England and Wales High Court (Administrative Court) Decisions

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

		Royal Courts of Justice Strand London WC2A 2LL
		7 March 2013

1. MR JUSTICE COLLINS: This is an appeal under section 26 of the Extradition Act 2003 against the decision of District Judge Coleman given on 4 January 2013 that the appellant should be returned to Germany to face charges of evasion of tax. Essentially, what is alleged is that he was involved in what is described as a carousel fraud. It is not necessary to go into any further detail so far as the nature of the charge is concerned at this stage. He was arrested on 31 May of this year pursuant to the EAW issued on 23 September 2011. There were a number of adjournments until the final hearing before the District Judge which, as I have already indicated, was on 4 January.
2. The ground of appeal is that, in all the circumstances, it has not been established that there is dual criminality. The starting point is to see what is alleged in the warrant. Without going into too much unnecessary detail, the case against the appellant is that he had acquired possession of what is described as a one-man firm - what would be equivalent of a limited company - but that the affairs of the company were dealt with by his co-accused, a man called Man Dat Huynh. It is said that that firm was registered in July 2009 and de-registered at the end of December 2010 and that it had failed to pay what is a sort of sales or turnover tax imposed in Germany which is, it would appear, largely equivalent to our Value Added Tax.
3. The means by which such tax was evaded, again, is not necessary for me to go into more detail. But the case according to the warrant against the appellant is as follows:

"The accused person Davis is both shareholder and sole managing director of [the relevant firm]. As such, [he] knew that the invoices issued (...) to the one-man firm of the accused person, in the total amount of Euro 7,778,801.00, would be used by the accused person Huynh to assert an unjustified input tax deduction towards the fiscal authorities. Furthermore, he knew that the prerequisites for an input tax deduction in the one-man firm of co-accused person Huynh were not at hand because [the relevant company in which Davis was the sole shareholder and managing director] itself did not pay any turnover taxes. In total, with the invoices of [the appellant's company] input taxes in the amount of Euro 1,477,972.10 were asserted by the one-man firm of the co-accused person Huynh. With respect to an amount of Euro 1,380,230.70, the input tax deduction was also accepted at first by the competent fiscal authorities.

The accused person Davis is thus used of having aided and abetted the co-accused person Huynh, within the context of his one-man firm, to evade turnover taxes of at least Euros 1,380,230.70. Moreover, the accused person Davis is also charged with the fact of having aided and abetted the co-accused person Huynh in the attempt to evade turnover taxes in the amount of over Euro 97,741,46."

The nature and legal classification of the offences are described as:

"Aiding and abetting tax evasion in an especially severe case in a multiplicity of offences with aiding and abetting attempted tax evasion in an especially severe case [and the relevant provisions of the German tax code and criminal code are then referred to]".

This is not an offence which is within the offences covered by the discretion statement and so it is necessary to establish dual criminality.

4. So far as the German code is concerned, one finds that tax evasion is committed by one who makes false or incomplete statements as to fiscally essential facts, or fails to inform, contrary to duty, to the fiscal authorities as to fiscally essential facts and thus evades taxes or procures unjustified tax advantages. There can be no doubt on the face of it that Huynh was indeed guilty of tax evasion at the very least.
5. So far as aiding and abetting is concerned, what constitutes aiding and abetting, according to the translation in the warrant, is this:

"Whoever has intentionally rendered aid to another to his intentionally committed unlawful act will be punished as an abettor."

On the face of that, it is asserted that the appellant knew that the invoices issued by his company to the one-man firm of Huynh were to be used to defraud the German Revenue. However, further information was sought from the German authorities, partly because there had been a request taken up by Her Majesty's Revenue and Customs whereby the appellant was told that he was required, or was desired, to give information on the basis that he was to be treated as a witness rather than a potential defendant in the offences committed by Huynh. He gave a statement, which did not in any way deal with any knowledge or otherwise that he might have had, save as follows which was evidence which was given by him before the District Judge.

6. What he said was that he had taken over the company in question as a result of a chance meeting in a snooker hall in Wandsworth with a stranger and that this stranger, a gentleman called Drapak, suggested that he should open his own business, that commerce was generally good in Germany, that he knew of a company there that sold electrical goods and was available to be taken over and he suggested that Mr Davis should take that business over. As a result, he travelled to Germany and acquired the company. Unfortunately, he said that soon after this his father became seriously ill and he devoted himself to his father's care and had no further dealings with the company in question. He did not see Drapak again and he had had no involvement with Huynh. Indeed, he knew nothing essentially of the fraudulent and dishonest behaviour of Huynh. That was his evidence and that reflected what he had said in the witness statement that he provided to Her Majesty's Revenue and Customs.
7. As a result further enquiries were made of the German authorities and they produced two letters dated 18 October 2012. That statement contained is of considerable importance. What it says is that:

"In his quality as the Managing Director of ASFAR UG, the person charged with a crime [that is to say the appellant] was obliged to hand in sales tax advance returns by the tenth day after expiry of each VAT accounting period and an annual sales tax return by May 31st of the respective following year at the tax office competent for him as well as to state truthful and full particulars in these declarations at any time. He was especially under the obligation to show the fictitious invoices made out by him as such in the sales tax advance return, to declare the collected sales tax, and to pay it over to the tax office, even if it concerned only fictitious invoices not based on real delivery processes executed by him. By omitting to submit the sales tax advance returns of the years 2010 and 2011 as well as the annual sales tax return of year 2010, the person charged with the crime [the appellant] left the tax authorities in the dark about fiscally relevant statements of facts."

8. That clearly identifies the obligation on the responsible person of the company as managing director. The question is whether the appellant, in all the circumstances, was aware that these fictitious invoices had been issued and were being used by Huynh in order to defraud the Revenue. Certainly, so far as the obligations of the managing director of the company were concerned under German law, his was the obligation to provide the necessary details and to pay the relevant sums to the VAT authorities. However, as the statement on 18 October continues:

"... Strong suspicion has arisen that these companies were also integrated into the sales tax 'roundabout' itself [and the relevant amounts very substantial sums of money are referred to]."

Having said there was a reasonable and probable cause aiding and abetting sales tax evasion in favour of Huynh's company between July 2010 and January 2011 and an attempt in relation to January 2011, the statement goes on:

"During his interrogation, the person charged with a crime admitted to have seen a German notary public and to have taken over the company. This corresponds to the findings of the Tax Investigation of Landshut, according to which a share in a company STARTESTER UG in the amount of Euros 100 was assigned to [the appellant] with the notarial deed authenticated by [the notary public in question] dated August 6th 2009 (...) the name of the company was changed to ASFAR (UG). These changes were registered on September 29th 2009...

Furthermore, the company ASFAR UG is said to operate or to have operated a virtual office at the business enterprise offering office services ECOS Office Centre Hamburg. But the employee Ms Pfefferkorn only knew the Managing Director Davis by name.

After the testimony of the person charged with a crime Davis, he is suspected of endorsing possible sales tax evasion recklessly."

9. Mr Jones' submission is that that effectively changes the approach made by the German judicial authority to the way in which it is said that the appellant was involved and that the allegation of actual knowledge is reduced to one of recklessness in the sense that he ought to have known. The submission made, and the same submission was made before the District Judge, is that that means that dual criminality is not established because in order for a person to be guilty of aiding and abetting an offence of evasion of tax, whether it be VAT or the more all-embracing charge of cheating revenue, there must be knowledge of the dishonest activities or the intent by those activities to evade tax that was due. Recklessness in any sense of that word as used, certainly in the English criminal context, would be insufficient.
10. The District Judge, in dealing with this particular submission, approached it in this way. He said that the primary document was the EAW and it was clear from that that he faced allegations of dishonesty. In fact it was clear from the wording in the warrant itself that it was being said that he did know and, in those circumstances, if one looks at the warrant on its own, it is clear that dual criminality is established and the contrary has not been suggested. But the District Judge then goes on to deal with the statement of 18 October. What he says is this:

"This is a translated document and inevitably the English translation requires careful consideration. The contents of the statement taken as a whole clearly alleged dishonesty against the appellant. It is only in the very last line that the word reckless is used."

11. Pausing there, I have referred to the relevant wording in the statement. It is not clear to me that dishonesty is clearly set out in that statement. What is clearly set out is that he is said to be guilty of - or there is evidence which enables him properly to be prosecuted for - aiding and abetting. Aiding and abetting requires intentionality. Intentionality must, prima facie, one would have thought, involve that the appellant, or the individual aiding and abetting in any case, was aware of what was going on. That is to say, did know that the particular offence which he was said to be aiding and abetting was being carried out. It is difficult to see how the word intentional can cover a state of mind which is below that of knowledge. If it is merely that he ought to have known then it would be difficult to say that it was intentional. That is the prima facie view which, in my judgment, one can take on the basis of the statement.
12. However, as we know, the last sentence of the statement says that he is suspected of endorsing possible sales tax evasion recklessly and, in dealing with that, the District Judge said this:

"In English jurisprudence 'reckless' and 'dishonest' are separate and distinctly different concepts. It is argued that the use of reckless, completely changes the way the entire case is put against the RP as set out in the warrant and other documentation. While the translation of that word in the statement is probably linguistically accurate, I am not persuaded that it necessarily conveys the legal meaning of the word as we apply it here. If it did so, it would contradict the rest of the statement. I do not find that it changes the way the case is put against Mr Davis".

13. It seems to me that there is a possible ambiguity in this statement because it is asserted in it, as I have said, that the appellant was guilty of, and can be proved to have been guilty of, and the case against him is that he is guilty of, aiding and abetting, ie intentionally assisting the commission of the offence. It seems to me that, as a matter of logic, that must convey that he knew. Whatever may have been intended by the use of the word recklessly, it is difficult to see that it fits in with the maintained assertion that he is properly to be convicted and there is evidence which can establish his guilt of aiding and abetting the activities of Mr Huynh.
14. The problem arises because of that apparent discrepancy in the warrant between the use of the word recklessly as we would understand it, as applied to our criminal jurisdiction, and the use of the word intentional, which is involved in the German concept of aiding and abetting. It is, I should say, accepted by counsel in this case that nothing short of knowledge is sufficient to establish the guilt of someone who is charged with aiding and abetting the commission of an offence which, in this case, involves dishonesty. There must be knowledge that the evasion of the Revenue was taking place.
15. On the statement put forward by the appellant it is his case that he knew nothing of the issue of these invoices, he was not involved in them at all. There is at least some possible support for that in as much as the evidence from the employee in Hamburg was that she had not seen him and he had not appeared to take any active part in the issue of the invoices in question.
16. Again, it is common ground and the authorities establish, that in order to be satisfied that there is dual criminality, I have to apply the criminal standard. Accordingly, if I have doubt on the whole of the material that dual criminality is established, I ought not to allow the return to take place. I have already identified the difficulty, namely the discrepancy or apparent discrepancy between the maintenance of intentionality in relation to aiding and abetting and the use of the word recklessly. The District Judge felt able to deal with it - as I have already indicated from the citation of his judgment - on the basis that reckless did not necessarily convey a legal meaning of the word as we applied here. The other possibility is that the word intentional in the German translation of aiding and abetting does not go so far as would be required in this country. It is at least possible that the discrepancy is the other way round, so far as the two uses of the two words are concerned.
17. It seems to me in the circumstances that there is a doubt as to precisely what is to be alleged against the appellant as to whether because, if what he says in his statement that he was not involved in the issuing of the invoices and if there is no evidence that he was and the case against him depends upon the fact that he was managing director of ASFAR (UG), then it may be that there is not sufficient to prosecute him and that that is what is intended to be conveyed by the statement coupled with the EAW.
18. I suspect it may well be that the matter can be clarified and sorted out and if the German authorities are satisfied that there is sufficient to prosecute him for the offence of being knowingly and intentionally in that sense involved, in that he assisted because he knew that these invoices were being issued and that they were being used to evade tax, then a warrant could properly be acted upon.
19. It seems to me that there is sufficient doubt in this case to persuade me that dual criminality has not been established to the standard that is required. Accordingly, I allow the appeal on that basis. I make it clear that this does not in any way preclude the German authorities from issuing a fresh warrant if they are able to say that they can prosecute him for an offence which involves him knowingly having been involved in the provision of the invoices which result in the in evasion of tax.
20. MR JONES: My Lord, can I have an order that costs be assessed?
21. MR JUSTICE COLLINS: Yes, of course you can.
22. MR JONES: I am very grateful.
23. MR KEITH: My Lord, I am not going to trouble your Lordship with any further applications.