England and Wales Court of Appeal (Criminal Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM PORTSMOUTH CROWN COURT
HIS HONOUR JUDGE PEARSON
Insert Lower Court NC Number Here

		Royal Courts of Justice Strand, London, WC2A 2LL
		23/01/2008

Lord Justice Rix:

1. On 7 February 2007 at the Crown Court at Portsmouth before HH Judge Pearson and a jury the appellant, Roger George Doncaster, was convicted of cheating the public revenue (count 1) and two counts of false accounting (counts 2 and 3). He was sentenced to a total of two years imprisonment. He now appeals against conviction with the limited leave of the single judge. He also renews his application for leave to appeal against conviction in respect of two grounds on which the single judge refused leave.
2. Count 1 (cheating the public revenue) related to the appellant's tax affairs in the ten years between April 1992 and April 2002. During this time he had been making tax returns in respect of his trading as a used car dealer, but the Revenue complained that he had cheated in respect of his income tax, national insurance contributions and VAT liabilities in four ways: by failing to disclose the full extent of his turnover, thereby understating his taxable profit; by falsifying sales invoices to support the false turnover and profit figures submitted; by falsely stating his turnover as being below the limit (£50,000) for compulsory VAT registration for the purpose of evading liability to account for VAT; and by deliberately failing to register for VAT knowing that his turnover exceeded the limits for compulsory VAT registration.
3. Counts 2 and 3 (false accounting) related to statements of assets which he had signed during earlier tax investigations on 13 September 1992 and 13 June 2001 respectively. It was charged that he had dishonestly falsified those statements, being documents required for an accounting purpose, by omitting from them the full extent of his then assets, namely bank and building society balances totalling £37,216.71 in the case of the earlier statement and £125,210 in respect of the latter.
4. The full extent of the evidence deployed against him, which so far as necessary we will briefly describe below, on the Crown's case allegedly showed that for much of his life, from 1983 onwards when he was 33, the appellant had failed to account for his income tax (and later VAT) liabilities, had failed to disclose his assets, and had lied to the tax authorities. In particular he had falsely failed to disclose his full assets in September 1992 and June 2001. In July 2002 his case was referred by tax inspectors to the Revenue's Special Compliance Office (SCO) and a year later in July 2003 he was arrested. Further investigations and searches before and after his arrest revealed the extent of his trading and cash assets.
5. The appellant's defence at trial was that, although he had done much of which complaint was made over the years in terms of failing to render tax returns or make full disclosure of his assets, and had done so consciously, and had lied in support of his non-disclosures: nevertheless he had done so honestly, always intending to pay any tax due, and that he had made full and proper disclosure of his motor trading and its profits; that his non-disclosed assets and his life-style had been respectively accumulated and supported by income from property dealings or gifts from his father; and that any non-disclosure of his full assets had been in the honest belief that, if he had made such disclosure, the Revenue would have wrongly but maliciously insisted that he justify those further assets as not having been derived from his motor trading.
6. The appellant had traded as a second hand car dealer in Croydon from 1978 to 1986 and thereafter on the Isle of Wight from 1987.
7. There had been in all three separate tax enquiries, in 1983, 1990 and 2000. The first enquiry was started in 1983 by the Croydon tax office for failure to notify the Revenue of chargeability for income tax in relation to the years 1978/79 through to 1982/83. In other words the Revenue was concerned that he had been trading and in receipt of income but had not notified the Revenue that he was doing so and had not filed any tax returns. At the conclusion of that investigation the appellant completed a statement of assets and (save that he disputed that it had ever been signed) a certificate of full disclosure. His tax and national insurance liabilities for the relevant years were assessed at £6,617.93 plus interest, of which the appellant paid only £2,100 on account.
8. In 1987 the appellant moved to the Isle of Wight and again failed to notify the Revenue of his chargeability to income tax in respect of his motor trading. As a result the second enquiry was started in 1990. This enquiry went back to cover the whole period from 1978 through to 1989, because of the appellant's failure to discharge the whole of his assessed liabilities arising out of the first enquiry. On 13 September 1992 the appellant signed a second statement of assets as at 30 June 1992 (that is the statement which is the subject matter of count 2) and a second certificate of full disclosure. The second statement of assets referred to very modest cash credits in a small number of accounts, of which the only building society account was held at the Woolwich. On the basis of this second statement of assets, as the Revenue alleged, they were willing to proceed with a proposed settlement of tax liabilities up to 5 April 1989 in the sum of £45,000. That included an interest and penalty loading of 60%.
9. The second enquiry was conducted in the main by a local tax inspector by the name of Barry Davies. In the course of the second enquiry it emerged that:

(i) At an interview on 17 July 1990 the appellant had been told by Mr Davies that he was concerned at the way the previous enquiry at Croydon had gone: he had promised co-operation but had not kept his side of the bargain and had moved to the Isle of Wight without informing the Revenue; full co-operation and disclosure would be expected and a further statement of assets would be required; the Revenue took a serious view of forms subsequently found to be false.

(ii) At a further interview on 26 July 1990, the appellant disclosed, but only after being seen to visit a local branch of the Abbey National building society, that he had been there to close an account and withdraw £10,000; and then also disclosed the recent closure of three other building society accounts and withdrawals totalling approximately £20,500. He said he had now disclosed all such accounts. The appellant paid the Revenue £25,000 on account.

(iii) In a telephone conversation of 4 March 1991 the appellant revealed that over a decade before he had sold a property in Thornton Heath. In a further telephone conversation on 26 April 1991 the appellant's accountant, Mr Hutchinson, told Mr Davies that that sale occurred in 1980 in the sum of £21,000. Mr Davies said that this had not figured in the first certificate of full disclosure, and he again spoke of the serious view that the Revenue took of false statements of assets and certificates of disclosure.

(iv) As a result of this latest disclosure Mr Davies referred the enquiry to the Enquiry Branch (as the SCO was then called) for possible transfer to it of further investigations as a case of serious fraud (which under standing order Guidance was the exclusive responsibility of the Enquiry Branch), but the Enquiry Branch declined transfer. When the appellant and Mr Davies next met on 28 January 1992, Mr Davies spoke to the appellant again of how he had promised co-operation but had told lies and was regarded as still being un-co-operative in not disclosing where he was holding the balance of the funds which he had withdrawn from closed building society accounts in the previous summer.

Following the conclusion of the second enquiry the appellant started filing annual tax returns for the first time.

10. The third enquiry commenced in August 2000 when the appellant's 1998/99 self assessment form was selected for further enquiry. It had calculated his turnover at £48,784 and his net profit at £5,201. The turnover figure was only just below the limit of £50,000 at which registration for VAT was compulsory, and this, together with a profit figure considered as too low to live on, alerted the Revenue. The third enquiry was conducted by other local tax inspectors, by the name of Robert Paton and Robert Morton. On 14 June 2001 the appellant signed a third statement of assets, this being as at 5 April 1999 (the subject matter of count 3). This statement disclosed two bank accounts (at NatWest) and modest amounts of cash, but no building society accounts. The third enquiry was never concluded, for in July 2002 it was transferred to the SCO as a possible case of serious fraud. The transfer took place after it had been discovered that a number of other accounts had been in operation as at 5 April 1999 and that the activity of these accounts demonstrated that the appellant had been banking and spending sums of money well in excess of the profits declared in his tax returns. Following transfer it was confirmed that as of 5 April 1999 the appellant had operated in addition to the two NatWest accounts disclosed a further 10 bank and building society accounts containing £125,210 which had not been disclosed. Analysis of these newly discovered accounts also revealed that a substantial part of those funds dated back some years and following further investigations it was revealed that the second statement of assets (as of 30 June 1992) was also incomplete in omitting 4 building society accounts with a credit total as of that date of £37,216, opened on 6 May 1992 (only six weeks before the reference date of that statement). These were the subject-matter of agreed admissions and schedules at trial.
11. Moreover at trial the Crown relied on inter alia the following further matters which had come to light in the course of the third enquiry or after the transfer to the SCO:

(i) In November 1999 the appellant had delivered to the Revenue what he said were his business records for the 1998/99 year. Sales invoices of only 36 cars totalling £50,286 were included. They were only in photocopy, however, and the invoices were unnumbered. Subsequent investigation revealed an invoice book recovered from the appellant's home (when it was searched on 22 July 2003) showing the genuine sales; enquiries with other traders on the Isle of Wight also revealed that the appellant had sold other cars beyond the 36 disclosed by him; enquiries from customers showed that the invoices disclosed were false and had been specifically created to mislead; a further set of the photocopied invoices was discovered at the appellant's home marked "One's shown to the Revenue".

(ii) Some nine invoice books for the five tax years to April 2002 were discovered at the appellant's home. Customers contacted as a result confirmed that the invoiced sales were genuine, but they significantly exceeded the turnovers declared in the appellant's tax returns. A forensic accountant, Ian Barber, gave evidence at trial that for those five years total income tax, national insurance, interest and VAT payable would have been in excess of £30,000. A further witness, Kevin Sullivan, performed a similar exercise for the previous five years.

(iii) The appellant's own accountant, Colin Haffenden, over a number of years beginning in 1994 gave evidence for the Crown. He had never met the appellant. He drew up the appellant's tax returns on the basis of figures supplied by the appellant. He had never seen any original documentation. In respect of the 1998/99 tax return he had adjusted the turnover, on the appellant's instructions, from above to below the VAT threshold. The appellant signed the returns in blank. He knew the appellant wished to avoid paying tax and had one year made a fuss when he had incurred a tax liability of £100.

12. In his defence the appellant accepted much of the Crown's case including his non-disclosures and lies, but maintained that his returns concerning his motor trading were essentially correct, even if he might have missed the odd car. His assets derived from property deals or gifts and so on, none of which was taxable income. He had not disclosed his hidden assets, none of which had come from his motor trading, because the Revenue was conducting a witch-hunt against him. Even the agreement in 1992 whereby he had paid the Revenue £45,000 was unfair. Thus he accepted that he had lied in 1983 in failing to declare the proceeds of the sale of his property or the existence of building society accounts, but he said that he had come clean in the end about that. He agreed he also lied in the 1990 enquiry, both in the course of it and also in respect of his non-disclosure of building society accounts in his second statement of assets. He said that he knew this was wrong. He made similar admissions in respect of the third statement of assets. He also accepted that he had been trading for some seven to eight years prior to the 1983 enquiry without notifying the Revenue, and had done the same after his move to the Isle of Wight. He knew he was meant to notify the tax authorities.

The grounds of appeal

13. In these circumstances the grounds of appeal we have heard are somewhat technical. The first is that the judge wrongly admitted evidence of the appellant's bad character in the first two enquiries under section 101 of the Criminal Justice Act 2003 (the "2003 Act"). The second is that the judge erred in failing to exclude that evidence under section 76 and/or section 78 of the Police and Criminal Evidence Act 1984 (PACE). The third is that the judge erred in failing to give the appellant a good character direction.
14. The fourth and fifth grounds of appeal were renewed as an application for leave to appeal. The fourth ground is that the judge erred in refusing an application of no case to answer on counts 2 and 3: because he was wrong to hold that the statements of assets could be accounting documents within the offence charged. The fifth ground is that the judge erred in allowing the appellant to be cross-examined on material which, although served on the Crown by the appellant himself, had not already been put in evidence by the Crown.
15. At the conclusion of the hearing we rejected the first three grounds of appeal and dismissed the appeal. We also refused leave to appeal on grounds four and five. These are now the reasons for our decisions.

The first ground of appeal: section 101 of the 2003 Act

16. In October 2006, a few months before the commencement of the trial in January 2007, the judge was asked by the Crown to admit evidence of the first two enquiries under gateways (c) and/or (d) of section 101. The 2003 Act provides as follows:

"98. References in this Chapter to evidence of a person's "bad character" are to evidence of, or a disposition towards, misconduct on his part, other than evidence which

(a) has to do with the alleged facts of the offence with which the defendant is charged, or

(b) is evidence of misconduct in connection with the investigation or prosecution of that offence…

101. (1) In criminal proceedings evidence of the defendant's bad character is admissible if, but only if –

…

(c) it is important explanatory evidence

(d) it is relevant to an important matter in issue between the defendant and the prosecution…

(3) The court must not admit evidence under subsection 1(d) or (g) if, on an application by the defendant to exclude it, it appears to the court that the admission of the evidence would have such an adverse effect on the fairness of the proceedings that the court ought not to admit it…

102. For the purposes of section 101(1)(c) evidence is important explanatory evidence if –

(a) without it, the court or jury would find it impossible or difficult properly to understand other evidence in the case, and

(b) its value for understanding the case as a whole is substantial.

103. For the purposes of section 101(1)(d) the matters in issue between the defendant and the prosecution include

(a) the question whether the defendant has a propensity to commit offences of the kind with which he is charged, except where his having such a propensity makes it no more likely that he is guilty of the offence;

(b) the question whether the defendant has a propensity to be untruthful, except where it is not suggested that the defendant's case is untruthful in any respect.

112. (1) In this Chapter –

"bad character" is to be read in accordance with section 98;

…

"important matter" means a matter of substantial importance in the context of the case as a whole;

"misconduct" means the commission of an offence or other reprehensible behaviour…"

17. There appears to have been some discussion before the judge as to whether the facts of either of the first two enquiries fell outside the definition of bad character as being evidence which "has to do with the alleged facts of the offence" within section 98(a). The Crown's position appears to have been that the second enquiry was directly part of the facts of the offences charged, but the judge preferred what seems to have been the defence's position which was that the second enquiry was merely potentially bad character which fell within the limitations and safeguards of the statute. On this basis the judge ruled that the facts of the first enquiry were, but the facts of the second enquiry were not, within gateway (c). We are puzzled by the second aspect of this ruling, and it is to be observed that when the judge came to direct the jury he told them that they had heard about both the first and second enquiries in part because "it may help you to understand other evidence in the case", treating each as background to the third enquiry.
18. On behalf of the appellant, Mr Richard Germain submits that the judge was manifestly wrong to admit anything about the first (or second) enquiries under gateway (c). He submits that the first two enquiries were unrelated to each other and to the third enquiry. We find it difficult to understand this submission. We see that count 1 on the indictment was only directly concerned with matters after the appellant had commenced to account to the Revenue for his motor trading in respect of the 1992/93 year and following. But count 2 was directly concerned with the second statement of assets made during the second enquiry in 1992. And we agree with the judge that the second enquiry could not be properly understood without knowing about the first enquiry and that the value of the first enquiry for understanding the case as a whole was substantial. We would also agree that the same can be said for the second enquiry in relation to the third enquiry, to the extent to which those facts may not have been part and parcel of the offences charged. In this connection it needs to be borne in mind that the second enquiry returned to the period covered by the first enquiry.
19. The judge also admitted evidence in relation to the first two enquiries under gateway (d) on the basis that such evidence was of bad character in the two respects mentioned in section 103(1)(a) and (b), namely the question whether the appellant had a propensity to deal with the revenue in a dishonest manner and to be untruthful. Although there were no relevant previous convictions, his misconduct (or other reprehensible behaviour) established a propensity to commit offences of the kind charged, which made it more likely that he had committed the offences charged, and it was not unjust to rely on that bad behaviour and the proceedings would not be unfair if evidence of it were admitted (cf the three questions of the Vice-President, Lord Justice Rose in R v. Hanson [2005] EWCA Crim 824, [2005] 2 Cr App R 21 (299) at para 7).
20. On the appeal Mr Germain again submitted that the judge had erred in so ruling. He said that the appellant had not committed any offences in the past, and submitted that trading without registering or notifying the Revenue was not the same as presenting false accounts. However, bad character misconduct can be in any relevant form and does not need to be proved by way of convictions or criminal offending. He next submitted that the judge had not considered whether the bad character in question was relevant to an "important" matter in issue. It is true that he had not expressly adverted to that language. But he did agree with the Crown's submission that the second enquiry was "highly relevant" to one or more counts on the indictment, and in any event the critical issue in the trial was the appellant's honesty and there is no escaping the fact that throughout the history of the enquiries the appellant had displayed an attitude to the Revenue which was capable of being viewed by the jury as dishonest. Mr Germain next submitted that dishonesty was not in issue because the appellant had admitted lying throughout the enquiries. It is true that in his evidence the appellant did concede having told many lies; and that at times during the enquiries he had come clean about what he had previously failed to disclose. However, the submission was hopeless. Despite his admissions the appellant maintained that his second and third statements of assets had not been dishonestly signed and that his tax returns had honestly declared his trading turnover and profits.
21. Mr Germain submitted that in any event the history of the enquiries was too old, unfairly affected the proceedings and should have been excluded under section 101(3) of the 2003 Act and/or section 78 of PACE by reason of the length of time that had elapsed between the conclusion of the earlier enquiries and trial. This submission was supported by reference to an issue as to whether the appellant had signed the first certificate of full disclosure at the end of the 1983 enquiry. The files of this enquiry had been lost, but they still existed at the time of the second enquiry during which Mr Davies referred to a signed certificate, and this reference was supported by the contemporaneous notes of that second enquiry. It was in any event common ground that the first statement of assets had been signed, and an unsigned certificate was present among the appellant's own papers.
22. However, the judge did consider the position under section 101(3) and expressly (by analogy with section 103(4)) by reference to the time factor and concluded that there was no unfairness in the admission of the evidence. We agree. It is true that the first enquiry was in 1983 and went back to the 1978/79 year and the second enquiry started in 1990 and again went back to the 1978/79 year: but the third enquiry and the trial itself concerned not only the whole of the appellant's tax returns from 1992/93 onwards, that start-time being more or less contemporaneous with the end of the second enquiry, but also concerned the second statement of assets which had been made in 1992. In truth, the history of the appellant's dealings with the Revenue made up a single book of many parts, but with a consistent theme, which the Crown was entitled to put before the jury as one of dishonesty. We do not regard the narrow issue relating to the certificate of full disclosure of the first enquiry as rendering the admission of evidence concerning the first and second enquiries unfair.
23. So far as there is any uncertainty about the width of the judge's admission of evidence under gateway (c), we have in mind that once evidence of bad character has been admitted under any gateway it is open to the jury to attach significance to it in any respect in which it is relevant: see R v. Campbell [2007] EWCA Crim 1472, [2007] 2 Cr App R 28 (361) at para 26, citing R v. Highton [2005] EWCA Crim 1985, [2006] 1 Cr App R 7 (125).
24. There are other aspects of the appellant's case on section 78, and therefore section 101(3), which are best dealt with under the next ground of appeal.
25. Subject to those further considerations dealt with below, we therefore provisionally reject this first ground of appeal.

The second ground of appeal: sections 67(9), 76 and 78 of PACE

26. This ground focuses in particular on aspects of the second and third enquiries in which the appellant, under pressure from the tax inspectors (by reference to the possibility of civil penalties in the settlement of his tax liabilities in the absence of proper co-operation) to tell the truth about any further cash assets he may have and any further accounts in which he may hold or have held them, made partial admissions (such as to building society accounts he had just closed) while at the same time, as subsequent investigations were to show, continuing to lie about such disclosure. The judge described such aspects of his interviews as "hybrid", consisting as they did of elements of truth and lies. There was never any admission, however, of any of the substantive offences for which he was subsequently charged.
27. Mr Germain submitted that the tax inspectors who conducted such interviews, Messrs Davies and Paton, were within section 67(9) of PACE which provides –

"(9) Persons other than police officers who are charged with the duty of investigating offences or charging offenders shall in the discharge of that duty have regard to any relevant provision of…a code."

It is said that Messrs Davies and Paton had failed to do this, in particular by failing to caution the appellant and advise him as to the taking of legal advice, and that this was a substantial and significant breach of Code C. Moreover, the appellant's admissions about previously concealed assets amounted to a confession within section 76 which had been obtained by oppression and should have been excluded as such. In any event, such admissions should have been excluded under section 78 on the ground that, as it provides –

"having regard to all the circumstances, including the circumstances in which the evidence was obtained, the admission of the evidence would have such an adverse effect on the fairness of the proceedings that the court ought not to admit it."

Reliance was also placed on article 6 of the European Convention on Human Rights and Fundamental Freedoms, but it was not submitted that this took the argument beyond domestic protection.

28. The judge was asked to rule on similar submissions and for these purposes held a voire dire in which Messrs Davies and Paton and the appellant gave evidence. The tax inspectors explained that they were trained to investigate tax liabilities, but that if their enquiries threw up serious fraud, they were required to refer the matter to what is now called the SCO. This they had done. The judge accepted their evidence that they had acted in good faith, and had complied with their own internal codes of practice. They had not been trained for criminal investigations, and therefore not trained as to when and how to administer any caution. They were concerned with administrative, not criminal, sanctions. The appellant for his part said that if he had been cautioned he would not have answered the questions in the way that he did; he did not appreciate the significance or seriousness of the forms he was asked to complete; he would not simply have relied upon the accountant who accompanied him to most of the interviews, but would have consulted a solicitor.
29. The judge, while accepting the inspectors' evidence, rejected that of the appellant. He did not consider that he would have acted differently if he had been cautioned and taken legal advice. He knew that it was in his own interest, in order to satisfy the inspectors in his appeals against their assessments, to provide them with information, but he had his own ideas of what information he was prepared to give. It was clear from his own evidence that he conceded lying consistently and persistently over a long period of time about both his assets and his income.
30. The judge concluded: (1) that the tax inspectors were not "Persons…charged with the duty of investigating offences" within the meaning of section 67(9) and that therefore the PACE Codes did not apply, albeit he referred to this as a "borderline decision" because some aspects of investigations may "touch on criminal proceedings"; (2) that there had been no confession within the meaning of section 76, because nothing the appellant said was as a result of threats or inducement; (3) that there was in any event nothing in the circumstances which made the admission of this evidence unfair for the purposes of section 78; (4) that even if Code C had applied, his decision on section 78 would have been the same, for the breach would not have been serious, substantial or significant: the appellant would have acted in the same way if he had been cautioned, he had volunteered what he wished, in any event conscious of procedures to protect his own interest, in accordance with his own discretion; (5) as for article 6, the position was the same: any breach did not make the investigatory procedures or the trial unfair. The judge ended thus –

"It seems to me that this was a man who was exercising his own powers of judgment with the advice in the main of accountants and as I say, choosing to behave in such a way that has eventually brought him on for trial. It seems to me that he is not a man, therefore, who could claim that the trial would be unfair, because it has breached the rights against self-incrimination under provisions of article 6."

31. Under this second ground of appeal, Mr Germain has put these matters all again in issue. He submits that the judge was in error in his rulings, in particular because he mistook the evidence of the two tax inspectors. Each had in the voire dire admitted that their duties did involve the investigation of criminal offences. Reliance was placed on the following passages in the cross-examination of each: where Mr Davies said "Yes" in answer to the successive questions "Part of your duties therefore involved investigating possible tax evasion?" and "Tax evasion is a criminal offence, is it not?"; and Mr Paton was questioned as follows:

"Q. Right. Your investigation involves, does it not, an investigation into whether a criminal offence has been committed?

A. Ultimately at the beginning one is looking to see whether the figures returned are correct.

Q. But if they are not correct, if they have been deliberately reduced, then that amounts to a criminal offence, does it not?

A. Yes, you know depending on the magnitude as to whether one would…

Q. Depending on what?

A. The magnitude of the offence.

Q. Well, it is a criminal offence. Whether a prosecution is brought may depend on the amount but any tax evasion is a criminal offence, is it not.

A. Yes."

32. We do not accept, however, these answers as characterising the inspectors' evidence as a whole, which made it quite clear that they both regarded their role as limited to the investigation of civil tax liabilities, not criminal matters with a view to prosecution, which required referral to what used to be called the Enquiry Branch and is now called the SCO. As Mr Davies said when asked if he considered it to be his role to carry out a criminal investigation: "No, not a criminal investigation with a view to prosecution, no…[That] was certainly the role of the head office Enquiry Branch." Similarly Mr Paton answered "No, no" when asked if the investigation of criminal offences was his role. This evidence is confirmed by reference to the internal guidance issued to tax inspectors at the time of the second and third enquiries, to which those witnesses made, albeit superficial, reference. That internal guidance demonstrates that serious fraud (defined to include a potential understatement of profit of £50,000 overall or £25,000 in any three year period or a significantly false or incomplete disclosure which had purported to be complete) had to be referred to what is now the SCO. In this respect, therefore, an enquiry by a local tax inspector is a civil procedure designed to identify and settle a taxpayer's proper tax liabilities, in the course of which penalties and interest may be imposed but not by way of criminal as distinct from civil sanction. It became important therefore for a local inspector to refer an enquiry to the SCO, for the very purpose that that Office could administer a caution and give warnings about legal advice before carrying the investigation any further. Section 67(9) does apply to officers of the SCO: see in this context R v. Gill [2003] EWCA Crim 2256, [2004] 1 Cr App R 20, where there was a breach of the Code by the SCO because of failure to administer a caution, but the evidence was nevertheless admitted because (as the judge also found in the present case) there was no likelihood that the defendants there would have given different answers if the caution had been administered, and the prosecution wanted to adduce the answers as evidence of deliberate lies rather than as confessions.
33. A similar distinction between enquiries for the purpose of settling civil liabilities on the one hand and criminal investigations with a view to prosecution on the other hand has been operated by HM Customs & Excise, save that in the case of the Customs the procedure appears to have been somewhat different, in part because there was no separate SCO which retained exclusive control over criminal investigation. It therefore appears to have been the practice of the Customs to assure a taxpayer under civil enquiry that nothing said by him at that stage would be used as part of any criminal prosecution: see Han v. Commissioners of Customs and Excise [2001] EWCA Civ 1040, [2001] 4 All ER 687 and Khan v. HM Revenue and Customs [2006] EWCA Civ 89 (23 February 2006) especially at paras 24/31 and 91/92.
34. We therefore agree with the judge that Messrs Davies and Paton were not persons charged with the duty of investigating offences who were required to have regard to the PACE Codes. We accept, however, that in certain circumstances, for instance where an enquiry is close to the point where it is referred to the SCO, or even past the point where it ought to have been referred, there may well be the possibility of unfairness if evidence then obtained were to be admitted at a future trial. It is perhaps in this sense that the judge spoke or intended to speak of a "borderline". It seems to us, however, that that would not turn the local tax inspectors into persons charged with a duty of investigating offences, but might nevertheless require evidence to be excluded under section 76 or section 78 in appropriate circumstances; sections which remain available in any event to deal with particular problems of possible unfairness.
35. In the present case, however, there was never any admission of any offence charged. At most the admissions referred to by the appellant are part of a general admission of past non-disclosure, and even then they are in truth to be regarded as part and parcel of further lies. Even if, contrary to the judge's view, which we have no reason to doubt since he had the advantage, denied to us, of hearing the voire dire, it could be said that the appellant's admissions might otherwise have constituted a confession obtained by threats or inducement amounting to oppression, the significance of the admissions was that they were part and parcel of a continuing process of lies and deception whereby the appellant only conceded what he thought the inspectors knew or would inevitably discover, and continued falsely to assert that he was being entirely co-operative in relation to full disclosure. It was only for this purpose that this part of the evidence of the earlier enquiries was used. It is well established that section 76 does not protect lies as though they were confessions: R v. Allen [2001] UKHL 45, reported together with R v. Dimsey [2001] UKHL 46, [2002] 1 AC 509 at para 35, R v. Gill at para 42. We therefore think that the judge was right to rule that section 76 was not in play.
36. That leaves section 78, but in our judgment that does not assist the appellant either. There was no breach of any Code, but even if there had been the appellant would have acted no differently. He was given the opportunity of dealing frankly and honestly with the Revenue, but he pursued his lifelong course of deceit. There was no abuse of process. There had never been any promise of immunity for what was said during the enquiries. On the contrary, the importance of proper disclosure, and the significance attached to the statements of assets was made completely clear to the appellant. The inspectors had acted in good faith and in accordance with their internal guidance. The judge, who heard the appellant give evidence in the voire dire, was fully entitled to take the view he did of him. As for the three offences on which he was ultimately charged, count 1 derives out of entirely new matters, his post 1992 tax returns, and so does count 3; and both counts 2 and 3 really turn on the discovery as late as 2002 of the hidden 10 accounts with their £125,000 which could then be traced back to the earlier hidden 4 building society accounts with their £37,000 in 1992. We agree with the judge that there was no unfairness in the admission of the evidence whose admissibility was in dispute. On the contrary, we think that the jury would have been wrongly deprived of the whole picture if the judge had ruled otherwise.

Ground three: the judge's failure to give a good character direction

37. The appellant had only one previous conviction, for a trading standards offence, which was more than 30 years old at the time of trial and which the judge agreed was irrelevant for the purposes of deciding whether he was a man of previous good character. However, the judge declined, although asked by Mr Germain at trial, to give him a good character direction. This was because of the bad character evidence admitted, beginning with the appellant's failures both before and after the first enquiry to notify the Revenue of his chargeability to tax. In the light of the bad character admitted under section 101 of the 2003 Act and the obligation to explain the role and significance of this, the judge gave a modern bad character direction in his summing-up. So far as that is concerned, there is some additional but limited complaint, to which we will refer below.
38. In the main, however, Mr Germain complains of the absence of a full good character direction. He submits that the appellant's case is similar to that of Messrs Yorganzi and Tosun in R v. Aziz [1996] 1 AC 41. That involved a serious tax fraud: it was said that the loss to the public was some £12 million in income tax and a further £2 million in VAT (at 46B). Both Mr Yorganzi and Mr Tosun were men of previous good character. However, Mr Yorganzi accepted that he had knowingly made a false mortgage application and had lied to the Customs officers in interview. Mr Tosun accepted that he had not declared his full earnings for income tax purposes and had allowed his employees to do the same (at 46F/G). Even so, as Mr Germain points out, the House of Lords dismissed the Crown's appeal against this court's holding that in the cases of Messrs Yorganci and Tosun a full direction covering propensity as well as credibility should have been given; thus the judge at trial had erred in given a direction only in respect of credibility (at 54B/C). Mr Germain submits that the same should apply here.
39. Aziz is the leading modern authority on good character. Lord Steyn explains the general need for a defendant of good character to receive a direction which explains its relevance to both propensity and credibility. He goes on to examine, however, the limits of good character where, despite the absence of any previous convictions, it emerges in the course of a trial, perhaps in cross-examination by a co-defendant, that a defendant has been shown to have behaved dishonestly. He said it is a complex problem where generalisations are hazardous (at 52G). He continued (at 53B/E):

"A good starting point is that a judge should never be compelled to give meaningless or absurd directions. And cases occur from time to time where a defendant, who has no previous convictions, is shown beyond doubt to have been guilty of serious criminal behaviour similar to the offence charged in the indictment. A sensible criminal justice system should not compel a judge to go through the charade of giving directions in accordance with Vye in a case where the defendant's claim to good character is spurious. I would therefore hold that a trial judge has a residual discretion to decline to give any character directions in the case of a defendant without previous directions where the judge considers it an insult to common sense to give directions in accordance with Vye…

That brings me to the nature of the discretion. Discretions range from the open-textured discretionary powers to narrowly circumscribed discretionary powers. The residual discretion of a trial judge to dispense with character directions in respect of a defendant of good character is of the more limited variety. Prima facie the directions must be given. And the judge will often be able to place a fair and balanced picture before the jury by giving directions in accordance with Vye [1993] 1 W.L.R. 471 and then adding words of qualification concerning other proved or possible criminal conduct of the defendant which emerged during the trial. On the other hand, if it would make no sense to give character directions in accordance with Vye, the judge may in his discretion dispense with them."

40. Mr Germain relies on the actual decision in the cases of Yorganci and Tosun, that a full Vye direction on propensity and credibility should have been given. The judge's bad character direction in this case, however, went in the opposite direction, for he directed the jury that they could use the bad character they had heard about both as to propensity and credibility against the appellant, if they thought fit. He did not direct them that they should consider that the absence of previous convictions counted in his favour on the questions of propensity and credibility.
41. Moreover, Mr Germain complains about the credibility branch of the judge's bad character direction in itself, referring us to what Lord Phillips CJ said in R v. Campbell at paras 30 and 41. However, we do not agree with that criticism, because in this case the appellant's propensity for untruthfulness was relevant to an important issue, the critical question of his honesty or dishonesty in his tax affairs: see Campbell at para 31. Mr Germain also criticised the judge's direction on the ground that it assumed and asserted the appellant's bad character. We reject that criticism too, however. The judge repeatedly used language which left all relevant decisions to the jury: thus he referred to the matters of the first and second enquiries as "potential blemishes upon his character"; he asked the jury whether "this previous misbehaviour if that is what it was means that [the] defendant has a propensity…to be dishonest as to his tax affairs with the Revenue[?]"; he twice more used the phrase "the defendant's bad character if that is what it is"; he said, as to credibility, "You must decide to what extent, if at all, his character helps you in judging his evidence" and similarly as to propensity, "You must decide to what extent, if at all, his character helps you when you are considering whether or not he is guilty"; and he continued "Whether that previous behaviour does show a propensity is for you to decide and you must take into account what the defendant has said about his previous behaviour" (emphasis added).
42. In our judgment, we would by and large respect the judge's exercise of his discretion, even allowing for the fact that it has been described as a residual and narrowly circumscribed discretion. It is not as though the terms of his direction had not been discussed with counsel before his summing-up: it was therefore properly informed by that discussion and his decision in the light of it. Moreover, where bad character is admitted under the 2003 Act on the grounds that it is relevant both to propensity and credibility, it would make no sense for the judge to give a standard good character direction, stating its relevance to propensity and credibility in precisely the opposite direction. As for Mr Germain's reliance on Aziz, we would comment as follows. First, this precedes the 2003 Act with its abolition of the common law in relation to bad character and its replacement in terms of its own provisions as to bad character. Although there is no similar abolition of the common law rules as to good character, it is difficult to think that the new law (as to bad character) has no impact for the old law (as to good character). In any event Lord Steyn was not contemplating the case where the bad character evidence is part of the prosecution case. Secondly, the misconduct which was here in question in terms of the appellant's bad character was persistent and serious and closely similar and relevant to the offences for which he was charged: in this respect it was analogous to the situation contemplated by Lord Steyn in Aziz at 53B. Thirdly, in Aziz the misconduct in question (at 46F/G) was trivial compared to the huge tax conspiracy which was the subject-matter of trial.
43. Having said that, we nevertheless consider that the judge should at least have reminded the jury in this context that the appellant was a man without previous convictions (although we recognise that the jury would have been aware of this). We also consider that one way to deal with the difficulties presented in the aftermath of the 2003 Act by a defendant without previous convictions but with evidence of bad character admitted under section 101 is by modifying the bad character direction. In the past, it became recognised as possible to modify a good character direction to take account of the exceptional case where there was evidence before the jury that a defendant of no previous convictions was nevertheless potentially of bad character, or even actually so (as where there was a plea of guilty to a lesser offence but the trial continued on the graver offence charged): see R v. Vye (1993) 97 Cr App R 134 at 139, R v. Teasdale (1994) 99 Cr App R 80 at 82, R v. Durbin [1995] 2 Cr App R at 91/92. In suitable cases there was the discretion to give no good character direction at all (Aziz, R v. Shaw [2002] 1 Cr App R 77). We consider that in the post 2003 Act world, where bad character directions as to propensity have more frequently become necessary, even in the absence of previous convictions, it may be possible similarly to tailor a modified bad character direction, along the following lines. Thus when a judge is directing the jury about the relevance of bad character to propensity or propensities, he could remind them that the defendant had no previous convictions and say that, in the ordinary case, where there was no evidence of bad character, a defendant of no previous convictions would have been entitled to a direction that the jury should consider that that counted in his favour on the questions of both propensity and credibility; as it was, it was for the jury to consider which counted with them more – the absence of previous convictions or the evidence of bad character; and if the former, then they should take that into account in favour of the defendant, and if the latter, then they would be entitled to take that into account against him.
44. A direction such as that would hold the balance, for the jury to decide, between the previous absence of any conviction, which at least would be a given, and the current evidence of previous misconduct, which depending on the circumstances may or may not amount to a criminal offence and may or may not be admitted by the defendant. Of course, in the case of which Lord Steyn spoke, one where any direction on good character would be a charade or spurious, no good character direction need be given at all.
45. We are inclined to think that the judge was entitled to conclude that this was such a case. If, however, we are wrong about that, and a modified direction such as we have diffidently suggested would have been more appropriate, we nevertheless consider that the judge's error could have had no effect on the safety of these convictions. In sum, the appellant had to concede, as he did, that he had been persistently dishonest with the Revenue: and this was so in circumstances where his continued denials that he had been dishonest in the substantive offences charged did not hold water.

The renewed grounds

46. We briefly refer to the renewed grounds. The first of them was that the judge had erred in rejecting a submission of no case to answer in respect of counts 2 and 3. The basis of this submission had been that the second and third statements of assets could not have been documents "required for an accounting purpose", a necessary ingredient of the offence on those counts. The judge considered that that was a question for the jury. They had heard that these statements had been required by the Revenue as the basis for any settlement of the second and third enquiries, so that the Revenue could know the appellant's exact financial position. It was for the jury to say whether those documents had therefore been required for an accounting purpose. In our judgment the judge was entitled to come to that decision and we do not think it is arguable otherwise. This is despite Mr Germain's reliance on R v. Okanta [1997] Crim LR 451 which he submitted was indistinguishable: but that concerned a case, in any event on different facts, which was merely being considered by this court as a possible substituted verdict and was rejected by this court on the evidence.
47. The second renewed ground related to documentary evidence formally introduced by the Crown, with the permission of the judge and against the opposition of Mr Germain, in the course of the appellant's cross-examination. The appellant had been giving evidence that his life-style had been supported, not by undisclosed motor trading profits, but by the rental income from properties owned by companies by the name of R & S Lettings and Florida Sun Properties. The financial statements of these companies had been submitted to the Revenue by the appellant. However, they were irrelevant to the Crown's case, for they were not said by the Crown to be false and the appellant had never said before his cross-examination that the profits of these companies had enabled him to lead the comfortable life he did. In fact, the financial statements of these two companies indicated very modest profits and sometimes losses: they contradicted the appellant's new assertion. The Crown therefore applied to introduce them into evidence in order to cross-examine the appellant further. Mr Germain submitted that the judge was wrong to permit them to do so, since there was a long-established principle against introducing new prosecution evidence during cross-examination of a defendant and it ought to be strictly adhered to.
48. However, there is an exception where evidence is given by a defendant ex improviso, ie which the Crown could not have foreseen or, in the discretion of a judge, where even if not strictly ex improviso the evidence is only marginally or minimally relevant: see Archbold 2008 at paras 4-340/341, citing R v. Anderson 87 Cr App R 349 and R v. Levy 50 Cr App R 198. In our judgment the judge was entitled to admit the documentary evidence, which, since it derived from the appellant himself, could have caused him no surprise. We do not consider that the contrary is arguable.

Conclusion

49. It was for these reasons that we dismissed this appeal at the conclusion of its hearing and refused the renewed application to extend the appeal's grounds.