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Cite as: [2001] EWHC Admin 581, [2001] EWHC 581 (Admin), [2001] 4 All ER 721

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QUEEN ON APPLICATION OF COMMISSIONERS OF INLAND REVENUE and THE CROWN COURT AT KINGSTON [2001] EWHC Admin 581 (24th July, 2001)

Case No: CO/4735/2000
Neutral Citation Number: [2001] EWHC Admin 581
IN THE HIGH COURT OF JUSTICE
ADMINISTRATIVE COURT
DIVISIONAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Tuesday 24th July 2001

Be f o r e :
LORD JUSTICE KENNEDY
MR JUSTICE STANLEY BURNTON
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THE QUEEN ON THE APPLICATION OF

	THE COMMISSIONERS OF INLAND REVENUE	Claimant
	- and -
	THE CROWN COURT AT KINGSTON	Defendant
	- and -
	ROBIN WAYNE JOHN	Interested party

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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
- - - - - - - - - - - - - - - - - - - - -
Richard Sutton QC, M Lucraft and M Nelson (instructed by the Solicitors to the Inland Revenue) for the Claimant
Alun Jones QC and H Keith (instructed by Simons Muirhead & Burton) for the Interested Party
- - - - - - - - - - - - - - - - - - - - -

Judgment
As Approved by the Court
Crown Copyright ©
MR JUSTICE STANLEY BURNTON:
This is the judgment of the Court.
Introduction
1. In these proceedings the Commissioners of Inland Revenue seek an order to quash the ruling of HH Judge Hucker at Kingston Crown Court dismissing, pursuant to section 6 of the Criminal Justice Act 1987, all of the charges against the Interested Party, Robin Wayne John. The charges in question were of conspiracy to defraud the Revenue, and related to a tax saving scheme operated at the instigation of, and principally for the benefit of, Ian Leaf.
2. The distinction between lawful tax avoidance and illegal tax evasion is well-known. Tax-saving schemes that involve transactions having little or no commercial benefit apart from the scheme are a common feature of commercial life. In the absence of statutory criminal prohibitions, the transactions involved in the scheme and the scheme itself are lawful. Whether the scheme is effective depends on the provisions of the tax legislation in question. Tax-saving crosses the border from lawful to criminal when it involves the deliberate and dishonest making of false statements to the Revenue. A criminal scheme may involve the dishonest bringing into existence or use of documents evidencing transactions that never took place, or the creation and use of documents that contain some other misrepresentation of fact, such as the date when they were executed or came into effect. The Inland Revenue allege that the scheme used by Mr Leaf on the advice and with the knowing participation of Mr John was such a criminal scheme.
3. During the period covered by the charges, Mr John was a partner of Ernst & Young, the well-known firm of accountants, and was based in London. He specialised in advising on tax saving schemes. Ian Leaf was resident in Switzerland. He ran a company in Rolle, Switzerland, the name of which was, ironically, Prudential SA. He was a client of Ernst & Young.
4. The scheme to which the charges relate involved the purchase by companies controlled by Mr Leaf of companies (referred to as "targets") registered in England the assets of which were solely, or almost solely, cash, and which had substantial corporation tax liabilities. The price paid for a target reflected its tax liabilities as well as its cash assets. The scheme involved, among other steps, that relevant members of the group of companies into which the target passed should be resident in the UK for a certain period, and in Guernsey at other times; that after acquisition the target should engage in large-scale profitable trading on the foreign exchange market; that it should borrow very large sums from an independently-owned bank, thereby incurring proportionately large liabilities for interest; and the declaration of substantial dividends by the target justified by its profits on its foreign exchange dealings. The apparent result of the implementation of the scheme was to eliminate the tax liabilities of the target companies, or even apparently to entitle them to repayment of large sums previously paid in respect of their tax liabilities. The amounts involved during the operation of the scheme were enormous: the total tax which was not paid to the Inland Revenue or repaid by it exceeded £60 million.
5. The target companies were renamed by Mr Leaf after their acquisition. There were three groups of target companies that feature in this case. (There were others, but it is unnecessary to mention them in this judgment.) Each company in a group was given a name common to other companies in that group. The three groups were the Kinetic, the Yorkstone and the Zenith groups. In each group there was a Holdings company (e.g., Kinetic Holdings Ltd) that held the shares of the subsidiary companies in the group; an Investments company (e.g., Kinetic Investments Ltd) and a Subsidiaries company (e.g., Kinetic Subsidiaries Ltd). They were purportedly lent enormous sums of money by Allied Bank Corporation ("ABC"), a bank incorporated in Nairu controlled by Mr Leaf; they purportedly prepaid interest to ABC on their borrowings; and they purportedly traded on a huge scale in foreign exchange through other Leaf companies, Guild Corporation Ltd ("GCL") and Gilt-Edged Investments Ltd ("GIL"), acting as their trading advisers and brokers.
6. The Inland Revenue allege that Mr John advised and played a major part in establishing the tax-saving scheme in question. For the purposes of this application, they accept that the scheme was tax-efficient: that is to say, that if the various transactions involved in it had been properly carried out, the tax liabilities of the targets would have been lawfully reduced or eliminated, and in appropriate circumstances repayments of tax would have become due. However, they allege that the transactions involved in the scheme, or at least certain essential ones, were not carried out at all: they were fictions or shams. In fact, they allege, there were no large loans from a bank to the targets: the bank in question was a company controlled by Mr Leaf that did not have at its disposal assets of the size required by the scheme as it was purportedly implemented. In fact, they allege, there was no foreign exchange dealing, only the creation of contract notes and statements of account in the names of Guild and Gilt that were used to represent to the Inland Revenue that there had been such trading.
7. In addition, the Inland Revenue allege that the residence of the targets did not move as required by the scheme: at all times they were controlled by Mr Leaf, through directors resident in Guernsey who acted as his nominees to conceal the true centre of management of the target companies, on which the place of their residence for the purposes of the relevant tax liabilities depended. They also allege that the date of the purported transfer of management and control of the companies to Guernsey was retrospectively and dishonestly changed by the replacement of original board minutes (which were destroyed to avoid detection of the alteration) with a written resolution of the board purporting to have been passed on 1 December 1992 evidencing a decision to transfer management and control on that date. In fact, they allege, the Board did not pass such a resolution on that date or at all: it had previously decided, on the instructions of Mr Leaf, to transfer management and control to Guernsey at an earlier date, as had been evidenced by the replaced and destroyed original minutes. The substitute written resolution of the board of Kinetic Subsidiaries, bearing the date 1 December 1992, came into existence after 22 February 1993 and was submitted to the Inland Revenue on 14 May 1993.
8. Mr Leaf is in custody in Italy as a result of proceedings to extradite him to London. For the purposes of the present application, it has been assumed that the Inland Revenue allegations against him are well-founded, i.e. that the transactions apparently carried out by the target companies were in fact shams, fictions existing on paper only that were manufactured for the purpose of defrauding the Revenue, and that the Guernsey directors did act as his nominees, so that, contrary to what was represented to the Inland Revenue, the true centre of management and control of the targets following their acquisition was Switzerland; and that these shams and deliberate misrepresentations were orchestrated by, and carried out for the benefit of, Mr Leaf. If these frauds did occur, the Revenue lost a very substantial sum as a result the fraud of Mr Leaf and those who knowingly participated in his fraud. In this judgment we refer to these alleged and assumed frauds; but nothing in this judgment should be taken to indicate that the Inland Revenue proved them to us, or as in any way prejudging the prosecution case against Mr Leaf.
The Judge's ruling on the application to dismiss
9. Mr John accepts that he played a major role in advising on the tax-saving scheme and in implementing it. However, he denies that he knew that the transactions carried out by the target companies after their acquisition by Mr Leaf were not genuine, or that false documents were being submitted to the Inland Revenue. For the purposes of the application made on his behalf to HH Judge Hucker, the only real issue was whether the prosecution had shown that a jury could properly conclude that Mr John knew that he was assisting in the perpetration of frauds on the Revenue. His knowledge was the central, indeed the only live, issue.
10. The hearing of Mr John's application for dismissal took 4 days. The Judge was taken to numerous documents and to the witness statements relied on by the prosecution to establish Mr John's knowledge of and participation in the fraudulent scheme. In his ruling, HH Judge Hucker stated:

"7. It is necessary before considering the development of (the) Defence submission to consider the basis of the Prosecution case and set it out in outline.
8. There is one area from which it clearly does not emanate, and that is the statements of witnesses included in the transfer. I am wholly satisfied about this and will spend no further time considering them - save to note that at first blush it is difficult, (to put it no higher) to understand why a number of the prosecution witnesses do not find themselves in the same position as Mr John."

11. The Judge then described the tax-saving scheme and the fraud, and continued:

"9. Robin John advised in relation to the scheme at the outset, and then as is clear from the documentation, advised on the format and style of many of the supporting documents for the fraud - contract notes, loan agreements, and even the appearance of bank statements."

He then listed a number of documents that he regarded as representing individually and in total the high point of the prosecution case, and a group of documents that the Crown said went directly to fraud. In his conclusions, he stated as follows:

"16 At the outset of my consideration of this case, and having read the skeleton arguments in full, the witness statements and the very full "Statement of Evidence" prepared by Mr. Sutton and his two junior counsel - it seemed to me that that I would be indicating that there would be more than sufficient inferences to be drawn, of a compelling nature, that would point to criminal conduct in most, if not all transfer charges - sufficient to be tried by a jury.
17 However, even prior to hearing Mr. Jones and during Mr. Sutton's opening on the dismissal application there began to emerge lurking doubts. The more slowly each document was studied and put into context - even when accompanied by an expert commentary by Mr. Sutton, what was once a clear landscape seemed to cloud over, or at least become misty. At this juncture I asked questions as to what did either this or that really mean? There can be little doubt that many ordinary sensible people (oft quoted in legal contexts - both civil and criminal in different ways) could look at the history of this case and concentrating specifically on Robin John, and assessing the financial figures that genuinely read like telephone numbers could have their suspicions raised to an extent that might be perceived as conclusive proof of guilt.
18. It is when Mr. Jones dealt with each matter point by point - head on, that it became clear that a great deal of the prosecution evidence points specifically away from guilt. Very often the closer each point is examined the clearer this point becomes.
19. For example:-
19.1 Why should only one adviser not be alerted to potential fraud and/or dishonesty when other reputable advisers were not?
19.2 Why should Mr. John only be one of many - kept in separate compartments and held at arms length?
19.3 Why should the advice tendered be open to examination by other advisers - or really anybody else generally?
19.4 Why should future advice tendered to wholly independent directors of high probity and integrity - when all they had to do was to pick up a phone and speak to the Inland Revenue or the police or their own solicitors or accountants? In my judgment nobody acting fraudulently or dishonestly upon the scale as alleged in this case would dare to casually fax the material I have seen, to be studied by any passing person. (There were no confidential markings, envelopes or codes used for critical material. Further, any partner in Ernst and Young could have had access.)
19.5 Why should Mr. John risk a whole series of chartered or certified Accountants starting an investigation of their own volition e.g. J Lewis - see C1481?
20. I conclude that my preliminary view of this case against Robin John, was mistaken and that most of the evidence does not provide the necessary inference to be drawn from primary facts except in one or two cases (see B 1263 and 4, B 2280 and B 99 - 100 - 103 and B 28/cfB38), and even here the general inferences to be drawn are not compelling. Further there are no inferences which a reasonable man would, unerringly find compelling. Taken as a whole, it would not be safe to leave the transfer case to a jury. They could only convict on the basis of speculation and prejudice. I allow the application to dismiss."

12. It was not in issue before us that this Court has jurisdiction to review a decision of a Crown Court Judge on an application under section 6 of the 1987 Act on the normal grounds for judicial review. However, only in exceptional circumstances should this Court interfere with a decision by a trial Judge under section 6. In R v Central Criminal Court ex p Director of the Serious Fraud Office [1993] 1 WLR 949, Woolf LJ said, at 958 E:

"I would however emphasise that I do not anticipate the courts being prepared as a matter of discretion to give leave to make an application for judicial review of such a decision except in the exceptional case. The jurisdiction should clearly only be exercised in extremely limited circumstances. In this connection I would draw particular attention to the comments of May L.J. in Reg. v. Oxford City Justices, Ex parte Berry [1988] Q.B. 507, 512-513, with regard to the judicial review of a decision of the justices to commit a defendant for trial. Normally the assessment of the judge of the merits of the proceedings should be regarded as conclusive. In accord with the normal approach to judicial review it will not be part of the function of this court to second guess the judge who has heard the application."

Pill J agreed, at 960B, that "the jurisdiction should be exercised only in extremely limited circumstances".
13. The Inland Revenue submit that the Judge erred in three essential respects: in disregarding the evidence contained in the witness statements; and in applying an incorrect test to the documentary evidence; and in failing to give adequate reasons for his decision. They have not expressly submitted that the Judge reached a conclusion that no reasonable tribunal correctly applying the law could have arrived at: i.e., they have not alleged that his ruling was perverse. While defending the Judge's approach to the evidence, Mr Jones submitted that in substance Mr Sutton was seeking to appeal the Judge's decision, and to have a rehearing of the application to dismiss, a procedure which goes beyond the powers of a reviewing court.
The witness statements
14. The witness statements before the Judge evidenced the lack of genuine foreign exchange trading and the absence of genuine loans to the targets by ABC. They also evidenced that the Guernsey directors of the target companies were reputable persons who had in fact acted in accordance with Mr Leaf's wishes. The statements evidenced the role of Mr John in advising on the tax-saving scheme and its implementation. However, none of the witness statements evidenced that Mr John had known that any transactions purportedly carried out by the targets were fictitious or that he had known of facts from which his knowledge of the fraud could be inferred. The prosecution case as to his knowledge of the fraudulent nature of the scheme as carried out by Mr Leaf depends on the documentary evidence put before the Court. Given that the issue before the Judge was Mr John's knowledge of the fraud, he was right to say, as he did in paragraph 8 of his ruling, that the prosecution case did not emanate from the witness statements. There is nothing in the first point.
The Judge's approach to the documentary evidence
15. Mr Sutton criticised the Judge for failing to distinguish between direct documentary evidence and circumstantial evidence. He submitted that the Judge treated all of the evidence as circumstantial, leading to inferences, instead of direct, which it was. Furthermore, in relation to inferences, Mr Sutton submitted that the Judge erred in deciding for himself what was the correct inference to draw from a document rather than considering whether an inference of guilt was capable of being drawn, and dealing with the application for dismissal on the basis that it was for the jury to decide whether or not that was the correct inference to draw in this case. Paragraph 5.6 of Mr Sutton's skeleton for this Court stated:

"The judge's task at dismissal is to determine whether the inferences that the prosecution asks the jury to draw are capable of being sustained in the light of all the evidence. If they are, it is for the jury to decide whether they are prepared to draw those inferences."

In his submissions to us, he contended that it was not for the Judge to weigh up inferences and probabilities as he did in paragraph 19 of his Ruling, and that that was to usurp the function of the jury.
16. We do not think that the Judge did err in these respects. The Judge did not treat the documentary evidence as circumstantial. The documentary evidence contained no admission of fraud by Mr John, and nothing that indisputably informed him of the frauds committed by Mr Leaf or showed knowledge of or knowing participation in the frauds. The prosecution case depends on the inferences to be drawn from the documents, as the Judge rightly stated. The test to be applied by the Judge on the application to dismiss was that prescribed by section 6: did it appear to him that the evidence against Mr John would not be sufficient for a jury properly to convict him? In our view, the statute clearly requires the judge to take into account the whole of the evidence against a defendant, and to decide whether he is satisfied that it was sufficient for a jury properly to convict the defendant. This is what the Judge did. On an application under section 6, it is not appropriate for the judge to view any evidence in isolation from its context and other evidence, any more than it is appropriate to derive a meaning from a single document or from a number of documents without regard to the remainder of the document or the other connected documents before the Court. We reject the argument that the judge was bound to deal with the application under section 6 by assuming that a jury might make every possible inference capable of being drawn from a document against the defendant. Section 6 expressly provides that the judge will decide not only whether there is any evidence to go to a jury, but whether that evidence is sufficient for a jury properly to convict. That exercise requires the judge to assess the weight of the evidence. This is not to say that the judge is entitled to substitute himself for the jury. The question for him is not whether the defendant should be convicted on the evidence put forward by the prosecution, but the sufficiency of that evidence. Where the evidence is largely documentary, and the case depends on the inferences or conclusions to be drawn from it, the judge must assess the inferences or conclusions that the prosecution propose to ask the jury to draw from the documents, and decide whether it appears to him that the jury could properly draw those inferences and come to those conclusions.
17. Mr Sutton also submitted that the Judge erred in law in failing to give proper weight to the evidence and in concluding that the case could not be safely left to the jury. As mentioned in the previous paragraph, on an application under section 6, it is for the Judge to determine the weight to be given to the evidence against the defendant. His conclusion as to the weight to be given to any evidence, and his conclusion that the evidence against the defendant is or is not sufficient for a jury properly to convict him can only be impugned if they can be shown to be conclusions that no reasonable judge could have come to. This Court cannot interfere if the decision of the judge was within the range of decisions open to a reasonable judge properly directing himself as to the law. Moreover, the words in section 6(1) "if it appears to (the judge)" make it clear that Parliament intended the judge to have a wide margin of appreciation in this respect: c.f. R v Central Criminal Court ex p Director of the Serious Fraud Office, referred to above.
18. It follows that this application can succeed only if the Inland Revenue can establish that the Judge's decision was perverse, i.e., unreasonable in the Wednesbury sense. As mentioned above, this is a burden they have not expressly taken on themselves. We agree with Mr Jones that the Inland Revenue's submissions seek to classify the Judge's decision as to the inferences that a jury could properly draw from the documentary evidence as errors of law. We nonetheless propose to consider the documentary evidence and the question whether the Judge was entitled to come to his conclusion.
The documentary evidence
19. We do not propose to discuss all of the numerous documents referred to in the course of argument, let alone the very large number of documents in the so-called core bundles placed before us, the very great majority of which were never referred to. We shall confine ourselves to those which in our view are the most significant.
20. Before coming to the documents, some general comments are called for. The first relates to the use of so-called "nominee" directors, usually in off-shore jurisdictions. (The expression "nominee director" is to be avoided, since it confuses directors who are nominated by shareholders, and who properly carry out their responsibilities as directors, and those who are appointed by shareholders and only do as they are instructed by the person who appointed them.) It is a feature of modern commercial life that many companies have their place of residence in off-shore jurisdictions purely in order to avoid tax which would be payable if the company were located in the United Kingdom. Corporate residence depends on the location of the central management and control of the company. Inevitably, persons who live on-shore wish to own companies that reside off-shore. For this purpose, they may arrange for the appointment of directors of the company who themselves reside in the off-shore jurisdiction in question. Notwithstanding the ultimate "foreign" ownership of the shares of the company, it will be resident for tax purposes in the off-shore jurisdiction in question if the appointed directors genuinely determine its affairs in that jurisdiction. If, however, they simply obey the instructions of the ultimate owner of the company's shares who remains in another jurisdiction, the central management and control, and therefore the residence of the company for the purposes of its tax liabilities, will be the location of the ultimate owner of its shares. The difficulty here is to distinguish between the situation in which the directors act as mere ciphers, simply doing as they are told by the ultimate owner of the company, and the situation in which the directors have explained to them by the ultimate owner of the company's shares that certain transactions are in the interests of the company, and decide on the basis of the information given to them that the company should enter into them. In the latter situation, the company can genuinely claim to be resident off-shore; in the former situation, its off-shore residence is not genuine, but a false sham. The line between them is a very nice one, as the Inland Revenue no doubt appreciates, and as do those involved in the minimising of tax by locating companies in off-shore jurisdictions, including the professional directors of off-shore companies. That line features large in the case against Mr John. It may be impossible for someone who is not present at the board meetings of a company, and who is not told how the board in fact takes its decisions, to know on which side of the line the company operates. It is not alleged that Mr John attended board meetings of the target companies in Guernsey or that he was informed by their directors how they took their decisions.
21. It is also necessary to comment on the use of pre-prepared minutes of board meetings. Minutes of both board and general company meetings are often drafted in advance of the meetings to which they relate. There is nothing improper in the use of such drafts, provided the meeting does deal with the business before it in the manner indicated in the draft, and that, in the case of a board meeting, the directors present do have the discussions and make the decisions indicated by the draft. It is one thing for directors to take into account the wishes of the ultimate shareholder of their company or the advice of its advisers, as indicated by a draft resolution; it is another for them to act without regard to the company's interests or their own judgment, but solely because they are instructed to do so their ultimate shareholder.
22. The prosecution allege that the Guernsey residents who were appointed as directors of the target companies at the instigation of Mr Leaf were mere ciphers, acting solely on the instructions of Mr Leaf, and known to be so by Mr John; and that Mr John was a knowing party to the false representations made to the Inland Revenue as to the place of residence of the companies. For this purpose they rely on the document that causes us the greatest concern in this case. It is one of the documents referred to by the Judge as one of a group that the Crown said went directly to fraud. It is a note of a meeting in February 1993 at which Mr John was present, sent to him by Ms Reiter of Prudential by fax dated 22 February 1993. Mr John is referred to in the note by his initials, RWJ. Mr John certainly received the note, since he annotated it in his handwriting. In it, Guernsey was referred to as GSY; a question mark was used as a wild card. The relevant part of the note is as follows, with italics added by us:

"1. GENERAL
a .....
b. Transfer of control: RWJ/MRJ/CER agreed that the existing date on which Kinetic, Yorkstone and Zenith purportedly moved their control to GSY is incorrect, as it took place prior to the end of the relevant accounting period and creates a problem for group relief (see 1d for details). It was agreed that the control of KIL, KSL, YIL, YSL, ZIL and ZSL should move to the end of the respective accounting periods.
RWJ suggested leaving the control transfer of KHL, YHL and ZHL on their original dates. The problem is that it would hard for ?IL and ?SL to say that they are not controlled from GSY if ?HL is so controlled and they have the same sole director.
RWJ suggested that ?IL and ?SL might appoint new directors to rebut that presumption. However, on reflexion (sic), an attempt retrospectively to appoint new Directors would seem equally as artificial, particularly as they were not mentioned in the subsequently filed Annual Returns, as to try to claim that Garvey managed GCL's operations as of 1.1.92.
Therefore we propose the following:
i to transfer the control of ?HL, ?IL and ?SL on the same date, being the first day of the new accounting period. We will therefore not need to appoint supplemental directors for ?IL and ?SL.
ii For the future, we should follow RWJ's memo of April 1992 by transferring control of ?SL to GSY immediately after acquisition. RWJ to reconfirm that it is acceptable to transfer the control of ?HL and ?IL to GSY prior to purchasing ?SL.
iii We should leave all appointments and resignations of directors unchanged (ie leave the GSY company as sole director). However, we should change the text of existing board minutes in order to clarify that the date of the transfer of control took place after the end of the accounting period and to confirm the place where these meetings occurred (ie not in Guernsey). RWJ to confirm that if the meetings took place eg in Sark, the IR might argue that control was not in the UK, but will not be able to argue that the companies were controlled by GSY.
The result of this is substantially to reduce the number of artificial steps.
RWJ to confirm that copies of all superceded minutes currently kept by Ernst & Young (EYG) and or the directors will be returned to us uncopied. CER will then liase with W Hunter from EYG for details.
c. UK trading: RWJ/MRJ/CER discussed abandoning UK trading through Guild Corporation Ltd (GCL), that is dispensing with the services of Mr Garvey altogether and , except for Kinetic and Yorkstone where contract notes already went out, reversing the GCL transactions.
.......
Therefore we propose the following:
i. Mr Garvey will not have been a manager of GCL prior to 1.1.93. However, his appointment as director from 1.1.93 will remain valid.
ii We will not try to deny the existence of previous GCL activities. We believe that it would be difficult for the IR to argue that this was not UK trading as GCL is a UK company and will accept tax liability on its profits.
....
v. For the future, we should make sure that the UK activity is more substantive. This means e.g. transfer a small amount of money to a real broker who will execute a significant volume of commodities trading. RWJ to assist."

23. The passages we have italicised certainly are capable of leading to the inference that those present at the meeting proposed to bring into existence board minutes of the companies in question that falsely represented that they had decided to transfer control to Guernsey at the end of their respective accounting periods, when in fact the directors had already decided to and had transferred control during their accounting periods. The inference of dishonesty is supported by the express concern that copies of the existing board minutes be destroyed. That paragraph of the note was annotated by Mr John "Do (it) yourself". The proposal was ultimately implemented not by the creation of board minutes, but by the submission by at least one of the companies via its auditors, to the Inland Revenue of a written resolution of the Board. The inference of dishonesty also receives support from the reason reportedly given for not backdating the appointment of new directors of the Investment and Subsidiary companies, namely that the companies had submitted annual returns that did not mention their appointments: i.e., the backdating of the appointments might be noticed. Those at the meeting similarly seem to have contemplated the backdating of the appointment of Mr Garvey as manager of GCL to a date prior to the true date of his appointment.
24. The reference in the last sentence of the above extract to "a real broker" may be innocuous: it may contrast that real broker with GCL and GIL who, at least prior to Mr Garvey's appointment, had no broker on their staff and therefore could only trade in foreign exchange if they in turn employed a "real" broker.
25. However, this document has to be read in the context of earlier documents that show that Mr John was informed that there had been or was genuine trading in foreign exchange, that he was concerned that there should be genuine trading and that he was equally concerned that the Guernsey directors should be men of known integrity. In his draft report on the scheme, sent to Mr Leaf on 6 March 1992, Mr John advised Mr Leaf:

".... It is important that the directors of Target have the necessary blend of seniority and experience to rebut any suggestion that they are merely ciphers. To this end we suggest that in addition to (say) a partner from the St Peter Port Office of Ernst & Young, that Mr Leaf is also a director of the company, and that such decisions as are required for the company are actually taken in Guernsey."

There were further discussions of the proposed directors in Mr John's fax to Mr Leaf of 8 May 1992 and in Mr Leaf's fax to Mr John of 28 May 1992:

"Stephen (Harlow, of E&Y Guernsey) has fortunately proposed an ex-manager of Standard Chartered: whilst he is perhaps not quite of the same calibre as the first chap, he is equally not a typical nominee."

26. The directors appointed to the target companies included Mr David Le Maitre, who had been Principal in Ernst & Young Guernsey and who signed a number of the misleading resolutions of the companies. He is a prosecution witness whose honesty has not been questioned. Two other directors who signed relevant minutes, Mr Mallett and Mr Willis, are also prosecution witnesses of unquestioned honesty. The point is made by Mr Jones, on behalf of Mr John, that Mr John was entitled to expect the directors of the targets to act honestly, and only to sign a revised minute if it gave a true account of the business conducted at the meeting to which it related. On this basis, it is suggested that Mr John must have thought that the original minutes, evidencing a decision to transfer control during an accounting period, mis-stated what had been decided at the meetings in question. The original minutes were to be destroyed, it is suggested, to avoid the practical problems involved in having two inconsistent sets of minutes in existence rather than for fear of discovery that the later minute was a backdated alteration of history.
27. Mr Sutton also relied on Mr John's fax to Mr Leaf of 6 March 1992 as showing that Mr John was aware that the transactions envisaged by the scheme would be shams, and certainly was alive to the possibly that they might be shams. Mr John stated:

"1. I would draw your attention to the point in the general comments about whether these are real transactions. When you start to look at the numbers involved for a company with significant tax capacity, your borrowings add up to a total that looks significant, even in relation to the national debt. This being so, it rather begs the question "did they happen". Despite the level of documentation, and I appreciate that I am not familiar with the banking and investment arrangements you have, but the question which springs to my mind, and no doubt to that of the Inland Revenue, in that on such large sums of money even a very small margin would be a great deal, and the bank would have to allocate a considerable amount of capital: indeed not that many banks could accommodate the transactions. In this case there is a suspicion that the transaction is a sham and whilst I am not suggesting that this is the case there is certainly a prima facie case for suggesting it. This being so, the simplicity of procedure 3 and to some extent procedure 4 makes it rather too easy for the Revenue to take the point. At least on procedures 1 and 2 money is being borrowed by one person and then lent to another and the other person uses it for a securities trade. Whilst not providing complete protection to the accusation that they are sham-transactions, it certainly does not make it any worse. In view of this I think that you might be better to stick with procedures 1 and 2 even though it does involve an extra company."

28. However, in the draft report enclosed with that fax, Mr John advised:

"The temptation for the arrangements under consideration is that given the enormous sums required for borrowing, capitalisation etc, money does not actually pass between Bank, Funding, Target etc to save on transmission difficulties etc. If money does not actually pass between the parties then arguably, (say), Funding has not had the use of the money. It was held in Re Euro Hotels (Belgravia) Ltd (51 TC 293) that for a payment to amount to "interest of money" there must in general be a sum by reference to which the "interest" is to be ascertained, due to the person entitled to the interest. It will be readily appreciated that if funds are not genuinely advanced, then any payment will not constitute interest for tax purposes. In addition, the potential for attack under section 787 ICTA 1988 arises, as discussed at 6.6 above.
We strongly recommend that funds genuinely flow from the bank through the companies, evidenced by documentation at the relevant banks concerned. ...."

29. In a fax dated 29 April 1992, Mr Leaf informed Mr John:

"There are some four or five companies which have commenced securities trading under the previous procedures, but none of which have come to the end of their first accounting period since acquisition. .... Could you please let me have a check list of information you require and/or steps to be taken in order to export these companies to Guernsey as soon as possible."

This fax is relied on by Mr Jones as justifying an honest belief by Mr John that genuine trading had and did thereafter take place. He also took us to a fax dated 8 May 1992 from Mr John referring to the agent in the UK genuinely concluding contracts on behalf of the Guernsey companies, and to a fax from Mr Leaf to Mr John dated 5 January 1993 stating:

"Switch from currency trading to option trading.
As you know, we were keen for this to start from the beginning of January and would not want to get it wrong."

30. The Prosecution also allege that the payments of interest in advance by the target companies to ABC were a sham, and that Mr John must have known it. Mr Sutton referred to the commercial improbability of paying interest in advance on loans not yet drawn down, the actual amount of which might not be as anticipated. However, in a fax to Mr Leaf of 12 May 1992, Mr John stated:

"I have discussed the concept of paying interest in advance, rather than in arrears, with Counsel on previous occasions and I am happy that it is effective in obtaining relief for tax purposes although I am aware that the Inland Revenue do not like interest being paid in advance but I remain of the view that there is nothing they can do about it. This is a point you may wish to confirm with Milton Grundy (the well-known tax counsel) particularly as you may welcome his further comments on the points set out below."

31. Mr Leaf did indeed refer the question of payment of interest in advance to Milton Grundy: see the fax dated 18 May 1992 from Poppi SA to Mr Grundy. In the light of these documents, the payment of interest in advance and Mr John's knowledge of it are not indicative of his participation in a fraud.
32. Mr Sutton relied on a memorandum of a meeting between Mr John and Ian Tredinnick that took place on 4 December 1992 as showing that Mr John was aware that transactions were being invented after their purported date. Ian Tredinnick worked for Mr Leaf. He too was a chartered accountant. The Prosecution accept that he acted honestly. It is therefore difficult to regard the memorandum of their meeting as evidence of the carrying out of a fraudulent conspiracy. In any event, the memorandum does not provide the Prosecution with the evidence they claim. It is true that it refers to finalising GIL transactions to 30 June 1992; but it also states, in an underlined sentence:

"The company should be carrying on a genuine trade - so that the revenue is not to be treated as a capital gain or interest income for tax purposes."

33. The last matters to which we refer are the contracts between the trading target companies and GCL and GIL purporting to appoint one or other of those companies as broker to carry out foreign exchange dealing on behalf of the trading target companies, and the contracts of loan between ABC and target companies. It is clear from the documents that Mr John advised on the terms of these agreements during 1992 and early 1993. In a fax dated 25 January 1993, he was told that a draft agreement would form part of the documents to be sent to the Inland Revenue. When executed, these contracts were given dates in January and February 1992, before they had been drafted. In other words, they were backdated, presumably for the purpose of representing to the Inland Revenue that they had been entered into on those dates rather than, as was the fact, about a year later. Copies of some at least of these contracts were submitted to the Inland Revenue, with no explanation that they had been back-dated.
34. The Defence's answer to this point is that the scheme was on-going, and that Mr John was concerned to draft documents applying to trading and borrowings by target companies to be acquired in the future rather than to transactions that had already apparently occurred. We add that as far as we have seen, no document shows unequivocally that Mr John knew that the contracts were or had been back-dated, as opposed to their being given retrospective effect.
Conclusion on the evidence
35. When we look at the evidence as a whole, we are clear that it cannot be said that the Judge's decision was perverse or one that he could not reasonably have arrived at. We do not say that we should necessarily have made the same decision. The view he took of the note of the meeting attended by Mr John, enclosed with Ms Reiter's fax of 22 February 1993, referred to at paragraph [22] above, was more charitable than we would have taken. But that is a far thing from saying that the view he took of the evidence as a whole was not one he was entitled to take.
Inadequate reasons
36. Lastly, Mr Sutton submitted that the reasons given by the Judge were inadequate, so that the Prosecution were unable to discern why he had rejected their case. The reasons given by the Judge for his ruling were brief in the extreme. However, we do not think that the Judge, even in a case dealt with in as much detail as this, was obliged in his ruling to consider every document referred to and to summarise his conclusions on it. His reasons made clear the facts that he had taken into account in coming to his decision and his conclusion that the documentary evidence was insufficiently unequivocal to enable a jury properly to convict Mr John. In any event, it can only be in a very exceptional case that this Court would remit a case such as this to the Crown Court for the judge to give further reasons. We should only do so if there were strong grounds for believing that his decision was one that he could not properly have arrived at. However, if it was established that his decision was one not properly open to him, there would be no point in requiring the judge to elaborate on his reasons: his decision could be quashed immediately.
Conclusion
37. For the reasons set out above, there are no grounds for interfering with the Judge's decision. The application for judicial review of his decision will be dismissed.
38. We add that in a case such as this, depending essentially on documents and the inferences to be drawn from them, and involving a considerable number of documents, we should have been considerably assisted if the Prosecution had supplied us with a document specifying the propositions alleged by them to be established by the documents in the case, and identifying the documents, or the passages in long documents, relied upon for each of those propositions. A more analytical approach would have enabled us to deal with this case far more efficiently.