Satish Chatwani and Others v The National Crime Agency and Another

JurisdictionEngland & Wales
JudgeLord Justice Davis,Mr Justice Hickinbottom
Judgment Date11 May 2015
Neutral Citation[2015] EWHC 1283 (Admin)
Docket NumberCase No: CO/576/2015
CourtQueen's Bench Division (Administrative Court)
Date11 May 2015
Between:

The Queen on the Application of

(1) Satish Chatwani
(2) Jawahar Chatwani
(3) Bhasker Tailor
(4) Rakesh Tailor
(5) Rashmi Chatwani
(6) Daksha Chatwani
(7) Hansa Chatwani
(8) Shilpa Chatwani
(9) Raksha Tailor
(10) Pravina Gulabivala
Claimants
and
(1) The National Crime Agency
(2) Birmingham Magistrates' Court
Defendants

[2015] EWHC 1283 (Admin)

Before:

Lord Justice Davis

and

Mr Justice Hickinbottom

Case No: CO/576/2015

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

DIVISIONAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Alun Jones QC and Bart Casella (instructed by Neumans LLP and Kaim Todner) for the Claimants

Andrew Bird and David McNeill (instructed by NCA Legal) for the First Defendant

The Second Defendant neither appearing nor being represented

Hearing dates: 15–16 April 2015

Mr Justice Hickinbottom

Introduction

1

On 28 January 2015, the First Defendant ("the NCA") arrested and detained the First to Fifth Claimants; and executed search warrants, issued by the Second Defendant ("the Magistrates' Court"), at six premises at which those Claimants lived or worked. In this judicial review, the Claimants challenge both the arrests and search warrants.

2

The claim gives rise to two issues for this court, namely:

i) The lawfulness of the arrests.

ii) The NCA concedes that the search warrants were unlawful; and accepts that the warrants should be quashed, and the entries, searches and seizures made under their authority should be declared unlawful. The issue that remains is limited to whether, despite that unlawfulness, the court should in its discretion allow the NCA to retain the material seized – or any copies or schedules of that material – pending its proposed application for an order under section 59 of the Criminal Justice and Police Act 2001 ("the CJPA"), which enables an agency that has obtained material from an unlawful search to apply to the Crown Court to retain it.

The Parties

3

The First, Second and Fifth Claimants ("Satish", "Jawahar" and "Rashmi") are brothers. They arrived in the United Kingdom from Uganda in the early 1970s, and have remained here as non-domiciled residents since. They each have accountancy qualifications.

4

From the early 1980s, they have had business interests held in a corporate structure, the three brothers being directors of each of the relevant companies, the largest and most relevant to this claim being Fairview Hotels & Healthcare Limited ("Fairview") and Davis & Dann Limited ("DDL"), both owned by the brothers for over 20 years. Fairview now ultimately owns and manages six hotels including the Mercure Bloomsbury London Hotel, with an annual turnover of about £10m. Jawahar is particularly involved in the management of Fairview. DDL has an annual turnover of about £50m, from a core business of trading in a wide-range of fast-moving bulk consumables, including pharmaceuticals, toiletries, household goods, soft drinks and (since 2012) under bond alcohol in the form of beer and wine. Much of the trading is done on the grey or parallel market, i.e. outside the manufacturer's authorised trading channels, and in very large quantities. DDL's day-to-day operations are handled by Rashmi, and the Fourth Claimant ("Rakesh") who acts as DDL's General Manager. The Third Claimant ("Bhasker") acts as Company Secretary for many of the group companies. The Head Office for the group is Kanta House, in Ruislip.

5

As a substantial trading company, DDL has had regular dealings with HM Revenue and Customs ("HMRC"), until recently without incident. However, in 2006, a VAT repayment was refused on the basis that a particular payment had been made by DDL as part of a series of fraudulent transactions. The payment related to the purchase of 24m razor blades for nearly £25m net of VAT, through twelve separate transactions, which contributed to a VAT repayment claim of some £4.3m. It turned out that the company at the top of each transaction chain defaulted in accounting for the VAT charged on its sale: it was a missing trader intra-community (or "MTIC") fraud. HMRC considered that DDL ought to have known that the transactions were connected with VAT fraud, and refused the repayment. DDL unsuccessfully appealed to the First-tier Tribunal, which found that the only reasonable explanation for the circumstances in which the purchases took place was that they were connected to fraud. However, on 6 August 2013, the Upper Tribunal (Tax and Chancery Chamber) allowed DDL's appeal, finding that the terms of dealing for the razor blades were broadly consistent with the way in which transactions in the grey market are ordinarily conducted; and DDL were innocent traders within a fraudulent scheme. HMRC are currently appealing that determination to the Court of Appeal: they have been granted permission, and a hearing date has been set for November 2015.

6

The Sixth to Tenth Claimants are the wives of the First to Fifth Claimants.

7

The NCA is a national law enforcement agency, which has been in existence since October 2013 when (amongst other things) it replaced the Serious Organised Crime Agency ("SOCA"). It was created by section 1(1) of the Crime and Courts Act 2013, with the functions of "securing that effective activities to combat organised crime and serious crime are carried out…", and of "gathering, storing, processing, analysing and disseminating information relevant to (a) activities to combat organised crime, (b) activities to combat any other kind of crime, (c) exploitation proceeds investigations…" (section 1(5)). It is an investigating agency, without the function of prosecuting offences, which is left to other agencies notably the Crown Prosecution Service ("the CPS") (section 1(10)).

8

The Director General of the NCA is able to designate any NCA officer as having the powers of a constable (section 10). Article 3 of the Crime and Courts Act 2013 (Application and Modification of Certain Enactments) Order ( SI 2014 No 1704) provides that the Police and Criminal Evidence Act 1984 ("PACE") applies in relation to NCA officers so designated, subject to the modifications in Schedule 1 to the Order. Under those modifications, generally, where PACE requires the approval of an act by a police officer of at least the rank of inspector, such an act requires the approval of an NCA officer of at least grade 3 (which is inspector-equivalent).

The Factual Background

9

This claim arises out of Operation Heteredon, an NCA investigation into money laundering. Brian Hickman is the lead officer of the operation, and Kevin Gilligan is the senior financial investigator.

10

In paragraphs 7 and following of his first statement dated 4 March 2015, Mr Hickman sets out the main evidence that, he considers, links DDL and the first five Claimants to the investigation. There are two primary strands, namely (i) evidence of a link to known and suspected money launderers through a man called Harvinder Batth (also known as Nindy Singh), and (ii) evidence of payments into DDL's bank account of moneys known or suspected to be the proceeds of crime, including the proceeds of a phishing scam on a school.

11

The evidence in the first strand is, briefly, as follows. As a result of the investigation, when Rajnesh Sharma (an Indian national based in Hamburg) visited the United Kingdom in March 2014, he was arrested for offences involving international money laundering. In August 2014, at Birmingham Crown Court, he pleaded guilty to offences involving not less than £10m of laundered money, and was sentenced to just over six years' imprisonment. His brother-in-law also pleaded guilty to similar offences, and was sentenced to three and a half years.

12

Those two men having been convicted, the focus of the operation turned to others who had connections with Sharma, notably Batth and Batth's wife, Harjeet Kaur Dhariwal. Batth had been convicted of money laundering offences in 2008, when he was sentenced to nine years' imprisonment, and was made subject to a confiscation order in the sum of £500,000. He was released on licence in 2012.

13

Batth was known to Rashmi, who had met him in 2006. When Batth was allowed out of prison on day release, Rashmi (who by this stage knew of his conviction) gave him a job with DDL because (he says) he felt sorry for him and his family. When Batth was released on full-time licence in November 2012, that job was made full-time.

14

In November 2013, Batth told Rashmi that, if he did not satisfy the confiscation order, he and his family would lose their home. He asked Rashmi if he could help. Rashmi arranged for DDL to loan Batth £179,000 – paid to HM Courts Service in part satisfaction of the confiscation order – which ensured the house was safeguarded; on the basis that (i) Batth would repay the debt and interest within two years, (ii) Batth would sell the house to discharge the debt; and (iii) in the meantime, the company took a charge on both that house and property owned by Batth's father-in-law (i.e. Dhariwal's father). (There is also evidence that DDL has paid £215,000 to another convicted money launderer, Brian McAvetey, after which he paid off a confiscation order of £200,000 earlier imposed on him. Mr McAvetey was in HMP Spring Hill at the same time as Batth.)

15

Enquiries with HMRC revealed that the 2013 declared income of Batth and Dhariwal was about £10,000. Dhariwal appeared to be on housing benefit. However, it seemed that they were living in a house in Gerrards Cross, purchased in August 2014 for £735,000 by a Jersey company with which it was believed the Chatwani brothers had connections; they each drove...

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