England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JU STICE
QUEEN'S BENCH DIVISION

		22 July 2009

1. This has been the trial of a claim by the Prosecutor against the Third Claimant ("Larkfield"), that Larkfield is not the true (or the sole) beneficial owner of a flat in London's Docklands which had previously been identified as part of the realisable assets of the Defendant ("Mr May") when a confiscation order was made against him by the Crown Court. As I shall explain other matters that were to be decided at this hearing have fallen away or been left over.

Background

2. On 5 September 2000 Mr May was arrested and charged with conspiracy to cheat the Revenue over a "missing trader" fraud. On 7 September this court made a restraint order over Mr May's assets and on 28 November a management receiver was appointed over them. On 24 September 2001 Mr May was sentenced to 5 years imprisonment (reduced to 4 years on appeal) at the Central Criminal Court. On 2 August 2002 after a contested hearing at Blackfriars Crown Court His Honour Judge Samuels QC made a confiscation order in the sum of £3,246,277 to be paid by 2 August 2005, with 6 years imprisonment in default. There is currently, with interest, a little over £4 million outstanding. Mr May's appeal against that order first to the Court of Appeal and then to the House of Lords was dismissed on 2 June 2008. On 28 June an application was made to the court under section 80 of the Criminal Justice Act 1988 for the appointment of an Enforcement Receiver. On that date I gave directions for the trial of claims by third parties to property identified by the Crown Court as Mr May's realisable assets. In the light of developing events those directions were modified by Beatson J on 3 November 2008 and McDuff J on 18 December 2008. On 15 January 2009 Treacy J made orders for the appointment of the Enforcement Receiver and for the oral examination of Mr May before a Queen's Bench master as to the extent and whereabouts of assets available to satisfy the confiscation order. A transcript of Mr May's examination was ordered to be available at the hearing before me. The examination took place before Master Eyre on 18 March and 6 April 2009. The hearing before me began on 21 April 2009 and was completed on 6 May.
3. As a result of receiving evidence in the possession of the Isle of Man Financial Crime Unit the prosecutor also sought on 28 June 2008 an inquiry into the extent of Mr May's assets and an order for that matter be heard after the third party claims and before the same Judge.
4. There were several unexpected developments in the period before the trial, some of which caused the Prosecutor to apply at the start of the hearing for an adjournment. I refused that application essentially on the grounds that the problems which had arisen could be overcome in the course of the trial or, if necessary, at further hearings later. The trial started half a day late because one counsel could not return from abroad in time and further time was lost at the end of the first week following a problem with witnesses and the unfortunate indisposition of Mr David Barnard who had given considerable assistance to the court.

The third party claims

5. Mrs Denise May, Mr May's former wife, claimed a half-share in the former matrimonial home at The Robins, Bickley in Kent and also the entire value of the art antiques and jewellery at that property. Early in the hearing those claims were settled on the basis that her claim to the half-share of the home was conceded and that to the art antiques and jewellery accepted as to 50%. The Second Claimant Mr George May, Mr May's father, claimed that properties in Rochester and Maidstone registered in the names of Mr May and Mrs Denise May were held by them on trust for his grandchildren James and Kelly. The Prosecutor also conceded that claim. Mr George May also made a claim in respect of a sea going boat. This too was conceded by the Prosecutor. This left the claim by Larkfield to which I refer in more detail below and the claims as to the further assets of Mr May.

Claim by Larkfield

6. Larkfield is a company incorporated in the Bahamas. Only two shares were issued one to Bankhill Limited and the other to Northquay Limited, both Liberian companies. Larkfield was incorporated on 30 March 1999. The directors of Larkfield were themselves companies represented at meetings by employees of an Isle of Man Trust administration company. Declarations of Trust dated 14 June 1999 stated that the shareholders held their shares on trust for the Magle Settlement ("Magle") a trust established in the Isle of Man in about November 1996. Mr Peter Gleeson claims to be the sole beneficiary of Magle and thus to be the owner of Larkfield and in practice what I shall call "the flat", 85 Dundee Wharf London E14. Larkfield bought the flat for £255,000 in July 1999. It is currently worth about £450,000, according to Mr Martin an estate agent who gave evidence. The Prosecutor contends that Mr May provided the money for the flat. Larkfield contends that Mr Gleeson bought the flat with trust resources.
7. The evidence for Larkfield was given by Mr May, Mr Gleeson, Mr Paul Quayle, a chartered accountant from the Isle of Man who is a trustee of Magle and a director of Larkfield, Mr Mark Hubbard the settlor of one of the trusts with which Mr May is claimed to be connected, Mr Christopher Martin an estate agent who handled an abortive sale of the flat in 2003 and Mr Francis Howard a former director of Coda Corporate Services Limited ("Coda") an Isle of Man company dealing with corporate and trust administration and support whose business was later purchased by Caledonian & Manx Corporate Services Limited ("Calmanx"). Larkfield also relies on the witness statement of Elizabeth Ciarrocchi who lives at Flat 94 close to the flat in dispute in this case.
8. The Prosecutor relied on several statements from Mr Andrew Fatherly who at the relevant time was an officer of HM Customs & Excise, and live evidence from Mrs Emma Gilkes who, with her husband, had sold the flat to Larkfield in July 1999 and also from Mr Michael Jeffcock who had worked at times for Calmanx. Mr Jeffcock's live evidence was mainly directed to withdrawing something he had included in an earlier statement.

Legal issues

9. Mr McGuinness QC submits that the flat is a realisable asset within the terms of the Criminal Justice Act 1988 and is beneficially owned by Mr May. Mr Gleeson's claims on behalf of Larkfield fail on their facts. Larkfield's claim must therefore fail. Mr Casey for Larkfield contends that, on the evidence, Mr May had nothing to do with the flat but that even if this is incorrect, the claim fails on grounds of law. No question of a constructive trust arises. Any claim that Larkfield holds the flat on a resulting trust for Mr May must fail. Further there is no room for the Prosecutor to rely upon the law relating to "sham" trusts. Moreover any claim by the Prosecutor based on piercing the corporate veil fails also.
10. The relevant principles are not in dispute but I set them out so that it is clear what the court has to decide and so that I can refer in this judgment only to the relevant material. Some 70 bundles have been before the court, although fortunately only the 7 core bundles and a few others have been much relied upon.
11. Part VI of the Act deals with confiscation of the proceeds of an offence. Section 71 permits the Crown Court to make a confiscation order in a specified sum. By 71(6) the sum must not exceed:-

"(a) The benefit in respect of which it is made; or

(b) 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".

By section 74(1) "realisable property" means, subject to exceptions which are irrelevant,

"(a) Any property held by the Defendant; and

(b) Any property held by a person to whom the Defendant has directly or indirectly made a gift caught by this Part of this Act"

Section 74(3) states that the amount that might be realised at the time a confiscation order is made is –

"(a) The total of the values at that time of all the realisable property held by the Defendant, less

(b) Where there are obligations having priority at that time, the total amounts payable in pursuance of such obligations, together with a total of the values at that time of all gifts caught by this Part of this Act".

Section 102 provides that "property" includes "money and all other property, real or personal, heritable or moveable, including things in action and other intangible or incorporeal property."

Section 102(7) provides that property is held by any person if he holds any interest in it. Section 80 deals with the realisation of property and provides by sub-section 6 "the court may order any person holding an interest in realisable property to make such payment to the receiver in respect of any beneficial interest held by the Defendant or, as the case may be, the recipient of a gift caught by this Part of this Act as the court may direct and the court may, on the payment being made, by order transfer, grant or extinguish any interest in the property". By section 80(8) "the court shall not in respect of any property exercise the powers conferred by (amongst others) (6) above unless a reasonable opportunity has been given for persons holding any interest in the property to make representations to the court". The present issue as to the flat comes before the court under section 80(8).

12. Section 82 states how these powers are to be exercised in the following terms:-

"(1) This section applies to the powers conferred on the High Court by section 102 above…….

(2) Subject to the following provisions of this section, the powers shall be exercised with a view to making available for satisfying the confiscation order or, as the case may be, any confiscation order that may be made in the defendant's case the value for the time being of realisable property held by any person by the realisation of such property.

(3) In the case of realisable property held by a person to whom the defendant has directly or indirectly made a gift caught by this Part of this Act the powers shall be exercised with a view to realising no more than the value for the time being of the gift.

(4) The powers shall be exercised with a view to allowing any person other than the defendant or the recipient of any such gift to retain or recover the value of any property held by him.

(5) An order may be made or other action taken in respect of a debt owed by the Crown.

(6) In exercising those powers, no account shall be taken of any obligations of the defendant or of the recipient of any such gift which conflict with the obligation to satisfy the confiscation order".

13. The approach to applications of this kind was considered by the House of Lords in Re Norris [2001] 1 WLR 1388 (at paragraphs 25 and 27 in particular). Although section 80(8) grants an opportunity for those claiming an interest in the property to make representations to the court it is for the Prosecutor to prove that the relevant property belongs to the offender, at least where, as in this case Larkfield is registered as having title to the flat. Furthermore, as Lord Hobhouse put it "… the third party's defence in the civil proceedings … should be determined in accordance with the normal civil procedures". Mr Casey cited this passage when politely refuting my ill informed suggestion that the approach to proceedings might be less formal on this sort of application than in a conventional action. Further findings by the Crown Court such that the flat is realisable property of Mr May bind the Defendant but not others claiming ownership of property under section 80(8).
14. Larkfield contends that it is not a proper party to any dispute about whether Mr May does or does not have an interest in Larkfield's share capital. For that determination other parties need to be before the court. Larkfield contends that it is not fair for the court to determine whether or not Mr May had some interest in the assets of one of the trusts to which I will turn unless the trustees are before the court. Larkfield accepts that it is and should be neutral on that issue but not, it suggests, if investigation of these matters is used to seek a finding from the court to support a conclusion that Larkfield holds the flat on trust for Mr May. As I see it, the trustees and others connected with the trust know full well about these proceedings and have had ample opportunity to participate in them. The fact that they have elected not to become involved is not a reason for the court not to make appropriate findings necessary to its main task. Moreover Larkfield has necessarily put itself into a somewhat unusual position. On the one hand it is entitled to resist a claim that its main asset is held on trust for someone else. But in reality Mr Gleeson is maintaining these proceedings at his expense on the basis that the flat belongs in substance to him as he is the sole beneficiary under a trust on whose behalf a nominee company holds the shares in Larkfield. Larkfield's claim is about who really owns it and how it got its money. This would not usually concern the company itself. Despite these anomalies it is not unjust to proceed in this way and, for practical reasons, desirable to do so.
15. Larkfield contends, correctly, that there is no question of Larkfield holding the flat on a constructive trust for Mr May. There is of course no express trust so the only other possibility is a resulting trust. As is well known if property is acquired in the name of A but with funds provided by B it will be presumed that B (as opposed to A) did not intend A to take beneficially. Larkfield contends that If Mr May provided the purchase price of the flat the presumption would be rebutted. If Larkfield was set up to hold property for Mr May there would be no purpose in him having or retaining any beneficial interest, a proposition supported by the unreported decision of Chadwick J in The Arab Monetary Fund v Hashim (15.6.94). Further Mr Casey submits that the Prosecutor cannot succeed by alleging that the trusts or either of them were shams. He submits that the court cannot, on authority, find a trust to be a sham unless and until it is proved that not only the settlor but also the original and current trustees were party to it. He cites various cases, the high watermark being a decision of Munby J in A v A [2007] EWHC 99 (Fam).
16. Mr Casey submits that there is no pleaded case from the Prosecutor or evidence produced at the trial sufficient to overcome these points of law. Further he says that the position is the same with piercing the corporate veil. He draws attention to the helpful summary of the law contained in the judgment of Cooke J in Kensington International Limited v Congo [2006] 2 BCLC 296 at 177-190 and focuses on three essential principles, first that the separate personality of a company cannot be ignored merely because it might be thought just to do so, secondly that the setting up of a company with some dishonesty or impropriety may lead to a piercing of the veil if it has been done in order to defeat existing claims and thirdly that questions of ownership and control of the company are crucial – only if it is under the ownership and control of the miscreant can it be regarded as a mere façade and then be pierced.
17. I refer to the submissions of Mr Casey only briefly because they are not challenged by Mr McGuinness. He submits that they are irrelevant given the nature of the statutory power which has led to the confiscation. He submits that subject to the protection of an innocent third party under section 82(4) the court is not and should not be prevented from "making property available for satisfying the confiscation order" (section 82(2)) because it is held for the Defendant in a company or trust. He relies on the confirmation by the Court of Appeal that the court may pierce the corporate veil and treat the assets of a company as those of the Defendant in cases under the Act – see Re H [1996] 2 All ER 391. He also submits that directly applicable to the enforcement of a confiscation order are cases addressing the earlier stage of the restraint and receivership under statutes with identical wording such as the Drug Trafficking Act 1994. Mr McGuinness relies upon paragraph 17 of the judgment of Ouseley J in Re D [2006] EWHC Admin 254.

"In my judgment the real question which a judge faced with an application for a restraint or receivership order is whether the order of the extent sought and now obtained is appropriate or necessary in view of the two legislative objectives out in section 31(2) and (4) of the 1994 Act. The question whether the effect of such an order is to pierce the corporate veil or whether some particular test related to that concept requires to be satisfied is not, in my judgment, the ultimate object of the inquiry which the court has to carry out. The object of the Act is to enable proceeds of crime to be ascertained, protected and realised. The first question therefore is whether there are corporate assets which should be treated as the defendant's assets and the second question is whether, if that is the case, a restraint and receivership order of the extent sought is necessary. The position, in my judgment, is the same where there is an intermingling of the assets of a criminal, who is seeking to evade the effect of the confiscation order, with the assets of innocent business partners in a company. If it is established that some or all of the assets of the company are to be treated as assets of the defendant, the question of how their intermingling with the assets of someone who is innocent of wrongdoing is to be dealt with, is a matter for resolution by deciding whether an order should be made and if so on what terms, rather than a matter which has to be resolved by simply asking whether the corporate veil should be pierced."

Mr Casey responds by submitting that there is a distinction to be drawn between assets which are the subject of a confiscation order but not themselves the proceeds of crime (as he submits must be the case here since the flat was bought in July 1999 and the relevant criminal conduct of Mr May did not begin until early 2000) and the courts' approach to assets which are the actual proceeds. He relies upon the sentence used by Ouseley J "the object of the Act is to enable proceeds of crime to be ascertained, protected and realised."

18. In my judgment the approach of the Prosecutor is correct. Once assets have been identified as relevant realisable property they may be recovered, subject to the protection afforded by sections 80(8) and 82(4). They may be recovered from any trust or company irrespective of any legal obstacles or protections for the direct or indirect benefit of the Defendant which would otherwise arise under company or trust law. The sentence of Ouseley J relied upon by Mr Casey is, it seems to me shorthand, as indeed is the title of Part VI of the Act itself "Confiscation of the proceeds of an offence". As soon as one looks at the detailed provisions it is clear that the statute and the case law guidance do not contain the limitation contended for by Mr Casey. If the position were otherwise, as I put it to Mr Casey, a master criminal, before embarking on a serious financial crime would be able to protect his assets, other than those directly obtained from the crime he was about the commit, by placing them all in trust. It cannot have been the intention of Parliament to make that possible leaving the victims with only the potential weapon of the law of insolvency to rely upon. In my judgment the purpose and the language of the Act is clear. So while the propositions so ably put forward by Mr Casey, standing on their own, have considerable force and indeed are not disputed by the Prosecutor they are, as it were, trumped by the Act.

Facts agreed or not seriously in dispute

19. The relevant background facts begin well before the purchase of the flat.
20. Mr Gleeson and Mr May and their families have been close friends for more than 30 years. They met as teenagers, were best men at each other's weddings and are Godfathers to each other's children. They have worked closely together in business matters and also in their personal financial affairs. The friendship has been sporadic since Mr May's conviction. Mr May's business background is set out in the papers relating to his conviction and the confiscation. Mr Gleeson in contrast has been very successful in his business dealings as one sees from some of the transactions in this case. He described his work and the source of his wealth as follows

"A. Actually putting together in the 1980s many international vintage car deals. I was actually at the forefront of getting cards out of Eastern Europe when the wall came down. I used to get cars through Czechoslovakia. I financed the deals. I've done money lending for many people that I've done business with in Austria and stuff like that. And financed deals going on and moved forward continuously doing it. Normally it's actually Austria, Germany but in many other parts of Europe, including Switzerland, France and whatever.

Q. So the money came from car dealing?

A. No, it came from financing car dealing, financing projects, money lending. People would come to me and say they had deals to put together and they didn't have the money to do it, I would loan them the business.

Q. What was the name of your business?

A. There wasn't a name of the business, I done it in my own name."

In the early 1990's both were involved in a venture known as Videoplus. Mr Gleeson recalled that Mr May introduced the project to him and that his own involvement was "in the name of" Mr May. A loan to one of the companies of £500,000 ostensibly from Mr May was, Mr Gleeson recalled, made with funds provided by him. Mr Gleeson apparently suffered the loss of his whole investment. Although Mr May "failed miserably" over this investment he retained Mr Gleeson's trust and confidence. Another participant in the Videoplus venture was Mr Richard Hubbard, another very successful businessman. Mr Hubbard, his father and his brother Mark, who gave evidence, worked closely together and had substantial international business and personal interests. Thus Mr Mark Hubbard gave an address in Kinshasa in his witness statement where he has been domiciled since 1976 but resides at homes in Belgium, Switzerland, Portugal and Greece. The Hubbards had for some years made investments using trusts in the Isle of Man advised by Mr Francis Howard a chartered accountant and tax advisor who was a director and shareholder in Coda. In time Richard Hubbard and Mr Gleeson became very close friends.

21. There is no reason to doubt Mark Hubbard's recollection about the Mark Hubbard No 2 Settlement ("MH2") set up by a trust deed dated 7 April 1995 that despite its name it was established with money that was effectively Richard's with a view to benefiting, mainly, Richard and his family. Mark Hubbard says that Mr Gleeson is a close friend, and Godfather to his children and that while he knows of Mr May the latter is neither a friend or acquaintance. The beneficiaries are set out in Part II of the schedule to the MH2 deed as being "Thomas Hubbard and his issue, Ray May and his issue, Peter Gleeson and his issue".
22. Three sheets of paper in the handwriting of Mr Howard relate to this trust. The first is a diagram showing the trust holding shares in companies including 100% of Valeo Limited. Mr Hubbard recalls that Valeo was a name used by his family for previous companies. Mr Howard accepts that two asterisks by the name Valeo Limited referred to a note "Ray & Pete are Ben Owner of 325,000 shares in Trinity Biotech and $150,000 cash". Mr Gleeson and others suggested the marks were not asterisks but the position is put beyond doubt by Mr Howard, the writer. The second and more complex diagram shows holdings in six companies, most of which are acknowledged by Mark Hubbard to be familiar names, being held by various Hubbard interests but mainly by "Bankhill Trustees of M Hubbard No 2 Slment. Make new Slment from old Slment". The diagram appears to envisage all assets of "Ray" being transferred into Valeo and all non-Ray assets being transferred elsewhere. Mr Howard has no live recollection of how he came to write this chart. I accept that he could only have obtained the data from Mr Richard Hubbard, unless it was already available to him from other sources. Mr Howard's conjecture that he must have written this in a telephone conversation with Richard Hubbard seems to me unlikely because of the number and complexity of the transactions referred to and the cogency with which they have been recorded. The third piece of paper is the only one bearing a date. It appears to be a list of assets held "at 20 June 1996 for Ray". It lists holdings by Valeo in 5 companies plus $500,000 cash and, in another Hubbard company Elsemani, of another share Namco. On its face the document appears to be a record that these companies hold the shares and the cash for Ray May at 20 June 1996.
23. Mr Howard says that Valeo was intended to be the main asset of the Trust. It seems that Mr Hubbard and Mr Gleeson transferred money to Valeo. Mr Gleeson said that Mr May spoke about doing so too. Mr May denies any knowledge of or involvement in Valeo. There is a transfer of £14,495 from Valeo to "Mr G May" in November 1996. Mr May guessed that this might have been a payment to his father George, who dealt in cars amongst other things from a base at Intamotorcycles.
24. Richard Hubbard was a director of a company which for a period had the name Intamotorcycles Limited. Richard Hubbard, Peter Gleeson and Origen Pension Trustees Limited, the trustees of the Acomex Executive Pension Fund owned the site where Intamotorcycle carried on business. Valeo transferred and received substantial sums much higher than would be for payment of the sales and purchases of motorbikes between July 1997 and November 2002. Mr George May gave the telephone number of the business as a contact number. Mr Raymond May used the address as being his business address for obtaining a shot gun certificate in 1997, made statements on "probes" which were in evidence before the Crown Court in 1999 and 2000 which indicated a good knowledge of Intamotorcycle's business outgoings, such as advertising, expenditure and of a personal link. Mr May explains this as being exaggerations by him to impress those he was talking to. When he was arrested Mr May had in his briefcase a number of business cards for Intamotorcycle.
25. On 10^th March 1999 the MH2 trustees revocably declared that there should be excluded from the list of beneficiaries "Thomas Hubbard and his issue excluding Richard Peter Hubbard, Ray May and his issue, Peter Gleeson and his issue" thereby limiting the class of beneficiaries to Richard Hubbard. Back in November 1995 Mark Hubbard had notified the trustees that administration of the trust should be discussed only with Richard Hubbard.
26. The second trust is the Magle Settlement. A handwritten note of Mr Howard dated 8 November 1996 giving as the client "the Magle Settlement" records that "Ray May, Peter Gleeson R Hubbard" met him to discuss "c$2m to come in and be invested in … High Octane Fund". An inception form for a new trust apparently dated 20 November was filled out showing the contact as Peter Gleeson with his address and the clients being Ray May and Mr Gleeson with the address as "c/o contact". The settler client is given as Richard Hubbard and the beneficiaries are to be clients and their families. Mr May denied any knowledge of this, apart from having attended a meeting in the Isle of Man. Mr Gleeson says the form contains a mistake and that it was "crazy" to include the name of Mr May. A letter on the file indicates that letters from "Ray May/Pete Gleeson" should arrive soon. There is no evidence that Mr May ever sent a letter and he insists that he did not. There is however a letter from Mr Gleeson to the trustees in January 1997 expressing his wishes in relation to the entire $2m being invested in the High Octane Fund. A letter from Richard Hubbard of 25 November 1996 to the trustees states that although named as the settlor he has acted on behalf of "Ray May and Peter Gleeson". That letter is however superseded by another letter in January 1997 where he states that he has acted on behalf of "Peter Gleeson". By a nomination dated 16 January 1997 Peter Gleeson, his then wife Tracey and Richard Hubbard are given power to appoint and replace trustees. On 8 June 2000 Coda wrote to Mr Gleeson, at an address in Bermondsey which is his mother's home, seeking compliance details on behalf of Mr May. Mr Gleeson's bank statements from his account with ANZ Grindlays Bank in Geneva confirm that he paid some £1.46m to Valeo but this was apparently for his share investment and back in 1995 and 1996. An email from Calmanx dated 29 October 2003 appears to show that assets to be held by Magle were never formally added to the trust. These are recorded as being just over a million shares in Middlesex Holdings Plc and two shares in Larkfield Limited. The reference to the Middlesex shares appears to have been an error relating to shares sold some years ago. The investment of $2m in the High Octane Fund never reached Magle. So Magle holds only the two shares in Larkfield.
27. The Prosecutor suggests that the name Magle connotes a joint venture by Mr May and Mr Gleeson. Mr Gleeson contends that the name was chosen as a compression of the first and surnames of his mother. Although both sides pressed their competing and plausible submissions hard this quest was a distraction.
28. Larkfield was incorporated on 30 March 1999. The two issued shares were held, as I have said, by the corporate trustees used by Coda who declared that they held them on trust for Magle. On 4 August 1999 a meeting of the directors of Valeo, comprising Mr Michael Doyle and Mr Howard as representatives of Northquay and Southquay resolved to make a loan of £258,324.52 interest free and repayable on demand to Larkfield for the purchase of the flat. On 20 August in their capacity as representing the directors Northquay and Southquay they resolved to buy the flat. The money used by Larkfield to buy the flat came from a Valeo bank account which, according to Mr Gleeson, would have come from funds invested in Valeo by Richard Hubbard. The money went from Valeo to Abchurch Corporate Services, a Coda vehicle. There is no documentary evidence of Mr Gleeson or Mr May providing money to Valeo to buy the flat. There is no evidence of Larkfield ever repaying the loan.
29. When reviewing and appraising the records held by Coda and by Calmanx for the trusts I bear in mind that this material may well be incomplete because of the acrimonious circumstances surrounding the sale of the business of Coda to Calmanx in 2001. The sale followed an order from the Manx High Court in 2000 disqualifying Mr Howard from serving as a company director for 5 years. The transfer has led to the parties making serious allegations against each other and to litigation against Mr Darroch and colleagues, the new owners of the business, brought by the Hubbards. Mr Ian Darroch and his brother have disclosed material piecemeal and indeed documents they had disclosed in Cyprus for use in this litigation were received only towards the end of the trial.

Purchase of the flat

30. The vendors of the flat were Mr & Mrs Gilkes. In October 2000, some 15 months after the purchase, Mrs Emma Gilkes made a witness statement in the criminal proceedings. Although I will refer when dealing with other witnesses to the evidence of Mrs Gilkes I attach importance to this statement because of its date and because it is supported by a manuscript note Mrs Gilkes wrote at the time of her meeting with Mr May and Mr Gleeson. There is a dispute about what happened at that meeting. There is a post-it note on which she has written "IOM Co … "Ray May" . On the fax on which she has placed that post-it note she has written, amongst other things, "Ray May buying for Co (IOM) not on anyone's books – came via Flat 94 …". Flat 94 is the flat of Mrs Ciarrocchi to whom I have referred earlier. In her statement Mrs Gilkes said this:-

"My husband and myself are the former owners of 85 Dundee Wharf, 100 Three Colt Street, London E14. In April 1999 we instructed a number of agents to place this property on the market. In early June 1999 we were introduced to a man using the name of Ray May and a second man who used the name Peter. This introduction was via a man we knew at Dundee Wharf. I believe this man may have lived at Flat 94 Dundee Wharf.

Mr May told us that he was buying for an Isle of Man company for entertaining clients. Mr May told us that he was able to 'move fast' and that the cash was available. The price was agreed at £248,000 plus £7,000 for fixtures and fittings at a meeting at the property. They indicated that they were on their way to celebrate one or the other's birthday.

I would describe Ray May as being tall, medium build, fair haired, with an East London/Essex accent. Peter was considerably shorter than Ray May, solidly build.

This was the first and only meeting with Ray May and Peter.

My husband spoke to Ray May a number of times. I believe that the number used was 07930 866084".

31. The telephone number given to Mrs Gilkes is the mobile phone number of Ray May. I will refer later to their evidence about this meeting.
32. The probe evidence in the criminal trial records Mr May as referring to having used a firm of solicitors in Chester for the purchase. Such a firm was indeed instructed. In April 2000 he refers to the value of his flat, apparently accurately, to the process of negotiating the price, dealing with the porters and considering renting it. Against that, as Mr Casey points out there is a probe conversation on 20 September 1999 which appears to refer to Mr May assisting with the delivery of some beds from Marks & Spencer which the delivery men had had trouble in getting to the right flat.
33. The bills and utilities and other services at the flat were in the name of Steven Lee. That is a false name which Mr Gleeson said he used. Coda appears to have acquiesced in this decision. There is an exchange of letters in August 1999 about consent to lay a wooden floor that indicates that Mr Gleeson, not Mr May was involved with this. It also seems that Mr Gleeson paid fees for the administration of Magle and Larkfield.
34. After Mr May's arrest in September 2000 his solicitors asked Mr Gleeson to assist and he did so on 5 October by signing both a witness statement and an affidavit claiming that he was the beneficial owner of the flat and that it had been purchased "solely with funds provided by myself". Mr Gleeson accepted that at this point he had not repaid the loan and referred to the wording as "incorrect terminology".
35. In early 2003 Mr Gleeson approached Mr Martin, an estate agent employed by London Link to sell the flat. Mr Martin said that Mr Gleeson sometimes stayed at the property which was 100 yards from the office. He sometimes called Mr Gleeson's girlfriend Jennifer to arrange viewings of the property and discussed other matters with a Ms Poole of Calmanx. Although a purchaser was obtained the sale did not proceed once the inhibition on the register caused by the Crown Court Order came to the solicitors' attention.

Evidence

36. Mr May claimed, as he had in the criminal proceedings, that the flat belonged to a company owned and run by his friend Peter Gleeson who lives there. Mr May said that neither he nor any member of his family had any connection with the flat, Magle, Valeo, Larkfield, or the MH2. He had however stayed at the flat on a few occasions with his then girlfriend Miss Traynor. He added that they would however generally leave in the middle of the night to return to their homes. He had never seen, before these proceedings, any of the documents referring to him held at Coda or elsewhere in the Isle of Man and he had not seen or spoken to Richard or Mark Hubbard or Mr Howard for over 10 years. He agreed that he knew of Intamotorcycles, that it was run by Austin Holmes, who was known to him only through his father who occasionally did work at or through Intamotorcycle. He had no explanation as to why he had given the address of Intamotorcycle for his firearms certificate and attributed his references to the business in probe conversations to his tendency to exaggerate. He accepted that he had gone with Mr Gleeson to meet Mr & Mrs Gilkes to discuss the flat but his recollection was that Mr Gleeson did the negotiating and he did not recall an Isle of Man company being mentioned. He had given his mobile phone to Mr Gleeson to avoid the risk of Mrs Gleeson finding out about the flat. He accepted that a set of keys for the flat were found hidden in his Mercedes car when he was arrested at his house on 5 September 2000. He was asked why his girlfriend had written a letter to the London Golf Club in March 2000 asking it to amend their records to show Mr May's new address as being 85 Dundee Wharf. He claimed that Miss Traynor would receive marketing materials and that her name was always all over the paperwork because she had given him membership as a birthday present. Mr May was unable to assist with why Valeo was making a payment of £14,495 to his father but felt that it might be a payment for a car. Mr May's explanation for his statements on the probe suggesting that he owned the flat was that he was at that point in his life inclined to lie and exaggerate in order to impress actual or potential girlfriends.
37. Mr Gleeson said that in 1996 he approached Mr Howard at Coda to set up a trust for him and as a result Magle was established in November of that year. Richard Hubbard was technically the settlor but this was probably a formality brought about because unlike Mr Gleeson he was a regular visitor to the Isle of Man and could sign documents. He dealt primarily with Mr Howard. In June 1999 his marriage was in severe difficulties and he wanted to find alternative accommodation as he might have to leave his home. He did not want his wife to know that he was putting contingency plans in place so in June 1999 he asked Mr Howard to set up a company to be owned by Magle to hold a flat. Mr May told him of a flat at Dundee Wharf and he went to visit the owners. Mr May went with him because he had helped to find the property. He said that he did "all the talking" at the meeting and agreed to buy the flat.
38. Mr Gleeson had been doing share trading through Valeo through most of the 1990's. As his money was tied up in shares in Valeo that company agreed to transfer the purchase price by making a loan. He set up utility bills in name of Steven Lee to keep things away from his then wife. He never moved into the flat or stayed there for any material length of time. After a short period there he decided that it was too far away from his children so he rented accommodation closer to their school. He gave Mr May a set of the keys and was aware that he used the flat from time to time.
39. Mr Gleeson was cross-examined. He said that he had invested some £1.5m in Valeo on the recommendation of Richard Hubbard. He made no inquiries about Valeo's status or investment policy before using it as a vehicle for investment because of the trust he placed in Richard Hubbard. He did not seek any information or documentation about the progress of his investment except at the occasional reconciliation meeting. He did not receive and therefore did not retain any valuation or other indications of value over the years. He said that he did not require this information for tax purposes. He said that as regards the $2m that he understood that he had invested in Magle he was unaware that this was wrongly placed in MH2 or in Valeo. A number of times he referred to some of the apparent contradictions in the paperwork as being matters of "semantics". He still had no documentary evidence to show that he provided funds to Valeo for share dealing. He accepted that he had made an investment in Videoplus in the name of Mr May. He denied that Mr May had ever invested in Valeo, although accepted that this had been spoken about. He did not explain how, given his wealth, he had had no cash available to buy the flat. He said that he signed an affidavit about the ownership of the flat because Mr May's lawyers asked him to do this and promised it would only be one short paragraph. He conceded the wording may be incorrect but he said he did it "quickly with the lawyers". Although he had responded with the affidavit because of the potential threat to the flat it was not his impression following the criminal trial that that threat remained. I was not convinced by Mr Gleeson's attempt to diminish the significance of his affidavit.
40. Mr Mark Hubbard, who like Mr Richard Hubbard is a very close friend of Mr Gleeson gave evidence, the truth of which I accept, that although entitled MH2 the assets of the trust came in effect from Richard. Mr Hubbard said that as the years went by he became disappointed by Coda's standard of maintaining trust paperwork and organisation and moved his own business elsewhere. He expressed the view that he would not be surprised if Mr Gleeson's and Mr May's names were included in his settlement trust as a result of a mistake or misunderstanding but he had no direct knowledge of that at all.
41. Mr Paul Quayle, a chartered accountant and a director of a licensed Corporate Service Provider in the Isle of Man is the trustee of the Magle Settlement. He was approached by Mr Gleeson in March 2007 following the difficulties with Calmanx and Coda to which I have referred. There was some disarray following the striking off of Valeo and Larkfield, at least temporarily from the Registers. It was therefore difficult for Mr Quayle to give detailed answers on some matters. Mr Quayle was clearly an honest professional man doing his best to assist the court and to the extent that he was unable to explain matters, this was the result of problems created before he arrived on the scene in early 2007.
42. Mr Francis Howard who now lives in France was a director of Coda and has been a close friend of Richard Hubbard for many years. He is still close to Mr Hubbard and indeed spoke to him the evening before giving evidence. Mr Howard first met Mr Gleeson in the early 1990's in the context of Videoplus. MH2 was set up to invest in securities to be recommended by Richard Hubbard. Valeo was a Coda company to be used for making investments. Mr Howard did not have day to day involvement in the affairs of the Settlement since this was in the hands of junior staff. He understood that Mr Gleeson had some "positions" held through Valeo as he was interested in following Richard Hubbard's investment suggestions. He also recalled that he thought Mr May might also have been making such investments.
43. Mr Howard could not recall why Mr Gleeson and Mr May were named as potential beneficiaries of MH2. The Deed of Exclusion reflected the removal of Mr Gleeson and Mr May as beneficiaries because they had been included by mistake or because the original intentions behind the Settlement involving them had been overtaken by developments. Whatever may have been the original intention that Mr May might make investments as a client in the same way as Mr Gleeson the matter did not proceed. Mr May did not produce a bank reference, passport and other due diligence documents which would have been essential for him to be a client. Mr Howard felt that the three pages of notes were wrong and incomplete and he would have wished to see the original documents. He attributes the notes to a "brainstorming" session about how MH2 might be restructured. His recollection, although vague, is that many of the suggested courses of action in the note were not implemented or were put into effect in some different way. In referring to assets held by Mr May, Mr Howard felt with hindsight that he must have confused matters by recording as belonging to him shares in fact held for Mr Gleeson. As far as he was aware Mr May never had any investments in the Settlement or Valeo or any other Coda entity. Mr Howard emphasised that he had been involved with many trusts, that his staff generally dealt with day to day matters and that it was difficult to remember details so many years after the event. He had some recollection of the formation of Magle and Mr Gleeson's suggestion and indeed recalled that Mr Gleeson said that the name was based on his mother's first and second names.
44. Mr Howard recalled Mr Gleeson approaching him about the flat in 1999. He suggested the name Larkfield would have come from an employee of his who had lived for a significant period of time near Canterbury in Kent and perhaps knew Larkfield. Mr Howard accepted that this was speculation on his part.
45. Although I have no doubt that Mr Howard was in general a truthful witness he is clearly very close to the Hubbards and Mr Gleeson. His memory was selective in that he seemed able to recall some minor matters such as the reasons for the name behind the Magle Settlement while being able to cast very little light on his manuscript notes. I was not convinced, given the details of the three pages of manuscript notes and Mr Howard's close relationship with the Hubbards that, even after all these years, his recollection was as poor as he indicated. I also had difficulty in understanding how Mr Howard was so relaxed about permitting companies such as Valeo, established in the context of a particular trust, to be used for the investment purposes of individuals who, on one view of the facts, had never been or had soon ceased to be beneficiaries. I refer later to what I see as being his lack of objectivity.
46. Mr Michael Jeffcock had been involved as an employee and director of Abchurch and Coda for a period. His evidence was to be relied upon by the Prosecutor because it contained a recollection of a meeting with Richard Hubbard on 23 March 2009 in which the latter had apparently told Mr Jeffcock that Mr May had been a beneficiary of the ("MH2") Settlement until 1999. Following a meeting with Revenue & Customs Officers on 25 March Mr Jeffcock received a call from Mr Howard asking about the meeting. Richard Hubbard was also in touch with Mr Jeffcock to explain that the latter's recollection was a mistake. Mr Jeffcock accepts that he was or may have been mistaken. I therefore place no weight on his evidence and accept that he was honestly confused.
47. Elizabeth Ciarrocchi is married to Aldo Ciarrocchi, then serving a sentence of imprisonment, who had apparently informed his acquaintance Mr May that Flat 85 was on the market. According to Ms Ciarrocchi's statement Aldo "had introduced Peter to the vendors" and she came to know Mr Gleeson and was aware of him staying in the flat for some months "it could have been as much as a year on and off, or it might have been less".

Submissions of the Prosecutor

48. The Prosecutor submits that the evidence shows the property to be a realisable asset of Mr May. It relies on the evidence of Mrs Gilkes, the provision of Mr May's telephone number, the supply of funds by Valeo in which Mr May is recorded as having an interest, the name "Larkfield", the presence of keys in Mr May's possession and the correspondence in March 2000 indicating the address to be that of Mr May. The Prosecutor also relies upon the probe transcripts and the submission that if Mr Gleeson was really the owner of the flat he would not have waited 8 years to apply for its release from restraint. The Prosecutor points to the association between Mr May, Mr Gleeson and Mr Richard Hubbard and what it says is the lack of truth of Mr Gleeson and Mr May. The Prosecutor submits that Mr Gleeson, Mr May and possibly Mr Hubbard seem to have treated some of each others assets inter-changeably. Mr Howard who was at best "substantially hands off" was just the sort of person that they could use in the Isle of Man to conceal the true ownership of assets.

Submissions of Larkfield

49. Mr Casey submits that the Prosecutor's case is inherently implausible.
50. Mr Gleeson, an intelligent and wealthy businessman with legitimate interests although an old friend would not give false testimony for Mr May, particularly about a relatively modest sum. Mr Gleeson would not otherwise foot the bill for this litigation. Mr Gleeson had no reason to assert ownership until it was clear that other assets of Mr May would not be available to satisfy the debt. Mr Gleeson would not have become so involved in the acquisition of the flat just to do Mr May a favour. Mr May is not sophisticated enough to carry out a scheme as elaborate as that suggested by the Prosecutor or to persuade Mr Gleeson to get involved. Mr May does not on the evidence have any other assets offshore. Mr May had use of the flat on a few occasions only and his boastfulness had an explanation. Mr Casey refers to some uncertainty in a couple of Mrs Gilkes' answers to indicate that she may be mistaken and points to the absence of Mr Gilkes, with whom Mr Gleeson recalls having had calls on the mobile phone, from the list of witnesses. It was not challenged that Mr Howard only ever met Mr May twice and this is not consistent with the degree of involvement in the Isle of Man alleged by the Prosecutor. Mr Quayle had never heard of Mr May. The involvement of professional trustees in the Isle of Man makes the likelihood of the Prosecutor's claim all the more remote.

Conclusions of the court

51. Although it is ten years since the flat was bought, it is quite clear that Mr May conducted the negotiation with Mr & Mrs Gilkes and told them that he was seeking to buy the flat through an Isle of Man company. The introduction to the flat came to Mr May. Mrs Gilkes' contemporaneous note and witness statement only a year later combined with the obvious truth of what she said in evidence make the position clear beyond doubt. Mrs Gilkes had no reason to state anything other than the truth and she told it clearly and meticulously. There is no contemporaneous record to support the recollections of Mr May and Mr Gleeson. The mobile telephone number also ties Mr May to the purchase. I do not believe that Mr May lent his mobile phone to Mr Gleeson. This sort of claim is commonly made by witnesses who wish to create a distance between themselves and a mobile phone. It is no doubt sometimes true but given their age, experience and the purpose for which the phone would be used Mr May and Mr Gleeson's claims were unconvincing and inconsistent with Mrs Gilkes' recollection. Correspondence between Mr Gleeson and the agents is consistent with Mr Gleeson dealing with the flat as though it was his but Miss Traynor's letter to the golf club points to it being Mr May's permanent address. Although one item in the probe evidence is consistent with Mr May not being the owner, more items have him explicitly claiming the flat as his. It is possible Mr May was boasting to impress but unlikely given his mature years. In evaluating Mr May's evidence I disregard the fact of his conviction. He pleaded guilty. But like Mr Gleeson he has admitted telling untruths and some of what he says is obviously implausible. So I am unwilling to accept what he says unless he has other material to support it. On the points at issue I, like Judge Samuels, do not believe him.
52. Dealings after October 2000, by which time Mr Gleeson was on record as claiming to be the owner, have to be viewed in the light of his and Mr May's interest in that being seen to be the case. The indications point to Mr May as being the real owner. Mr Gleeson's account is difficult to accept given the pointers to Mr May, his deceit in the use of a false name, Steven Lee in the running of the flat, his false claim in his affidavit of October 2000 and the circumstances in which it was made. Further, the ruse which Mr Gleeson says he adopted to deceive his wife seems an elaborate one in the circumstances. What is claimed to have been dishonest concealment of an asset from a spouse is an unpromising starting point when deciding whether a witness is telling the truth. Most of my reservations about Mr May's evidence apply equally to Mr Gleeson who came across as a personally charming and highly intelligent man. The implausibility of some of the replies when inconsistencies were drawn to Mr Gleeson's attention in cross examination was particularly striking when coming from someone of wide experience and high intellect. When Mr Casey made his final submission I did mention that it would be useful to know whether Mr Gleeson disclosed the flat in his divorce proceedings as being an asset. I have received further evidence to the effect that disclosure was not required as the parties settled on informal and amicable terms – albeit the process had in cross examination been described as "probably the most traumatic experience of my life".
53. There is no direct supporting evidence that either Mr Gleeson or Mr May paid for the flat. If that evidence had been available or if Mr Gleeson had dealt with matters in an honest fashion the position might have been different but without that necessary support I must and do reject Larkfield's claims about this aspect of the case.
54. When considering the trust arrangements in the Isle of Man I bear in mind that the big picture presented by the documents is incomplete. Some of the material is only available because it has been disclosed unconventionally by the Darrochs as part of their continuing feud with Mr Howard and his former colleagues. It is unfortunate that neither Mr Gleeson, nor it seems the Hubbards or Mr Howard, have been able to produce other papers relating to their various very substantial investments. I do not doubt that Mr Gleeson somehow made investments in or through Valeo. Whether those were his investments or, just as Mr Gleeson had invested in Mr May's name some years earlier, Mr May's is not clear. It is very likely that Mr May invested also, directly or in Mr Gleeson's name. It cannot have been a clerical error or administrative mix-up that provisions in a trust deed made Mr May and Mr Gleeson and their issue beneficiaries. Equally it would not have been an error that in March 1999 both Mr May and Mr Gleeson were excluded as beneficiaries. This does not however appear to have had any effect upon investments made by, at least, Mr Gleeson in Valeo.
55. Mr Howard disputed that Mr May, Mr Gleeson and their issue were "beneficiaries", notwithstanding the definition in the Deed, insisting that they were "potential" beneficiaries in effect submitting that no-one becomes a beneficiary until the trustees actually transfer a benefit. He further claimed that they were also only potential beneficiaries because of the standard clause in a Deed providing for the addition to or removal from the beneficiary class. Despite the names of Mr May and Mr Gleeson being defined beneficiaries Mr Howard was insistent throughout on reducing the potential significance of that even when answering quite innocent questions ("Q as beneficiaries? A As members of the beneficiary class"). Mr Howard said "an awful lot of what is on here didn't, in fact, happen" but there is no evidence of what did.
56. Such claims from a chartered accountant with very great experience of trust work confirmed my impressions of Mr Howard's lack of objectivity. Despite being very unclear in his recollection about the documents Mr Howard was confident that pages 368 and 369 dealing with "make new Settlement from old Settlement" pre-dated MH2 and were not written afterwards. This seemed unlikely because if it was written before 7 April 1995, the date of MH2, it must have been within the narrow window after 31 March 1995 when Valeo was incorporated. I do not share Mr Howard's confidence.
57. The handwritten documents are important. They are too detailed and coherent to be jottings in a telephone conversation. They appear to discuss detailed arrangements for transferring Mr May's assets into Valeo and out of other companies within a structure already apparently in existence. The document listing assets of Mr May in 1996 is likely to be at least broadly correct. It is improbable that an advisor as sophisticated as Mr Howard would write down Ray May instead of Peter Gleeson. It seems more likely than not that these entries record that Mr May, just like Mr Gleeson had investments in Valeo. Mr Gleeson did not cease to have investments in Valeo when he ceased to be a beneficiary under MH2 in March1999. It seems to me likely that Mr May was in the same position and had substantial funds with Valeo or elsewhere within Coda.
58. I reject the submission that because the purchase was administered by Isle of Man professionals Larkfield's case is more plausible. Mr Howard and Coda appear to have been casual, lax and inefficient, going through the motions of running trusts without proper regard to the meticulous duties imposed upon trustees.
59. The creation of the Magle Trust was a less simple process than that described by Mr Gleeson in his statement, written without the benefit of documents which have come to light since. It was preceded by a meeting involving Richard Hubbard, Mr May and Mr Gleeson at which an investment of $2m was discussed without any indication that this was to be by Mr Gleeson alone. Initial documentation shows that Mr May was to be a client just like Mr Gleeson. However Mr May was to be contacted through Mr Gleeson. The documentation shows that, quite soon, Mr Gleeson alone was to be the client and not Mr May. I do not doubt that Mr May failed to provide passport and other essential information required of any client. Whether he ceased to be named as a client for Magle because he did not provide that documentation or he did not provide it because he was not to continue in that role I do not know. From that point, ostensibly, Mr Gleeson was the beneficial owner, in effect, of Magle. But it seems that the $2m never reached Magle but went elsewhere. Magle appears to have ended up simply as a vehicle used for the purchase of the flat via Larkfield with money borrowed from Valeo.
60. The court is therefore left with some evidence that Mr May had substantial investments in Valeo or, if the transactions contemplated did not proceed, elsewhere within Coda. There is no written evidence that those investments were realised before the purchase of the flat. Mr Gleeson says that his investments were not realised until recently. Mr May has produced no records, although of course if his account is right he would not have any. Mr Gleeson has produced no records even though it seems to me inconceivable that they do not or did not exist. Self made men who accumulate very great wealth like Mr Gleeson do not achieve their success by declining to keep an eye on substantial investments and by leaving it all to trust. The records of Coda and its successor as disclosed leave the picture open. Mr Richard Hubbard who has been closely involved in talking to witnesses and in writing letters around the edges of this litigation has not given evidence or produced his records. That is not a context which encourages one to afford Mr Gleeson and Mr May the benefit of the doubt given the concerns about their truthfulness which I have already expressed. The picture is to an extent confused and opaque as a result of the ways in which Mr Gleeson, Mr May and others have arranged their affairs. But that is no reason not to form common sense conclusions based on the totality of the evidence about both the Isle of Man and the London sides of the transactions. On balance I conclude that Mr May had significant assets within Valeo, possibly mixed up with the assets of Mr Gleeson and that these were drawn on to enable Mr May to buy the flat, the purchase of which he negotiated with Mr & Mrs Gilkes.

Conclusion

61. I therefore conclude that the Prosecutor has shown on balance that the flat is the realisable property of Mr May. Larkfield's claim therefore fails. I shall be grateful if counsel will supply corrections of the usual kind when convenient and, no less than 48 hours before the hand-down of this judgment, a draft order, preferably agreed, and a note setting out their position on any outstanding issues. I will at that time also deal with the possible further claims which the Prosecutor has intimated against Mr May but was not in a position to develop or pursue at the trial.

GH013257/SCW