SITA UK Group Ltd and Another v Serruys and Others
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE JACK,Mr Justice Jack |
| Judgment Date | 29 April 2009 |
| Neutral Citation | [2009] EWHC 869 (QB) |
| Docket Number | Case No. Hq08x01790 |
| Court | Queen's Bench Division |
| Date | 29 April 2009 |
[2009] EWHC 869 (QB)
Mr Justice Jack
Case No. Hq08x01790
Case No Hq08x01561
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Mr Alexander Hickey (instructed by Seymours) for the Claimants
Mr Adrian Beltrami QC Instructed by Mills & Reeve) for Andre Serruys,
Spc (norwich) Limited and Richard Cubitt
Mr Lance Ashworth QC (instructed by Wake Smith & Tofields) for Steven Winstone
Hearing dates: 22 April 2009
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
………………………..
This is an application made in two actions that the claimants have permission pursuant to CPR 31.22 to disclose to Her Majesty's Revenue & Customs documents and information obtained in the course of proceedings, and that they be released from undertakings given by them in relation to some of that information. The application was issued on 9 April 2009 and was heard on 22 April.
The history is as follows. On 1 May 2007 an agreement was made for the purchase by the first claimant, SITA UK Group Holdings Limited, 'SITA', of the issued shares in Easco Limited from SPC Norwich Limited, Mr Andre Serruys and Mr Richard Cubbitt. SPC Norwich was largely controlled by Mr Serruys. Easco had a number of subsidiaries, and carried on business in metal recycling under the control of Mr Serruys. The total consideration was £91.5 million. SITA allege that by reason of dishonest practices known to and encouraged by Mr Serruys the financial information provided to SITA prior to the sale was false. Those practices have been identified under the headings of skimming, cash payments and adulteration of metal sold. The skimming is alleged to have consisted of under-declaring the weight of metal received from suppliers, and so paying less than was due. Cash payments were allegedly made to employees and suppliers, which were not accounted for in the books or declared for tax. The alleged adulteration consisted of the inclusion with metal sold of material to increase the weight and therefore the price received. It is alleged that representations as to the financial information were made fraudulently. It is alleged that the shares in Easco were worthless. Mr Winstone was a director and the general manager of Easco Sheffield. It is alleged that he carried out various dishonest practices which resulted in the extraction of cash amounting to £4.8 million from Easco Sheffield, which he and Mr Serruys laundered. These allegations are made in what is called 'the deceit action', which was commenced on 23 April 2008 by SITA and SITA MR Sheffield Limited, as EASCO Sheffield had become. On that day I granted freezing orders against Mr Serruys, SPC (Norwich) Limited and Mr Winstone. SITA subsequently started a second action against Mr Serruys, SPC (Norwich) Limited and Mr Cubitt for breach of warranties contained in the sale agreement. This has been called 'the warranty action'. The two actions are progressing in tandem and are due to be tried together commencing on 25 January 2010 with an estimate of 40 days. The claimants have instructed Moore Stephens as accountancy experts to provide a report in support of their allegations, which is due to be served by the end of July 2009. On 20 October 2008 I made an order on the application of SITA and SITA Sheffield, which provided for the seizure from Mr Winstone of certain documents. The order contained an undertaking by the applicants not without the permission of the court to use any information or documents obtained as a result of the order, nor to inform any one of the application and order except for the purposes of the two actions. The order was executed and various documents were seized. The claimants say that they demonstrate Mr Winstone's dishonest conduct, and that of Mr Serruys. That is denied by them. The allegations and the denials are contained in the statements of case in the deceit action.
I will next set out the developing interest of HMRC. During a telephone conversation on 20 May 2008 Linda Pike, SITA's group UK tax manager, told Annette Hughes of HMRC of the obtaining of the freezing order on the grounds of the three dishonest practices which I have outlined – skimming, cash payments and adulteration It was agreed that a meeting would be appropriate. In a later memorandum (at page 37 of divider 12) it was stated 'on 20/05/08 the Tax Manager contacted the CRM to disclose major irregularities in relation to the Easco companies which significantly impact on Employment Taxes.' The meeting took place on 10 July 2008. Copies of the affidavit on which the freezing order had been obtained and the particulars of claim in the two actions were given to HMRC. HMRC wanted to know whether systems were now in place so there could be no repeat. They were happy to wait for a report in due course – apparently from Moore Stephens, but wanted to be kept informed and to have a proposed timetable of actions. In early August HMRC were sent some documents by e-mail. There is then a gap, whether because nothing of significance had happened, or because the documents have not been produced, is unknown to me. On 9 January 2009 Ms J Marriott, an HMRC investigator, wrote to Mr Christopher Chapron, Finance Director of the SITA Group, saying that she had been passed responsibility for establishing the tax consequences of the alleged frauds. She said that the investigation would be carried out under Code of Practice 9, and supplied a copy. The object was to reach an agreed monetary settlement. She suggested that, in the unusual circumstances that SITA had not been responsible for the companies when the alleged frauds were occurring, it would be beneficial to have a meeting prior to the opening meeting described in Code of Practice 9. She stated that at this 'pre-meeting' she could be informed as to progress of the claims in court. She said that a director of SITA would be required to answer the questions annexed to the Code. She suggested that as Moore Stephens' report would apparently form the basis of the disclosure to be made to HMRC it would be beneficial for Moore Stephens to attend.
The Code states:
“We will ask you to a meeting and invite you to make a full disclosure of all tax irregularities. This will be your only opportunity to secure the maximum benefit from making a full and complete disclosure of all irregularities in your tax affairs.
It is a matter for you to decide whether or not to attend and respond. If you do, we will ask you to explain the full facts and prepare a report detailing the nature, extent and reason for those tax irregularities, together with supporting evidence. We will then test that disclosure before seeking an agreement with you as to the amount of additional tax, interest and penalties and make arrangements with you for payment. You will be encouraged to make payments on account during the investigation. If you choose not to attend and respond, HMRC will conduct a thorough investigation of your tax affairs and will take into account your conduct during the course of the investigation in determining the level of any penalties due.”
It later states:
“If you tell us that there are matters that need to be disclosed, we will invite you to provide a disclosure report, the nature of which will depend on the individual circumstances of the case. Areas to be covered in the report should include
• a brief business history
• the nature of the irregularities and how they came about
• the steps you have taken to verify amounts with supporting documents and any assumptions you have made
• a detailed schedule of the irregularities for each period involved for each tax.
We will agree a timetable for producing this report at the meeting. In most cases we would expect the disclosure report to be submitted within six months of the opening meeting. The timetable will vary according to the complexity of the case and the volume of work required, for example, in more straight forward cases the report could be submitted considerably sooner.”
and:
“We will ask you for the information and documents that we need. We will give you a reasonable amount of time to provide any information.
You should tell us straightaway if you have difficulty obtaining the information we have requested and we will discuss with you how you might obtain it. You should also tell us if you think the information is not relevant to our investigation. We will discuss and try to agree the situation with you.
You should ensure that any information you provide and any answers you give are correct. If you are unsure about any matter you should say so. It is important that you give us all the relevant facts even if you are in doubt about the tax consequences of a particular matter.”
The Code also describes the reduction in penalties which cooperation may earn. It is as well to have in mind that the Code is primarily directed to the situation where executives of a company, who have been conducting tax evasion, meet with HMRC and confess their conduct. As HMRC pointed out, that is not the position of SITA.
The 'pre-meeting' was held on Thursday, 19 March 2009. It was attended by four representatives of SITA, two of Moore Stephens and three from HMRC Special Civil Investigations. The meeting itself was to be on Tuesday, 24 March. SITA were informed that the...
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