England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
DIVISIONAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		05/12/2013

Lord Justice Treacy:

1. The Claimants seek judicial review of the grant of search warrants by the First Defendant, Solihull Magistrates' Court, on 21^st January 2013 and the execution of those warrants by officers of the Second Defendant (HMRC) on 6^th February 2013.
2. The First and Third Claimants were arrested on 6^th February 2013 as suspects in a criminal investigation into the storage and sale of non-duty paid excise goods contrary to Section 170 of the Customs and Excise Management Act 1979 and associated money laundering activity contrary to Sections 327 to 329 of the Proceeds of Crime Act 2002.
3. The investigation concerned a Birmingham based haulage company, Cross Transport Limited, and an alcohol distribution company, AQ Wholesale Limited, based in Manchester. In addition, the investigation covered Castle Trade Services Limited (Castle Trade), which is based in Wolverhampton, and of which the First and Third Claimants are director and manager respectively.
4. At present the investigation is still ongoing. The First and Third Claimants are on police bail until January 2014.
5. On 20^th July 2012 search warrants were executed at the premises of Cross Transport Limited, and some 260,000 litres of alcohol were seized, with an alleged evasion of duty being put at more than £556,000.00. Cross Transport Limited's unit is not an approved storage location for non-duty paid excise goods. On 25^th July 2012 Mohammed Hussain, director of AQ Wholesale Limited, informed HMRC that the alcohol seized belonged to him and that it had been obtained from Castle Trade. Thus it was that HMRC decided to extend their investigation to include Castle Trade.
6. On 21^st January 2013 HMRC obtained warrants under Section 8 of the Police and Criminal Evidence Act 1984 (PACE) to search the Claimants' home addresses. The warrants were in identical terms and were executed on 6^th February 2013. Various items were seized in the course of the searches, and the First and Third Claimants were arrested for the offences set out above, and interviewed under caution at police stations.
7. The Claimants filed their claim on 10^th April 2013, a little over two months after the searches and arrests, which would have been the first they knew about the earlier obtaining of warrants. Issues are raised by the Second Defendant as to the promptness of filing the claim and as to the existence of an alternative remedy, either pursuant to Section 59 of the Criminal Justice and Police Act 2001 or, in the event of any prosecution, under Section 78 of PACE.

Ground One

8. It was asserted that the warrants should be quashed as defective because the warrants did not identify with sufficient precision the property which might be seized under them.
9. Each warrant authorised officers to enter the premises and search for:

"•     Business and individual records including transportation and shipping documents, invoices, faxes, correspondence and other documentation relating to the supply of excise goods.

•     Banking financial and accounting document, telephone and electronic communication records, diaries and written records.

•     Mobile phones, fax machines, computers, electronic storage media, satellite navigation devices and other communication equipment which are believed to contain material relating to the facilitation of the offences under investigation.

•     Documents relating to the movement and control of monies and assets and any other material, which appears relevant to the facilitation and methodology of the offences under investigation."

Ground Two

10. This ground asserted that the description of property sought in the warrant was so wide that the Magistrates could not have been satisfied that there were reasonable grounds for believing that such material was likely to be relevant evidence for the purposes of Section 8(1)(c) of PACE.
11. The information before the Magistrates set out the offences being investigated and identified material likely to be relevant evidence. The offences identified were Being knowingly concerned in, or taking steps with others, with a view to the Fraudulent Evasion of Excise Duty contrary to Section 170 of the Customs and Excise Management Act 1979, and "associated money laundering offences" contrary to Sections 327, 328 and 329 of the Proceeds of Crime Act 2002. The information then described the background history concerning Cross Transport Limited and Mohammed Hussain set out above, thus explaining how Castle Trade came into the investigation.
12. Other material information provided to the Justices included:

"Castle Trade are currently deemed to be "non-compliant" as they have failed to render any returns or business records to HMRC to substantiate their trading activity. They have also failed to show that any duties have been paid despite repeated requests by HMRC in order to verify their VAT returns…"

"It is believed that the companies and persons involved are producing false documentation to facilitate the fraud. Both the residential and business addresses will likely have computers, mobile phone/telecommunication data and other electronic media (e.g. USB memory sticks) which may evidence those mentioned roles within the fraud under investigation. The false documents used and records of communications in relation to the fraud are suspected of being stored on media devices likely to be found at the premises searched.

Therefore, it is necessary to search the business and residential addresses listed in this information in order to secure the evidence relating to the alleged offence. The search will be for material of [sic] associating Cross Transport Limited with AQ Wholesale Limited and Castle Trade Services Limited to the fraud being committed."

13. The information provided to the Magistrates showed that Hussain had provided documentation which he said he had received from Castle Trade in relation to the alcohol, and that Hussain had claimed in interview that Castle Trade had assured him that duty had been paid.
14. There was thus evidence of a chain of supply of a large quantity of alcohol in relation to which duty had not been paid, flowing from Castle Trade through AQ Wholesale to Cross Transport, in whose warehouse the goods were found.

Ground Three

15. The First and Third Claimants alleged that HMRC were in serious breach of their duty to give full and frank disclosure of all relevant facts to the Magistrates when the warrants were applied for. In the interviews that took place on 6^th February 2013, after the execution of the warrants, both the First and Third Claimants alleged that Castle Trade invoices had been effectively forged by Mr Hussain for his own purposes. Thus, they were the victims of forgery, and HMRC enquiries should have revealed this and been placed before the Justices, consistent with HMRC's duty of full and frank disclosure at the time of seeking the warrant on 21^st January 2013.

Relevant Legislation

16. Section 8 of PACE 1984 provides:

"(1) If on an application made by a constable a justice of the peace is satisfied that there are reasonable grounds for believing –

(a) that an indictable offence has been committed; and

(b) that there is material on premises…which is likely to be of substantial value (whether by itself or together with other material) to the investigation of the offence; and

(c) that the material is likely to be relevant evidence; and

(d) that it does not consist of or include items subject to legal privilege, excluded material or special procedure material; and

(e) that any of the conditions specified in subsection (3) below applies in relation to each set of premises specified in the application,

he may issue a warrant authorising a constable to enter and search the premises.

…

(4) In this Act, "relevant evidence", in relation to an offence, means anything that would be admissible as evidence at trial for the offence."

17. Section 15 of PACE 1984 provides:

"(1) This section and section 16 below have effect in relation to the issue to constables under any enactment, including an enactment contained in an Act passed after this Act, of warrants to enter and search premises; and an entry and search of premises under a warrant is unlawful unless it complies with this section and section 16 below.

…

(6) A warrant –

(a)…

(b) shall identify, as far as practicable, the articles or persons to be sought."

18. Section 16(8) of PACE 1984 provides:

"A search under a warrant may only be a search to the extent required for the purpose for which the warrant was issued."

The Parties' Submissions

Ground One

19. Ground one relates to Section 15. The challenges are to the terms of the warrant in the sense that there was a failure of that document to identify so far as was practicable the articles to be seized. It was said that this warrant lacked sufficient specificity of detail as to the articles sought so as to comply with Section 15(6)(b).
20. By reference to the bullet points in the extract from the warrant cited at paragraph 9 above, Mr Alun Jones QC, for the claimants, pointed out that not only was there no reference in the warrants to identify what offence or offences were believed on reasonable grounds to have been committed, there was a failure sufficiently to identify under any of the four categories that the items sought related to the companies Cross Transport Limited, AQ Wholesale Limited and Castle Trade Services Limited. These companies had clearly been referred to in the information provided to the Magistrates at the time the officer applied for the warrants (see paragraph 12 above), and provided a clear and practicable means of identifying the material to be sought.
21. The focus of the investigation and of the information provided to the Magistrates related to documents and materials associating those companies with the alleged fraud. The officer had been able to define the materials sought in that way at the time of his application to the Magistrates, but had failed to carry through that precision in definition to the terms of the warrant itself.
22. In addition there was criticism of the words "which are believed to contain material" in the third bullet point. It was argued that this had the effect of enabling wider seizure by officers of articles so as to go beyond that which the Magistrates had identified as necessary for the terms of the warrant. It conferred a degree of discretion on the officer, when the purpose of the warrant was to enable him to search for and seize only that which had been authorised by the Magistrates.
23. It would have been practicable for the officer to draft the warrant in a way which identified the articles sought, yet that had not happened in this case. Accordingly, by reason of Section 15(1), the entry into and search of premises with resultant seizures of articles was unlawful.
24. Mr Rupert Jones, for the Second Defendant (HMRC), accepted the substance of Mr Alun Jones QC's criticisms and thus conceded the unlawfulness of the entry, search and seizure. He submitted that those failures were mitigated, whilst accepting the unlawfulness of the search, by the fact that relevant information not incorporated into the warrant had, on the evidence of the defendants' witnesses, been imparted orally to the occupiers of the premises. Accordingly, little or no mischief had been done.
25. He further submitted that the descriptions of articles sought in the warrants were rather narrower than those which this court had found offensive in other cases such as R (Anand) v HMRC [2012] EWHC 2989 (Admin) and R (Hoque & Das) v City of London Magistrates' Court [2013] EWHC 725 (Admin).
26. There had in this case, for example at bullet point one, been reference to "the supply of excise goods", and in Burgin v Commissioner of Police of the Metropolis [2011] EWHC 1835 at paragraph 86, Stadlen J had observed that the warrant as a whole should be considered, an observation repeated in R (Glenn & Co) v HMRC [2011] EWHC 2998 (Admin) at paragraph 62.
27. Finally, he argued that there was no evidence of bad faith in the execution of the warrants by HMRC. Undoubtedly mistakes had been made on this occasion, but that was different. Whilst evidence before the court showed that HMRC had been slow to react to the decision of this court in Anand in impressing on its officers the need for particular care in drawing up warrants, and in replacing a template for the issue of such warrants, that again fell far short of acting in bad faith.
28. These points were made on behalf of HMRC, not with a view to affecting any conclusion that entry, search and seizure were unlawful under Section 15(1), but rather with an eye on the remedies available to this court arising from the unlawfulness. In particular it was submitted that those matters were relevant to the question of whether this court should quash the warrant or merely declare that the entry, search and seizure were unlawful.

Ground Two

29. Mr Alun Jones QC advanced his second ground by reference to Section 8(1)(c) of PACE 1984 and the requirement that a Justice of the Peace be satisfied that there are reasonable grounds for believing that the material to be sought was likely to be relevant evidence. His submission was that the description of the property at the bullet points in the warrants was such that the Justice of the Peace could not have been so satisfied. Mr Jones QC accepted that he had to show that no reasonable Justice could have been satisfied.
30. In pursuing the point, he submitted that examination of the information provided to the Magistrates failed to show grounds for a belief that his clients had committed offences in relation to the alcohol recovered from Cross Transport Limited.
31. In the course of the hearing we examined the information in detail.
32. Mr Rupert Jones on the other hand argued that there were reasonable grounds for belief that the offences identified had been committed. It was not necessary to demonstrate that the offences had been committed by Mr Alun Jones' clients in particular, although the information was capable of leading to that conclusion. The purpose of the warrant was to enable a search of premises relating to these claimants on the basis that at those premises there was material which was likely to be relevant evidence of substance and value to the investigation as a whole.
33. Such a conclusion was justified when the information pointed towards excise and money laundering offences involving individuals and the three named companies. The situation pointed towards the use of false documentation; that of itself would give rise to a potentially large category of relevant material. Castle Trade had been non-compliant in VAT matters, and in the circumstances residential and business addresses were likely to contain relevant materials.
34. The combination of those matters in the information could properly provide a basis for the Magistrates to be satisfied that the material sought was likely to be relevant evidence.
35. In support of this second ground, Mr Alun Jones also put forward a further argument. He drew attention to a document appended to the First Defendant's Acknowledgement of Service entitled "Information to Assist Administrative Court". This document does not appear to have been created until more than three months after the hearing. Its final paragraph is in these terms:

"On this basis the Magistrates had reasonable grounds to suspect that evidence relevant to the investigation would be found on the premises. Further, the specific items listed, would be of substantial value to the investigation. Each item searched for relates to each address to be searched."

36. Mr Alun Jones argued that this demonstrated that the Magistrates had applied the wrong test and had failed to consider whether the material was likely to be relevant evidence under Section 8(1)(c).
37. Mr Rupert Jones observed that this point had not been taken in the Claim Form or the claimants skeleton, and submitted that in any event there was ample material within the information provided to the Magistrates to satisfy them that there were reasonable grounds to believe that the material was likely to be relevant evidence, and that looking at the material contemporaneous to the hearing, we could be satisfied that the Magistrates had approached the matter correctly.

Ground Three

38. Mr Alun Jones QC, in the light of disclosure of the information provided to the Magistrates after the claim was commenced, and also in the light of evidence served on behalf of HMRC, did not pursue ground three, and I therefore need say no more about it.

Conclusions on Ground One

39. In the light of the concessions made by the Second Defendant (HMRC), I have little difficulty in concluding that the entry, search and seizure at both sets of premises was unlawful. The purpose of the mandatory requirement imposed by Section 15(6)(b) is to enable anyone interested in the execution of a warrant to know what are the limits of the power of search or seizure which is being granted. This is necessary so that such a person can be put in a position to enable him or her to challenge the lawfulness of the seizure of any particular item. Accordingly, it is now well established that the terms of the warrant must be precise and intelligible by reference exclusively to its own terms and not by reference to any other material. The relevant authorities are helpfully collated in Van Der Pijl & Another v The Crown Court at Kingston [2012] EWHC 3745 (Admin) at paragraphs 53 and 54.
40. The obligation under Section 15(6)(b) for the warrant to identify as far as practicable the articles to be sought is a reference to articles which the Magistrates decided fell within Section 8(1) and in relation to the search for which they issued the warrant. Accordingly, in considering whether the obligation under Section 15(6)(b) has been satisfied, it is necessary to look back to the information before the Magistrates in order to identify what those articles must have been.
41. It is clear that the parameters of the material identified to the Magistrates was by reference to specific offences under investigation and connection to the three named companies. Given the vague and general terms contained in the four bullet points and the absence of precision in contrast to the information provided to the Magistrates, I am satisfied that there was a failure to identify, as far as was practicable, the articles sought. Whilst the officers executing the warrant may well have understood the basis which underlay their search, that is nothing to the point. The occupiers of the affected premises were not in a position to know from the warrant itself the extent of the powers of search and seizure available to the officers. It is an essential part of the citizen's safeguards that he or she can learn of the scope of the authorised search from the warrant rather than from the warrant as interpreted by the executing officers.
42. The execution of a search warrant at private or business premises is a significant invasion upon individual liberty. Parliament has rightly required that certain safeguards be put in place. Those safeguards are contained in Sections 15 and 16 of PACE 1984, and Section 15(1) specifically provides that a failure to observe the requirements of those sections will render the entry and search unlawful. I have no doubt that that is the case here.
43. It is to be observed that a failure or failures of compliance with the provisions of Section 15 or Section 16 do not render the warrant itself unlawful, but rather the entry on or search of premises.
44. Whilst I have come to my conclusion based on the failures to identify the relevant legislation and to confine the search to articles by reference to its association with the three companies, I do not consider that Mr Alun Jones' additional point about the wording of bullet point three "(which are believed to)" carries the same force. An officer always has to make some form of judgment at the time of seizure as to whether a document or other material falls within the ambit of the articles defined by the warrant. It is, in the circumstances, unnecessary to resolve this point.
45. As far as the matters advanced by way of mitigation are concerned, I consider these are best assessed at the remedy stage of these proceedings, in the light of the proper acknowledgment that those matters cannot affect a conclusion as to the lawfulness or otherwise of the entry and search.

Conclusions on Ground Two

46. This ground focuses on Section 8 and thus the stage of matters prior to execution of the warrant, namely the issuing of the warrant by a Justice of the Peace and authorisation of a constable or similar officer to enter and search premises.
47. Having viewed the underlying material I consider that the information placed before the Magistrates was such that a Justice of the Peace could properly be satisfied that there were reasonable grounds for believing that an indictable offence had been committed, and that the material on the relevant premises was likely to be relevant evidence.
48. The overall picture presented by the information was in my judgment quite sufficient to warrant such a conclusion. Mr Alun Jones QC's submissions on this point were brief, and in reality invited us to form our own view from the material. My view accords with the analysis put forward on behalf of the Second Defendant.
49. As to Mr Alun Jones' further point under this ground asserting that the wrong test had been applied by the Magistrates, I am unpersuaded. The point is based on a document which was not contemporaneous with the relevant events. As experience during the hearing itself showed, this legislation is such that it is easy to slip into inaccurate use of language. My assessment of the contemporaneous documentary evidence, together with the witness statement of the investigating officer, Mr Beer, who appeared before the Magistrates, and who refers to being questioned about the application and the nature of the alleged fraud over a period of about 15 minutes, is that we can be satisfied that the requirements of Section 8 were satisfied, and that the document relied on by Mr Jones QC is an aberration which does not alter that position.
50. In the circumstances I do not consider that ground two is made out.

Conclusions on Ground Three

51. As already stated, this ground was not pursued.

Remedies

52. Mr Rupert Jones, for HMRC, submitted that there had been a failure to issue the claim "promptly", thus the question of delay arises. He conceded, however, that no prejudice had been caused to HMRC.
53. I am persuaded that the claim was not made promptly in the absence of any satisfactory explanation from the claimants. However, I would not exercise the court's discretion against the claimants. The claim is concerned with important rights for the claimants, and the merits of the substantive claim, at least in relation to ground one, are in their favour. Accordingly, I would not deny relief on this ground.
54. A further point is taken in relation to the availability of an alternative remedy. HMRC's written submissions point to the availability of an application to the Crown Court for the return of the seized property under Section 59 of the Criminal Justice and Police Act 2001. In addition, it is submitted that were criminal proceedings to be initiated, an application could be made to exclude any material relied on from the seizures under Section 78 of PACE 1984.
55. As to the latter, no criminal proceedings have yet been commenced, so the remedy is not realistically available at this stage. Moreover, under a Section 78 application, the Crown Court retains the power to admit in evidence materials which are the result of an unlawful seizure. I therefore do not regard Section 78 as an available alternative remedy.
56. As to Section 59 of the 2001 Act, it is clear that the only forum for a challenge to the validity of a warrant is in judicial review proceedings. See R (Goode) v The Crown Court at Nottingham [2013] EWHC 1726 (Admin) at paragraphs 50-52. The legality of the warrant cannot be challenged in the Crown Court, and that court's powers do not extend to the quashing of a warrant or the granting of a declaration as to the unlawfulness of entry, search and seizure. In those circumstances I do not regard Section 59 as an available alternative remedy.
57. Mr Alun Jones QC invited the court to quash the warrant and to order return of the items seized. In the alternative he sought a declaration of unlawfulness, together with return of the items. I do not consider that, within the exercise of this court's discretion, the warrant should be quashed. The claimants' failure on ground two means that their challenge to the issue of the warrant by the Magistrates fails. This therefore is not a case where there was no basis for issuing a warrant or where that part of the process was very significantly flawed, or where there is, in my judgment, any evidence of bad faith or failure to make full and frank disclosure. The flaw in what occurred arises from the failure to ensure that the warrant itself was drafted with sufficient specificity in identifying the material to be seized.
58. I do, however, consider that the claimants are entitled to a declaration of unlawfulness relating to the entry, search and seizure of 6^th February 2013 arising from the failure of the warrants to satisfy Section 15(6) in terms of their content.
59. HMRC sought to argue that because they had acknowledged that the warrant was defective in that respect, there was no need to grant a declaration. I consider the claimants are, in the circumstances, entitled to the declaration.
60. As to the return of the items seized, I am satisfied that they were seized in the course of a criminal investigation, and that if the warrants had been properly drafted, there would have been reasonable grounds to seize and retain those items. There has been no submission made of any pressing need for the claimants to have access to the material, and so I am not minded to order an immediate return.
61. The fact remains, of course, that these items are now unlawfully held by HMRC subject to the order of this court, but there is a potential public interest in the retention of the documents for the purposes of the criminal investigation. Accordingly, I conclude that the proper order is that HMRC should be ordered to return all property and any copies which have been taken of such material seized pursuant to the warrants on 6^th February 2013 and currently retained in its possession, within 14 days of the making of the order unless, within that period HMRC has made an application to the Crown Court at Birmingham pursuant to Section 59(5) of the 2001 Act for the retention of material on the grounds that the conditions in Section 59(7) are satisfied.
62. A factor in that decision has been the absence of evidence of bad faith. However, I have concerns relating to the drafting of the warrant in this case. It is clear that such warrants are prepared by officers who do not have the benefit of legal scrutiny. It is clear also that notwithstanding a number of decisions of this court prior to 2013 relating to the content of warrants, HMRC have been slow to respond to the need for care and attention in the drawing of search warrants whose effect is to make substantial inroads into individual freedoms. We were told, for example, that warrant templates altered in the light of the decision in Anand in October 2012 were only made available in July 2013.
63. It seems to me that those are legitimate matters for the claimants to raise before the Crown Court in the event that a Section 59 application is made by HMRC. The court has a discretion in those proceedings and, consistent with the observations of Stadlen J in R (El–Kurd) v Winchester Crown Court [2011] EWHC 1853 (Admin), may have regard to the approach of HMRC.
64. That said, there is clearly also a concurrent and important responsibility lying with the Magistrates and their legal advisor to satisfy themselves that the contents of warrants are in proper form as required by the decisions of this court.
65. I invite the parties before us to draw up the necessary order and to provide brief written submissions as to costs. The order should also make provision for any damages claim arising from this judgment to be tried by a single judge of the Queen's Bench Division.
66. Finally, at the hearing the court received a letter from the Official Receiver informing it that Castle Trade was wound up on 18^th February 2013 and that the Official Receiver was appointed liquidator. The Official Receiver reminded the court of his statutory responsibilities and requested that if Castle Trade's records, computers and removable media are to be released from the custody of HMRC, the court directs that they are forwarded directly to his offices. He asks the court to make such directions and grant such relief as will not impede him in carrying out his duties.
67. The Official Receiver has not applied to be joined as an Interested Party to this claim. I am not therefore minded to make any directions at present. However, in the light of the order to be made as a consequence of this judgment, there may well be a Section 59 application by the Second Defendant to the Crown Court. If that course was taken, I see no reason why the Official Receiver should not make representations in that application, and note that the Claimants accept that that is the case.
68. Accordingly, I would do no more than direct that the Official Receiver be provided with a copy of this judgment and the court's order so that he may consider how to proceed in the light of it.

Mr Justice King:

69. I agree.