England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		06/07/2007

MR JUSTICE RIMER :

Introduction

1. This is a petition by the Commissioners of Her Majesty's Revenue and Customs ("HMRC") for a bankruptcy order against Richard Alan Crossman (described as "junior" in the proceedings). The issues raised in answer to the petition caused Deputy Registrar Schaffer to decide on 18 January 2007 that it should be adjourned to a judge.
2. The proceedings have a protracted history and I hope it will not be unfair to observe that at times there appears to have been some confusion in the minds of HMRC and their solicitors as to the basis on which Mr Crossman's indebtedness arose. Having said that, there is no dispute that he did become indebted to HMRC in the sum asserted and that he has failed to discharge that debt. Nevertheless Mr Shivji, for Mr Crossman, has submitted that for one or more of three reasons the court should exercise its discretion under section 266(3) of the Insolvency Act 1986 to dismiss the petition. The first is a public law ground. The second goes to HMRC's conduct in relation to the matter. The third is that for the court to make a bankruptcy order would be for it to act in vain since it would achieve nothing but wasted costs.

Background

3. On 5 September 2003, on a prosecution brought by HMRC, Mr Crossman pleaded guilty to, and was convicted of, fraudulent evasion of Value Added Tax ("VAT") and excise duty on kerosene fuel. He was sentenced to 42 months in prison. On 27 February 2004 a confiscation order was made against him under section 71 of the Criminal Justice Act 1988. The court found that the value of his proceeds of crime amounted to £488,090 (in respect of both the VAT and excise duty fraud) and fixed the amount of the confiscation order at £55,965.46. That sum was fixed by reference to what Mr Crossman's assets were estimated to realise at the time the order was made. He was ordered to pay it within 18 months and, in default, he would face a two-year term of custody in addition to the term he was already serving.
4. HMRC wrote to Mr Crossman in prison on 6 April 2004. The letter was headed "Confiscation Order £55,965.46" It said that "although the Court has given you 18 months in which to satisfy the Order, this however, does not mean that enforcement action cannot commence until that date." It continued, so far as material:

"At the time of the Confiscation Hearing the following were considered by the Court to comprise your realisable assets:

1. Property at 13 Portobello Terrace, Birtley DH3 2JS

2. Business Unit 10-12 Westline Industrial Estate, Birtley

Although the above were specifically listed as your assets, if you are able to satisfy your Confiscation Order in full using other means, then this would be a viable option.

Once the Magistrates' Court is in receipt of payment in full satisfaction of your Confiscation Order, our interest in this matter will cease.

Accordingly this Office will now need to know your proposals for payment of your Order."

5. By an uncertain date in mid-2005, which Mr Shivji said was probably July, Mr Crossman had paid the £55,965.46 ordered by the confiscation order.
6. In April 2005 HMRC served a statutory demand on Mr Crossman for payment of £343,450 said to be due to HMRC in respect of unpaid fuel excise duty and penalties. Particulars were given of the periods and amounts by reference to which the calculation was made. In May 2005 Mr Crossman issued an application in the Newcastle upon Tyne County Court to have that demand set aside on the ground that he did not understand its basis, referring to the fact that HMRC had previously demanded VAT arrears from him in the same sum. He wanted to know what sum was claimed and whether for VAT or excise duty.
7. That request provoked a witness statement of 29 July 2005 from Debra Smith, a paralegal with Clarke Willmott, HMRC's solicitors. She explained that the debt was exclusively in relation to unpaid kerosene excise duty, a United Kingdom revenue duty chargeable under section 6 of the Hyrdrocarbon Oil Duties Act 1979 on imported and home produced hydrocarbon oil. She said the duty claimed was calculated following an assessment made on Mr Crossman by an HMRC officer. She also said that HMRC were separately pursuing him for £71,784.97 unpaid VAT due under the Value Added Tax Act 1994.
8. In August 2005 Deputy District Judge Silver dismissed with costs Mr Crossman's application to set the statutory demand aside. I have no note of the arguments then deployed or of any judgment then delivered. Suffice it to say that HMRC does not suggest that any of the points that Mr Crossman now takes in defence of the petition should have been taken before the judge in August 2005 and cannot be taken now.
9. After some apparent delay, HMRC presented a bankruptcy petition against Mr Crossman in the High Court on 17 January 2006. That is the petition now before me. It is not surprising that it is based on the unpaid sum of £343,450 claimed by the statutory demand. What is surprising is that it asserts that the entirety of the £343,450 was in respect of unpaid VAT and penalties, of which full particulars are said to have been given in the statutory demand. Of course they had not: the demand had described the debt as being in respect of excise duty and penalties, and Ms Smith had confirmed that in July 2005. Despite this, James Garside, another paralegal with Clarke Willmott, appears to have had no qualms about making a witness statement asserting that the statements in the petition were made from his own knowledge of dealing with the matter and from information provided to him by the petitioner. One wonders to what extent he had first read the file. His witness statement is anyway formally hopeless. It is described as verifying the bankruptcy petition, and was presumably made in purported compliance with Rule 6.12 of the Insolvency Rules 1986. In fact, it does not attempt to verify the statements in the petition at all, which is perhaps just as well as the most crucial of them is wrong.
10. There was some difficulty in doing so but the petition was eventually served in March 2006, following which Mr Crossman served notice of his grounds of opposition. He said he had satisfied the confiscation order. He asserted that it was his understanding that, as a matter of policy, HMRC do not seek to recover unpaid duty by way of civil proceedings and he referred to two decisions of the Court of Appeal, Criminal Division, decided in 2004 and 2006, to which I shall come. He said he therefore challenged the petition as an "(i) abuse of process, (ii) breach of Art. 1, Protocol 1 of the ECHR, (iii) wrong in principle." He did not take the point that the petition reflected a change of tack and was now asserting that the claimed debt was for unpaid VAT rather than excise duty. I say straight away that he has not pursued the point based on the alleged breach of the European Convention for the Protection of Human Rights and Fundamental Freedoms.
11. Those grounds of opposition raised, or can be read as raising, the point that the claim to bankrupt Mr Crossman on the basis of his unpaid debt of £343,450 reflected (at least in part) a bid to achieve double recovery against him, since he had already paid £55,965.46 in satisfaction of the confiscation order. That payment was not made to HMRC, although it was paid to the Crown of which HMRC are part. Nor was it so paid in satisfaction of any part of the unpaid duty. Despite this, in such circumstances it is the policy of HMRC not to press for the payment of at least that part of their debt equivalent to any amount paid to the Crown in satisfaction of a confiscation order. HMRC have, therefore, accepted that their debt for the purposes of the petition should be calculated by giving credit for the £55,965.46; and so they have agreed to treat their outstanding debt as in the reduced sum of £287,484.54. The first issue raised by Mr Shivji is whether HMRC's policy is even more generous to debtors in the position of Mr Crossman, such that satisfaction of the confiscation order is treated as writing off the entirety of their debt. HMRC dispute that that is or ever has been their policy.
12. The matter of the admitted deficiencies in the petition and verifying witness statement was raised at the hearing. Mr Beswetherwick, for HMRC, sought permission to amend the petition so as to describe the debt as being in respect of excise duty and to produce a witness statement verifying the amended petition. Mr Shivji raised no objection to such permission being given, which it was, and at the end of the hearing I asked that those further documents should be available when I delivered my reserved judgment. The hearing proceeded on the basis that the petition is based on unpaid excise duty of £343,450, reduced by the payment of the £55,965.46 so that the net amount of the unpaid debt is £287,484.54. I now turn to the issues.

(a) The public law defence

13. Before outlining this issue, I should set out the material provisions of section 71 of the Criminal Justice Act 1988, headed "Confiscation orders," which are relevant also to the second submission advanced on behalf of Mr Crossman. They provide:

"71. (1) Where an offender is convicted, in any proceedings before the Crown Court or a magistrates' court, of an offence of a relevant description, it shall be the duty of the court -

(a) if the prosecutor has given written notice to the court that he considers that it would be appropriate for the court to proceed under this section, or

(b) if the court considers, even though it has not been given such notice, that it would be appropriate for it so to proceed,

to act as follows before sentencing or otherwise dealing with the offender in respect of that offence or any other relevant criminal conduct.

(1A) The court shall first determine whether the offender has benefited from any relevant criminal conduct.

(1B) Subject to subsection (1C) below, if the court determines that the offender has benefited from any relevant criminal conduct, it shall then –

(a) determine in accordance with subsection (6) below the amount to be recovered in his case by virtue of this section, and

(b) make an order under this section ordering the offender to pay that amount.

(1C) If, in a case falling within subsection (1B) above, the court is satisfied that a victim of any relevant criminal conduct has instituted, or intends to institute, civil proceedings against the defendant in respect of loss, injury or damage sustained in connection with that conduct –

(a) the court shall have a power, instead of a duty, to make an order under this section;

(b) subsection (6) below shall not apply for determining the amount to be recovered in that case by virtue of this section; and

(c) where the court makes an order in exercise of that power, the sum required to be paid under that order shall be of such amount, not exceeding the amount which (but for paragraph (b) above) would apply by virtue of subsection (6) below, as the court thinks fit. …

(4) For the purposes of this Part of this Act a person benefits from an offence if he obtains property as a result of or in connection with its commission and his benefit is the value of the property so obtained.

(5) Where a person derives a pecuniary advantage as a result of or in connection with the commission of an offence, he is to be treated for the purposes of this Part of this Act as if he had obtained as a result of or in connection with the commission of the offence a sum of money equal to the pecuniary advantage.

(6) Subject to subsection (1C) above the sum which an order made by a court under this section requires an offender to pay must be at least the minimum amount, but must not exceed –

the benefit in respect of which it is made; or

the amount appearing to the court to be the amount that might be realised at the time the order is made,

whichever is the less."

14. Mr Crossman admits that the claimed debt, reduced as I have explained, has accrued due to HMRC and remains unpaid but he disputes that HMRC are now entitled to a bankruptcy order based on its non-payment. Mr Shivji's first submission was that Mr Crossman had been given a legitimate expectation that, subject to making the payment ordered by the confiscation order, HMRC would not look to him for the payment of the excess of the excise duty he owed. He said that this gave Mr Crossman a public law answer to the petition, which he was entitled to raise by way of a defence, a submission for which he cited Wandsworth London Borough Council v. A [2000] 1 WLR 1246, in particular the judgment of Buxton LJ at pages 1256 to 1258. He also submitted that such a defence is not confined to raising complaints of procedural shortcomings, but can, as Mr Crossman seeks to do, also disturb a substantive right such as HMRC's right to enforce their claim to unpaid duty, a proposition for which Mr Shivji cited Regina v. North and East Devon Health Authority, Ex parte Coughlan [2001] QB 213, in particular the judgment of Lord Woolf MR at paragraph 57.
15. Mr Shivji relied, first, for the factual basis of this defence on the letter to Mr Crossman of 6 April 2004. He said that gave Mr Crossman an unambiguous assurance that, once he had paid the money the subject of the confiscation order, that would be the end of HMRC's claims in respect of the unpaid duty. He admitted that, if Mr Crossman needed to show reliance on that representation, the only reliance he could show was payment of the confiscation money. He further submitted that by the time of the hearing HMRC had, in two reported cases in the Criminal Division of the Court of Appeal, manifested a policy not to pursue creditors such as Mr Crossman for any excess of their unpaid debt beyond the amount of any money paid by them in compliance with a confiscation order. He accepted that Mr Crossman could not be said to have relied upon the statement of policy said to be manifested in those cases, since he was ignorant of them. But he also said that reliance is not an essential ingredient of a public defence built on legitimate expectation, for which he cited Regina (Bibi) v. Newham London Borough Council [2002] 1 WLR 237, in particular paragraphs 27 to 31 of the judgment of the Court of Appeal. He said the nub of the point was that it is unreasonable and an abuse of power for HMRC to bring proceedings in violation of their stated policy.
16. The first of the two cases is Glyn Edwards v. The Crown [2004] EWCA Crim 2923, a decision of Mance LJ, Newman and Fulford JJ. It was decided on 30 November 2004. It was one in which in May 2003 the appellant had pleaded guilty to the fraudulent evasion of £311,627.48 duty on a quantity of tobacco. He was sentenced to two years' imprisonment. In confiscation proceedings in February 2004 he was ordered to pay £30,257.52, being the totality of his assessed realisable assets. The main issue at that hearing and on his appeal was whether he had derived any "benefit" within the meaning of section 71 of the Criminal Justice Act 1988, the question being whether he had in fact evaded the duty. The court dismissed the appeal. The passages upon which Mr Shivji relied are towards the end of the end of the judgment of the court delivered by Newman J:

"24. … On this appeal it was not argued that the provisions of the CJA arguably gave rise to the unlawful confiscation of property and a breach of Protocol 1, Article 1 of the ECHR because they could give rise to double recovery of the duty. In response to enquiry from the court, counsel for the respondent stated that where a confiscation order has been made, based upon a benefit calculated by reference to the unpaid duty, the Customs and Excise authorities do not, as a matter of practice, seek recovery of the unpaid duty by way of civil proceedings. That both civil and criminal remedies are available is not in doubt. Should the Customs and Excise Authorities pursue a civil remedy where a confiscation order has been met, it is clear that there would, in effect, be double recovery of the duty.

25. The firm practice of the Customs and Excise Authorities is, in our judgment, well placed. Mr Bodnar drew the court's attention to section 71(1C) of the CJA [which Newman J then cited, and which I have set out above]. Mr Kholhar, representing Customs and Excise, confirmed in answer to the court's question that Customs and Excise do not intend to, and will not, institute any civil proceedings against the appellant in respect of the duty. In the light of this undertaking, we decided that no further argument was necessary concerning the possibility that there might otherwise have been a potential for double recovery."

17. That is the first passage upon which Mr Shivji relied by way of support for HMRC's claimed statement of policy relevant to the present case. The second is in the later authority of Regina v. Bakewell [2006] EWCA Crim 2, decided on 11 January 2006 (a decision of Rix LJ, Bell J and Sir John Alliott). That appeal arose out of a confiscation order made against Mr Bakewell in 2005, this time under section 6(2) of the Proceeds of Crime Act 2002. The total tax evaded by Mr Bakewell amounted to £403,959.67 (in respect of customs duty, excise duty and VAT), with the confiscation order being in the sum of £10,000. The appeal was by HMRC asking for the amount of the confiscation order to be increased to the full amount of the tax evaded. The court allowed the appeal and substituted a confiscation order in that full amount against Mr Bakewell for the £10,000 ordered by the judge. I need cite no more than the following paragraph from the judgment of the court upon which Mr Shivji relied:

"19. There was some discussion during the appeal as to whether, if Mr Bakewell were to be rendered liable to a confiscation order in the amount of the pecuniary advantage so obtained he would be double penalised in that he would also remain liable to pay the duties evaded. However, we were informed by Mr Andrew Mitchell QC, counsel for HMRC, that where a confiscation order was obtained reflecting the duties payable but evaded, it was the policy of HMRC to seek no other recovery. In this connection, no reliance was placed on behalf of Mr Bakewell, either here or in the Crown Court, on section 6(6) and 7(3). If those provisions apply to the possible recovery of evaded duty by HMRC, then in theory they are a means by which the possible unfairness of a double liability can be avoided. As it is, HMRC eschew any intention of seeking to enforce such a double recovery."

18. In my judgment those passages from Edwards and Bakewell do not provide support, or at any rate unambiguous support, for the policy which Mr Shivji asserts that HMRC apply in a case such as this. The relevant facts of this case are that Mr Crossman incurred a total liability of unpaid duty in the sum of £343,450. He was made the subject of a confiscation order in the sum of £55,965.46 which he has paid. Although that sum was not paid to HMRC, as opposed to the Crown generally, HMRC treated it as paid in reduction of the liability to duty and are not by their petition seeking to achieve double recovery of the same sum. Their petition is based solely on the reduced sum after giving credit for the £55,965.46. I do not regard anything said in either of the cited cases as suggesting that, in a case such as the present, HMRC's policy is such as to deprive them from seeking to recover the excess of their debt over and above the amount paid under the confiscation order.
19. In both cases the statement to the court as to HMRC's policy was expressed in similar terms. That is not surprising because, so I presume, the same policy was being described. In Edwards it was that "where a confiscation order has been made, based upon a benefit calculated by reference to the unpaid duty, the Customs and Excise authorities do not, as a matter of practice, seek recovery of the unpaid duty by way of civil proceedings." In Bakewell, it was that "where a confiscation order was obtained reflecting the duties payable but evaded, it was the policy of HMRC to seek no other recovery." In my judgment neither statement amounted to more than one to the effect that where the amount of the confiscation order matches the amount of the unpaid duty, HMRC will not take civil proceedings to recover the amount of the unpaid duty. That is certainly what was said in Bakewell and I do not accept that anything different was said in Edwards. I do not read either statement as amounting to a statement of policy to the effect that if the confiscation order was in an amount, say, equal to 10% of the unpaid duty, HMRC would not pursue civil proceedings to recover the other 90%. In Bakewell there was no question of any such civil proceedings, because the Court of Appeal increased the amount of the confiscation order to the full amount of the evaded duty. In Edwards there was in theory the possibility of such civil proceedings, because the amount of the confiscation order represented just under 10% of the evaded duty. In my view, however, nothing said to the court in that case justifies Mr Shivji's claimed interpretation of HMRC's policy. As I interpret it, the statement in paragraph 24 of the judgment was merely making the general point that where the amount of the confiscation order matches the unpaid duty, no civil proceedings will follow, since otherwise there would in substance be double recovery of the duty. But that statement makes no sense in a case in which the unpaid duty exceeds the amount of the confiscation order. Why, in such a case, should HMRC impose a restraint upon themselves from suing for the recovery of the excess? In paragraph 25 HMRC confirmed that, in that particular case, it would not in fact be taking any proceedings against Mr Edwards, and therefore not even in respect of the balance of unpaid duty in excess of the amount of the confiscation order. There is, however, no basis for treating that confirmation as reflecting HMRC's policy in every such case: it may simply have been a decision dictated by the particular circumstances, perhaps because HMRC could see no prospect of any further recovery. After all, the practical reality is that the amount of the confiscation payment will have been fixed by reference to the defendant's realisable assets at the time the order is made (see section 71(6)) and so there may in practice be little prospect of any further recovery. But a debtor's circumstances can change and other assets can subsequently come to light.
20. That interpretation of what was said in relation to HMRC's policy in Edwards and Bakewell is in fact in line with other evidence as to HMRC's policy with regard to issues such as have arisen in this case. Paragraph 4.8 of the current policy document, headed "Debts arising in the course of criminal proceedings", provides:

"As a matter of policy, civil recovery action is appropriate if the debt is a debt that Law Enforcement established in the course of a criminal prosecution. If part of the debt is not enforceable, due to the presence of a confiscation or compensation order, the investigating officer must tell the DMU [Debt Management Unit] what part of the debt may be the subject of civil recovery proceedings. …

Generally, LE will not refer a debt to a DMU until the investigation is over or has reached the stage where our action cannot prejudice the outcome of the investigation. This means that the debt reported for civil recovery action may be aged (see paragraph 4.1). It may be necessary to tell the court of the existence of the criminal prosecution and of any confiscation or compensation order made. We can take civil recovery action against traders in prison (see paragraph 4.9)."

21. The evidence of Debra Smith is that the policy in force at the time of the Edwards case was identical. I find that HMRC's internal guidance at all material times was to the effect that, in a case such as this, HMRC would not seek to recover by way of civil proceedings that part of a debt that was regarded as satisfied by a payment under a confiscation order, since that would amount to double recovery; but that they would regard themselves as entitled to pursue any unpaid balance of the debt.
22. In my judgment, therefore, the pursuit by HMRC of Mr Crossman by the present petition involves no departure from HMRC's policy in the present type of case; and I do not accept that HMRC's public utterances as to that policy in Edwards and Bakewell amounted to the articulation of any different policy. HMRC's internal policy, and these two authorities, provide no assistance to Mr Crossman in his bid to assert a public law defence to HMRC's claim.
23. All that is left, therefore, in support of that claim is the letter of 6 April 2004. The question which that letter raises is whether it amounted to a clear and unambiguous representation to Mr Crossman that, subject to his payment of the confiscation order money, HMRC would not pursue him for the balance of the debt. It is accepted that if it fell short of such a representation it will not do the work that Mr Crossman requires of it in order to establish his defence.
24. As to whether it did amount to such a representation, the points made by Mr Beswetherick against the proposition are that the letter is exclusively about the payment due under the confiscation order. It nowhere contains any reference to the unpaid excise duty as a whole, or even to the balance of it once the confiscation order has been satisfied. The thrust of the letter is to encourage Mr Crossman to recognise that he should satisfy the order and it even goes to the lengths of saying (the justification of which I question) that it would be open to HMRC to enforce compliance with the order before the expiry of the 18 months which the court gave Mr Crossman to satisfy the order. Mr Beswetherick submitted that there was no scope for interpreting the letter as containing the clear and unambiguous representation that Mr Shivji asserted that it did.
25. Those are compelling points. The only counter-argument is, so it seems to me, the sentence reading "Once the Magistrates' Court is in receipt of payment in full satisfaction of your Confiscation Order, our interest in this matter will cease." (My italics). It can perhaps be said that it is a statement of the obvious that HMRC's interest in the confiscation order, or in its due satisfaction, would cease upon the ordered payment being made in full. So why did HMRC regard it as necessary to say that? If they are to be acquitted of making statements of the perfectly obvious, the only other interpretation of those closing words is that they were directed at conveying that the nature of the interest that would cease would be HMRC's interest in recovering the difference between (a) the full amount of the unpaid excise duty and (b) the amount of the confiscation order. For my part, however, I find it impossible to read all that into those words. The letter is in no manner directed to that balance, or as to the debt as a whole. I am unpersuaded that it can fairly be interpreted as conveying an unambiguous representation to that effect. I find it does not.
26. Even if, contrary to my opinion, the letter did convey to Mr Crossman that, subject to satisfying the confiscation order, HMRC would not look to him for the balance of the unpaid duty, the point anyway takes Mr Crossman nowhere. That is because later, and well before he had paid the £55,965.46, HMRC made it clear to him that they would anyway be pursuing him for the full amount. That is reflected in a chronology created by HMRC of the relevant events. On 5 December 2004 HMRC sent Mr Crossman what is described as a seven-day warning letter in relation to its claim for the full £343,450. He was in prison at the time, but his father promptly took the matter up on his behalf and telephoned HMRC, asserting his understanding (an obvious misunderstanding) that the Crown Court had reduced the debt to £56,000. HMRC sought internal guidance on that assertion and their Mr O'Flaherty advised on 14 December 2004 that Mr Crossman senior was simply wrong and that, unless and until written off, the excise debt remained due in full and Mr Crossman junior also had to pay the amount ordered by the confiscation order. On 25 January 2005 Janet Moore of HMRC spoke to Mr Crossman senior and explained that the confiscation order was separate from the excise duty debt. The note of the conversation records that "He said that his son was in jail and unable to pay. I informed him that I would prepare my case for Civil Recovery & they would be in contact with his son." Mr Crossman junior was released from prison on 24 February 2005 and he telephoned HMRC about a week later. On 22 March 2005 a further seven-day warning letter for the full £343,450 was sent to him, which led to a call from him on 31 March 2005 saying he did not understand why HMRC were demanding all this money when there was already a confiscation order in place. The call was with Billy Logan of HMRC's Civil Recovery Unit, who explained that HMRC were entitled to proceed for the remaining debt. No point appears to have been taken by Mr Crossman that the April 2004 letter had said anything different. No point has been made in evidence that Mr Crossman at any stage relied upon that letter, which was only put in evidence by his solicitor six days before the hearing. Nor is it easy to see how he could have placed any reliance on it. He discharged the confiscation order in, so I am told, about July 2005, but it is unrealistic to regard that exercise as involving any element of choice. He had been ordered to make the payment.
27. In my judgment, therefore, at no point before Mr Crossman made the confiscation order payment did HMRC at any stage make any unambiguous representation to Mr Crossman that, if he were to pay it, he would be released from any claims in respect of the unpaid balance of the excise duty. On the contrary, as the statutory demand shows, they were asserting a right to claim the full amount of that duty right down to the time he satisfied the confiscation order. It was only later that HMRC, in recognition of their policy, agreed to give credit in their debt calculation for the amount of the confiscation order.
28. I find, therefore, that there is no factual basis on which Mr Crossman can establish his "legitimate expectation" defence, and I reject it.
29. If I am wrong in my interpretation of the letter of 6 April 2004, I record that I anyway find that there is no evidence that Mr Crossman ever relied on that letter. Mr Shivji of course submitted that, assuming the relevant representation could be established, it was unnecessary to prove any reliance. Mr Beswetherick advanced the contrary submission, relying on what Bingham LJ had said in Regina v. Inland Revenue Commissioners, Ex parte M.F.K. Underwriting Agents Ltd. and Others [1990] 1 WLR 1545, at 1568E. In view of my conclusions on the facts, I find it unnecessary to rule on this difference between counsel. Mr Beswetherick also submitted that, even if Mr Shivji's argument was right on the facts, Mr Crossman has no private law rights which have been infringed by HMRC's decision to take bankruptcy proceedings against him so that he is not entitled to invoke a public law defence. He said that Mr Crossman's only remedy was to seek judicial review of that decision. For that proposition he referred to what Buxton LJ had said in Wandsworth London Borough Council v. A [2000] 1 WLR 1246, at 1258. Again, I find it unnecessary to rule on that point either.

(b) The non-disclosure issue

30. The point here is that under section 71, and in a case in which the defendant has benefited from any relevant criminal conduct, the starting position is that there is an obligation upon the court to make a confiscation order. That obligation is, however, qualified by section 71(1C) to the extent that, in cases in which the court is satisfied that "a victim of any relevant criminal conduct has instituted, or intends to institute, civil proceedings against the defendant in respect of loss, injury or damage sustained in connection with that conduct", the court merely has a power rather than a duty to make a confiscation order; and, if it decides to exercise that power, section 71(6) does not apply for the purpose of determining the minimum amount to be recovered.
31. Mr Shivji said that it is a basic principle that the prosecution in any case is under a duty of full and frank disclosure. For that he referred to the decision of the Criminal Division of the Court of Appeal in R v. Makin [2004] EWCA Crim 1607, in particular to Hooper LJ's judgment at paragraph 36. It is said that in this case HMRC had a duty to disclose any intention they had to institute civil proceedings against Mr Crossman for recovery of the unpaid duty, since that went to whether the court had a duty, or merely a power, to make a confiscation order. The complaint in the present case is that, in their statement to the court in support of the making of a confiscation order, HMRC did not disclose their intention to bring civil proceedings against Mr Crossman. The maker of the relevant statement said no more in paragraph 6 than that:

"I am not aware of any civil proceedings, instituted by a victim of an offence to which these proceedings relate, in respect of loss, injury or damage sustained in connection with the offences to which the defendant has been found guilty."

32. That was no doubt true, but Mr Shivji pointed out that it went to only part of the inquiry under section 71(1C). It did not inform the court as whether any victim, including HMRC themselves, intended to institute civil proceedings. There is no evidence as to whether the judge asked counsel for HMRC whether they did have any such intention.
33. As to whether, at the time of the confiscation order hearing, HMRC did so intend, the evidence is a little unclear. The internal chronology to which I have referred reflects that HMRC's stance at 1 October 2002 (before Mr Crossman's conviction) was that they should not take any action to recover the debt until advised to do so by Mr O'Flaherty. The debt was, at that stage, described as "suspended". At about that time Mr O'Flaherty reported that the case was under criminal investigation. On 10 December 2002 he reported that the instruction from "headquarters" was that "we should not chase this debt." A further note as at January 2003 recorded that the debt would be a longstanding one and that "I do not see any chance of us chasing this debt in the near future." In July 2003 there was an internal inquiry of Mr O'Flaherty as to whether the debt could be chased yet, to which he replied on 25 July 2003 that "… this is still in the crown court so unless otherwise stated I would suggest that the debt is not chased." Mr Crossman was convicted in September 2003. In January 2004 O'Flaherty reported that the process for a confiscation order was under way and that "Action continues to be on HOLD." The confiscation order was made in February 2004. In October 2004 an internal note was made to the effect that "the debt of £343,450.00 should be pursued." In due course it was, with the statutory demand being served in April 2005.
34. Mr Shivji submitted that the sense of all that was that, so long as the criminal proceedings were contemplated and undisposed of, HMRC would take no steps to enforce the debt by concurrent civil proceedings; but that their intention was that, once they were disposed of, such steps would be taken, as they were. Mr Beswetherick submitted that the position was not as clear as that and that one inference was that HMRC were awaiting the outcome of the confiscation order hearing. He said that if the confiscation order had been in an amount equal to, or at least substantially representing, the amount of the unpaid duty there would have been no point in pursuing civil proceedings, and none would have been pursued. HMRC's stance can, therefore, be regarded as one of "wait and see".
35. There is something to be said for both viewpoints; and the difficulty in deciding which is to be preferred is that there is no evidence from HMRC dealing specifically with the point. Doing, however, the best I can with what I have I conclude that the probabilities are against HMRC having rationalised the matter in the way that Mr Beswetherick attributes to them. There is no support for it in the notes of the history of the matter during the lead up to the confiscation order hearing; and the subsequent notes in the chronology appear to record that HMRC's understanding until well after the statutory demand was served was that they could proceed for the full amount of the unpaid duty and without even giving credit for the amount paid under the confiscation order: the petition was presented in January 2006, and was based on the full amount of £343,450. It was only later that HMRC remembered that their policy was not to seek double recovery in respect of payments made under confiscation orders. I find, therefore, that HMRC did, at the time of the confiscation order hearing, have an intention to institute civil proceedings. There is no evidence that they disclosed that to the court, and I infer that they did not. They should have done.
36. Mr Shivji submitted that had that intention been disclosed, the court would have postponed the confiscation order application until after the disposal of the civil proceedings. He said that had that happened, this petition would have been presented and would probably have resulted in a bankruptcy order. In that event no confiscation order such as was made would have been made; and the assets that were applied in satisfying the confiscation order would have been available for Mr Crossman's general creditors, including HMRC. By contrast, HMRC's non disclosure resulted in the making of a confiscation order that ought not to have been made; and it led to a payment which was to the benefit of the Crown (including HMRC), but in which Mr Crossman's general creditors did not share. In such circumstances it would, it is submitted, be unjust for Mr Crossman now to be made the subject of a bankruptcy order at the suit of HMRC. To the question whether at any material time Mr Crossman had any creditors other than HMRC, the answer was that there was no evidence as to that. On 11 April 2005 Mr Crossman's previous solicitors wrote to Clarke Willmott to the effect that at that date his only substantial creditor was HMRC.
37. In support of the proposition that, had the Crown Court been told of HMRC's intention to issue civil proceedings against Mr Crossman, the court would have adjourned the application for the confiscation order until after the disposal of any civil proceedings, Mr Shivji relied on the decision of the Court of Appeal in Borders (UK) Ltd and Others v. Commissioner of Police of The Metropolis and Another [2005] EWCA Civ 197 (a decision of May, Sedley and Rix L.JJ). I do not derive from that authority any support for the proposition that, upon its being disclosed to a Crown Court that a victim intends to sue the defendant, the court will automatically adjourn any consideration of a confiscation order until after the outcome of the civil claim. It may be that, in any particular case, the court will do so. But there is nothing in section 71 which requires it. On the contrary, section 71(1C) contemplates that the court can there and then exercise its power to make a confiscation order despite the intention of any victim to sue. What the court will do in any particular case will, as it usually does, turn on its facts.
38. I nevertheless approach this issue on the basis that Mr Shivji is correct that HMRC failed, in proper discharge of their duty of disclosure, to inform the court that they would, or at least might, institute civil or bankruptcy proceedings against Mr Crossman. I do not, however, agree that, on the facts, that has the automatic consequence that this court should now decline to make a bankruptcy order. In my judgment a consideration of the overall justice of the case points to the making of a bankruptcy order, not to a refusal to do so.
39. If Mr Shivji is right that, had HMRC disclosed their intentions to the Crown Court, that court would have adjourned the confiscation proceedings until after the outcome of the civil proceedings, HMRC could have taken proceedings against Mr Crossman for the full £343,450; and, when they recovered judgment, they could have levied execution on his assets with a view to achieving maximum recovery for themselves; or they could at any stage have served a statutory demand and taken bankruptcy proceedings. All, or at least the bulk, of any recoveries would, so far as the evidence goes, have accrued to HMRC since there is no evidence of Mr Crossman having any other creditors, or at least any material creditors. In the event, this did not happen because the court made the confiscation order. The effect of that was to result in a payment of £55,965.46 to the Crown, which HMRC are content to regard as paid in satisfaction of the unpaid duty; and all that they are now doing is to recover what they can in respect of the balance by way of bankruptcy proceedings. They are, therefore, in substance endeavouring to achieve virtually the same result as that which, on Mr Shivji's submission, would probably have followed had the duty of disclosure been discharged.
40. I cannot see how in these circumstances there is any injustice in the making of a bankruptcy order. No other creditors are involved. No other victim of Mr Crossman's criminal conduct is involved. Had there been any such other victim, and had that victim made known to the court any intention to sue Mr Crossman, the court might have declined to make the confiscation order either in the sum it did or in any sum. But as, so far as the evidence goes, the only victim/creditor with any claim on Mr Crossman's assets is HMRC, none of these considerations arises. Mr Shivji's point was that, had HMRC made the disclosure that it should have made, the confiscation proceedings would have been adjourned and Mr Crossman would have had the opportunity to propose an individual voluntary arrangement with his creditors, and it is said he has been deprived of that opportunity. But there is no evidence that at the time of the confiscation hearing he had any creditors other than HMRC. I am unpersuaded that the claimed loss of this opportunity represents any prejudice or other injustice to Mr Crossman.
41. In my judgment there is no merit in Mr Crossman's opposition on this ground to the making of the bankruptcy order sought and I reject this ground of opposition.

(c) No assets sufficient to support a bankruptcy order

42. Mr Shivji's final point was that as the Crown Court must, in making the confiscation order, be taken to have made a finding that the amount of its order represented the totality of Mr Crossman's assets, there will be no further assets in his estate for any trustee to collect and distribute in his bankruptcy. Any bankruptcy order would, therefore, be in vain and so should not be made. For that submission Mr Shivji cited In re Thulin [1995] 1 WLR 165, a decision of Mr Jules Sher QC sitting as Deputy High Court Judge of the Chancery Division. The relevant passage is at page 169, where the judge referred to the dictum of Sir Robert Megarry VC in In re Field (A Debtor) [1978] Ch 371, at 375, that "A man may indeed be too poor to be made bankrupt: but the burden of proof is heavy." The judge also referred to the emphasis as to the weight of the burden of proof made by Lord Esher MR in In re Betts, Ex parte Betts [1897] 1 QB 50, at 52. Whilst I do not question the principle referred to by the judge in Thulin, I do not regard it as of any assistance to Mr Crossman. If he is saying that he is entitled to be a beneficiary of this principle the burden on him is to prove that he is too poor to be made bankrupt. He has made no attempt to do so. It is fair to record that Mr Shivji did not press this submission.

Result

43. The outcome is that, subject to a sight of the amended petition and the evidence in support, I propose to make a bankruptcy order against Mr Crossman.