The Commissioners for HM Revenue and Customs v Parul Keshavlal Malde
| Jurisdiction | England & Wales |
| Judge | Mr Nicholas Thompsell |
| Judgment Date | 19 May 2023 |
| Neutral Citation | [2023] EWHC 1188 (Ch) |
| Docket Number | Case No: HC-2015-002989 |
| Court | Chancery Division |
[2023] EWHC 1188 (Ch)
Mr Nicholas Thompsell
Sitting as a Deputy Judge of the High Court
Case No: HC-2015-002989
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF
ENGLAND AND WALES
Chancery Division
Rolls Building
Fetter Lane
London, EC4A 1NL
Mr Christopher Brockman and Mr Ben Hayhurst (instructed by The Commissioners for His Majesty's Revenue & Customs) for the Claimant/ Respondent
Mr Howard Watkinson and Mr Simon Gurney (instructed by Freeths LLP) for the Defendant/Applicant
Hearing dates: 3–4 April 2023
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.
INTRODUCTION
This hearing relates to a substantial and long-running claim made against the Defendant, Mr Malde, by the Claimant, the Commissioners for His Majesty's Revenue and Customs (“ HMRC”). The claim is based on Personal Liability Notices (“ PLNs”) and a Director's Liability Notice (“ DLN”) that were issued to him in respect of the activities of two entities: Sintra SA and Sintra Global.
HMRC alleges that these entities were engaged in alcohol diversion fraud; the entities were liable to pay VAT and excise duty on goods owned by them which were said to have been smuggled into the UK; and that Mr Malde was the controlling mind behind each entity. HMRC assessed both entities for VAT and excise duty and consequent penalties and sought to make Mr. Malde personally liable for penalties in a claim amounting to some £22,500,000.
Mr Malde successfully appealed the assessments in the First Tier Tribunal ( FTT), with the result that currently there are no outstanding assessments against him.
Since July 2015 Mr Malde has been subject to a freezing injunction made by this court preventing him from dealing with his assets.
On 15 December 2022, I first heard Mr Malde's application, made by notice dated 21 November 2022, to lift the stay on proceedings, dismiss the claim made against him by HMRC and to discharge the freezing injunction. HMRC had objected to this on the grounds that it is appealing the FTT decision. I learned on the day of that hearing that it had been given permission to do so. HMRC argued that, as a result, the matter is not yet finally determined and the freezing injunction remained necessary to prevent a real risk of dissipation of Mr Malde's assets so that he would be unable to meet the assessments against him if HMRC is successful in its appeal.
At that hearing, in an ex tempore judgment (see HMRC v Malde [2022] EWHC 3430 (Ch)), I determined that (i) a previous stay on proceedings should be lifted for the purposes of hearing this application; (ii) Mr. Malde's application to dismiss the proceedings (on the grounds that, the original claim supporting the FI were the PLNs and DLN and that the result of the FTT decision was that these notices were no longer valid after the FTT's decision) be refused; and (iii) Mr. Malde's application to discharge the freezing injunction be adjourned to a two-day hearing; and I gave directions for that hearing.
In deciding whether the order should be discharged or extended in such circumstances it was, and remains, common ground that I should apply the test outlined in Novartis AG v Hospira (UK) Ltd [2014] 1 W.L.R. 1264. In that case Floyd LJ summarised as follows the principles which apply to the grant of an interim injunction pending appeal where the claimant has lost at first instance:
(1) The court must be satisfied that the appeal has a real prospect of success.
(2) If the court is satisfied that there is a real prospect of success on appeal, it will not usually be useful to attempt to form a view as to how much stronger the prospects of appeal are, or to attempt to give weight to that view in assessing the balance of convenience.
(3) It does not follow automatically from the fact that an interim injunction has or would have been granted pre-trial that an injunction pending appeal should be granted. The court must assess all the relevant circumstances following judgment, including the period of time before any appeal is likely to be heard and the balance of hardship to each party if an injunction is refused or granted.
(4) The grant of an injunction is not limited to the case where its refusal would render an appeal nugatory. Such a case merely represents the extreme end of a spectrum of possible factual situations in which the injustice to one side is balanced against the injustice to the other.
(5) As in the case of the stay of a permanent injunction which would otherwise be granted to a successful claimant, the court should endeavour to arrange matters so that the Court of Appeal is best able to do justice between the parties once the appeal has been heard.
HMRC had applied for, and had received permission, to appeal to the Upper Tribunal on six grounds of appeal and I considered, and still consider, it appropriate to treat this appeal as equivalent to an appeal in these courts and to apply the Novartis test accordingly.
At the short hearing in December I considered that I did not have the time to determine for the purposes of the first of the Novartis principles whether the appeal had a real prospect of success. Also, whilst I was able to determine that, in the absence of the freezing injunction, there remained a real risk of dissipation, I did not consider that there was time or evidence to consider properly the balance of convenience or the issue as to whether the circumstances justified a departure from the starting point established in Financial Services Authority v Sinaloa Gold Plc [2013] 2 A.C. 28. ( Sinaloa) that where a claimant is a public body such as HMRC performing its public functions, that the body should not be required to provide a cross-undertaking in damages as the price for a freezing injunction.
I considered that there would need to be an adjournment for this to be dealt with in a two-day hearing. That hearing is the subject of this judgment.
The hearing was heard remotely over two days, although the first morning was needed for me to read into the voluminous bundles and authorities provided to me. I was greatly assisted in the hearing by counsel. It is a testament to the extent and complexity of the issues that each side was represented by two counsel. Mr Howard Watkinson and Mr Simon Gurney represented Mr Malde (with the latter taking the lead in relation to explaining Mr Malde's case before the Upper Tribunal, and the former dealing with other areas of law). Mr Christopher Brockman and Mr Ben Hayhurst represented HMRC (with Mr Hayhurst taking the lead in relation to explaining HMRC's case before the Upper Tribunal, and Mr Brockman dealing with other areas of law). I am grateful to all counsel for their helpful skeleton arguments and for their ability to condense detailed and subtle arguments within the short time allowed by the hearing.
MR MALDE'S CASE
As set out in his counsels' very helpful and detailed skeleton argument, Mr. Malde submits, in summary, that the freezing injunction should be discharged because:
(1) HMRC's Grounds of Appeal to the Upper Tribunal do not have a real prospect of success;
(2) in any event the balance of hardship falls in Mr. Malde's favour;
(3) in any event:
(i) the freezing injunction continuing to July 2024 and beyond breaches the reasonable time guarantee in Article 6 of the European Convention on Human Rights ( ECHR);
(ii) the Court is bound to avoid such a breach and so it would be unlawful for the Court to extend the freezing injunction; or
(iii) if the Court concludes that it could extend the freezing injunction without itself acting unlawfully that there must in any event be an effective remedy for such a breach, and the only effective remedy for the breach here is to discharge the freezing injunction.
(4) In the alternative, if the court determined that the freezing injunction should continue, Mr. Malde's submission was that it should only be permitted to continue:
(i) to the date of the hand down of the Upper Tribunal decision; and
(ii) if a cross-undertaking in damages is provided by HMRC, backdated to the date of the original freezing injunction; and
(iii) with a significant variation to increase Mr. Malde's monthly allowance being permitted, reflected in a yearly allowance instead, to significantly mitigate both the ongoing harshness of the order and recent rampant inflation, and to afford him some flexibility in expenditure.
As the Article 6 ECHR point goes straight to the heart of the question whether I should be considering extending the freezing injunction at all, I will deal with that point first before considering the elements of the Novartis test.
MR MALDE'S ARTICLE 6 RIGHTS
(A) APPLICATION OF ARTICLE 6
It was common ground that the PLNs and DLNs amount to criminal charges for the purposes of Article 6 ECHR. Customs and Excise Commissioners v. Han & Yau; [2001] EWCA Civ 1048, [2001] 4 All ER 687 was correctly cited as authority for this proposition.
As was found in Lloyd v Bow Street Magistrates Court [2003] EWHC 2294 (Admin) at [14], Article 6(1) applies to all stages of criminal proceedings. In that case it was extended to apply to confiscation proceedings. I accept that it applies to the freezing injunction in this case.
Mr Malde submits that even if the court concludes that (i) HMRC's Grounds of Appeal have a real prospect of success, and (ii) the balance of hardship falls in HMRC's favour, the freezing injunction should be discharged because its continuance breaches the reasonable time...
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