of an adult, although, in exceptional circumstances, it might rarely be possible in the case of a juvenile. The inherent power of the magistrates or of the Crown Court were adequate to protect a person from abuse of process and, since there were other remedies available, direct access to the High Court for judicial review should not be permitted.

Alternatively, the Revenue contended, if the decision was reviewable, the application by these applicants should be refused because the decision to prosecute had been made in accordance with the policy of the Board which had not been criticised.

Held, dismissing the application:

1. (Per Stuart Smith LJ) A decision by a prosecuting authority such as the Inland Revenue was theoretically susceptible to judicial review but the circumstances in which it could be successfully invoked were extremely rare. The reasons for the decision would have to show bias, fraud or corruption. The fact that alternative remedies were available in respect of some matters such as abuse of process or inadequate evidence, did not exclude from consideration by the court matters, if any, which created a gap in the jurisdiction. R v Chief Constable of Kent & Anor, ex parte L UNK(1991) 93 CR App R 416 considered.

(Per Popplewell J) It was doubtful whether the court could consider an application to quash a decision by the Board to prosecute. Even if, in theory, the court had jurisdiction to review such a decision, it was difficult to envisage a situation in practice which could give rise to a remedy by way of judicial review which could not equally be treated by the courts as an abuse of process. R v Telford Justices, ex parte Badhan UNK[1991] 2 All ER 854 at p. 863 approved.

2. The Board's selective policy was properly adopted with the primary objective of collecting tax; because of the lack of resources to prosecute all dishonest taxpayers; and to deter others who might be influenced by the possibility of prosecution. It was inherent in such a policy that inconsistencies would arise. The requirement of fairness and consistency in the light of the Revenue's selective policy was that each case should be considered on its merits and whether the criteria for prosecution were satisfied. The only legitimate expectation that a dishonest taxpayer could have was that he might be prosecuted in accordance with the Board's policy, and that in considering whether to prosecute, the decision maker would act fairly within the ambit of that policy.

Stuart Smith LJ: Introduction

This is an application for judicial review of a decision made by the Commissioners of Inland Revenue in November 1990 to prosecute the applicants for criminal offences in connection with tax evasion and a consequent decision in March 1991 to serve summonses upon them. The applicants seek an order of certiorari to quash the decisions and a declaration that they are ultra vires and unlawful. The application is brought pursuant to leave granted by MacphersonJ on 19 June 1991.

The facts

The charges relate to offences alleged to have been committed between 1981 and 1985 inclusive at a time when the applicants owned and controlled a company called Protech Instruments and Systems Ltd ("Protech"). During this period Geoffrey Charles Scannell, who is now retired, was the professional accountant advising the applicants and Protech. There are five charges against Mr Mead. Two of them are joint with Dr Cook and Mr Scannell, two are joint with Mr Scannell alone. One is against Mr Mead alone. There are also five charges against Dr Cook; in addition to the joint charges with Mr Mead, he faces two charges jointly with Mr Scannell and one in which he alone is charged. The joint charges are much the most serious. They fall into two groups: those that allege fraudulent extraction of funds from Protech: the Revenue case is that by means of forged invoices and false accounting the costs of Protech were exaggerated and the sales were deflated thereby diminishing the apparent profits. The money was eventually paid into an offshore account. The other group relates to the alleged fraudulent provision of private building work charged to Protech. These charges are said to be specimen charges. It is possible that the applicants may face a further charge of conspiracy.

According to the Revenue the tax avoided was £272,308 of which some £158,000 is attributable to Dr Cook and the balance to Mr Mead. The individual charges involve in each case sums of about £750. It is very unlikely that if these stood alone the applicants would face prosecution.

Mr Scannell was a partner in the firm of Thompson Scannell, chartered accountants. He is charged with 17 offences, including those involving the applicants. They relate to the affairs of six other taxpayers who were his clients; the offences are alleged to have been committed between 1981 and 1988 inclusive, and again they are specimen charges. The matters arise out of a long-running investigation of Mr Scannell's activities and involve a total of some 50 taxpayers in all and it is still continuing.

None of the other taxpayers, or at least none of the six whose affairs are the subject of charges against Mr Scannell, are to be prosecuted, although it is clear that some are alleged to have been knowingly involved in and to have benefited from significant and protracted dishonesty towards the Revenue, although it is said that the amounts of tax avoided is significantly less, the highest amounting to £65,101: but it is right to say that these figures are disputed by the applicants. Some, perhaps most, of these other taxpayers are to be called as witnesses against Mr Scannell. In most of the other six cases the Revenue have been content to exact penalties instead of proceeding by way...

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