QUEEN'S BENCH DIVISION
London WC2A 2LL
Friday, 14 January 2011
B e f o r e :
MR JUSTICE DAVIS
|CENTRAL CRIMINAL COURT||Defendant|
WordWave International Limited
A Merrill Communications Company
165 Fleet Street London EC4A 2DY
Tel No: 020 7404 1400 Fax No: 020 7404 1424
(Official Shorthand Writers to the Court)
MISS C DOBBIN appeared on behalf of the Defendant
Crown Copyright ©
LORD JUSTICE GROSS:
"Tax Plan 1" - Relevant Discounted Securities ("RDS tax plan");
"Tax Plan 2" - Capital Redemption Policies ("CRP tax plan");
"Tax Plan 3" - Contracts for Difference ("CFD tax plan");
"Tax Plan 4" - Gifting of Gilts ("charity tax plan").
The criminal investigation, Mr Rawbone says, involves indictable offences, namely cheating the Public Revenue contrary to common law and/or false accounting contrary to section 17 of the Theft Act 1968. According to Mr Rawbone, Mr Gittins is not the only suspect in the inquiry and it may extend to other individuals and companies.
1) A search warrant is intrusive and capable of causing grave reputational and other damage. As has been said, it must never be regarded as routine: see Redknapp  EWHC 1177, especially at ; Faisaltex  EWHC 2832 (Admin)  1 WLR 1687, especially at . In this regard it may be said that there are some similarities between a search warrant and Mareva, Anton Piller and Restraint Orders.
2) When an application for judicial review is launched seeking to quash the grant of a search warrant, it is, again, in some respects, akin to the "return date" for Mareva's, Anthony Piller's and Restraint Order's. Ordinarily, the expectation will be that the party challenging the grant of the warrant must be entitled to know the basis upon which the warrant was obtained.
3) By their nature, criminal investigations are such that there will be occasions when, for good reason, HMRC (or other authorities as the case may be) will not be able to divulge the full information or the full contents of the discussion before the judge who granted the warrant. There is an important public interest in combating economic crime, and HMRC's proper efforts to do so should not be undermined.
4) But, as it seems to me, HMRC should be in a position to justify that stance by reference to the facts of the individual case. No general policy would, in my judgment, suffice to do so unless such "non-disclosure" is warranted by the facts of the individual case. The norm should not be that while a criminal investigation is continuing HMRC will not disclose the basis upon which the warrant was granted. In saying this, I do not see any conflict with the observations of this court in Whiston-Dew, unreported  EWHC 3761 (Admin), which, to my mind, goes no further than emphasising the need for a fact sensitive consideration of the circumstances of the individual case. If Whiston-Dew goes further than that, then I would respectfully be unwilling to follow it. I repeat, if there is to be non-disclosure of the basis upon which the warrant was obtained, it must be justified by the facts of the individual case.
5) Where full disclosure cannot be given (and there will be cases where it cannot be), HMRC should, if at all possible, and again unless there is good reason for not doing so, make available, and in a timely fashion, a redacted copy or at least a note or summary of the information and the hearing before the judge, where appropriate, backed by an affidavit. It is most unfortunate that it took until yesterday for this to happen in the present case. It has not helped the preparation or presentation of this case. In some circumstances it might have resulted in the court declining to accept further material from HMRC and in other cases it might very well result in an adjournment at the cost of HMRC.
The application for permission to apply for judicial review
1) Ground 1 - the warrants were drafted too widely. Here, three points are taken (a) excessive width; (b) LPP; (c) relevant evidence.
2) Ground 2 - statutory pre-conditions were not met.
3) Ground 3 - failure to disclose relevant matters to the judge.
I shall take these grounds in turn.
On this day 24th September 2010 an application supported by an information was made by Paul Joseph Yates an Officer of Her Majesty's Revenue and Customs, for the issue of a warrant under schedule 1 paragraph 12 of the Police and Criminal Evidence Act 1984 to enter the premises situated at;
17 - 19 Cockspur Street, London SW1Y 5BL
And search for material from 1st December 2002 to date pertaining to income tax loss relief claims, capital gains tax loss of relief claims and corporation tax loss relief claims by individual and companies who have subscribed to four tax plans promoted by Montpelier Tax Consultants (Isle of Man) Limited (formally MTM (Tax Consultants) Limited and Montpelier Tax Planning (Isle of Mann) Limited) involving Relevant Discounted Securities, Capital Redemption Policies, Contracts for Difference and Gifting of Gilts to Charity. This includes, but is not be limited to, the following;
(1) All internal and external correspondence (including notes of meeting, telephone calls and emails), all documents, all agreements, all financial, business and accounting records (including audited, internal, group and management accounts) and all banking records (including opening application forms, records of signatories, authorisations, statements and paying in books) whatsoever, whether held in written form, on microfiche, magnetic tape, computer or any other form of mechanical or electronic retrieval mechanism, relating to the promotion, marketing and implementation of the four tax plans involving Relevant Discounted Securities, Capital Redemption Policies, Contracts for Difference and Gifting of Gilts to Charity in general and in particular the role of the companies detailed below and the role of any other companies or individuals involved in the promotion marketing and implementation of the four tax plans including but not limited to:
(2) All correspondence, documents, agreements, financial, accounting, business and banking records kept by Montpelier Trustees Limited (formally known as MTM Trustees Limited) for:
(a) The administration of the trusts set up for subscribers to the four tax plans including notes or minutes of meetings, resolutions, deeds of appointment, deeds of assignment, investments made, financial statements, trust records and accounts.
(b) The creation, issue, sale and, if appropriate, redemption of the Relevant Discounted Securities issued in March 2003.
(3) All correspondence, documents, agreements, financial, accounting, business and banking records kept by M.T.Holdings Limited, Mossbank Enterprises Limited and Bayridge Investments LLC for the loans supposedly made by them in connection with the four tax plans involving Relevant Discounted Securities, Capital Redemption Policies, Contracts for Difference and Gilts gifted to the charity, including but not limited to:
(a) Minutes of director, board and share holder meetings.
(b) Journal and ledger entries showing opening and closing balances and any movements between.
(c) bank account authorisations in particular those for inter company and bulk or multiple payments and/or transfers.
(4) All correspondence, documents, agreements, financial, accounting, business and banking records kept by Mossbank Enterprises Limited, Montpelier Insurance Company Inc (formally known as MTM Insurance Company Inc), Pendulum Investments Corporation, Pendulum Investments Limited and Alphabeta Trading Limited for the Relevant Discounted Securities, Capital Redemption Policies, Contracts for Difference and Gifting of Gilts to Charity including option agreements and stock transfer forms, including those in the name of Arvington Limited, with Rotunda Limited (formally known as Vauxhall Adult Education Trust Limited and Rotunda College Limited), including but not limited to:
(a) Minutes of director, board and share holder meetings.
(b) Journal and ledger entries showing opening and closing balances and any movements between.
(c) Bank account authorisations in particular those for inter company and bulk or multiple payments and/or transfers.
(5) All correspondence, documents, agreements, financial, accounting, business and banking records kept by Montpelier Tax Consultants (Isle of Man) Limited (formally MTM (Tax Consultants) Limited and Montpelier Tax Planning (Isle of Man) Limited) and Montpelier (Trust and Corporate) Services Limited (formally MTM (Isle of Man) Limited) but only in so far as they relate to the four tax plans involving Relevant Discounted Securities, Capital Redemption Policies, Contracts for Difference and Gilts gifted to the charity.
(6) All audited, internal, group, management or any other form of accounts prepared for Montpelier Tax Consultants (Isle of Man) Limited (formally MTM (Tax Consultants) Limited and Montpelier Tax Planning (Isle of Man) Limited) and Montpelier (Trust and Corporate) Services Limited (formally MTM (Isle of Man) Limited).
Having been satisfied that the conditions in paragraphs 2 and 14 of schedule 1 have been fulfilled, authority is hereby given for any Officer of Her Majesty's Revenue and Customs accompanied by such other person or persons as are necessary for the purpose of the search, to enter the said premises on one occasion within three months from the date of issue of this warrant to search for, seize and retain the material in respect of which the application is made."
Ground 1(a) - excessive width
"A warrant (b) shall identify, so far as is practicable, the articles or persons to be sought".
Ground 1(b) - LPP
Police and Criminal Evidence Act 1984 -
"8(1) If on an application made by a constable a justice of the peace is satisfied that there are reasonable grounds for believing
(d)that it does not consist of or include items subject to legal privilege, excluded material or special procedure material
He may issue a warrant authorising a constable to enter and search the premises.
9(1) A constable may obtain access to excluded material or special procedure material for the purposes of a criminal investigation by making an application under Schedule 1 below and in accordance with that Schedule.
(2) Any Act (including a local Act) passed before this Act under which a search of premises for the purposes of a criminal investigation could be authorised by the issue of a warrant to a constable shall cease to have effect so far as it relates to the authorisation of searches—
(a)for items subject to legal privilege.
10(1) Subject to subsection (2) below, in this Act "items subject to legal privilege" means—
(a)communications between a professional legal adviser and his client or any person representing his client made in connection with the giving of legal advice to the client;
(b)communications between a professional legal adviser and his client or any person representing his client or between such an adviser or his client or any such representative and any other person made in connection with or in contemplation of legal proceedings and for the purposes of such proceedings; and
(c)items enclosed with or referred to in such communications and made—
(i) in connection with the giving of legal advice; or
(ii) in connection with or in contemplation of legal proceedings and for the purposes of such proceedings
When they are in the possession of a person who is entitled to possession of them
(2) Items held with the intention of furthering a criminal purpose are not items subject to legal privilege.
14(2) Subject to the following provisions of this section, this subsection applies to material, other than items subject to legal privilege and excluded material, in the possession of a person who—
(a)acquired or created it in the course of any trade, business, profession or other occupation or for the purpose of any paid or unpaid office.
19(6) No power of seizure conferred on a constable under any enactment (including an enactment contained in an Act passed after this Act) is to be taken to authorise the seizure of an item which the constable exercising the power has reasonable grounds for believing to be subject to legal privilege."
Police and Criminal Evidence Act 1984, Schedule 1 -
"2. The first set of access conditions is fulfilled if -
(a) there are reasonable grounds for believing -
(i) that a serious arrestable offence has been committed;
(ii) that there is material which consists of special procedure material or includes special procedure material and does not also include excluded material on premises specified in the application;
(iii) that the material is likely to be of substantial value (whether by itself or together with other material) to the investigation in connection with which the application is made; and
(iv) that the material is likely to be relevant evidence"
Criminal Justice and Police Act 2001 -
(a)a person who is lawfully on any premises finds anything on those premises ( "the seizable property") which he would be entitled to seize but for its being comprised in something else that he has (apart from this subsection) no power to seize.
(b)the power under which that person would have power to seize the seizable property is a power to which this section applies, and
(c)in all the circumstances it is not reasonably practicable for the seizable property to be separated, on those premises, from that in which it is comprised
That person's powers of seizure shall include power under this section to seize both the seizable property and that from which it is not reasonably practicable to separate it
(4)Section 19(6) of the 1984 Act and Article 21(6) of the Police and Criminal Evidence (Northern Ireland) Order 1989 (S.I. 1989 1341 (N.I. 12))(powers of seizure not to include power to seize anything that a person has reasonable grounds for believing is legally privileged) shall not apply to the power of seizure conferred by subsection (2)."
1) As is plain, even -- dare I say so -- from the unfortunate jumble of legislative provisions, no warrant can authorise the seizing of items subject to LLP.
2) If on its true construction a warrant extends to material for which there are not reasonable grounds for believing that it does not consist of or include items subject to LPP then the warrant will be quashed, at least unless the offending passages can be severed. Such a warrant cannot be saved by precautions governing its execution on the day, such as, for example, the engagement of independent counsel.
3) The mere fact that on the premises to be searched there will or may be items subject to LPP does not mean that a warrant for the search of those premises will need to be quashed. Such a conclusion seems to me plain, not least from the terms of paragraph 2(a) of schedule 1. For the avoidance of doubt, s.19(6) of PACE applies only once the officers executing the search are already on the premises, ie it goes only to the manner of exercise of the powers of search and seizure, not to whether a warrant should have been granted in the first place. Good practice will no doubt involve the taking of suitable precautions such as the engagement of independent counsel to deal with contingencies arising in the course of the search, but the desirability or need for such precautions does not in any way give rise to a proper ground for complaint as to the warrant.
4) There can be no general, still less universal, rule, but, in a case such as the present where a search is to be conducted of the premises of a professional man where items subject to LPP may be encountered, no harm would be done by an express exclusion for such items. Indeed, it might be better if the warrants in this case had included such wording. That said, the absence of an express exclusion for items subject to LPP does not require the quashing of a warrant which is otherwise appropriately drafted. As already underlined, an exclusion of this nature is simply making express that which is in any event implicit.
1) It is fanciful to suggest that the wording of the warrants permitted or encouraged the seizure of documents whether or not they were privileged.
2) Having regard to the nature of the materials covered by the warrants, the test most favourable to Mr Gittins -- that contained in section 8(1)(d) of PACE -- was satisfied. There were reasonable grounds for believing that documents relating to the mechanics of the plans or schemes would not contain items subject to LPP. Those, as already suggested, were the documents to which the warrants related. That conclusion, I emphasise, is in no way undermined by the appropriate precautions commented favourably upon by the judge, including the instruction of independent counsel, taken by HMRC relating to the conduct of the search in the event that privileged material was encountered. Mr Jones' reliance on the gist document in this regard is, with respect, misplaced.
3) So far as concerns computers, because on the day it was feared that privileged material could not be separated from non-privileged material, notices were issued under s.50 of the 2001 Act. By reason of s.50(4) of that Act, s.19(6) of PACE is effectively disapplied. No complaint could properly be made in this regard.
4) The letter written on the day of the search on behalf of the claimants and handed to HMRC officers said only this:
"Dear sirs, please see memo attached from our Isle of Man office. I have been asked to hand you this letter. Having taken legal advice, Montpelier Tax Consultants (IOM) Limited want it noted that, as far as they are concerned, under the terms of the warrants you should only be taking documents, agreements, correspondence etc relating to the four schemes mentioned in the warrants. All documentation relating to any other schemes should not be taken"
Ground 1(c) - relevant evidence
"In this Act 'relevant evidence' in relation to an offence means anything that would be admissible in evidence at a trial for the offence".
Mr Jones rightly emphasises that the test here is whether there are reasonable grounds for believing that the material is likely to be "relevant evidence" -- rather than simply that the material is likely to be relevant to the inquiry. Until the arrival of the gist document and the redacted transcript he supported this submission by criticism of HMRC for not disclosing the information on which the application for the warrants was based. Having seen those documents he maintains his submission that HMRC has not satisfied the applicable test. HMRC have not been entitled to engage in a fishing expedition, which this was.
"2(b) other methods of obtaining material (i) have been tried without success; or (ii) have not been tried because it appeared that they were bound to fail
14(d) that service of notice of an application for an order under paragraph 4 above may seriously prejudice the investigation."