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Cite as: [2012] ScotCS CSOH_15
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OUTER HOUSE, COURT OF SESSION
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P1801/05
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OPINION OF LADY STACEY
in Petition of
THE SCOTTISH MINISTERS
Petitioners;
against
RUSSELL STIRTON
First Respondent;
and
ALEXANDER ANDERSON
Third Respondent:
for a Recovery Order in terms of Section 266 of the Proceeds of Crime Act 2002
ннннннннннннннннн________________
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Petitioners: Crawford QC et Heaney; Civil Recovery Unit -Morton Fraser
First Respondent: Taylor QC et Frain-Bell; Robertson & Ross
Third Respondent: Party
Interim Administrator: Smith QC, Anderson QC, Davidson; Harper McLeod
24 January 2012
Index
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(i) - (iii) |
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(i) The following list is of names and abbreviations used in this Opinion. It is given for ease of reference. It does not include all witnesses, and does include some people who did not give evidence but to whom reference was made. In this Opinion I have referred to police officers by their rank when first mentioned and thereafter have designed them as Mr or Miss.
1. Proceeds of Crime Act 2002 referred to as POCA.
2. Income and Corporation Taxes Act 1988 referred to as ICTA.
3. The petitioners, referred to as Scottish Ministers.
4. The first respondent, Russell Stirton, referred to as Mr Stirton.
5. The third respondent, Alexander Anderson, referred to as Mr Anderson
6. Mr Stirton and Mr Anderson collectively, referred to as the respondents.
7. Jacqueline Stirton, Mr Stirton's wife, referred to as Mrs Stirton.
8. Janice Leonard, Mr Anderson's partner, referred to as Miss Leonard.
9. The late Tony McGovern, Mrs Stirton's brother who was murdered in 2000.
10. Spring Radio Cars Limited, a limited company which used the trading names Network Private Hire Group and Spring Radio Cars referred to as Spring Radio Cars, Spring, and in error, in the Record, as Spring Radio Cabs.
11. Allan Gibson, a director and part owner of Spring Radio Cars, referred to as Mr Gibson.
12. Kenneth McLeod, part owner of Spring Radio Cars, referred to as Mr McLeod.
13. Kenmure, a private car hire business bought by Spring Radio Cars.
14. Thomson's Bar a public house in Springburn owned by Pineloch Limited and subsequently by Mr Anderson.
15. Pineloch Limited a company in which Mr Anderson was director and shareholder.
16. Jacqueline Craig, the widow of Tony McGovern, referred to as Miss Craig.
17. James Milligan, a person who had owned Thomson's Bar in partnership with Miss Craig and who traded as SRS and to whom Spring Radio Cars paid money, referred to as Mr Milligan.
18. Billy Viola, a person who purchased Spring Radio Cars from Mr Gibson but who was then sentenced to imprisonment on controlled drugs charges, resulting in the business reverting to Mr Gibson, referred to as Mr Viola.
19. RS Construction, a business run by Mr Stirton and Mr Anderson.
20. A & S Leasing a business run by Mr Stirton and Mr Anderson.
21. A & S Group a business run by Mr Stirton and Mr Anderson.
22. Loveboat, a business run by Mr Stirton and Mr Anderson.
23. The Balgrayhill Road development/project, retail units developed by Mr Stirton and sold to Mr Mirza.
24. Mr Mirza, a shop keeper.
25. MD Associates, a financial advisory business run by the late Maurice Davies who died 14 July 1999, and who had acted for Mr Stirton and Miss Leonard.
26. Mac's Cars a private hire car firm run by Mr Deans and Mr Rodden.
27. Louise Rivers, pseudonym of the interim administrator, referred to as Miss Rivers.
28. Mallard Associates, pseudonym for the firm in which the interim administrator worked.
29. Miss A, pseudonym for a witness sought by Mr Stirton and Mr Anderson.
30. Mr Safdar Yousaf, an accountant of S Yousaf & Company who acted for Mr Stirton and Mr Anderson and their businesses.
31. CRU, Civil Recovery Unit.
32. SCDEA, Scottish Crime and Drugs Enforcement Agency.
33. SOCA, Serious Organised Crime Agency.
34. TA, the Territorial Army.
35. Operation Maple, a police operation concerned with allegations of money laundering and of extortion.
36. Mr Eddie McCusker, senior investigating officer of Operation Maple
37. Miss Anne Ramsay, a retired police officer.
38. HMRC, Her Majesty's Customs and Excise, incorporating the former Inland Revenue.
39. ICAS, Institute of Chartered Accountants of Scotland.
40. Dr T McMorrow, Director of Legal Services, ICAS.
41. Barry Hughes, boxing promoter and friend of Mr Anderson.
42. Operation Vacsay a police operation concerned with importation of controlled drugs from Calais to Dover in 1997.
43. M74 the main road from England to Glasgow where Mr Stirton and Mr Anderson were stopped in 2000 by police officers.
(ii) The authorities referred to in the course of the proof and in the hearings on the interim administration order are set out in Appendix I. Several of the authorities were relevant only to the hearings in the interim administration process. In my Opinion I have referred to the authorities which were relevant and material to the arguments put before me in this process. The authorities submitted with written submissions are set out in Appendix II. The decision made by me in the interim administration process on the Scottish Ministers' motion to reduce sums paid in respect of living expenses is produced in Appendix III.
(iii) The evidence is discussed by me in this Opinion in chapters or by witness, depending on the best method of narrating and explaining the evidence and the position of parties.
[1] This is a case under POCA in which Scottish
Ministers seek civil recovery of recoverable property. The scheme of POCA is
that if the court is satisfied that property is recoverable property as
defined, then it must make a recovery order. Recoverable property is defined
as property obtained through unlawful conduct. I have found that there is
recoverable property. Therefore I must make a recovery order.
[2] The unlawful conduct which the Scottish
Ministers have proved to have taken place comprises involvement in the
importation of controlled drugs and a handgun; involvement in unlawful conduct
evidenced by possession of a large quantity of cash in circumstances redolent
of involvement in controlled drugs; extortion of money from Spring Radio Cars; laundering
of money by buying cars using cash obtained from unlawful conduct and obtaining
money for the resale of the cars, and laundering of money by developing a
filling station using money obtained from unlawful conduct, then operating and ultimately
selling the filling station; and fraud on lending institutions by falsely
declaring income and ownership of assets.
[3] Mr Stirton and Mr Anderson were
investigated by the police between 2003 and 2005 in Operation Maple, a police
operation concerned with allegations of money laundering and of extortion. They
appeared on petition. They were released on bail. No indictment was ever
served on them. Both respondents in evidence expressed views to the effect
that the police operation had ruined their successful businesses. Both were
of the view that as they had not committed any crime, there was no evidence
against them, and that position was vindicated by the fact that no criminal proceedings
were taken against them. Their view was that the current proceedings were
flawed because much of the investigation and search for materials which
resulted in production of papers in this case was carried out by the police in
a criminal case which did not proceed. It was suggested both on behalf of Mr Stirton
and by Mr Anderson to some witnesses that there was a conspiracy against them.
[4] Many of the facts in the case were not in
dispute. It was not disputed that the respondents had been in a relationship
with Spring Radio Cars which had three aspects. The first was a loan
agreement, whereby RS Construction was recorded as having lent Spring
Radio Cars г265,000 on very onerous terms. Mr Gibson and both
respondents said that the loan was never paid over, despite the agreement being
registered in the Books of Council and Session. The second was an open ended contract
between RS Construction and Spring Radio Cars for the provision of
services under which payment of г2,500 plus VAT was paid every week. The
third was a contract between A & S Leasing and Spring Radio Cars for
sale to Spring Radio Cars of fifteen Skoda motor vehicles, bought by the
respondents in cash for г148,000 in which Spring Radio Cars agreed to pay г4,000
plus VAT per week for 78 weeks, being г312,000. The dispute between the
parties on these matters related to the inferences which should be drawn from
the existence of the contracts. A large amount of evidence was led from
witnesses who had differing points of view of events. Scottish Ministers
argued that Spring Radio Cars had been the subject of extortion, having been
intimidated into entering into the contracts. They led evidence from the
directors of Spring Radio Cars, both of whom denied that there had been any
extortion. They led evidence of statements made by the directors to others in
the past which Scottish Ministers submitted showed that they had claimed that
they had been subject to extortion. Evidence was led of an agreement reached
between Spring Radio Cars and HMRC in relation to tax, from which Scottish Ministers
argued that the court should infer that Spring Radio Cars had been subject to
extortion by the respondents. Both respondents gave evidence in which they
said that the contracts were legitimate business arrangements. The
respondents led evidence from Spring Radio Cars' accountant and from that
company's solicitor which they argued supported their position. I considered
all of the evidence and came to the conclusion that the contracts did not make
commercial sense. I did not believe the denials of extortion from the
directors of Spring Radio Cars and from the respondents. Scottish Ministers led
evidence from an accountant, Mr Kenneth Murray who gave his opinion of the
relationship shown by the contracts and their treatment in the company accounts.
I accepted much of his evidence. Scottish Ministers led a number of police
witnesses who had been involved in Operation Maple. They spoke of statements
made by the directors of Spring Radio Cars. The respondents claimed that the
police had concocted the statements. I believed that the directors had made
the statements. In my opinion the whole picture of the contracts, the
statements made to HMRC and to police officers, the tax agreement and the
accountant's analysis showed that the contracts had been entered into as a
result of intimidation and that money had been extorted. It was paid in order
that Spring Radio Cars might be allowed to go about its business, that is, as
protection money.
[5] It was not disputed that the respondents
had bought a filling station and ground adjacent to it, on which they developed
a large modern filling station and shop. They put it up for sale and an offer
was made but the sale did not go ahead due Operation Maple. The filling station
was eventually sold. The dispute between the parties was as to the extent and
sources of funds for the purchase and development. Parties did not dispute
that some of the cost of purchase and development came from money paid by
Spring Radio Cars under the contracts referred to above. The consequence of
that is dependent on the view taken of the contracts; as I have decided that
they were entered into as a result of extortion, the funds from them come from
unlawful conduct. Nor was it disputed that some money for the development
came from a secured loan obtained by Mr Anderson from Habib Bank. Scottish
Ministers argued that the loan was obtained by fraud and that if they are
correct about that, the loan funds come from unlawful conduct. The respondents
deny fraud. I have come to the view that loan was obtained by fraud and thus by
unlawful conduct. There is a dispute between parties about the total cost of
the development. Scottish Ministers led evidence from a surveyor, Mr Martin,
who estimated it at just in excess of г1 million. The respondents led a
surveyor, Mr Eadie, who estimated it at just over г600,000. Mr Anderson
in evidence estimated it at about г600,000. Evidence was led by Scottish
Ministers from Mr Milliken, an accountant, who examined the trading
position of the filling station. They led a forensic accountant, Mr Neill
Thomson who analysed the respondents' bank accounts and some of their business
books. They led Mr Kenneth Murray, who had written a report on the
respondents' financial records. He also wrote an article about organised
crime which the respondents lodged. Another accountant, Mr Meek, was led
on behalf of Mr Stirton to comment on the work done by the accountants led
by Scottish Ministers. The submission from Scottish Ministers was that the
majority of the money used to buy and develop the filling station came from
either Spring Radio Cars or from other unlawful conduct. The respondents
submitted that there was no unlawful conduct. Where the accountants differed
I preferred the evidence of Mr Murray, Mr Milliken and Mr Thomson
to that of Mr Meek.
[6] It was not disputed that Mr Stirton
and Mrs Stirton had owned various houses on which they had secured loans,
and that they had various investments. Scottish Ministers led evidence of
Mr Stirton's tax returns and discussions with HMRC carried out on his
behalf by Mr Anderson, and of accounts for businesses said to be run by
him. They argued that the loans had been obtained by fraud, and that deposits
came from unidentified sources from which it should be inferred that they came
from unlawful conduct. Mr Stirton denied fraud and led evidence about
his employment, his businesses, and his borrowing from friends. I accepted he
had borrowed from a friend and otherwise I preferred the evidence led on behalf
of the Scottish Ministers.
[7] It was not in dispute that Miss Leonard
bought Mr Anderson's house at 37 Cowan Wynd, Uddingston, when he was
sequestrated. She paid a deposit of г800 and the rest of the price came from
a loan secured over the house. Scottish Ministers led evidence of her
application for the loan and of a police interview in which she made certain
admissions. They argued that she had obtained the loan by fraud. Miss Leonard
gave evidence in which she denied fraud. Mr Anderson argued that her
interview was inadmissible, and that there was no evidence of fraud. I
decided that the interview was admissible, and that in any event the allegation
of fraud was proved.
[8] There was a factual dispute about
Mr Stirton's presence on a ferry from Calais to Dover, in 1997, when controlled drugs were
imported into the UK.
Scottish Ministers led evidence from police officers who claimed that they saw
Mr Stirton. He denied having been present. On behalf of
Mr Stirton evidence was given by Mr Haig, who had been present and
convicted, and who said he did not know Mr Stirton, and had not seen him
there. Mr Hughson was led on behalf of Mr Stirton. He denied any involvement
and said he did not know Mr Stirton. Mrs Dickson, widow of
Mr Dickson who was not present at the port but who was convicted of
involvement with the consignment gave evidence and said she did not know
Mr Stirton. I preferred the evidence of the police and came to the conclusion
that Mr Stirton was present and was concerned in the importation of
controlled drugs.
[9] There was no dispute that Mr Stirton
and Mr Anderson were stopped by police when driving on the M74 in 2000. They
had a large sum of money in the car. Scottish Ministers led evidence to the
effect that Mr Stirton had been seen in a drugs operation earlier in Liverpool. The respondents gave
evidence to the effect that they had not been in Liverpool and had the money for their own
business. I preferred the evidence led for Scottish Ministers and I inferred
that the money was from unlawful conduct.
The case on Record
[10] Scottish
Ministers offer to prove in Statement V.OA of the Record -
"The First and Third Respondents' involvement in and provision of 'services' to Spring Radio Cars Ltd and their acquisition of assets (including but not restricted to the recoverable and associated property condescended upon) all as hereinafter condescended upon is consistent with their being engaged upon serious organised crime, including money laundering and extortion."
[11] Thereafter Scottish Ministers make averments
about Mr Stirton's presence on a ferry in which drugs were imported, and
about Mr Stirton and Mr Anderson driving on the M74 in Scotland, on another date, with a
large sum of money in the car, said to vary between г20,000 and over г50,000. Scottish
Ministers aver that on both occasions unlawful conduct was committed. These
averments are denied, in so far as Mr Stirton denied his presence on the
ferry and any involvement in drugs, and both Mr Stirton and Mr Anderson
admit presence in the car with a quantity of money but deny any involvement in
unlawful conduct. Scottish Ministers then aver that both respondents have
controlled and operated licensed premises known as Thomson's Bar since 2001,
and that a loan secured over those premises from Habib Bank was obtained in
2003. The respondents admit this, but deny that Mr Stirton had any
ownership of Thomson's Bar. Scottish Ministers then aver, at statement V.10,
that between April 2001 and April 2004 sums in excess of г769,863 were "siphoned
off or otherwise diverted" from Spring Radio Cars and paid to RS Construction
and A & S Leasing. They offer to prove that the sums were
obtained by the respondents by means of extortion. The averments in answer by
Mr Stirton are to the effect that г702,221.87 was paid by Spring Radio
Cars to RS Construction and A & S Leasing between 27 April 2001 and 12 January 2004, the payments being in
respect of goods and services. The averments in answer by Mr Anderson
are to the effect that there was no extortion. He avers that the whole basis
of the complaint concerning extortion by him is a result of collusion by two
police officers, DC Anne Ramsay and DC Martin Murray. He also avers
that those alleged to have been the subject of extortion, Mr Gibson and Mr McLeod,
have denied that they were the subject of extortion. Scottish Ministers then
make detailed averments about the way in which it is alleged that extortion was
carried out, which averments are denied. The respondents make averments about
their business relationship with Spring Radio Cars. At statement V.16 the
Scottish Ministers make averments about the involvement of the Inland Revenue
(now HMRC and hereinafter so referred to) with Spring Radio Cars.
[12] In statement V.18 Scottish Ministers make averments
about involvement with the police. The averments in answer refer to the
alleged victims of extortion denying that there had been any extortion. In
statement V.23 the Scottish Ministers turn to documents recovered from the
premises of Spring Radio Cars. In statement V.25 Scottish Ministers aver that
Spring Radio Cars made payments to A & S leasing in respect of
the provision to Spring Radio Cars of fifteen Skoda cars. It is averred that Mr Anderson
paid г148,000 in cash to a third party, Barry Hughes, who then purchased the
cars from St Andrews Garage, with invoices made out to Spring Radio Cars. Thereafter
a document bearing to be a lease agreement, production 6/25/5, was
executed, which Scottish Ministers offer to prove committed Spring Radio Cars
to payment of г4,000 plus VAT per week for 78 weeks which is a total of
г312,000 plus VAT. It is averred that the contract had no commercial
justification for Spring Radio Cars. The Scottish Ministers aver that the
respondents had no legitimate source of income from which to fund the purchase
of the Skodas. The averments in answer are to the effect that the cash to
purchase the cars came from the profit of a building project at Balgrayhill Road
in Glasgow, and that the contract which was for sale of the Skodas made good
commercial sense because Spring Radio Cars had the benefit of acquiring cars
which it leased to drivers thereby making income, and that in any event Spring
Radio Cars were not able to fund purchase of cars by any other means.
[13] Scottish Ministers then aver that Spring
Radio Cars entered in to an agreement, production 6/24/1 acknowledging that it had borrowed
г265,000 from RS Construction and agreeing to pay back г1,088,000 over a
10 year period. The agreement is dated 29 March 2001 and was registered in the
Books of Council and Session for preservation and execution on 2 April 2001. It is averred that the
loan is not shown in Spring Radio Cars' accounts. The loan agreement is
admitted to exist by the respondents under explanation it was never implemented
and the purpose of it is described as being security, required in light of an
agreement that the respondents would seek to purchase land and build a self
contained taxi operating base for Spring Radio Cars. If Spring Radio Cars
decided not to use it the loan would cover the outlays of the respondents.
[14] Scottish Ministers sum up their averments
thus far in statement V.27 to the effect that payments from Spring Radio Cars
to RS Construction and A & S Leasing were made in such
circumstances as to enable a reasonable inference that they were paid under
extortion. Further, the Scottish Ministers aver that the explanation given by
Mr Gibson and Mr McLeod of Spring Radio Cars to HMRC and police was
that the payments were made as result of extortion. Those averments are
denied. It is averred on behalf of the first respondent that HMRC wrongly
interpreted answers given to them, and that the directors of Spring Radio Cars
had said that they had not told the police that there had been extortion. For
the third respondent the averments of the first respondent are adopted and it
is averred that the directors were bullied by the police, and that the Scottish
Ministers have no evidence of extortion except for hearsay evidence from police
officers and Mr Donnelly of HMRC. It is averred that both directors have
taken advice from the third respondent on business matters since the events relied
on by Scottish Ministers.
[15] Scottish Ministers aver that properties were
purchased by means of fraud. It is averred that mortgage application forms
were completed and submitted fraudulently and that mortgage lenders were
thereby induced to lend. These averments are denied.
[16] In statement VI the Scottish Ministers
aver that the financial transactions of the respondents since 1993 have sought
to conceal proceeds of unlawful conduct. These averments are denied.
[17] In statement VI.1 the Scottish Ministers
aver that the respondents bought premises at 911 Springburn Road, Glasgow on 21 December 2001 as trustees for A & S
Group for г151,000 which they operated as a filling station and shop. That is
admitted under explanation that the price was paid by cheque not in cash. The
Scottish Ministers then aver that the funds to buy the filling station came
from a business known as Thomson's Bar, from money paid by Spring Radio Cars
and from unknown sources. It is averred that the funds from Spring Radio Cars
and unknown sources are recoverable property. Those averments are denied, and
reference made to averments in answer already made.
[18] In statement VI.4 it is averred by
Scottish Ministers that land adjacent to the filling station was purchased in
May 2003 for г30,500. It is averred that the money came from the petrol
station trading account and that income and profits derived from the operation
of the garage are recoverable property. It is admitted that a portion of the
funds come from the petrol trading account.
[19] In statement VI.5 Scottish Ministers aver
that г157,000 was paid towards redevelopment of the filling station which came
from a loan secured over Thomson's Bar. They aver that the loan was obtained
by fabrication, rendering that money recoverable. Then they aver that other
money which was used to develop the filling station came from unknown sources
and Thomson's Bar. They aver that the capital cost was at least г1 million,
and that only г544,609 can be traced through bank accounts. They aver that
part of the expenditure was funded by account number ending in 738 under the
name "R Stirton trading as RS Construction" which was opened in 4 February 2002 and which received
deposits of at least г279,209 from Spring Radio Cars. They aver all of that
is recoverable. The account received at least г182,000 from A & S Leasing
whose only source of income was Spring Radio Cars. They aver all of that is
recoverable. At page 107B of the Record, Scottish Ministers aver that "The
income and the property derived from the operation of garage are recoverable
property." In answer the respondents aver that they paid about г500,000
including VAT to develop the property. They admit that expenditure included
the г157,000 from Habib Bank, and it included money from RS Construction
account and from the filling station trading account. It is said that much of
the work was done by Mr Stirton himself.
[20] In statement VI.6 Scottish Ministers aver
that the subjects at 911 Springburn Road were financed largely from
recoverable property. Scottish Ministers estimate the proportion of funds
obtained from recoverable property to be at least 76%. They aver that
"But for said percentage the respondents would not have been in a position to purchase and improve the subjects. Further and in any event the subjects at 911 Springburn Road were obtained through money laundering. The respondents obtained the subjects by concealing disguising converting and transferring criminal property. The proceeds of sale of the subjects are therefore recoverable property."
The respondents in answer explain and aver that the premises were not financed in part from recoverable property.
[21] Scottish Ministers aver that the property
known as The Limes was purchased by Mr and Mrs Stirton using funds
from the Skipton Building Society obtained by fraud, and partly by funds from
the sale of another property known as Vida Ventura, which is the subject of
averments later in the record. It is admitted that a loan was obtained from the
building society and the rest is denied. As for Vida Ventura, it is averred by
Scottish Ministers that a deposit of г27,000 was paid and the rest of the
purchase price came from a loan from the Nationwide Building Society, which was
fraudulently obtained. The averments in answer are that the deposit came from
savings of г7,000 and loans from friends of г20,000. It is denied that the
loan from the building society was obtained by fraud. Scottish Ministers aver
that Miss Leonard bought the property at 37 Cowan Wynd from Mr Anderson's
trustee in sequestration on 15 September 1998, which is admitted. It is averred
that a deposit was paid from unknown funds and that the loan used to complete
the price was obtained by fraud. In answer it is averred that the deposit for
the house was only г800. While there is no averment the proof proceeded on
the basis that it is denied that the loan was obtained by fraud.
[22] At VI.10 Scottish Ministers aver that bank
account in name of Mr Stirton with Bank of Scotland ending in 984
contained money emanating from A & S Group, A & S
Leasing, RS Construction and Thomson's Bar, all of which are tainted. It
is averred that the account also contains funds the source of which cannot be
accounted for. In answer the respondents admit that funds came as listed but
deny any sums are from unidentified sources.
[23] Scottish Ministers aver that Mr and
Mrs Stirton bought policies between 1993 and 2003 which came either from
the 984 account, or from no identifiable source and are therefore recoverable,
except for г263 said to be from child benefit paid to Mrs Stirton. This is
denied. Money from an account ending 738 is said to be recoverable and that
is denied.
[24] Thus it is agreed between parties that a
loan agreement, production 6/24/1 existed; that a contract for services, productions 6/23/26 and 6/100 existed although there is
a dispute about the date of it; and that a contract to buy cars production 6/25/5 existed, although it is, on its face,
a lease agreement. It is agreed that the loan was not made and did not appear
in any accounts; that payments of г2,500 plus VAT per week were made ostensibly
under the contract for services; and that fifteen Skodas were obtained under
the contract to buy cars, and were paid for at a rate of г4,000 plus VAT per
week. Invoices in respect of both contracts were produced, although there is
a dispute about when the invoices under the contract for services were
rendered. It is agreed that the money paid by Spring Radio Cars was used to
buy the filling station and ground adjacent to it and develop it. It is
agreed that either Mr and Mrs Stirton, or Mr Anderson, or Miss Leonard
obtained secured finance over 3 Kelvin Road, Vida Ventura, The Limes, 37 Cowan
Wynd and Thomson's Bar.
[25] The dispute between parties is over the
reason for the loan agreement being executed; the reason for the payments
being made; the truth or falsity of information given to the lenders, and if
any information was false, as to the effect of that; and as to the source of
funds to redevelop the filling station, in so far as not coming from money paid
under the contracts. Scottish Ministers submitted that the loan was a method
of the respondents obtaining control over Spring Radio Cars; that the
circumstances of the payments were such as to show, on balance of
probabilities, that they were made under duress; that the information given to
the lenders was shown to be false and that the lenders would have declined to
lend had they known that. Scottish Ministers submitted that the cost of the
redevelopment was such as to require funds, the source of which had not been
explained, together with funds from Spring Radio Cars and Thomson's Bar. The respondents
submitted that the loan was a legitimate transaction, which had never been put
into effect; that the sums paid under the contracts were legitimate payments
between two business entities and that there had been no duress; that the
lenders were given no false information and in any event they had suffered no
loss as payments due under the loans had been kept up to date; and that all
money used to buy and redevelop the filling station came from legitimate
business.
Summary of Findings
following proof
[26] I
have found that Mr Stirton was present when controlled drugs and a hand
gun were imported into Dover from Calais in 1997, in circumstances which prove
that he was involved in the importation. Mr Stirton and Mr Anderson
were found to have a large amount of cash in a car on the M74 in 2000, in
circumstances from which I infer that they were involved in some capacity in
the supplying of controlled drugs or other contraband or in the laundering of
cash.
[27] As regards the involvement of Mr Stirton
and Mr Anderson with Spring Radio Cars, I have come to the view that
Mr Gibson was intimidated in 1996 or 1997 by his office being the subject
of an attack by masked men, his family car being set on fire shortly after his
wife and children had got out of it, by an attempt being made to run his wife
off the road while she was driving and by silent phone calls made to his house.
I have made no finding that any of these actions were carried out by either
Mr Stirton or Mr Anderson personally, nor that they were aware of
them in detail at the time of their commission. I have found that
Mr Gibson, shortly after these events, was approached by Billy Viola
and Tony McGovern with a view to selling his business, although he had not
advertised the business for sale. No agreement for sale was reached and Mr Gibson
had discussions with Mr Deans and Mr Rodden about selling to them, or
merging his business with theirs, which was known as Mac's Cars. No agreement
was reached with them either. I have found that in the circumstances
Mr Gibson felt vulnerable and that he felt obliged to make payment of
г2,800 per month to a business known as SRS, in order that he be left alone and
allowed to continue his business. Mr Gibson was very vague about why he
made payment to SRS,
which was run by Mr Milligan, and how or why it started. He did however
make payment of г2,800 per month to SRS from 31 May 1999 until the end of 2000. He said that the invoices
stopped soon after Tony McGovern was murdered in September 2000. I have found
that he understood that SRS was run by Mr Milligan. Invoices were sent from an
address at 149 Balgrayhill
Road, Glasgow and stopped approximately
two months after Tony McGovern's death, by shooting, in an unresolved murder in
September 2000. The invoices were found in Spring Radio Cars offices and
produced as production 6/25/7. In or around November 2000 Mr Anderson went to see
Mr Gibson and suggested to him that he could advise him on various
business matters and that as he was setting up a new filling station in
Springburn, could arrange account facilities for his drivers. Mr Anderson
told him that he ran a business in partnership with Mr Stirton, known as
RS Construction. He told Mr Gibson that he also traded with
Mr Stirton in partnership as A & S Leasing, and A & S
Group.
[28] Thereafter Mr Gibson made payment of
invoices to RS or RS Construction, said to be in respect of management
services. I have found that no services were rendered but payments were made.
A contract produced by Scottish Ministers and agreed to be a contract between
Spring Radio Cars and RS Construction stated that the services will be rendered
by Mr Stirton personally. Mr Stirton was the brother in law of the
deceased Mr McGovern. I infer that Mr Stirton and Mr Anderson
knew that Mr Gibson's business was paying money to SRS, and that the approach
Mr Anderson made was to continue payment of protection money, to be made
to RS Construction. Mr Gibson and his business partner Mr McLeod
denied that they had been intimidated into making payment. I did not believe
them, and have found that they had made such payments from other evidence,
including statements made by one or both of them to officers of HMRC, to police
officers, and to the Procurator Fiscal when under precognition on oath. The evidence
about these invoices and the treatment of them in accounts led me to believe
that the items detailed on them were not delivered. The tax treatment of the
sums paid further reinforced my view that Spring Radio Cars had paid protection
money. The invoices were for the same amount, г2,500 plus VAT every week and
they were said to be in respect of a number of matters including advertising,
health and safety advice, the finding of account customers, maintenance and
security. I was told that Mr Gibson thought that the security consisted
of Mr Stirton driving past the premises at night but he never knew if he
did it or not. I did not believe Mr Gibson when he claimed that his business
received any services from RS or RS Construction.
[29] I believed the evidence given by the
officers of HMRC, Mrs Robertson and Mr Donnelly. Both of them spoke
to their meetings with Mr Gibson and Mr McLeod in which Mr Gibson
said that Spring Radio Cars was making payments in order that they be allowed
to expand their business and in order that they got no hassle. The files from
HMRC are clear that in the notes of meetings taken these matters were referred
to. Notes of meetings were sent to Spring Radio Cars' accountants,
Neilson Renton, thereafter and no objection was taken to them.
Mr Gibson and Mr McLeod agreed to make payment of an extra sum of
г75,000 in tax on the basis that the payments made would not be deductable
before the calculation of tax as they were payments of protection money which
is not a deductible expense. While Mr Gibson and Mr McLeod claimed
that they had not been the subject of extortion, they were never able to
explain either in documents put before me or in their evidence why they had
agreed that these sums should not be deducted. It was submitted that the fact
that their solicitor, Mr Cockburn, continued to act for them and wrote
letters explaining that they claimed not to be the subject of extortion lends
weight to their denials. I did not accept that submission.
Mr Cockburn's evidence was to the effect that his clients never told him
that they were the subject of extortion and sought his help in persuading
various authorities that they had not been the subject of extortion. He
accepted those instructions which did not entail his having an opinion about
whether there had been extortion or not.
[30] I have found that Mr Gibson and
Mr McLeod told police officers in 2003 and 2004 that they had been the
subject of extortion. I accepted the evidence of DS Murray that when he
called to see Mr Gibson along with his colleague DC Ramsay on 27 November 2003 Mr Gibson told him
that he was paying protection money but that he would not sign any statement to
that effect. It was submitted that I should not accept Mr Murray's
evidence. It was suggested that he has concocted statements. I accepted that
Mr Murray was wrong when he said that bank account numbers were given him
off the top of the head by Mr Gibson. I did not think that could be
so. Further, I accepted evidence from Mr Clarke of Rix Petroleum that
Mr Murray or his colleague smelled of drink when they called on
Mr Clarke in Yorkshire early in the morning. I believed Mr Clarke when he said that that
he smelled drink, although Mr Murray denied it. I did not find Mr Murray's
claim to have remembered account numbers to be of any significance in assessing
his overall credibility. Similarly, if either he or his colleague smelled of
drink first thing in the morning, and denied doing so, I did not find that to
be of significance in assessing their overall credibility and reliability.
[31] I have found that as regards the payments of
г2,500 plus VAT made every week neither Mr Gibson nor Mr McLeod was
able to tell me what these payments were for. Mr McLeod became
distressed in evidence when pressed. Mr Gibson, while not becoming
distressed, was quite unable to state in evidence what services had been
rendered. I noted that both Mr Gibson and Mr McLeod had given
precognitions on oath before two separate sheriffs and each had been warned as
to perjury. I also found it necessary to warn Mr Gibson about perjury.
Mr McLeod seemed to me to be very frightened when giving evidence. I was
not therefore able to find that either Mr Gibson or Mr McLeod were credible
witnesses when they said that they had not been the subject of extortion.
[32] In submissions it was prayed in aid that
Mr Neilson, Chartered Accountant, had audited the accounts of Spring Radio
Cars in which the payments of г2,500 for services were recorded and had not
found any difficulties. Mr Neilson's evidence was to the effect that he
had asked what the payments were for and had been told that they were for
services and that there were invoices for them. He therefore took matters no
further. He said that if he had been suspicious of his clients then he could
not have continued as their accountant and auditor. He was not suspicious.
In his evidence he said that extortion is not something that is likely to be
found by an audit. That must be correct, so long as there are invoices said
to be for the payments which are in fact extortion, and so long as the auditor
is prepared to stop at that inquiry. I did not make any finding as to
Mr Neilson's competence as an auditor, that not being a question before me
in this case.
[33] Mr Graham Henry of St Andrews Garage, a
car dealership, gave evidence about the sale of fifteen Skodas. In early
2002, Mr Barry Hughes, a boxing promoter came to the car showroom and
negotiated the purchase of fifteen Skodas. The invoices were made out at Mr Hughes'
direction to Spring Radio Cars, and the cars were delivered to their premises.
The price was г148,000 which was paid in a number of instalments in cash. One
particular instalment payment stuck in the mind, as Mr Hughes brought in
about г15,000 in cash in a Sugar Puffs cereal box. Mr Henry recalled
this, as did his cashier who was also led by Scottish Ministers to speak to
receiving the cash and counting it. He understood that money laundering
regulations brought in since that date would prevent large cash payments being
taken. Mr Henry thought payment in cash a little unusual but in 2002 he
knew of no reason why he could not receive cash for such a transaction. He
recalled it happened in other transactions at that time. He understood that
the cars were for Spring Radio Cars, and did not know why Mr Hughes
apparently acted on their behalf. He did not know Mr Stirton or Mr Anderson.
Mr Henry's evidence was that Spring Radio Cars could have bought cars on
commercial finance arranged through his garage at that time without having a
deposit. Fifteen Skoda motor cars were made available to Spring Radio Cars by
A & S Leasing. That partnership had no other business than the
provision of these cars. The price paid by Spring Radio Cars for each car was
approximately twice the normal retail price, that is, twice the price paid by
Mr Stirton and Mr Anderson to buy the cars from the car dealer.
Mr Gibson's position was that he was prepared to pay that additional price
because he got the cars for several months before he had to pay anything at
all, and because he could not obtain commercial finance for the purchase of
cars, because he did not have the deposit and because he would have found it
hard to obtain a loan. I did not believe him. There was no provision made in
his accounts for accrued payments and there was no evidence that he had worked
out the true cost of the cars to him. There was also evidence that he had
obtained cars commercially, from St Andrews Garage and elsewhere, both before
and after obtaining the Skodas. Mr Anderson's evidence was to the effect
that both parties to the transaction, that is A & S Leasing and
Spring Radio Cars, benefitted from the arrangement. He did not claim that he
acted as an adviser to Mr Gibson and advised him to take the best deal for
Spring Radio Cars; rather he stated in evidence that it was necessary for both
parties to make a profit. Mr Anderson's evidence was to the effect that
Spring Radio Cars succeeded in business to a much greater extent after he and
Mr Stirton "took over". I asked him why he did not lend the amount
needed for a deposit and thereby enable Spring Radio Cars to obtain commercial
finance for the purchase of cars. He had no explanation other than that it
was not as simple as that, and that his deal was a good deal because it allowed
for a free period. Mr Stirton said in evidence that he could not understand
what the complaint was. He believed that Spring Radio Cars had obtained cars
when they needed them and when they had no other way of getting them. Spring
Radio Cars had made a profit from the cars, as had A & S Leasing.
He stated that was a normal commercial transaction. Neither Mr Stirton
nor Mr Anderson gave any explanation for this transaction being carried
out in the manner described. In my opinion it had the air of a money
laundering exercise in that large quantities of cash were used to buy goods;
the title to goods was taken in name of someone other than the payer of the
price; the price was negotiated by another person; and the goods were then
ostensibly sold on at a price far higher than their original worth. On the
other hand Mr Hughes' involvement made the transaction memorable, because
he was a person known in the world of boxing, and because he arrived on some
occasions at least in what Mr Henry found to be a very noticeable and
desirable car, a Bentley. He brought a large sum of money in a Sugar Puffs
box, rather than a more conventional brief case or money bag. Thus it cannot
be said that the cash payment was done quietly or unobtrusively. Having
weighed the evidence up I found that the transaction required explanation. No
satisfactory explanation was forthcoming. I have found that the purchase of
the Skodas for cash was money laundering, and that the payment by Spring Radio
Cars of a non commercial rate of interest in respect of them was achieved by
intimidation of the directors of Spring Radio Cars.
[34] The loan agreement, production 6/24/1, was registered in the Books of
Council and Session for preservation and execution. The total lent was
г265,000 and the total to be repaid was г1.08 million. It required
Mr Gibson to make payment of г50,000 in the first week and then payments
on a regular basis. It amounted to a rate of interest in excess of 38% in
respect of a loan which both he and Mr Anderson said was never paid over.
The terms of the loan were that default in payment would result in the
business of Spring Radio Cars going to RS Construction. Sale of the business required
permission of RS Construction and a sale over a certain price would result
in a portion of the sale price being paid to RS Construction. The
explanation given by Mr Anderson and by Mr Gibson in their evidence was
that the partnership of Mr Anderson and Mr Stirton were looking for land
on which to build a new taxi centre for Mr Gibson and they wished to have
an agreement with him so that he was prevented from losing interest in the
project after they had expended money on it. It was never explained what
money they anticipated expending, nor why the desire to maintain
Mr Gibson's interest in the project required the terms of the loan
agreement which could properly be described as exorbitant. The explanation did
not strike me as in any way credible. Mr Gibson said that he told no
one, not even his accountant, nor his business partner Mr McLeod, about
the agreement. It was secret, despite being registered in the Books of
Council and Session. He gave no explanation why he had told no one about
it. While I was not prepared to make findings as suggested by the Scottish
Ministers to the effect that the payments for the services and the Skodas were
invented as a cover for payments to be made under the loan, I did take the view
that the existence of the agreement showed further intimidation of
Mr Gibson.
[35] I was not prepared to make the findings
sought by Scottish Ministers concerning the loan because various pieces of
paper which had been recovered during searches of premises were led in evidence
and Mr Gibson, Mr McLeod and Mr Anderson were asked about them.
In general they denied knowledge of them. I took the view that all were evasive
about these productions. Therefore while I found that their evasiveness was
detrimental to their credibility, I was not able to draw any positive
inferences from the evidence.
[36] I accepted that Mr Stirton developed a
property at Balgrayhill
Road, Glasgow but I was not able to
find from the evidence before me what profit, if any, he made from that. I
accepted Mr Mirza's evidence that he paid г420,000 for the property. Mr Stirton
had a loan from State Credit over it, which he repaid. I did not know after
hearing all of the evidence what profit Mr Stirton had made at the end of the
transaction. It was agreed by parties in the notice to admit, paragraphs 140
to 146, that Mr Anderson withdrew a total г201,000 on seven occasions
between October 1998 and April 1999 from the account "Russell Stirton trading
as RS Construction." According to the respondents Mr Anderson did
so at Mr Stirton's request over a period, and that money came from the Balgrayhill Road development. Mr Anderson
claimed in evidence that it was used for wages, and also for the funding of the
Skodas. He said it was taken out of the bank and kept in a safe at Mr Stirton's
home. He had no explanation why Mr Stirton wished it to be kept out of
the bank. In his evidence Mr Stirton said that he was displeased with
the bank as they had refused to lend to him to enable him to carry out the
development and so he did not wish to keep funds from the successful
development in that bank. I regarded it as incredible that Mr Stirton, a
man who had bank accounts, would keep a large sum in cash at home for the
reason he gave. The property at Balgrayhill Road was purchased in the first place by
money supplied by Mr Anderson. There was no acceptable evidence as to
where he got that money from. It was approximately г48,000 which he said he
had saved from his work overseas. Thereafter Mr Anderson was made
bankrupt and claimed benefit. He did not regard the money which he had
supplied to Mr Stirton as a loan and therefore did not tell his trustee
about it. The money in respect of the development of the filling station
cannot have come from him. I found that there was nothing in the evidence
before me to show that it had come from work done by Mr Stirton as a self employed
builder. While I accepted that Mr Stirton did develop the site at Balgrayhill Road and did sell it to
Mr Mirza for г420,000, I did not find that his evidence about doing any
other work as a self employed builder was acceptable. When Mr Stirton
gave evidence he did not provide documentary evidence of people from whom he
had obtained work. Mr Anderson suggested some names to him which he
accepted. He said that one of the firms was Mr Anderson's own firm and
was then led by Mr Anderson into saying that he thought that it might have
been owned by someone else. Mr Anderson and Mr Stirton gave evidence
to the effect that Mr Stirton had not made tax returns for a number of years
while working as a self employed builder. Mr Anderson obtained a mandate
from Mr Stirton and approached HMRC through his accountant Mr Yousaf,
with a view to making late returns. Mr MacFie, HMRC officer, dealt with
this and agreed sums to be paid on the basis of information given to him by
Mr Anderson about Mr Stirton's lifestyle. It was said in evidence
that Mr Stirton's tax affairs were in disarray due to his adviser Mr Davies
having died. Mr Stirton had relied on him to make returns and to make
payment of sums due but he had not done so. I requested that Mr Davies
death certificate be lodged as Mr Anderson did not know his date of
death. The certificate shows that Mr Davies died on 14 July 1999. I found
Mr Stirton to be an incredible witness. The position therefore is that
no matter how much it cost to develop the filling station, some of that money
came from the money taken from Spring Radio Cars and from money raised on
Thomson's Bar. Other funds used came from other sources about which I have
not heard evidence. In all of the circumstances I have drawn an inference
that the filling station was developed from unlawful conduct.
[37] The houses bought by Mr and Mrs Stirton
were obtained by mortgage fraud. The house owned by Miss Leonard was
obtained by mortgage fraud. The loan from Habib Bank secured over Thomson's
Bar was obtained by fraud. The various insurance policies and investments
held by Mr Stirton and Mrs Stirton, excluding child benefit, were
paid for by money acquired by unlawful conduct. I explain below my reasoning.
The procedural course of
the proof
[38] This
proof was heard over the period between 19 May 2009 and 20 May 2011. Appearance was entered
on behalf of the first respondent, Mr Stirton and the third respondent, Mr Anderson.
In order to understand fully the history of the matters raised in the proof it
is necessary to appreciate that prior to a petition being raised for a recovery
order, a petition was raised for appointment of an interim administrator.
That petition was granted, the interim administrator, Miss Louise Rivers,
made several reports, and a petition for a recovery order was lodged. Answers
were lodged on behalf of Mr Stirton and on behalf of Mr Anderson and
in due course a diet was fixed for proof. Prior to the proof beginning,
various hearings were held in the process for the interim administration
order. Written Opinions were issued by Lord Macfadyen, Scottish
Ministers v Stirton and others 2006 SLT 306, Lord Emslie Scottish
Ministers v Stirton and others [2007] CSOH 41, and Lord Glennie
Scottish Ministers v Stirton and others 2008 SLT 505. During the course
of the proof certain matters arose in the process for the interim
administration order which were dealt with separately by me. I make reference
to these where required below.
[39] Several days were taken up with matters
concerning the interim administration order. They included a motion from Scottish
Ministers for a prohibitory property order, which I did not grant, and a motion
for the substitution of Miss Rivers as interim administrator by Ian Jones
which I did grant. Motions were made in respect of exclusions from the fund in
respect of living expenses, under s.261 of POCA. Agreement had been reached
between the parties and the interim administrator in March 2005 that sums
should be paid each month in respect of living expenses. I refused the first
motion, on behalf of Scottish Ministers, to reduce the sums excluded. A later
motion was made by Scottish Ministers which I granted. My Opinion is annexed
to this Opinion. I heard these various motions on several days instead of
hearing evidence in the civil recovery process. Certain of the authorities in
Appendix I were relevant to those motions rather than to the civil
recovery process.
[40] There were productions lodged for the
Scottish Ministers consisting of over one hundred lever arch files with, in
most cases, hundreds of pages in each file. For the respondents fifteen lever
arch files were lodged with rather fewer pages in each. Parties entered into
two joint minutes agreeing that many of the documents were what they bore to
be, reserving the right to argue about inferences to be drawn from the
documents. There was also a reservation on behalf of Mr Stirton and
Mr Anderson to argue that while certain documents, for example a document said
to be a surveillance log, was properly produced as a surveillance log, the
contents of it may be inaccurate. I asked to be addressed on the meaning of
that. As I understood parties it was an attempt to agree that the documents
produced as a surveillance log were what had been written but that they might
not be an accurate reflection of what those on surveillance had seen. Notices
to admit were drawn up by the Scottish Ministers and admissions and denials as
appropriate were made by Mr Stirton and Mr Anderson. Further,
following a discussion before Lord Glennie, parties were appointed to
produce requests of the other parties for further specification, which were
referred to thereafter as "shopping lists" and I refer to them in that fashion
in this Opinion. The following interlocutor was pronounced on 3 July 2008 by Lord Glennie:
"The Lord Ordinary having heard Counsel and the first and third Respondents personally By Order, (1) Appoints each party, no later than Thursday, 17 July, 2008, to provide to the other party a list of the further specification required by them from the other party's pleadings; (2) Allows each party to adjust their pleadings, taking into account the further specification required, until Thursday, 14 August, 2008; (3) Allows to parties a Proof Before Answer on the Record on the Petition and Answers, as adjusted; Appoints said Proof to proceed on at 10.00.a.m.; Grants diligence for citing witnesses and havers; (4) Appoints parties to fix with the Keeper of the Rolls a diet of proof of eight weeks duration; and (5) Appoints parties to be heard By Order on Thursday, 21 August, 2008 at 9.00 a.m."
Therefore, by the beginning of the proof, there were pleadings, joint minutes, notices to admit and shopping lists and answers on behalf of all parties. I was nevertheless moved to allow amendment to the pleadings thereafter, which I allowed. Both parties sought leave to amend and I took the view that their amendments would narrow the question between parties and therefore allowed them.
[41] At a hearing By Order on 19 March 2009 all parties were
confident that the proof could be completed within eight weeks. The Lord
Ordinary indicated that any break in the proof would be undesirable. According
to Mr Anderson, as the proof proceeded, he had not at the time of that
interlocutor thought that the time estimated was accurate. The estimate of
time proved to be inaccurate. A diet of seven weeks began on 19 May 2009 and at the end of that
diet the evidence led by the Scottish Ministers had not been completed. Due
to the inaccuracy of the estimate given to the court, it was necessary to
adjourn the case over many months. The case had not finished by the date of
the summer vacation. Thereafter the court had commitments to other
business. The court sat again on 17 November 2009 until 18 December 2009 and, following the recess
at Christmas 2009, from 5 January 2010 until 10 February 2010 when Mr Anderson became ill.
There were several By Order hearings to ascertain the state of
Mr Anderson's health. On 9 March 2010 Mr Anderson was fit to attend court and
Mr Stirton appeared as a party litigant and moved to have the diet
adjourned in order that he might seek a judicial review of a refusal of a full
legal aid certificate. That motion was continued and on 28 April 2010 I made no order in
respect of Mr Stirton's motion and the diet was adjourned until 21 September 2010. On 28 September 2010 Mr Anderson advised
that he would not attend next day as he felt unwell. The court was adjourned
until 30 September
2010 at
which time Mr Anderson was not present. A note from his doctor was sent
to court indicating he was unfit to attend. On 1 October 2010 the court convened for
the restricted purpose of an arranged attendance by counsel for
Miss Rivers so that he might be asked in open court to obtain up to date
details of his client's medical condition. On 5 October 2010 the court
again convened for the restricted purpose of advising counsel for Scottish
Ministers and counsel for Mr Stirton of enquiries made by the Clerk of Court
at my request of Mr Anderson's doctor, and again on 6 October 2010
for the restricted purpose of advising counsel of the results of the enquiries
which were that Mr Anderson was expected by his doctor to be able to
return on 8 October 2010. He did so and the court sat until 22 October 2010, when the diet was
adjourned until 2 November 2010 to accommodate leave already arranged. The court sat until
5 November
2010 when a
week's adjournment was necessary to accommodate the court's commitment to
criminal business. The court sat again on 16 November 2010 until 23 November 2010 when the diet was
adjourned to allow counsel for Mr Stirton time to prepare. The court sat
again on 30 November
2010 until 17 December 2010, with some time lost due
to difficulty of travel caused by bad weather. After the recess over
Christmas 2010, the court sat again from 11 January until 21 January 2011 when the diet was
adjourned for one week to accommodate the court's commitment to criminal
business. The court sat again on 1 February until 23 February 2011 when Mr Anderson was
absent due to illness. The court convened next day in order to have up to
date information about his state of health and adjourned until 1 March 2011. On that day the court
adjourned until 2 March 2011 and on that day to 3 March 2011, when it was adjourned
until 10 May
2011. The
court then sat from 10 May until 20 May 2011. Thereafter parties
were given time to prepare and exchange written submissions, to adjust if so
advised in light of each other's submissions and then to submit their completed
written submissions to the court.
[42] The court sat on over 130 days, either
to hear evidence or argument in the course of evidence, although some of those
days were as stated above concerned with matters relevant to the petition for
the interim administration order. Inevitably, in such a long proof, some days
were lost due to a variety of causes such as parties or witnesses requiring to
attend funerals, short periods of indisposition of witnesses or parties,
inability of parties to attend in Edinburgh because of very bad weather in
December 2010, witnesses not being available when needed, and due to counsel
being required to honour other commitments. There were several delays caused
by Mr Anderson becoming ill. The inaccurate estimation of time required
caused difficulty as the court schedule cannot be altered to allow a case to
run continuously when the time needed is much longer than that estimated. The
result was that both the court and the parties had a difficult task in hearing
the evidence spread out over two years and in assimilating that evidence at the
end of the case.
[43] The Scottish Ministers were represented by
senior and junior counsel. Mr Stirton was represented for the first
seven weeks of the case by junior counsel and thereafter senior counsel was
also instructed. Counsel were instructed by solicitors. Mr Stirton was
not legally aided for the first seven weeks and I was advised that he had
applied for legal aid in the adjournment thereafter. Counsel for Mr Stirton intimated
in March 2010 that legal aid was no longer in place, and one week later
Mr Stirton moved me to grant an adjournment of the case because he had
been told that his legal aid was withdrawn. It transpired that he had been
granted legal aid under emergency procedures and had not been granted a full
legal aid certificate. Mr Stirton appeared on his own behalf and
explained to me that he was not capable of dealing with the court appearance
himself; that he was dyslexic and so found the written pleadings hard to
understand; that he found it difficult to express himself formally in court and
that knew that he was in the habit of using language loosely so that he might
be thought to say something that he did not mean. I was aware that the court
had only two weeks of time available at that stage and that, taken together
with Mr Stirton's inability to present his own case, persuaded me that I
should adjourn. I was advised thereafter that he had applied for, and been
granted, legal aid and thereafter Mr Stirton was represented by the same
firm of solicitors and the same senior and junior counsel.
[44] Mr Anderson was a party litigant
throughout. On 22 February 2011 he moved me to adjourn in order that he might apply for
legal aid. The motion was opposed by Scottish Minsters. I took the view
that he had appeared as a party litigant for many days of the hearing of the
case and that his motion to adjourn in order to allow him to obtain legal aid
came very late. He had had representation at one stage prior to the proof
starting but had dispensed with his agents and counsel. While in my opinion
Mr Anderson had difficulty in understanding the way in which POCA provides for
the granting of an order for recovery in a case such as this in which no
criminal proceedings had been taken, he had been able to represent himself for
some years. He was familiar with court procedure. I did not think that he
was unable to complete the case. Therefore I did not think that he would be
deprived of a fair hearing by my refusing to adjourn at that stage to allow him
to apply for legal aid. I decided that it would be unfair to Scottish
Ministers and to Mr Stirton to delay the proof at such a late stage. They had
an interest in having the case completed. Further, the funds which were the
subject of the interim administration order were being depleted by being paid
out as exclusions from the order in respect of living expenses. In that
situation, delay in completing the case could, if an order were ultimately
made, lead to such an order being ineffective. In the context of the length
of the case by that stage I did not put much weight on that as a consideration.
I was more influenced by the need to maintain good order by making progress,
and by my view that Mr Anderson was capable of conducting his own case. I
did not regard representation as indispensible. I refused the motion. My
having made that decision, Mr Anderson moved me to recuse myself from the
case on the basis that I was biased against him. Scottish Ministers opposed
the motion. I refused that motion and refused leave to reclaim.
[45] In the preparation of the case
Mr Stirton and Mr Anderson had at one stage jointly instructed
solicitors and different counsel from those who conducted the proceedings
before me. I understand that instructions were then withdrawn. Thereafter
Mr Anderson had personally prepared his pleadings and those of
Mr Stirton. When answering the notice to admit, Mr Anderson had
carried out the work for both himself and Mr Stirton. In the proceedings
before me Mr Stirton and Mr Anderson were separately represented and
I therefore heard from counsel for Mr Stirton and then from
Mr Anderson on all matters.
The Interim Administrator
[46] The
interim administrator was called by Scottish Ministers as a witness and was
cross examined in part by counsel for Mr Stirton but then became ill and
did not return. Thus she was not cross examined by Mr Anderson. His
position was that his case was thereby prejudiced. There was controversy
about the interim administrator and her work throughout the case, which was
complicated by her becoming ill. Time was taken and expense incurred which
may have been avoidable had the case been presented differently. I discuss
below the difficulties which arose.
[47] Part 5 of POCA as amended by Serious and
Organised Crime Act 2005 provides for a regime for recovery of recoverable
property which is defined as property which has been acquired through unlawful
conduct. There is provision for orders preventing dissipation of the assets
said to have been so acquired during the dependence of court proceedings. The
Act as amended provides for two types of orders, namely an interim
administration order under section 256 and a prohibitory property order
under section 255A, the latter being introduced by amendment.
[48] An interim administration order is defined
by section 256(2) as
"An interim administration order is an order for
(a) the detention custody or preservation of property and
(b) the appointment of an interim administrator".
Thus such an order involves appointment of an interim administrator. By section 257(2) the court must authorise the interim administrator to take any steps which the court may think necessary to establish
"(a) whether or not the property to which the order applies is recoverable property
(b) whether or not any other property is recoverable property (in relation to the same unlawful conduct) and if it is, who holds it."
[49] Thus cases will come to proof in which the
there is a report in the interim administration order process which gives the
views of the interim administrator on whether property is recoverable or not.
The interim administrator is an officer of court, although initially instructed,
and paid for, by Scottish Ministers. The interim administrator is required to
consider the question whether or not the property to which the order applies is
recoverable property, which is part of the question which will come before the
court in any recovery order petition. Hence it has been said in an English
text book (Smith Owen and Bodnar on Asset Recovery 111.1.03)
"The reporting function of the interim receiver [interim administrator in Scotland] is a departure, not only from the principles applicable to receivers appointed in every other type of freezing order (whether criminal or civil), but might also be seen to give civil recovery proceedings a quasi inquisitorial character, an unfamiliar feature in the legal systems of the United Kingdom."
[50] Lord Glennie in his Opinion made clear that
the function of the interim administrator is to consider whether property is
recoverable on the working hypothesis that the conduct averred is unlawful, and
not to investigate if the conduct is unlawful or not. The function is to
establish what property is linked to the alleged unlawful conduct in such a way
as to make it recoverable property. The interim administrator does not answer
the whole question before the court. The court has to decide if there has
been unlawful conduct, and if that unlawful conduct has led to the acquisition
of property thereby rendering it recoverable. The views of the interim
administrator on whether or not property is recoverable property may be views
with which the court agrees or disagrees for a number of different reasons.
In this case, the respondents regarded the work of the interim administrator as
of vital importance. The Scottish Ministers were correct to submit that the
respondents at times appeared to be of the view that the interim
administrator's opinion would be conclusive in court. In that the respondents
were wrong. It is always for the Scottish Ministers to prove their case no
matter what view the interim administrator may take. Nevertheless in order to
carry out her function set out in section 257(1) and (2) of POCA, the
interim administrator is obliged to attempt to trace money or other assets
which are subject to the order made by the court and to ascertain from where
they may have come. It seems to me that the respondents should by their
pleadings set out their position on the views expressed in the interim
administrator's report and if there is a contrary position that they wish to
advance they should plead it.
[51] Mr Anderson produced many letters
written by him or by Mr Stirton or other members of Mr Stirton's
family to the interim administrator. Mr Ramsay was appointed in
succession to Miss Rivers as interim administrator. Mr Anderson attempted
to ask Mr Ramsay about the work done, as noted elsewhere in this Opinion.
He explained that he wanted to show that Miss Rivers had not done her work
properly. In my opinion Mr Anderson did not appreciate that the question
before the court was whether the Scottish Ministers proved that property was
recoverable and that the correspondence with Miss Rivers referred to was
not relevant to that question.
[52] The interim administrator was appointed
under the pseudonym Louise Rivers. In the course of the proof the question of
her identity was raised on several occasions. I took the view that the court
having allowed the interim administrator to use a pseudonym, I required to take
care that no questions were asked or reports made that might tend to disclose
her identity unless parties persuaded me that there was reason to do so. I
discuss below the various occasions on which this matter arose. At none of
them was I persuaded that the interim administrator's identity should be
revealed. As will be seen, on various occasions Mr Anderson and counsel
for Mr Stirton made motions which involved using the name which
Mr Anderson claimed to be the interim administrator's real name. In his
submissions after proof Mr Anderson explained that he assumed that he was free
to refer to her by the name he claims to be her real name. I have decided that
in this Opinion I will not disclose that name and will refer to the person as
"Miss A". A sealed envelope which I was told by Scottish Ministers
contains Miss Rivers' real name is in process. The interim administrator
was appointed in the first place without the Scottish Ministers advising the
court that the name Louise Rivers was a pseudonym. The propriety of that was
discussed before Lord Macfadyen. I respectfully adopt his view that the
Scottish Ministers should have told the Lord Ordinary this when seeking the
appointment.
[53] The question of the interim administrator's
real identity first arose in this way. The Scottish Ministers called
Miss Rivers as their first witness on 19 May 2009. They led in evidence
that the name Miss Rivers was a pseudonym, as was the firm's name which
she used being Mallard Associates. The evidence was to the effect that
Miss Rivers had been appointed interim administrator in this case on 3 February 2005. She had previously
acted as an interim administrator about twenty times, in Scotland and elsewhere.
Miss Rivers said that she was 53 years of age and that she had a
working understanding of POCA. She explained that she had written reports and
that she had written to the respondents asking them to attend for interview. While
interviews had taken place after several requests, Miss Rivers did not find
them satisfactory. Miss Rivers made reference to production 6/73/1,
which is a copy of her report of 12 July 2005. She continued to give evidence on the second day
of the proof and spoke to her report. She said that she had been asked to save
money in the preparation by not 'evidencing' her report, by which she meant
that she had not cross referenced it to the extent that she would do in other
cases. The witness at paragraph 7.12 and 7.13 of her report gave
opinions about apparent evasion of corporation and capital gains tax. At this
stage counsel for Mr Stirton objected to further evidence about
corporation tax or capital gains tax on the basis that he required to know the witness'
qualification to give evidence on this matter. The Scottish Ministers'
counsel said that she was not suggesting that this witness was a tax specialist
and that her report was qualified by words such "I believe" and "it may be".
I allowed the evidence under reservation of competency and relevancy. In the
event I have not used evidence from the interim administrator in making my
decisions. I would however have been of the opinion that her evidence was admissible.
She had been appointed by the court and therefore had been held to be suitable
for appointment.
[54] On the third day of proof counsel for the
Scottish Ministers advised me that Miss Rivers had suffered bereavement
overnight and was not in a fit state to continue with her evidence. Another
witness was interposed. That other witness was Mr Allan Gibson, an
important witness in this case. I discuss his evidence elsewhere in this
Opinion. He gave evidence over several days and on one day in the middle of
his evidence he had a hospital appointment so another witness was taken on that
day.
[55] When the interim administrator returned to
give evidence, counsel for Mr Stirton addressed me outwith the presence of
the witness and referred to production 6/89, page 141, an interview
between Miss Rivers and her colleague
Mr Ramsay on one side and the witness Allan Gibson on the other.
Mr Ramsay had said, "We would like to understand as accountants" and,
given that Miss Rivers had said in evidence that she was not an accountant
counsel wanted to ask about her qualifications and experience. He did not want
to reveal her identity but he did want to know about her experience.
[56] Counsel for the Scottish Ministers at that
stage produced a Public Interest Immunity certificate on which she wished to
address me. Mr Anderson and counsel for Mr Stirton said that they
had been taken by surprise and I therefore adjourned early in order to enable
them to read the certificate and address me on it the next day. Counsel for
the Scottish Ministers produced a sealed envelope in which the real name and
designation of the interim administrator was given. She asked me to keep the
envelope in the court process, sealed. She did not wish me to read it. I have
kept it as requested.
[57] The next day
Mr R W J Anderson QC appeared instructed by Harper
MacLeod for the interim administrator. He stated that Miss Rivers was
unwell. He had met with her that morning and, while he had no medical
certificate, he had been told by her that she felt unwell and he could see that
she was very pale and tremulous. She had asked to be excused from attending
court. I ascertained from counsel and Mr Anderson that they had no
objection to the witness being excused for that day as the information from her
counsel was that she could not attend, and the court was going to be addressed
on the certificate. I excused her for that day. Counsel for Mr Stirton
told me that he was ready to address me on the question of the certificate but
Mr Anderson said that he was not as he had not had sufficient time to
consider the certificate; the Lord Advocate who gave the certificate is
one of the Scottish Ministers and therefore a party and he wished to consider
that; and he was concerned that his rights under Article 6 of the European
Convention on Human Rights (hereinafter "ECHR") might be infringed.
Mr Anderson reminded me that POCA does not allow for funds to be released
for legal representation and therefore he was a party litigant. The purpose of
the action by the Scottish Ministers was to take from him all of his assets and
therefore it was important to him that he had time to prepare. I told
Mr Anderson that I would hear other parties and would not call on him that
day. It being Friday, he would have until Tuesday to prepare.
[58] Mr Anderson QC then addressed the
court. While he had not seen the certificate nor heard submissions, he
understood that there was a proposal that there would be questions concerning
Miss Rivers' qualifications. He said that the question before the court
was whether the certificate should be upheld and that the areas that required
to be considered in that question were as follows:- (1) the public
interest, (2) the interest of the interim administrator, (3) the
respondents' interest. He submitted that the certificate was necessary to
protect anonymity. Anonymity was needed because threats had been made by mail
and by telephone and a tracking device had been sent to an interim
administrator. These actions were taken by parties unknown. Other interim
administrators in other cases had resigned following threats made to them.
Therefore it was in the public interest that the identities of interim
administrators were kept confidential by the use of pseudonyms as otherwise
persons would be reluctant to take on the work. He referred to the case of MacLeod
v HMA 1998 SCCR 77 from which
he said that the Lord Advocate would be expected to raise a specific objection
to disclosure in cases only where it was needed and that the court should give
due weight to the Lord Advocate's opinion. He submitted that the test is
whether there is sufficient information made available for the respondents to
present their defence. In the present case he submitted that it must be
tolerably clear that the respondents know the case against them and can give
instructions for their defence. It is not necessary that they know the true
identity of the interim administrator. It is not necessary to know her
professional qualifications as the court had been advised that she had
presented reports in many other cases. He explained that there are so few
insolvency practitioners carrying out this type of work that further details of
her qualifications would enable her to be identified. He submitted finally
that if the argument is that knowledge of qualification is necessary in order
to assess the value of any opinion evidence on the part of the interim
administrator then the fact is that there is little opinion evidence and it is restricted
to the question of mortgage fraud.
[59] Counsel for Mr Stirton in response
moved the court to discharge the proof and have a new diet fixed to be heard by
a different Lord Ordinary. Thus his position had evolved from seeking to ask
questions about training and experience to seeking to have the proof discharged.
This had arisen following considerations of the certificate.
The certificate is in the following terms:-
"
CERTIFICATE BY THE LORD ADVOCATE
1. I am the Lord Advocate and I sign this Certificate on behalf of
the Scottish Ministers.
2. On 19 May 2009 there is to be a proof hearing in the petition proceedings brought by the Scottish Ministers against Russell Stirton, Alexander Anderson and others for a recovery order in terms of Part 5 of the Proceeds of Crime Act 2002. Mr Stirton and Mr Anderson are hereinafter referred to together as 'the Respondents'.
3. At the proof, the Scottish Ministers will lead evidence from Louise Rivers. Louise Rivers is the interim administrator appointed by the Court of Session by interlocutor dated 3 February 2005. In the discharge of her functions, Louise Rivers has provided reports on the issue of whether certain property is recoverable property as defined in the Proceeds of Crime Act 2002.
4. Louise Rivers will be an important witness at the proof hearing. It is likely that the Respondents will seek to criticise her evidence and undermine her credibility. It is also likely that they will seek to criticise her expertise and independence.
5. The Respondents have sought recall of the order appointing Louise Rivers as interim administrator and, amongst other things, have made a motion to have the Court ordain Louise Rivers to advise the Court whether or not her designation in the process is true and correct and, if not, to disclose her true and correct identity. That motion was refused by Lord Macfadyen, see, Scottish Ministers v Russell Stirton and Ors. [2006] CSOH 11. However, I am concerned that the Respondents may again seek to raise the issue of Louise Rivers' identity at the forthcoming proof.
6. Louise Rivers is a pseudonym. It is an alternative identity used by the interim administrator in the course of certain civil recovery proceedings in Scotland and others parts of the United Kingdom. In some civil cases Louise Rivers uses her real name and in other cases she uses other pseudonyms.
7. I have formed the view that a claim for public interest immunity ('PII') ought to be made in relation to any information which shows or tends to show her true identity of the interim administrator (or that of any member of her staff) has used or is using. This claim for PII extends to details of the interim administrator's (or any member of her staff's) qualifications, experience and training on the basis that placing these matters in the public domain may make it possible to identify her (or members of her staff).
8. In reaching my view I have had regard to two distinct questions that require to be considered when making a PII claim:
The first and paramount question for me is whether the information attracts PII. The approach that I have adopted is to focus specifically on the damage that would be done by putting any of the information referred to in paragraph 7 above into the public domain. I would not assert PII unless I believed that disclosure of these matters would cause real harm to the public interest. I have set out below the aspects of the public interest to which I have had particular regard.
The second question is whether the public interest in non-disclosure is outweighed by the public interest in disclosure of the information for the purposes of doing justice in the proceedings. It is open to me to consider and balance the relevant competing public interests and to agree to the disclosure of material that attracts PII if I am satisfied that the overall public interest favours disclosure. This has, on occasion, caused me to disclose material which otherwise attracts PII.
The information in issue
9. With
the benefit of advice from the Head of the Scottish Government's Civil Recovery
Unit, and taking into account information from the Metropolitan Police,
Strathclyde Police, and the Serious Organised Crime Agency I have satisfied
myself that, for the reasons of public interest set out below, the information
I described in paragraph 7 above, attracts PII.
The public interest in
non-disclosure
10. The
aims of the Scottish Ministers, in this context, are-
a. through the implementation of the powers contained in the Proceeds of Crime Act 2002, to ensure that crime does not pay, and, specifically through the use of civil recovery, to recover assets obtained as a result of unlawful conduct and thereby to assist in the fight against crime; and
b. to protect the interim administrator appointed by the Court, with particular reference to the interim administrator's Convention Rights;
There is a very clear public interest in the maintenance of a regime which will assist in the achievement of these aims, and there is an obvious and widely recognised need to preserve the effectiveness of the measures taken by the Scottish Ministers to secure them. I am satisfied that disclosure of the information described in paragraph 7 above would cause real harm to the work of the Scottish Government's Civil Recovery Unit and the safety of those mentioned above.
11. The reason why disclosure would cause such harm is as follows:
a. An interim administrator may be appointed in proceedings raised under part 5 of the Proceeds of Crime Act 2002. An interim administrator is an independent Court appointed officer and performs two essential functions. Firstly, the interim administrator secures the detention, custody or preservation of recoverable property pending the conclusion of proceedings for a recovery order. Secondly, the interim administrator must establish whether the property which has been identified by the Scottish Ministers is recoverable, and report those findings to the Court. The interim administrator's report will be a key piece of evidence in the recovery proceedings.
b. Respondents in civil recovery proceedings clearly recognise the importance of the interim administrator's role. Respondents have shown that they will do what they can to frustrate interim administrators in the performance of their duties, thereby potentially frustrating the aim of the civil recovery regime. In some cases the interim administrator has had to report a respondent to court for contempt of the instructions of the interim administrator. Further, in one case, a respondent threatened the interim administrator and placed him in a state of fear and alarm for the safety of himself and his family. The respondent in that case was ultimately sentenced to three years imprisonment for that conduct.
c. In those circumstances, it can be necessary for an interim administrator to use an alternative identity as a protective measure, not only in an attempt to secure his or her own well being, but also for the well being of any staff or agents. The use of an alternative identity is consistent with specific advice from the Metropolitan Police in relation to security of persons acting as interim administrators. It is the opinion of the Metropolitan Police that in addition to any specific alternative identity being concealed, the fact that such an alternative identity is being used should also be concealed. Further, the Metropolitan Police have specifically advised interim receivers in Northern Ireland (an interim receiver is the statutory equivalent of an interim administrator in England, Wales and Northern Ireland) that they should assume alternative identities, and only undertake such work using such measures.
d. People under investigation may have the experience, resources and contacts to initiate sophisticated activities intended to undermine the confidence of interim administrators and their staff. In a previous incident in London a sophisticated GPS tracking device was sent to the mailing address used by an interim receiver/administrator and then forwarded on to that person's business premises. This tracking device, which was activated, enabled the exact location of the previously undisclosed business premises of the interim receiver/administrator to be ascertained.
e. The respondents in the current case are well known to Strathclyde Police and the Serious Organised Crime Agency. They are believed by Strathclyde Police and the Serious Organised Crime Agency to operate at the highest level of organised criminality. The civil recovery petition alleges inter alia a course of conduct amounting to extortion on the part of the respondents. They are held in fear by those with whom they have business dealings.
12. The general nature of my concerns needs little elaboration. I have a duty both to protect the operation of the civil recovery process and the safety of an interim administrator and his/her staff and agents. To disclose any of the information described in paragraph 7 above in these proceedings may place the safety of the interim administrator at risk and would create a serious risk that interim administrators would not be prepared to act in certain cases in the future. If they were not prepared to act, this could prejudice the exercise of the Scottish Ministers' functions as the enforcement authority for Scotland under Part 5 of the Proceeds of Crime Act 2002.
13. I am satisfied
that disclosure of the information described in paragraph 7 above would
cause real harm for one or more of the reasons set out above, and therefore
that that information should be withheld.
Signed
Elish Angiolini QC, Lord
Advocate
May 2009"
[60] Counsel argued that under
paragraph 11(e) of the certificate the Lord Advocate made the following
points:- (1) she believes that the respondents operate at the highest
level of organised crime; and (2) they are held in fear by those with whom
they have business dealings. In giving such a certificate, the Lord Advocate was
inviting the court to accept that her belief is accurate but there are no
averments on Record that the respondents "operate at the highest level of
organised criminality". Nor are there averments that the respondents are held
in fear by those with whom they have a business relationship. Counsel moved
me to discharge the proof. He made reference to the case of Helow v Secretary
of State for the Home Department 2009 SC (HL) 1 and submitted that the
concern of his client was that the certificate had been read. It made reference
to the Lord Advocate's view of him with which he disagreed, and which, it was submitted,
was unrelated to the current case. Counsel argued that if the informed
observer were to be presented with the averments and the certificate and if the
certificate were to be upheld, there would be a perception of apparent bias on
the part of the court. He referred to the Employment Appeal Tribunal case of
Gill v Humanware Europe Ltd 2009 WL 908179 (EAT) submitting that the
point of that case was to show that in other situations the court had acted
unfairly and had had to discharge the case and have another court convened.
[61] Counsel's fall back position was that if the
proof continued, he should be able to ask questions of the interim
administrator about qualifications and experience. She gave opinions about
commercial viability and he wanted to know what qualifications and experience
she had to do so. The areas he wished to explore were as follows:-
(1) to understand the basis on which Miss Rivers is able to give
opinions on commercial sense of a transaction; (2) the basis on which she
reaches that view; (3) in order to evaluate her ability, what she did
before she was an insolvency practitioner and (4) what her professional
qualifications are. He would require to go back to her leaving university and
as she was 53 years of age, explore her 30 years of experience. He
submitted that the public interest in the case would be served by the interim
administrator's identity being kept confidential but her experience being
revealed.
[62] On the following Tuesday I heard
Mr Anderson. He supported counsel's motion that the case should be
dismissed and made reference to the case of Murphy v The General
Teaching Council for Scotland 1997 SC 172 which he submitted showed that a
decision making body could be poisoned by having been given information which it
should not have during a hearing. Further, in this case prior to the proof
diet he had made a motion to be allowed to cite the Lord Advocate as a witness,
but that motion had been refused. He wished to renew that motion now because
the certificate contained new information. He wanted to ask the Lord Advocate
about her reasons for giving the certificate. He adopted counsel's
submissions concerning the fairness of the proof and submitted that there was a
real risk of apparent bias which had been caused by the certificate having been
put before me. If I were not with him in his motion to discharge the proof,
then he wanted to be able to ask questions about Miss Rivers'
qualifications. He submitted that it was an important matter for him to find
out certain things about Miss Rivers. He referred to
production 6/7, page 22, in which his own accountant, Mr Yousaf,
was interviewed by Miss Rivers and her colleague
Mr Ramsay who said they were accountants. He wanted to know what qualifications,
if any, and what experience she had so that he might understand if she had the
ability to interview an accountant. He referred also to an interview carried
out by Mr Ramsay and another colleague of Miss Rivers, Peter Chester,
with Mr Neilson, chartered accountant who acted for Spring Radio Cars.
Further, the interim administrator said in one of her reports that she agreed
with Mr Kenneth Murray who had written a report. He is a chartered
accountant and a forensic accountant and Mr Anderson wanted to know what
qualifications, training or experience she had to enable her to agree or
disagree with him. Mr Anderson explained that he had 400 questions
prepared for cross examination of Miss Rivers and that if he was not allowed to ask about her professional
qualifications and experience, he could not present his case. He said that
her reports all go back to accountancy in some form or another. He was not
interested in her identity but wanted to know her qualifications, experience
and training. Mr Anderson submitted that he had had a meeting with the
interim administrator which had proceeded without any police presence and that
there had been no difficulties. If the interim administrator was prepared to
meet him in person then that showed that the secrecy now sought was not
necessary.
[63] Mr Anderson QC replied on behalf
of the interim administrator and submitted that the pleadings clearly showed
that the Scottish Ministers were of the view that the respondents were involved
in serious organised crime and therefore the certificate contained nothing
new. Thus the certificate could not be said in the eyes of the informed
observer to have prejudiced the court in any way. As to the question about
qualifications, if the court did not hear about the qualifications of the
interim administrator then the disadvantage, if there were any disadvantage,
would lie with the Scottish Ministers.
[64] Counsel for the Scottish Ministers replied
firstly on the question of discharge of the proof. She explained that it had
been hoped prior to the case that there would be no need to deploy the
certificate. The Lord Advocate did not grant such a certificate lightly. Counsel
argued that the statements in the certificate were not different from those in
the pleadings to any material extent. Judges were often asked to decide
preliminary matters in cases and were not seen to be prejudiced thereafter.
She referred to the Helow case and to the speech of Lord Mance, where
at paragraph 56, he rejected the proposition that a professional judge
would be seen by the reasonable and fair minded observer as influenced by a
process of osmosis in having read material in a journal. She argued that the
pleadings in the case clearly state that the respondents are involved in
serious organised crime when read as a whole. The Lord Advocate in granting
the certificate did so in the public interest and was seeking to preserve the
integrity of the scheme whereby interim administrators are appointed under
POCA. Counsel then gave examples of occasions on which a judge is asked to
look at something at one stage and is then able to consider the whole case at a
later stage. They included a judge granting interim interdict, a judge
granting interim damages and then hearing a case in which there is argument about
contributory negligence; a judge hearing a procedure roll debate in which it is
assumed that the averments are true; and, in the criminal context, a judge
hearing a trial within a trial as provided for in the case of Thompson v
Crowe 2000 JC 173. She referred to the cases of Sengupta v The
GMC 2002 EWCA Civ 1104 and to Jeffrey v Higson 2003 SLT 1053.
[65] Turning then to the question of whether the
qualifications of the interim administrator should be discussed in evidence,
counsel referred me to the case of Air Canada & Others v Secretary
of State for Trade [1983] 2 AC 394 and to Lord Scarman's speech at 446A-B. She
referred also to R v Lewes Justices ex parte Secretary of State for
the Home Department [1973] AC 338 at 400D. Counsel submitted that the
interest of the litigant, though barely explained in the submissions of counsel
for Mr Stirton or in the submissions by Mr Anderson, did not outweigh
the public interest in anonymity for interim administrators. She submitted
that Miss Rivers was not being relied on as an expert witness and that
there were on her list of witnesses three forensic accountants who would be
called.
[66] Finally, in relation to the motion to call
the Lord Advocate as a witness, counsel opposed it on the basis firstly that it
was not competent because a motion to call the Lord Advocate had already been
refused and it was not competent to review that interlocutor, even on a change
of circumstances. She referred to the case of Bremner v Martin 2006
SLT 169. If she were wrong in
that, then the witness should be allowed to be called only if the questions to
be asked of a proposed witness were relevant and competent. She argued that no
such questions had been suggested.
[67] I refused the motion to discharge the diet
of proof and fix a diet before another Lord Ordinary. I took the view that
the pleadings were such as to show quite clearly that the Scottish Ministers offered
to prove that the respondents were involved in serious organised crime and that
those with whom they had business dealings were afraid of them. There were
averments of extortion which would include both organised crime and fear. I
therefore took the view that the certificate did not add anything to the
court's knowledge of the Scottish Ministers' position. These matters were
clearly before the court as soon as the court read the Record. I therefore
came to the opinion that the informed observer, as described by Lord Hope
of Craighead in the case of Helow, would not see the court as having
been compromised by reading the certificate.
[68] I considered all that had been submitted and
came to the view that I should uphold the certificate of Public Interest
Immunity, on the basis that the public interest in maintaining the system of
interim administrators appointed under POCA with due regard for their personal
safety outweighed any detriment that may be suffered by the respondents in not
being able to ask detailed questions about this interim administrator's
experience and qualifications. I was not persuaded that the explanations
given me by counsel for Mr Stirton and Mr Anderson of the questions
they wished to ask and the detriment they claimed they would suffer if not
allowed to ask the questions showed that they would suffer any material
prejudice. It seemed to me that Mr Anderson QC was correct to suggest
that the Scottish Ministers would not be able to rely on the interim
administrator as an expert in the normal way if her qualifications were
unknown, and that any detriment would therefore be to the Scottish Ministers. The
potential to identify the interim administrator would be increased if the
questions were asked and answered. I was persuaded from the information given
me that the appointment of interim administrators would be difficult if their
identity was at risk of exposure. I came to the view that the balance lay in
upholding the certificate.
[69] I refused the motion by Mr Anderson to
allow him to cite the Lord Advocate as a witness. I took the view that
counsel for the Scottish Ministers was correct on the question of competency
but I did not hear full argument on it. In any event, I was not persuaded by
the merits of Mr Anderson's argument. So far as I understood him,
Mr Anderson wanted to ask the Lord Advocate about her certificate and
about Operation Maple. I heard nothing from Mr Anderson as to why any
questions he wanted to ask the Lord Advocate would be admissible.
[70] Counsel for Mr Stirton sought leave to
reclaim my decision. He submitted that the decision was wrong and on an
important matter. Thus he should have leave to reclaim. Mr Anderson
also sought leave to reclaim and asked me to note that he did not regard
himself as fully prepared, and so I granted him a short adjournment. He
submitted that it would be convenient and expeditious to grant leave to reclaim
when a decision that was finally balanced had been made. He submitted that he
was not being allowed to cross examine in the way which he required and that he
was being prevented from defending the case in the best way that he could. He
explained that the Lord Advocate was wearing two hats as she was already in the
action, being one of the Scottish Ministers, and had now granted a
certificate. He argued that that was unfair and that he should have leave to
reclaim my decision.
[71] Counsel for the Scottish Ministers opposed
leave to reclaim. She submitted that the policy behind RC 38.3(5) is to
discourage appeals taken in the middle of proofs. It is a discretionary matter
for the court and the court should take into full account the fact that the
case had been heard for four weeks. Neither Mr Anderson nor counsel for
Mr Stirton had argued that there was any error of law in the court's
decision and therefore leave should be refused. Counsel referred to the cases
of The Duke of Portland v Wood's Trustees 1926 SC 640, Adelphi
Hotel Glasgow Ltd v Walker 1960 SC 182 and Stewart v Kennedy
(1889) 16 R 521. Counsel argued that leave to reclaim
should not be granted if the effect would be to prolong the proof. The court
should consider convenience and expedience and if they point towards the
conclusion that the sooner the facts are decided the better, then leave should
not be granted. If a proposed appeal is on an incidental matter, then leave
should not be granted as the outcome could be a multiplicity of appeals. If
matters were finely balanced, then the court may consider it convenient to
grant leave to reclaim.
[72] I refused leave to reclaim, having taken the
view that my decisions to refuse to discharge the proof, to uphold the
certificate, to refuse questions concerning the experience and qualifications
of the interim administrator, and to refuse to allow the citation of the Lord
Advocate as a witness, were all matters which could be raised at the end of
proof. I accepted that if I was wrong in my decision then evidence would be
led before me and that evidence would be effectively wasted. Nevertheless I
took the view that no argument had been put up before me indicating that an
error of law had been made and that therefore I should refuse leave to reclaim.
I did not regard the matters as finely balanced.
[73] Cross examination of Miss Rivers by
counsel for Mr Stirton began on Thursday 18 June
2009. On
the next day counsel for the Scottish Ministers reported that Miss Rivers
had been taken ill. There had been a sudden deterioration in her health and
she had collapsed and had been taken to hospital. Miss Rivers' agents
sent a letter to the court stating that she had a medical appointment on
29 June and also advising that she was carrying out work under POCA in a
case in Northern
Ireland and
was concerned about the time being taken in Scotland as she wished to be able to schedule
her work in Northern
Ireland.
I indicated that while I was concerned about Miss Rivers' health, I was
not concerned that she required to carry out work in another case. If she was
needed as a witness in this case then she would require to appear, always
assuming her health allowed it. Counsel for Scottish Ministers was prepared
to lead another witness, namely Neill Thomson, a forensic accountant, who could
be ready by 2 pm. Both counsel for
Mr Stirton and Mr Anderson asked me adjourn until Tuesday as neither
of them were prepared and ready to deal with the evidence of Mr Thomson. I
did so.
[74] On Tuesday 23 June counsel for the
Scottish Ministers intimated that she was ready to lead Mr Thomson.
Counsel for Mr Stirton then said that he objected to the leading of any
evidence at that stage. He understood that the interim administrator remained
unwell and that a certificate would be produced to the effect that she would
not be available during this diet of proof. He was concerned that she may
never come back to court and he submitted that her evidence was a key part of
the case. Therefore he did not wish to hear any more financial evidence until
he knew if she was going to reappear. Mr Anderson took up a similar
position to that of counsel for Mr Stirton. He was concerned that if the
interim administrator did not return to court then four days of her evidence
had been heard and could not be dismissed from my mind, and that the case
should not go ahead until more information was available about her ability to
return to court.
[75] Counsel for the Scottish Ministers did not
have a medical certificate on behalf of the witness and had no explanation as
to why no certificate was available. She understood that Miss Rivers had
been discharged from hospital on the previous Friday and was to see a doctor
that day. Counsel argued that she had brought Mr Thomson to give evidence
and that neither Mr Anderson nor counsel for Mr Stirton had taken any
objection to that course of action when given notice of it the previous week.
[76] After a brief adjournment I intimated to
parties that any submissions about unfairness regarding the availability of the
interim administrator were premature. I thought it unsatisfactory that no
medical certificate was available, and requested that one should be obtained as
soon as possible. I decided that the case should go ahead and any questions
which might arise regarding the interim administrator could be dealt with if
and when her state of health became known. I agreed with counsel that no objection
to her calling Mr Thomson had been taken previously and therefore she
should go ahead and call him.
[77] At that stage Mr Anderson submitted
that he wished me to "call in a citation" of Miss Rivers as no medical
certificate had been provided. I understood him to mean that I should issue a
warrant for the witness' arrest. I stated that I had made my decision, that Miss Rivers
be excused attendance at that time, and that the case should continue with
Mr Thomson, and that I did not propose to reconsider it. At that stage
Mr Anderson said that he no longer wished to be in the court as I was
biased against him. He wanted time to seek advice about whether a warrant
could be issued for Miss Rivers' arrest. It appeared to me that
Mr Anderson was upset and I adjourned for a short period. When the court
reconvened I told Mr Anderson that it was a matter for him whether he
remained in court or not and I advised him of the terms of RC 20 to the
effect that if a litigant was neither present nor represented then his opponent
could seek decree by default. Mr Anderson stated that he would remain in
court.
[78] Counsel for the Scottish Ministers then
advised me that the witness she proposed to call, Mr Thomson, was going on
holiday on Friday and she was concerned about being able to finish his
evidence. She therefore proposed to call another witness, Mr Peter
Martin, a surveyor. Mr Martin gave evidence that afternoon. Parties
helpfully entered into a joint minute, agreeing that the witness' evidence in chief
was contained in his report and he was then cross examined by counsel for
Mr Stirton. His evidence continued the next day when he was further examined
by counsel and by Mr Anderson. I refer to his evidence elsewhere.
[79] On Wednesday 24 June
2009 counsel
for the Scottish Ministers produced a certificate regarding the health of
Miss Rivers. I was provided with a redacted and an unredacted
certificate. I was asked to let the respondents have the redacted
certificate. I took the view that the redacted version, on soul and
conscience from a GP, explained that she was unfit for four weeks and that as I
was satisfied with that I would excuse her from attendance at that time. I
understood Mr Anderson and counsel for Mr Stirton to be content with
the proposition that they did not need to know the address of her GP nor did
they need to know further details of her medical condition, those being the
matters which had been redacted.
[80] The court adjourned over the vacation. At
a By Order hearing in August 2009, prior to the proof starting again the court
was advised that the respondents were considering seeking leave to call as a
witness Miss A. Further, the respondents wanted to have information about
the health of Miss Rivers with a view to her attending at the next diet of
proof. At a By Order hearing in October 2009 counsel for Mr Stirton
advised that no decision had yet been made as to whether a motion to allow
Miss A to be cited would be made. Counsel for the Scottish Ministers
produced a certificate from Miss Rivers' doctor to the effect that she was
unable to attend court to give evidence. A full certificate was provided for
the court and a redacted version for the respondents. Counsel indicated that
the Scottish Ministers were content to proceed and moved that Miss Rivers
be excused from giving evidence. Counsel for Mr Stirton and
Mr Anderson sought time to consider the position.
[81] When the case called for proof on 17 November 2009 time was taken up by
consideration of the position of the interim administrator. Mr Smith, QC
appeared for the interim administrator and moved to have her sisted to the
process. This was not fully argued before me as the motion had not been
intimated and in the end was overtaken by events. As I was not fully
addressed my Opinion is tentative but I did not see the necessity of having the
interim administrator sisted as a party, as she is an officer of court and had
been represented already in the case by solicitors and counsel. Mr Smith
QC stated that the stress caused by this case had affected her health and that
she was not fit to appear. He was not able to tell the court on that day if
she was fit for her duties in administering the funds which had been made the
subject of the interim administration order. By the next day he had
information concerning the interim administrator to the effect that she wished
to demit office as being involved with the case was detrimental to her health.
Counsel for the Scottish Ministers indicated that she would move in early
course to have another person appointed interim administrator in her place.
[82] Counsel for Mr Stirton and
Mr Anderson submitted that they had not been given enough information. It
was not satisfactory that the certificates supplied to them were redacted.
Mr Smith QC was able to confirm in court that the writer of the
certificate was a psychiatrist and that the illness was related to giving
evidence in the case, that information having been redacted. I allowed the
interim administrator to be excused from giving evidence at that time as I was
satisfied by the medical certificate that she was unfit to do so. I took the
view that it was for the court, rather than for parties, to be satisfied as to
the health of the witness. I was satisfied by the certificate that Miss
Rivers was, at that time, unfit to give evidence. I agreed with counsel that
should she become fit, a motion could be enrolled to have her return to
complete her evidence. Counsel for Mr Stirton submitted that he wished
to have Miss Rivers examined by a doctor of his choice as he wanted to
know if she was suffering from an illness when she drew up her reports. I
refused that motion. I have kept all of the medical certificates in a sealed
envelope.
[83] Mr Anderson had enrolled a motion to
have the case dismissed due to the absence of Miss Rivers. He argued as
a preliminary point that no opposition had been marked and therefore the motion
should be granted. Counsel for the Scottish Ministers argued that the motion
had not been enrolled in time for that day's hearing, that she sought to oppose
it and that she was ready to argue it. I therefore allowed it to be opposed
and heard. Mr Anderson moved to dismiss the case on the basis that the
interim administrator was an important witness and that she was not present.
His defence would be prejudiced if he could not cross examine her. I asked
him to explain what in his pleadings he wanted to put to her and asked him if
he could indicate where in his pleadings he had an alternative case on which he
needed to cross examine Miss Rivers. I understood that Mr Anderson
wanted to put to Miss Rivers that her conclusions were wrong but I did not
understand that any positive case was to be put to her. In response counsel
for the Scottish Ministers opposed the motion and submitted that any decisions
about Miss Rivers' evidence could be taken at the close of the evidence in
the proof. She did not require to found on Miss Rivers, and would
proceed to prove her case without relying on her evidence. I refused
Mr Anderson's motion. At that stage Mr Anderson stated that he
wished to raise a "devolution minute". I asked him what subject he wished to
raise in the minute and he indicated that the point he wanted to make was that
the Scottish Ministers were going to rely on police witnesses to prove the
present case, despite the fact that the police had been investigating a
criminal case. He wanted to argue that no reference to any previous criminal
inquiry should be allowed. He moved for an adjournment to put his devolution
minute into proper form. I asked why he had not had this prepared previously
and he indicated that he did not know what my decision about the interim
administrator was going to be. I refused the motion for an adjournment. I
took the view that the subject which Mr Anderson said he wanted to raise
was not connected to the interim administrator's absence. I therefore had no
reason before me for its being late. Further I found it difficult to
understand what exactly Mr Anderson wanted to put before the court. I
understood him to wish to raise a preliminary argument that a petition for a recovery
order cannot be raised if there has been any reliance on material recovered by
the police in a criminal investigation. That should have been raised prior to
the proof in my opinion. In any event, I regarded the argument as unlikely to
succeed as it is clear that the scheme of POCA does permit a petition for a
recovery order to be raised, whether or not there have been criminal
proceedings. Nor does it matter if the evidence in a proof on a recovery
order has been obtained by police officers with a view to a criminal case which
did not proceed. Therefore I refused Mr Anderson's motion to adjourn to
allow him to lodge a minute.
[84] In November 2009 Mr Anderson moved a
motion to have the case dismissed due to the conduct of Miss Rivers. He
submitted that he knew the name of the interim administrator and had done so
since a member of her staff attended at his house when the order was granted.
A business card was left in the name of Miss A, with a firm's name. In
2007 he telephoned the number he had been given for Miss Rivers at Mallard
Associates and the person who answered said he was talking to the board room of
the firm whose name was on Miss A's business card. When he asked for
Miss Rivers he was told to get off the line. Shortly afterwards
Mr Ramsay of Mallard Associates phoned him and said there had been a
"telecoms problem" which he was looking into. Mr Anderson attended a
meeting in Glasgow with Mr Stirton,
Mr Ramsay of Mallard Associates and Miss Rivers in September 2008. According to
him Miss Rivers took Mr Stirton to a meeting room and
Mr Anderson remained with Mr Ramsay in a reception area. He told
Mr Ramsay about the business card and said he was worried that his
business was being discussed with third parties. Mr Ramsay told him that
Miss Rivers' real name was as shown on the business card. Thereafter,
Mr Anderson was approached by a television producer from the Panorama
programme and in discussion with her, Mr Anderson described
Miss Rivers and the producer said that she had interviewed Miss A, a
person who undertook duties as an interim administrator and who answered that
description. Mr Anderson was concerned about this because he had been
told that Miss A had been appointed in the Court of Session in another
case and in that process, part of which he produced, she is described variously
as a chartered accountant, an accountant, and at one part no designation is
given at all. In his case, Miss Rivers had written to him saying she is
not an accountant, and he submitted that the apparent discrepancies meant that
justice was not being seen to be done. Mr Anderson claimed that perjury
must have been committed as Miss A and Miss Rivers were the same
person. At the very least investigation was required.
[85] In response counsel for Scottish Ministers
submitted that the conversation said to have taken place between Mr Ramsay
and Mr Anderson was denied. As for the other petition, it is not
necessary that a person appointed is a chartered accountant and counsel
submitted that in the recovery order Miss A was not so designed. If she
had been designed in different ways, that might be in error.
[86] I took the view that I could not adjudicate
on disputed assertions about what may or may not have been said to Mr Anderson
by others. Therefore I had no proved or agreed basis of fact from which I
could hold that there was even a prima facie case that the real identity
of Miss Rivers was as Mr Anderson claimed. I refused
Mr Anderson's motion to have the case dismissed. He sought leave to
reclaim my decision, which was opposed, and I refused him leave.
Mr Anderson then moved the court to adjourn in order that he might report
the conduct of the interim administrator to the police. I refused an
adjournment telling him that he could report matters to the police outwith
court hours.
[87] I reserve my opinion as to the materiality
of the designation or variation in the designation but if the same person has
been designed in differing ways then an explanation may be required should she
be appointed in any other case. In my opinion the request by Scottish
Minsters for anonymity of interim administrators would be to some extent
undermined if the court were informed that the person in question appeared in Scotland in other cases in her own
name. I note that the Public Interest Immunity certificate does so state. Appearing
in POCA cases under one's own name as well as under a pseudonym in a small
jurisdiction does not assist in preserving anonymity. I do not know if this
has happened but if it has then I would be of the opinion that it should cease.
[88] Counsel for Mr Stirton made a motion to
the effect that the absence of the interim administrator and the consequent
lack of cross examination of her should lead me at that stage to decide that I
could not rely on any evidence given by her unless it was not in dispute and
that any evidence from witnesses who obtained information from her should be
inadmissible. I decided that I should instead hear evidence and deal with any
objections as they were made in the normal fashion and, once the evidence was
out, I should hear submissions on the weight, if any, that I should attach to
all of it.
[89] On 14 December 2010 counsel for
Mr Stirton said that he had information that Miss Rivers was going
about her business, attending conferences and lecturing. He had referred earlier
to a book in which he claimed that Miss A had contributed an article, namely
Young, Civil forfeiture of criminal property: legal measures for targeting
the proceeds of crime, Cheltenham: Edward Elgar, 2009. Counsel did not address me on the
book nor seek to lodge it as a production, but asked me to note its existence. He
sought to address me on a review of the redacted medical certificates
previously lodged which he had instructed be undertaken by Dr Black,
consultant psychiatrist, Carstairs. I told him if he had any motion to make
he should enrol in the normal way and Miss Rivers' agents could oppose if
so advised.
[90] On 21 January 2011 counsel for
Mr Stirton again raised the question of Miss Rivers' health, arguing
that because her illness may have been long standing, it may have affected the
report that she had written and the court had read. Therefore he moved once
more to have an order pronounced by the court to have her medically examined.
The motion had been intimated and marked as opposed. Mr Anderson QC
appeared on behalf of the interim administrator. Mr Anderson, in support
of counsel for Mr Stirton's motion, began by saying he wanted to know for
whom Mr Anderson QC appeared. Mallard Associates had told
Mr Anderson that Miss Rivers had retired and so he wanted to know
from whom Mr Anderson QC had instructions. I asked Mr Anderson to
complete his remarks and told him I would then call on Mr Anderson QC.
He submitted that Miss Rivers was being accorded special status by the court.
Enquiries should be allowed, as he asserted that she was not ill at all. He
made reference to a programme for a conference held in England between 5 and 12 September 2010 in which Miss A was
listed as a participant. As he maintained that Miss A and Miss Rivers is the same person, he
submitted that Miss Rivers was misleading the court. Counsel for the
Scottish Ministers opposed the motion on the basis that the interim
administrator could not decide the question before the court; nothing had been said
to show why it was essential to bring her back to court, and the court had
already been satisfied that she was unfit. Mr Anderson QC explained that
he acted for Miss Rivers, instructed as before by Harper MacLeod. He
invited me to refuse the motion on the basis that it was an attempt to have the
court reconsider a decision already made, to the effect that she should be
excused as ill.
[91] I declined to make any order. Counsel for
Mr Stirton sought leave to reclaim but did not wish to address me on why leave
should be granted. Mr Anderson also sought leave to reclaim on the basis
that he asserted that the matter was important; Miss Rivers had committed
perjury; and this would "all be uncovered no matter what this court did". I
refused leave to reclaim.
[92] Both Mr Stirton and Mr Anderson
then tried to obtain authority to cite Miss A as a witness. They each
said that they wanted to cite an experienced interim administrator to give
evidence about the work done by Miss Rivers. I refused permission on the
basis that the proposed evidence was irrelevant. Had I taken the view that it
was relevant, then I would not have allowed that person to be cited, as, if
Mr Anderson was correct in his assertion, it would lead to
Miss Rivers' identity being revealed despite the court's order that she be
allowed to use a pseudonym and the court's upholding of the Public Interest
Immunity certificate. If, contrary to my opinion, evidence from another
interim administrator was relevant, it would have to come from someone other
than Miss A.
[93] In February 2011 Mr Anderson called as
a witness Mrs Lorna Harris, a retired solicitor who had been head of the
CRU between 2003 and 2008. I deal elsewhere with the evidence given by the
witness. Mr Anderson asked Mrs Harris if she knew of Miss Rivers
as a person who was appointed from time to time as an interim administrator and
she confirmed she did. Counsel for Mr Stirton asked Mrs Harris if
she knew Miss A and she said that she did. He then produced three photographs
of an office at the address 34 Buckingham Palace Road, London, which is
the address used by Mallard Associates, which he sought to lodge though late.
I allowed them to be lodged as 7/20 to 7/22. The witness said she thought she
had seen those or similar photos before. She was asked if she knew where
Mallard Associates worked from and said she did not. Counsel then asked her
again about Miss A and asked when she had last met her. The witness said
it had been at a party given by a mutual friend in May 2009. Counsel then
asked how Miss A was and counsel for Scottish Ministers objected. I
closed the court and heard argument on the objection. On behalf of Scottish
Ministers it was argued that the question was an attempt to get behind the certificate
accepted by the court relating to the health of Miss Rivers. Counsel for
Mr Stirton stated that this was all highly artificial. He was proceeding
on the basis that Miss A and Miss Rivers were the same person. In
the interests of justice he should be allowed to ask this question. I upheld
the objection. If Miss A and Miss Rivers were the same person, then it was an attempt to go behind a
certificate of ill health already accepted by the court. If they are not the
same person then the health of Miss A was irrelevant to this court. It
was also an attempt to go behind the Public Interest Immunity certificate.
Counsel for Mr Stirton then advised that he would give notice of his next
question and if objection was taken then it could be argued before the witness
returned to court. The question proposed was to ask Mrs Harris when she
last saw Miss Rivers. Counsel for the Scottish Ministers objected on the
basis that it was a collateral matter; that it was an attempt to go behind the
certificate regarding Miss Rivers' health; and that there was a danger of
going behind the Public Interest Immunity certificate. Counsel in response
said that he wanted to ask the question so that if the witness said anything
other than that she had last seen her at a party in May 2009, Scottish
Ministers would know whether that was true or not, because they unlike everyone
else in the court know the true identity of Miss Rivers. Counsel for
Scottish Ministers would have certain duties to the court if they thought that
untruthful evidence was given. I upheld the objection. It seemed to me to
be a clear attempt to investigate the true identity of Miss Rivers; indeed
counsel for Mr Stirton had explained it as being so.
[94] Counsel for the Scottish Ministers
said in open court on more than one occasion that due to Miss Rivers being
ill and so unavailable for cross examination she would not rely on her
evidence. In her submissions on behalf of Scottish Ministers she has not
relied on it. I have not done so either in making my decisions in the case.
[95] Whilst the status and evidential worth of
the reports of the interim administrator are not matters which I need to
decide, I note that in the case of Scottish Minsters v Buchanan 2008 CSOH 5 Lord Penrose referred to the approach taken by King J. under
the similar but not identical English provisions in the case of The Director
of the Recovery Agency v Jackson [2007] EWHC 2553 (QB) 30.
His Lordship stated that he agreed with King J's views set out in the
latter's paragraph 29 as follows:
"29. It is obviously clear from this legislative framework and these statutory provisions governing the appointment of the Receiver and her investigative and reporting functions under the supervision of the court rather than the Director, that the Receiver is not an agent of any of the parties. In my judgment she is akin to an officer of the court and is reporting and giving evidence to the court in that capacity independent of the parties. It is further obviously right that the Receiver's report should be used in advance of the final hearing as a means by which to establish such facts as can be agreed between the parties and to identify the matters in dispute in need of resolution by the court. Further in principle I am prepared to accept that the Receiver's findings as to recoverable property should be given considerable weight by the court and to that extent her report enjoys special status.
30. However this said, I also agree with the Respondent's submissions that the Receiver's findings of recoverable property are not binding on the court, that it is the primary evidential material underlying her findings and said by her to justify them, which is of crucial importance together with any additional evidence called before the court, and that it is the duty of the court in determining any area of dispute between the parties carefully to scrutinise and weigh that evidence in order to determine whether the claim to recoverable property is made out. I intend to approach the dispute in this case in this way. The statutory provisions referred to do not alter either the burden or standard of proof which is upon the Claimant to establish the existence of recoverable property on the balance of probabilities by cogent evidence. The findings of the Receiver do not in themselves reverse the burden of proof so as to put any onus on the respondent to disprove her findings, and I did not understand the Claimant to submit to the contrary."
[96] I note that the Explanatory Notes to the
POCA state in paragraph 337 that the interim administrator's report
"may comprise a comprehensive account of the nature and origins of, and interests in, the property in question. It will be capable of being used as basis to establish agreed facts and to identify disputed matters that will fall to be resolved at the final hearing".
[97] I respectfully agree with the views of
Lord Penrose and King J. I take the view that in an appropriate
case the court will require to decide whether it is proper and necessary for
the interim administrator to be called to give oral evidence in a situation
where her reports have been lodged and the written pleadings do not take issue
with the methodology or conclusions of the report except to the extent that the
respondents deny that there has been unlawful conduct. It will always be for
the petitioners to prove that conduct has been unlawful and the interim
administrator reports not on whether unlawful conduct has been proved but on
whether on the assumption that it has been proved that property is
recoverable. I have not been addressed on this and my views are therefore
tentative. It seems to me that if no issue is taken with the interim
administrator's report in so far as it relates to recoverability rather than to
the existence or otherwise of unlawful conduct, it may not be necessary for
oral evidence to be led from the interim administrator. He is an officer of
court and the court may be entitled to read his reports and satisfy itself from
the written report. I am mindful that the interim administrator's view is
never conclusive and that it is always for the court to decide whether or not
the property has been obtained by unlawful conduct. I do however take the
view that the work undertaken by an interim administrator, if it is a detailed
analysis of transactions and bank accounts, is best presented in written form
rather than orally. I note in the recent case of SOCA v Gale
[2011] UKSC 49, mentioned below that the work of the interim administrator took
place over a three year period. In the present case the interim administrator
worked over a number of years. If no issue is taken with the detail of that
work in the written pleadings and the matter in issue between parties is
whether or not there has been unlawful conduct then, in a suitable case, it
appears to me that that the report by the interim administrator could be before
the court as a report by an officer of court and that it need not be the
subject of evidence.
The Legislation
[98] The
legislation with which I am concerned in this case is the Proceeds of Crime Act
2002 hereinafter referred to as "POCA". Part 5 of POCA is headed "Civil
Recovery of the Proceeds Etc. of Unlawful Conduct". By section 266 it is
provided that if in proceedings under this Chapter the court is satisfied that
any property is recoverable, the court must make a recovery order. By
subsection 3 the court may not make a recovery order in certain
circumstances which as regards Scotland are set out in subsection 5. In the present case no
submission is made that subsection 5 applies.
[99] "Unlawful conduct" is defined in
sections 241 and 242 of POCA as follows:
"241 'Unlawful conduct'
(1) Conduct occurring in any part of the United Kingdom is unlawful conduct if it is unlawful under the criminal law of that part.
(2) Conduct which -
(a) occurs in a country outside the United Kingdom and is unlawful under the criminal law of that country, and
(b) if it occurred in a part of the United Kingdom, would be unlawful under the criminal law of that part,
is also unlawful conduct.
(3) The court or sheriff must decide on a balance of probabilities whether it is proved -
(a) that any matters alleged to constitute unlawful conduct have occurred, or
(b) that any person intended to use any cash in unlawful conduct.
242 'Property obtained
through unlawful conduct'
(1) A
person obtains property through unlawful conduct (whether his own conduct or
another's) if he obtains property by or in return for the conduct.
(2) In deciding whether any property was obtained through unlawful conduct -
(a) it is immaterial whether or not any money, goods or services were provided in order to put the person in question in a position to carry out the conduct,
(b) it is not necessary to show that the conduct was of a particular kind if it is shown that the property was obtained through conduct of one of a number of kinds, each of which would have been unlawful conduct."
[100] In the case of Scottish Ministers v Buchanan
and others Lord Penrose considered the proper construction of these
provisions. At paragraph 11 his Lordship quoted King J. in the case of The
Director of the Recovery Agency v Jackson and Smith and noted that he
followed the case of The Director of the Recovery Agency v Green [2005] EWHC 316 8 (Admin) in rejecting the submission that it was sufficient to
establish a lifestyle inconsistent with the identified income of the person but
said that the court was entitled to look at the totality of the evidence and
the whole picture. His Lordship quoted King J. as follows:
"116. I equally reject the submission made on behalf of the Respondent that I am not entitled to take a global approach to the issue of proof that the property in issue is recoverable within the meaning of the Act. The question is whether the Respondent obtained the property through the unlawful conduct alleged or whether the property in the Respondent's hands is representative of property so obtained. The test is whether it is more probable than not that such is the case. It is as was said in Olupitan (Assets Recovery Agency v Oliputan [2008] EWCA Civ 104) the whole picture painted by the totality of the evidence which has to be balanced. I see nothing wrong in the court ultimately concluding that any significant asset of the Respondent has been obtained by or represents the proceeds of his criminal conduct as particularised..., if the court is satisfied on the evidence that this is more probable than not. I do not consider it essential that the court considers each property transaction on an item by item basis in the sense that the Claimant has an obligation to show some particular unlawful actions by the Respondent at some particular time which enabled the particular transaction."
I respectfully agree with that analysis. I note at paragraph 12 of his Opinion his Lordship states:
"[12] I agree with these views, as I understand them. However, it is important to have regard to the formulation of those views, especially in the last sentence quoted. In the case of an individual who holds a number of items of potentially recoverable property, and who has been shown to have engaged in unlawful conduct of a kind likely to have generated disposable funds, it is highly likely to be sufficient to ask whether that individual's legitimate resources as a whole were sufficient to explain his possession of the totality of the targeted property. In many, if not most cases, the application of funds available from legitimate sources and the application of funds from unlawful conduct would have been confused: the application of any particular sum would be a casual matter depending on the total funds available at any given time and the individual's personal choices as to distribution of those sums. It would be unnecessary to engage in a detailed analysis of each transaction as at the date it occurred and to show that at that time and in the circumstances obtaining it was more likely than not that the particular item was obtained by or represented property obtained by particular unlawful conduct. The two cases principally relied on demonstrate that."
I respectfully agree with those views.
[101] Sections 304, 305, 306 and 307 are
concerned with recoverable property which has been dealt with in some fashion
after its being obtained. These sections are in the following terms:
"304 Property obtained through unlawful conduct
(1) Property obtained through unlawful conduct is recoverable property.
(2) But if property obtained through unlawful conduct has been disposed of (since it was so obtained), it is recoverable property only if it is held by a person into whose hands it may be followed.
(3) Recoverable property obtained through unlawful conduct may be followed into the hands of a person obtaining it on a disposal by -
(a) the person who through the conduct obtained the property, or
(b) a person into whose hands it may (by virtue of this subsection) be followed.
305 Tracing property, etc
(1) Where
property obtained through unlawful conduct ('the original property') is or has
been recoverable, property which represents the original property is also
recoverable property.
(2) If a person enters into a transaction by which -
(a) he disposes of recoverable property, whether the original property or property which (by virtue of this Chapter) represents the original property, and
(b) he obtains other property in place of it,
the other property represents the original property.
(3) If a person disposes of recoverable property which represents the original property, the property may be followed into the hands of the person who obtains it (and it continues to represent the originals property).
306 Mixing property
(1) Subsection (2) applies if a person's recoverable property is mixed with other property (whether his property or another's).
(2) The portion of the mixed property which is attributable to the recoverable property represents the property obtained through unlawful conduct.
(3) Recoverable property is mixed with other property if (for example) it is used -
(a) to increase funds held in a bank account,
(b) in part payment for the acquisition of an asset,
(c) for the restoration or improvement of land,
(d) by a person holding a leasehold interest in the property to acquire the freehold.
307 Recoverable property:
accruing profits
(1) This
section applies where a person who has recoverable property obtains further
property consisting of profits accruing in respect of the recoverable property.
(2) The further property is to be treated as representing the property obtained through unlawful conduct."
The Standard of Proof
[102] This
action is a civil action and the standard of proof is therefore proof on the
balance of probabilities. This is provided for by POCA s241 (3). I accepted,
as submitted by the Scottish Ministers, that the authoritative judgment on the
standard of proof is that of the Supreme Court in In re S-B
(Children) (Care Proceedings: Standard of Proof) [2009] UKSC 17. The
cases referred to by counsel for Mr Stirton in submissions on the standard
of proof precede that case and in so far as there is any suggestion in them
that there must be stronger evidence when the allegation is a serious one, I
regard them as over ruled. Mr Anderson submitted the cases of R v
Terry Waya [2010] EWCA Crim 412 and R v Briggs-Price
[2009] UKHL 19. I did not find that either of them was in point in a civil
case. There is no heightened standard of proof, and no requirement to use a
different approach to fact finding, where unlawful conduct is alleged. It is
of course necessary that cogent, acceptable evidence is given before a court
can make any finding in fact. The question I have to ask myself is whether on
the evidence it is more probable than not that the crucial facts in the case
have been proved. Those facts include findings as to whether or not there has
been unlawful conduct which, in the context of POCA, is conduct which is
criminal. There is no necessity for the Scottish Ministers to prove criminal
conduct to the normal criminal standard, which is beyond reasonable doubt. Nor
is there any necessity for them to prove a particular crime happened in a
particular place at a particular time as would be libelled in an indictment. Counsel
for Mr Stirton submitted that it was necessary for Scottish Ministers to
prove that Mr Stirton and Mr Anderson threatened Mr Gibson and Mr McLeod
so as to lead to money being paid to them to prevent injury. I did not accept
that submission. I accepted the submission from Scottish Ministers that
extortion is obtaining payment not lawfully due, in return for refraining from
exercising influence to the detriment of the victim. There is no need for
threats of violence to be uttered. The Scottish Ministers submit that even if
the respondents did not have control over violence towards Spring Radio Cars'
directors and its business, so long as they exploited the impression that they
did, funds paid in respect of that have been extorted. They referred to the
cases of Silverstein v HMA 1949 JC 160 and Carmichael v
Black 1992 SLT
897. I agreed with that submission.
[103] The Scottish Ministers in their written
submissions noted that the case of Gale has been argued before the
Supreme Court but had not yet been advised. They therefore submitted that I
should make findings on the criminal standard as well as on the civil
standard. I would not have been prepared to do so, this case having been
presented before me under the law as understood at the date of presentation.
In any event, the Supreme Court decision is now available which holds that the standard
of proof to be applied is that of proof on balance of probabilities.
[104] All of my fact finding must be achieved by
taking the evidence as a whole. I am not concerned to discover if particular
events taken singularly happened or not. I respectfully adopt the approach
set out by Lord Brodie in the case of Toremar v CGU Bonus Ltd
[2009] CSOH 78 to the effect that the court simply determines whether it is
more probable that the thing happened than not. In considering the evidence
as a whole it is necessary for me to consider whether there is any contrary
proposition put by he who seeks to dispute evidence. If there is no
explanation then it makes it easier for me, having considered matters fully, to
accept whatever is asserted. If on the other hand there is a contrary
explanation, that requires to be weighed up. I note that this approach
accords with the approach taken by Lords Penrose and Bracadale in the
cases under POCA of Scottish Ministers v Buchanan and Scottish
Ministers v Smith [2009] CSOH 167.
[105] There is no objection to the admissibility of
hearsay, this being a civil case. Further, there is no requirement for
corroboration. In making my decisions on credibility and reliability I have
tried, where possible, to see whether or not there is support for one witness'
evidence from anywhere else. I have also considered the terms of documents
either spoken to by witnesses or relied on by parties. As many documents were
agreed in terms of the joint minutes and notices to admit, it has not been
necessary to have witnesses speak to each and every document. I have drawn
adverse inferences where an explanation was required and no satisfactory
explanation was given.
[106] In evaluating the evidence of skilled
witnesses I have endeavoured to weigh up the evidence which they gave, both
orally and in their reports. I explain at various parts of my Opinion below
what findings I was able to make in relation to the various experts. With his
written submissions Mr Anderson lodged a copy article headed "When is an
expert not an expert?" by Clare Hitchcock, with no information about the name
or date of the publication. The headnote is to the effect that much had been
written about changes in English procedural rules which require independence
from an expert, whose primary duty is to the court. The writer examined what
she describes as the "recent decision" of R ex parte Factortame and others v
Secretary of State for Transport [2002] EWCA Civ 932 in which the Court
of Appeal ruled on several issues. She noted that the Court of Appeal reviewed
two apparently conflicting decisions on when expert evidence may be deemed
inadmissible because of the relationship between the expert and the party
instructing him. The first case was Field v Leeds City Council (2000) 17 EG 165 CA in which the Court of Appeal held that the fact that a surveyor
called as an expert witness was employed by the defender did not automatically
disqualify him from giving evidence. The test of whether someone could be
able to give expert evidence should depend on whether it could be demonstrated
that the person had relevant expertise in an area in issue in the case and that
it can be demonstrated that he is aware of his primary duty to the court. The
fact that the witness was an employee of one of the parties could affect the
weight to be given to his evidence. The other case to which the writer made
reference is that of Liverpool Roman Catholic Archdiocesan Trustees Inc v
Goldberg (No. 3) [2001] 1 WLR 2337 in which the trial judge
excluded as inadmissible evidence from an expert who was a long-standing friend
and colleague of the defendant. The writer of the article explained that the
Court of Appeal clarified the position in the Factortame case in which it
took the view that while it was always desirable for an expert to have no
obvious interest in the outcome of the matter in which he was to give evidence,
such an interest did not automatically exclude that evidence. I understood from
his submission of this article that Mr Anderson sought to argue that the
experts on accountancy called by the Scottish Ministers, namely
Mr Milliken, Mr Thomson and Mr Murray should not be regarded as
competent expert witnesses. Mr Milliken was said to have been "paid by
the police to assist them" and despite his being an independent accountant, a partner
in the firm of KPMG, it was argued that because he was paid a fee by the police
he became partisan. Mr Thomson is an employee of the CRU and
Mr Murray is an employee of the SCDEA. I did not accept that the attack
on Mr Milliken was in any way justified. All expert witnesses who are
contracted by litigants to prepare reports and give evidence are paid a fee.
I was conscious that Mr Thomson was an employee of CRU and I was careful
to bear that in mind when assessing his evidence. I did find him to be an
impartial witness and was assisted in coming to that view by the fact that no
substantive criticism of his evidence had been made other than that he made
arithmetical mistakes which he required to correct. An attack was mounted on
Mr Murray, chartered accountant who is an employee of SCDEA, apparently on
the basis that he is such an employee and also on the basis that he had
colluded in a conspiracy. It was suggested to him that he had obtained an
increase in salary in exchange for work that he had done in order to discredit
the respondents. I regarded that as quite unsubstantiated. I did not regard
Mr Jeffrey Meek, chartered accountant, led on behalf of Mr Stirton,
as a very satisfactory witness. I explain below the detail of his evidence.
Shopping Lists, Notices to
Admit and Joint Minutes
[107] The
defence on Record was that there had been no unlawful conduct.
Lord Glennie pronounced an interlocutor inviting the parties to prepare
calls for further specification, called shopping lists in order to narrow the
scope of the inquiry. It is instructive to consider some of the shopping
lists and answers.
[108] In paragraph 7 of the shopping list for
the Scottish Ministers they sought the nature of the work carried out by
Mr Stirton and Mr Anderson for Spring Radio Cars Limited and by
paragraph 8 they sought examples of that work. In response to
paragraph 7 Mr Stirton and Mr Anderson stated that the work is
"as detailed on the invoices provided to Spring Radio Cars". The response to
paragraph 8 was:-
"As indicated by Mr Allan Gibson and Mr Kenneth McLeod on there (sic) statements under oath at Glasgow Sheriff Court and there (sic) affidavits all services were available when required. Examples of the work carried have been identified to the petitioners through precognition of the witness. Particular emphasis should be laid upon the outcome of the work which involved a material increase in the profitability and efficiency of the business of Spring Radio Cars Ltd." [my emphasis.]
[109] During the proof very little further
specification of what Mr Stirton and Mr Anderson did for the money
which was paid to them was given. I detail below Mr Gibson's evidence
and that of Mr McLeod in which they were unable to state what services
were rendered to them. Mr Anderson's evidence was to the effect that the
invoices had become inaccurate over time as what was truly paid for his
business acumen. He accepted that the invoices had not been altered to
reflect that. Mr Stirton maintained that he had obtained some business
referrals from restaurants which he named. The last sentence, emphasised
above, was echoed in the respondents' evidence to the effect that Spring Radio Cars
had become more profitable during the period of the contracts for services and
for the purchase of cars. Their position was that such an increase would not
have happened without their involvement and that the cost of the increase in
profitability was legitimately paid by Spring Radio Cars.
[110] In paragraph 10 of the shopping list the
Scottish Ministers sought details of assets of RS Construction and the
answer to that provided by Mr Stirton and Mr Anderson was that they were
unable to give details because their papers had been seized by the police. In
paragraph 19 the Scottish Ministers requested details of the period for
which Mr Stirton was a self-employed builder and examples of jobs on which
he worked and by paragraph 20 sought his income. The answers provided to
paragraph 19 were as follows:-
"As detailed and explained to the Inland Revenue which was agreed by the Inland Revenue and confirming that the first respondent's Tax Affairs where in order and up to date."
The answer provided to paragraph 20 was as follows:-
"As detailed and approved in the Inland Revenue in the First respondent's tax records."
[111] In light of these answers and in light of the
evidence lead before me I have formed the view that Mr Stirton and
Mr Anderson were unable to give detail of work done by Mr Stirton as
a self-employed builder and that they were of the opinion that whatever has
been agreed by HMRC was conclusive proof of the work having been done, and
income received. I did not accept that I was bound by any agreement reached
with HMRC in the different question raised before this court.
[112] The position of Miss Leonard was raised
in the pleadings. It was alleged by Scottish Ministers that Miss Leonard
obtained a loan to buy Mr Anderson's house by falsely claiming that she
earned г28,000 per year. At the date of adjusting the shopping list the
averment for Mr Anderson at answer 5.37 of the Record was as follows:
"The fourth respondent [Miss Leonard] located dilapidated flats for redevelopment. The details of the dwellings were provided to a Mr Maurice Davies of MD Associates and the fourth respondent received her income from MD Associates in cash and was told by Mr Maurice Davies that he deducted tax from her salary. There is no complainer in this averment."
In the final Record the averment had been amended to read as follows:-
"The fourth respondent located dilapidated flats for redevelopment. The details of the dwellings were provided to a Mr Maurice Davies of MD Associates and the fourth respondent received her income which was about г28,000 per year in cash from various business associates including MD Associates. She was told by Mr Maurice Davies of MD Associates that he had organised the settlement of her tax liabilities direct with HMRC. The fourth respondent having been made aware of her income tax has contacted HMRC to clarify her position."
I noted a significant difference between these two averments. I have found after hearing her evidence that Miss Leonard was not credible. The fact that Mr Anderson was prepared to plead at one stage that she "received her income from MD Associates in cash....he deducted tax from her salary" and at a later stage that she "received her income which was about г28,000 per year in cash from various business associates including MD Associates" and that Miss Leonard in evidence said that MD Associates had acted as her accountants contributed to my finding her incredible and unreliable. I did not accept her evidence and I detail below my reasons.
[113] A recurring theme of the pleadings and the
response to the shopping lists is that paperwork relating to Mr Stirton
and Mr Anderson's business was seized by the police in Operation Maple and
therefore they are unable to give any further specification of work done,
customers, and money received. I did not accept that a well run business
would be in that position. I would have expected a well run business to be
able to reconstruct records from bank statements and copy invoices and copy
accounts. Further, the various papers seized by Operation Maple had been
lodged by Scottish Ministers as productions and had therefore been available to
parties.
[114] Mr Anderson, when giving evidence, said
that there was no complainer in this case and that the building societies had
not complained that there had been any difficulty with the mortgages, as they
had been kept up to date. In my opinion that exhibited a lack of
understanding of the law. This is a civil case with no requirement for a
complainer. I have found that the secured lenders did not complain that their
loans were in arrears. There was evidence that Miss Leonard had been in
arrears from time to time, but had made payment before any action was taken by
the lender. That was however irrelevant to the question before me which was
to consider whether the loans were obtained by fraud or in the course of money
laundering or other unlawful conduct.
[115] Mr Anderson also said in evidence that
he had prepared answers both for himself and for Mr Stirton. There were
certain matters, such as Mr Stirton's employment history, which he chose
not to complete. He gave no reason for that when questioned by counsel for
Scottish Ministers.
[116] There were two joint minutes. The second
related to evidence of Mr Martin and enabled his report to be taken as his
evidence in chief. The first was a lengthy minute by which parties agreed
that a number of documents were lawfully obtained. Included in that category
were the files of Neilson Renton, Spring Radio Cars' accountants. Counsel for
Mr Stirton sought to argue that he was nevertheless entitled to ask
questions designed to show that the files had not been lawfully obtained, or
had in some way been dealt with unlawfully after they had been obtained from
their owner, the firm of Neilson Renton. Objection to that course of action
was taken, which I upheld. I explain my reasoning elsewhere.
[117] There were two very extensive notices to admit.
At an early stage of the proof counsel for Mr Stirton and Mr Anderson
moved me to allow them to amend paragraphs 65 and 66 of the second notice.
They had in error admitted that accounts produced to the Skipton Building
Society with an application for mortgage funds were false and were known by Mr Stirton
to be false. Mr Anderson explained that the error, a slip of the pen,
was his, as he had dealt with the notice for himself and for Mr Stirton. Counsel
for Mr Stirton explained that he should have checked the notices before
starting the proof but as he had been instructed late had omitted to notice the
error. I took the view that the admission was in error, as it did not accord
with the pleadings. I allowed it to be amended to a denial.
Operation Vacsay
[118] Scottish
Ministers led evidence, on 20 November 2009, from three police officers in
connection with Operation Vacsay. The first was CI Kevin Quinn of
Strathclyde Police. In 1997 he had been a detective sergeant seconded to the
Scottish Crime Squad. On 16 December 1997 he was in France on an operation led by a Customs and
Excise officer. He was there to carry out surveillance of suspected
importation of controlled drugs. He was on a ferry when it left Calais bound for Dover. The target of his
surveillance was Mark Haig, who was expected to board on a lorry, which he
did. Mr Quinn also noted a Land Rover Discovery vehicle which was known
to him from another operation and he recognised the driver as a man called
Sandy Hughson. He knew from police intelligence that Mr Hughson was said
to be associated with Mr Stirton. Mr Quinn then saw that the
passenger with Mr Hughson was Mr Stirton. He was a person known to
him in his work with the Scottish Crime Squad as being suspected of involvement
with controlled drugs. Mr Stirton was not however the target of this
surveillance operation. He was known as being from the north side of Glasgow and in particular from
Springburn. Mr Quinn stayed on the ferry as it crossed the Channel and
watched the lorry and the Land Rover leave. He then took up surveillance of a
petrol filling station in Dover and, at about 11 o'clock at night, noted that both the Land Rover and the
lorry came into the petrol filling station. He saw Mr Hughson approach
the lorry and saw him having a conversation with Mr Haig. At that time
he saw Mr Stirton standing in a corner looking as though he was taking
observations of the petrol station. Mr Quinn said that Mr Stirton
had chosen the position that he himself would have chosen in order to take
observations. As Mr Quinn was watching Mr Haig's lorry he saw
Mr Stirton leave on foot in the direction of the town centre.
Mr Stirton came back to the filling station and Mr Quinn saw him greet
Mr Hughson with a "high-five" gesture. He thought that they were
celebrating. He said that the lorry driven by Mr Haig was watched on its
route between Dover and Uddingston and, when
it was stopped and searched in Uddingston, it was found to contain cannabis and
cocaine to a value of approximately г2 million, and a hand gun. Prosecutions
followed and Mr Haig was convicted, as was a Mr Dickson. Mr Quinn
referred to production 6/8/10, which was a copy of the surveillance log.
Mr Stirton's name was mentioned in that log as having been observed. Mr Quinn
said that he understood that a passport was found at Mr Dickson's house
when it was searched in connection with the importation of drugs and that it
was in the name of "Frank Brian Luke" but that the photograph was of
Mr Stirton. As I noted him, Mr Quinn did not personally see the
passport. He said that Mr Dickson was known by him from police
intelligence to be associated with Mr Stirton and he said that had seen
them together in the past. Mr Dickson was sentenced to fifteen years
imprisonment, reduced on appeal to twelve and Mr Haig was sentenced to
twelve years reduced on appeal to ten. In cross examination it was suggested
on behalf of Mr Stirton that the police officer was mistaken and that he
did not see Mr Stirton. Counsel suggested to the witness that there may
be evidence that Mr Hughson and Mr Haig did not know Mr Stirton
and that he did not know them. The witness was adamant that he had seen
Mr Stirton and that he was not mistaken. In cross examination
Mr Anderson asked the witness if there had been criminal proceedings
against Mr Stirton and he said that there had not. On being asked why
not the witness said that he personally felt that an opportunity had been
missed. Mr Anderson then started to ask the witness if he had a personal
dislike of Mr Stirton and I told Mr Anderson that he had no pleadings
for any such suggestion and he did not continue with that line.
[119] DCI Elaine Morrison gave evidence that she had been the log
keeper in 1997 when she was a detective constable. She wrote in the log what
other officers asked her to write via radio. She confirmed the accuracy of
the log.
[120] The next witness was CI James Neil of
the Northern Constabulary who said that he had been a detective sergeant in the
Scottish Crime Squad in 1997. He had searched a house in Ayr Street, Glasgow belonging to Robert
Dickson, following the arrival of the lorry with the drugs and the hand gun at
Uddingston. He found a passport in the name of Frank Brian Lucas (sic)
with a photograph which he thought might look like Russell Stirton. He asked
another officer who said that he thought it was Russell Stirton. Mr Neil said
that he had carried out surveillance in the past on more than one occasion in
which Mr Stirton had been the target. He knew from police intelligence
that Mr Stirton was connected with the McGovern family, who he said were
known to be a family involved in crime. He said that Mr Stirton was very
elusive and very surveillance conscious. On one occasion he had carried our
surveillance, in London,
in which Mr Stirton was involved with a "very serious criminal" in which
it was thought that drugs had been exchanged. Mr Stirton had become
aware of the surveillance, which had then been aborted.
[121] Evidence was led on Mr Stirton's behalf
from Mrs Annie Dickson, Mark Haig and Alexander Hughson.
Mrs Dickson was the widow of Mr Dickson who had been convicted. She
too was convicted of an offence under the Misuse of Drugs Act 1971. She said
that she did not know Mr Stirton. She confirmed that Mr Anderson
had attended at her house at some stage in 2007 and, as a result, she had
written a letter to the authorities confirming that she would be a witness for
Mr Stirton, production 6/8/17. She had put to her a copy of an
application form for a passport with a photocopy of a photograph in it, production 6/8/9. She said that the photograph was
that of her late husband's son, Mark Dickson. The application was in the name
of Frank Brian Luke.
[122] Mr Haig confirmed that he had pled
guilty and had been sentenced as noted above. He said that he did not know
Mr Hughson and that the only person he had spoken to on the forecourt of
the petrol filling station was a policeman as he had asked him where he might
park his lorry. He said he did not know Mr Stirton. Mr Alexander
Hughson, 1 Wallace Crescent, Plean, Stirling gave evidence and said that
he had not been on a ferry on 16 or 17 December 1997 and had not been in
any filling station in Dover on that date. He did not know Mr Stirton,
nor did he know Mr Haig. He also said that he had never greeted anybody
with a "high five" gesture in his life and would normally shake hands. He
said that he had a conviction for assault to severe injury in which he had gone
to trial but had been convicted, in 2000. He was sentenced to two years
imprisonment.
[123] While witnesses were led on behalf of
Mr Stirton, he did not give evidence at that stage. He was however led
as a witness in Mr Anderson's proof. He denied being on the ferry or in
the petrol filling station at the relevant time. He knew neither Mr Haig
nor Mr Hughson. Mr Stirton believed that if he had been seen by
police he would have been charged. He had not been interviewed, questioned or
charged. He denied having any connection with the importation of drugs.
[124] I found Mr Quinn to be a credible
witness. I believed the entry made on his behalf by Miss Morrison in the
surveillance log. I understood from him that Mr Stirton was not the
target of his surveillance but nevertheless his name is in the log. The
witness also referred to a statement which he had produced in 2004, production 6/15,
page 1. In that statement he narrated seeing Mr Stirton and he
referred to the "high five" gesture. He said that he was asked to give that
statement by other police officers but could not recollect by whom. I did not
find Mr Stirton to be credible when he claimed that he had not been
present. While he did state that he was not present, Mr Stirton was
anxious to explain that if he had been he would have been interviewed and
perhaps charged. I did not regard that as in any way persuasive as I had
heard from the police that the target of the surveillance was Mr Haig.
There was no evidence to suggest that Mr Haig knew Mr Stirton and it
may therefore be that Mr Haig was truthful when he said that he did not.
As for Mr Hughson, I noted that his date of birth was known to counsel for
the Scottish Ministers as was his previous conviction. There was no
suggestion made that the person who was called to give evidence was a different
person from the Mr Hughson referred to by the police. I therefore had to
decide whether or not I accepted Mr Hughson's evidence to the effect that
he had not been present and that he did not know Mr Stirton or Mr Haig.
On balance I preferred the evidence of Mr Quinn to that of
Mr Hughson. I was influenced in that by the other evidence in the case
which seemed to me to link Mr Stirton with the incident on the ferry and
in the filling station. That included the finding of a passport in the name
of Frank Brian Luke. There was evidence later in this case that Mr Luke
had witnessed a standard security signed by Mr Anderson, production 6/52/1.
Mr Anderson said in evidence that Mr Luke was a person known to him
as he would be frequently in and around the petrol filling station at
Springburn and would be used to run errands. It seemed to me therefore that
the finding of a passport in his name in Mr Dickson's house linked
Mr Anderson and Mr Stirton to Mr Dickson. That confirmed the
evidence given by Mr Neil that the two men were associated. I was not
prepared to find that the photograph in the passport was that of
Mr Stirton as the passport was not produced and Mr Neil's evidence
was to the effect that, while he thought that the photograph resembled
Mr Stirton, that was confirmed for him by someone else. It would have
been open to me to accept that hearsay evidence but I was not prepared to do
so. I did however accept that the passport in the name of Frank Brian Luke
was found at Mr Dickson's house and that an application for a passport in
that name, though bearing the photograph of Mark Dickson, was also found. I
did not accept Mr Hughson as truthful. Nor did I accept Mr Haig as
truthful when he said he did not know Mr Hughson.
[125] In the submissions made on behalf of
Mr Stirton reference is made to production 7/4, page 1 which is
a statement made by DS Quinn, as he then was, dated 22 January
1998. It appears that the statement is a police statement for the trial of
Mr Dickson and it is therefore not surprising that Mr Stirton's name
does not appear in it. As is acknowledged in the submissions on behalf of
Mr Stirton, Mr Quinn did make reference to Mr Stirton in his
statement at 6/15, page 1 which was made in 2004. In his submissions,
Mr Anderson submitted that Mr Haig should be preferred when he said
that he did not know Mr Stirton and that he spoke only to a policeman or a
security guard. As I have said, I did not make any finding that Mr Haig
did know Mr Stirton but I did accept that Mr Hughson spoke to
Mr Stirton. I accepted that Mr Anderson was correct when he submitted
that Mr Quinn did not see the passport.
[126] I accepted that the gesture between
Mr Hughson and Mr Stirton was one of celebration and that in all the
circumstances I inferred from that Mr Stirton was involved in the
importation of a large quantity of drugs and a hand gun to this country from
France.
M74
[127] It
was not in dispute that Mr Stirton and Mr Anderson were stopped by the
police when driving north on the M74 near to the Abington Services on
27 October 2000. Nor was it in dispute that there was a quantity of
money in the car. The police officers who gave evidence were not sure how
much money was there and neither apparently were Mr Anderson nor
Mr Stirton. Estimates varied between г20,000 and over г50,000. I found
all of that evidence unsatisfactory. The police evidence was to the effect
that Mr Anderson and Mr Stirton were stopped because Mr Stirton had
been seen in Liverpool in the course of a
surveillance operation talking to one of the subjects of the surveillance.
There had been an exchange of a bag between the parties. Mr Anderson and
Mr Stirton disputed that explanation. Mr Anderson said that he had been
with Mr Stirton in Barcelona and then in Paris, both in connection with Loveboat business,
and then had been in London and Manchester. Mr Stirton's evidence was to the effect that they
had flown from Paris
to London. He recalled that they
had flown from Charles de Gaulle airport to London but he could not remember which
airport they had landed at. It was not in dispute between the parties that
the police asked Mr Stirton where the money had come from and he told them
that it came from his bank. He said that he had businesses in Glasgow. Mr Mackay, the
police officer who spoke to this, said that he was asked to investigate Mr Stirton's
bank accounts. He was told by the Clydesdale Bank that Mr Stirton had an
account and he was instructed by his superior officers to return the cash to
Mr Stirton. Mr Mackay left his post prior to the cash being
returned but understood that another police officer had returned it. Mr Anderson
called DS Elizabeth McLean who had been one of the officers who had
been present when Mr Stirton and Mr Anderson were detained. Ms McLean
could not remember much about the incident but had written a statement in 2003
production 6/10/46
which she accepted as accurate. She did recall that both Mr Stirton and
Mr Anderson had been very plausible and very co-operative. She was aware
that money had been returned and she had no idea where tapes of the interviews
were. It would be unusual if the tapes were missing, she thought. The tapes
were not produced in the case.
[128] This was therefore rather an unsatisfactory
episode of evidence in which the fact of some money being seized and returned was
not in dispute. The reason for the money being in the car is in dispute. I
found, on the balance of probabilities, that the explanation given by
Mr Stirton and Mr Anderson was not credible. It was not
consistent. I was conscious that the matter happened many years ago but
Mr Stirton and Mr Anderson had known since the petition was served on
them that this matter was to be raised. I would have thought therefore that
they would have endeavoured to check as best they could where they had been
that day. It was suggested by the Scottish Ministers that normal businessmen
do not carry in excess of г20,000 in cash with them. Mr Anderson submitted
that was not so, especially in 2000. I was prepared to accept that some
businessmen do carry cash for legitimate reasons and Mr Anderson submitted
that livestock dealers, jewellers, and auctioneers of all kinds of goods have
had to change their practices since 2000 to accommodate the requirements of the
law on money laundering. He submitted that in 2000, such people would
frequently carry cash. There was no acceptable explanation given in evidence as
to why they had cash on that day. Mr Anderson rather faintly suggested
he had funds for purchases which were not made. I did not accept that
explanation. There is no suggestion that Mr Stirton and Mr Anderson
dealt in any business which is for legitimate reasons required to deal in large
quantities of cash. I believed that the police had seen Mr Stirton in Liverpool in a surveillance
operation, which explained why the respondents had been stopped. I have found
that the money in the car was money which came from unlawful conduct.
Mr Gibson
[129] Mr Gibson
was called at an early stage in the case and gave evidence over several days
between 21 May and 3 June 2009. I formed the opinion that he was not a
credible witness, for reasons which I explain below. He appeared to be a highly
strung person who was agitated by being in court. He was knowledgeable about
his chosen area of business, and he was committed to working hard in it. He
said that he had been ill after the events with which this case is concerned
had happened, and had been unable to leave his house for a year. He had
recovered and was working in the private hire car trade once more. At the end
of his evidence Mr Anderson asked him if he would work with him and
Mr Stirton again and Mr Gibson said that he could not say he would,
as the whole thing had affected his health and his marriage.
[130] Counsel for the Scottish Ministers led
Mr Gibson in chief and he was cross examined by counsel for
Mr Stirton and by Mr Anderson and then re-examined. Mr Gibson
was asked questions about his business generally and about payments made by
Spring Radio Cars to RS Construction and to A & S Leasing;
about a loan agreement entered into by Spring Radio Cars; and about the
purchase of Kenmure Cars (variously spelled Kenmure and Kenmuir through the
productions) by Spring Radio Cars. It was put to him that he had been the
subject of extortion and that the company had made payments under
intimidation. He admitted payments had been made but denied that there had
been any extortion by anyone, and maintained that while there had been
intimidating incidents in 1996 and 1997 they had been carried out by persons
unknown who had never demanded anything from him. It was suggested to him by
counsel for Scottish Ministers that he had made prior inconsistent statements
which were put to him.
[131] Mr Gibson explained the way in which his
business worked, which was in essence that he had premises in which he had a
computer based telephone and radio system and contracted with drivers that he
would rent to them radio sets which enabled him to send them to collect fare
paying passengers who phoned his business. The drivers kept the money paid in
fares, and paid Mr Gibson every Friday for the rent of the radio. Thus
the drivers were self employed. Some of them owned their own cars, while
others rented a car from Mr Gibson or from another car owner. Most fares
were paid by the passenger at the point of delivery but over the years
Mr Gibson built up contract customers, where the fares were paid by a
business or organisation to Spring Radio Cars rather than directly to the
driver. Some contracts were to the effect that the price paid by the consumer
was higher than that apportioned to the driver; for example a journey might
cost the consumer г10 and the amount paid to the driver might be г9. In
contract cases the driver would obtain a chit from the passenger showing the
work he had carried out. Mr Gibson had a sophisticated computer system
which also recorded the work done by the drivers. Each Friday Spring Radio
Cars settled up with drivers, a procedure known as the "weigh in". If a
driver had carried out no contract work, he would keep the money he had
gathered in fares, and would pay to Spring Radio Cars rent for the radio, and
if he rented a car, rent for it. If contract work had been done, the
calculation was more complicated in that the driver had to be given credit for
all of the contract journeys he had completed before paying for his rent of
radio and possibly car. Mr Gibson settled with his drivers whether the
contract money had been paid to him or not. He explained that that was
attractive to drivers who did not want to wait for weeks until being paid.
[132] From the brief outline given above it can be
seen that the source of income to Spring Radio Cars was rent from drivers for
radios and cars, with some income coming from contracts. At his premises,
Mr Gibson had vending machines from which he also made some income. He
explained Spring Radio Cars' assets were its telephone numbers, and cars. It
was important to have as many drivers as possible, to maximise rental income.
In order to keep drivers, it was necessary to have work to keep them busy. As
Mr Gibson put it, he had to have the telephone ringing. The turnover of
his business in the profit and loss account for the year to 31 October 2001 was г1,018,987. The
combined figure for radio hire charges and administration fees was г965,175,
all as seen in 6/23/16
and 6/95/2, page 48. In the year to 31 October 2002, the turnover had risen
to г1,328,156. He was familiar with his duties as a company director. He
used Network as a trading name, and over the years had bought other private
hire car businesses and had operated from various addresses. Mr Gibson
thought that in 2001 the percentage of work from contracts was at most 15% and
by the time he left in 2005 or 2006 that business had risen to about 20%. He
explained that he worked with Mr McLeod who had previously been employed
by the City of Glasgow Council in the licensing department. He was familiar with the
licensing requirements of the business and dealt with insurance and other paper
work. Mr Gibson owned all of the shares in the company but he had an
informal agreement that Mr McLeod was entitled to 25% of the worth of the
company. He employed a number of staff, and since the incorporation of his
business his accountants had been Mr Neilson and Mr Reid, at one time
of Hastings and Co. and latterly of Neilson Renton. His solicitors were Tilston
McLaurin, where Mr Kerrigan dealt with purchase of businesses and
Mr Cockburn dealt with other matters. He banked with the Clydesdale Bank.
[133] Mr Gibson confirmed that Spring Radio
Cars had bought a number of cars to rent to drivers over the years. Skodas
were very suitable to use as private hire cars and he had bought over sixty of
them between 2000 and 2004. He confirmed by reference to productions which
were agreed that he had bought cars from St Andrews and Parks of Hamilton,
and that he had obtained finance to do so from Central Scotland Finance
Limited, Lombard, Edinburgh Mortgage Company and First National Motor
Finances. He understood when he bought cars in that fashion he was buying on
hire purchase and if he paid all of the instalments then he owned the car. Paperwork
indicated that monthly repayments were made including an element for VAT. He
said that between 2000 and 2003 the price of a suitable Skoda was between
г9,000 and just over г10,000. He agreed that he had obtained finance at an
APR of 6.5%.
[134] Mr Gibson's position was that the
investigation into Mr Stirton and Mr Anderson's involvement with his
business had been stressful for him; as will become apparent while I accepted
that, I also formed the view that he was not honest in his evidence. I have found
that he had been subject to intimidation leading to his company making payments
to Mr Stirton and Mr Anderson in order that he be allowed to carry
out his business, despite his denial of that. I have found that he paid
protection money, when making payment of г2,500 plus VAT per week and г4,000
plus VAT per week for Skoda cars.
[135] His evidence was not very clear or at times
coherent. Part of that was due to the length of time between the events he
spoke of and the date of the proof, but part of it was due to his determination
to make a false denial that he had been the subject of extortion. A number of
prior inconsistent statements were put to him. His position was that he had
been investigated by the authorities regarding corporation tax and VAT in
2003. He had also been asked to give many statements to the police in
investigations into the business affairs of Mr Stirton and
Mr Anderson and he was no longer clear how many statements he had given,
nor which came first. He recalled being precognosced on oath. He said that
he was honest when speaking to the tax authorities, to the police and to the Procurator
Fiscal. He said that the precognition on oath, taken in court before a
sheriff, was particularly important to him and that he had been honest in it.
[136] Mr Gibson said that he had been involved
in private hire car business for nearly all of his working life. He had
bought the business of Spring Cars in about 1986. The business was not incorporated
until about 1997. Mr Viola had bought the business from him and made it
into a limited company, as could be seen from production 6/43/4 which is a
bundle of documents relating to the company showing it was incorporated in 14 May 1997. The original
shareholders were Mr Viola and Miss Craig. Mr Gibson knew that she
was married to Tony McGovern, that she owned Thomson's Bar in Springburn and was
a friend of Mr Viola's. Mr Gibson explained that Mr Viola had
bought his business with missives dated between 4 July and 6 October 1997, agreed between their
lawyers, all as shown at production 6/23. Mr Viola had incorporated
a company Spring Radio Cars Limited, and that company bought the business from
Allan Gibson trading as Spring Radio Cars. The price, г285,000, was to be
paid by a deposit of г35,000 and monthly instalments of г13,888 for 18 months.
Mr Viola had paid the deposit and some of the instalments which were due
under the agreement and had then gone to London and failed to return, having
been sentenced to a number of years imprisonment in connection with offences
involving controlled drugs. Under the agreement the business then reverted to
Mr Gibson, and he had run it thereafter along with his colleague
Mr McLeod. Counsel asked Mr Gibson why he had wanted to sell to
Mr Viola. Mr Gibson said that Mr Viola had previously
approached him to join up with another firm run by Mr Viola, but he did
not wish to do so. He had negotiations with another firm, Mac's Cars. He
wanted to sell for personal reasons. He was asked if there had been any
violent incidents and he replied that this premises had been smashed up by
masked men; his family car had gone on fire just after his wife and three
children had got out of it; he had reported this to the police but they did not
seem to be able to do much about it. He said he and his wife had been
frightened. He was asked in examination in chief about production 6/87
1A which bears to be a statement given by him to a police officer in November 1996.
According to the statement Mr Gibson told police that in May 1996
Mr Viola phoned and asked to see him and came to his office with Tony
McGovern. Mr Gibson did not know these men but they introduced
themselves as Billy Viola and Tony McGovern. Mr Viola wanted to know if the
business was for sale; Mr Gibson said no; a few days later Mr Viola
asked if he could bring someone to see him and came to the office with a person
named Stevie Malcolm who seemed to be knowledgeable about the trade and who said
it was a blue chip business. Mr Gibson went to by invitation to Paisley to see Mr Malcolm
taking Mr McLeod and another manager, Stuart Thomson, with him. Tony
McGovern was there. Mr Gibson took his business books and left them
there. He went to a taxi owners meeting the same day where he met two men he
did know, Bobby Rodden and Davie Deans, the owners of Mac's Cars, who said to
Mr Gibson that they "didn't know you were for sale" and that if the deal
fell through they would be interested in buying the business, and invited him
to lunch to discuss matters. Neither Mr Viola nor Mac's Cars bought
Mr Gibson's business at that stage. In the statement Mr Gibson is
said to have said:
"On the Monday evening (Monday 13 May 1996) I phoned Stevie Malcolm and told him that the McGoverns had a bad reputation in Springburn and if they were to take over Springcabs (sic) most of the staff and drivers would leave. Stevie said he had no knowledge of the McGoverns activities and that he would tell them it wasn't a good investment."
In court Mr Gibson said that he told the police the truth but could not remember all that he said in the statement. He said that the name of his wife was wrong, being Elaine, not Ellen, and that the price he paid for the business in 1986 was stated to be г150,000 when he told the police it was г15,000. It seemed as if a page might be missing from the statement. Thus Mr Gibson did not adopt the statement as his evidence. He said that his memory had been better then than now and that he had been truthful to the police. He was quite certain that at some time in 1996 or 1997 his premises were the subject of attack by masked men. The attackers cleared the staff out of the premises and then smashed up the computers. His wife had come home one evening driving their three children in the family car, and shortly after they had all got out of it, the car was set alight. There had also been an incident when another driver tried to force Mrs Gibson off the road. Further, there had been silent phone calls made first thing in the morning to his home address. Mr Gibson said that he and his wife had been very frightened by these incidents. They had sent the children to live elsewhere with grandparents for some months. Mrs Gibson thought about emigrating to Australia. Mr Gibson said he had reported all of these events to the police and he had also sought help from his MP. He felt that no one had done anything about it. His position in court was that he did not know who had done these things, nor why. He said in court that he did not know anything about Tony McGovern having a bad reputation and had not said that to the police.
[137] I found from this chapter of evidence that
there had been an approach to Mr Gibson to sell his business to
Mr Viola in 1996, and that Tony McGovern had been present at discussions;
that there had been discussions between Mr Gibson and the owners of Mac's
Cars about selling to them, and that no deals had been done. Thereafter
Mr Gibson's premises were attacked by masked intruders and his family car
was set on fire; his wife was subject to an attempt to run her off the road,
and there were silent calls to his house in the early morning. These events
frightened him. In 1997, a limited company in which Mr Viola and Miss Craig,
wife of Tony McGovern, were shareholders, bought the business. Mr Gibson
stayed on for some months as provided for in the missives, and Mr Viola
paid some instalments. He was then sent to jail and as agreed in the missives
the business reverted to Mr Gibson.
[138] Mr Gibson was asked about security for
his premises after the attack by the masked men and said that it was at first
provided by a Mr Jim Milligan who traded as SRS. He did not know Mr Milligan
personally and could not recall how he had come to contract with him. He
confirmed that invoices in production 6/25/7 are from SRS. These invoices are the
subject of agreement between parties in paragraph 8 of the first joint minute,
to the effect that they were lawfully obtained from the offices of Spring Radio
Cars and that copies are equivalent to originals. There are 17 invoices, all
for г2,800, all marked "private and confidential" and all addressed to Spring
Radio Cars. They come from SRS Security Systems, Highbury House, 149a Balgrayhill Road, Springburn, Glasgow.
The narrative in the invoice is the same in each one, as follows:-
"For the provision of professional services in connection with the following premises".
There then follows a date, starting in August 1999 and proceeding thorough the months to December 2000. The premises are listed in the first eight as
1. Network Spring Cars,
Unit 2 Foundry Street
Atlas Industrial Estate
Springburn
Glasgow G21
2. Network Maryhill Cars
Gorston Path
Maryhill
Glasgow G23
3. Network AC Cars
Unit 3, Munro Business Centre
42 46 Munro Place
Anniesland
Glasgow G13
In the later nine invoices numbers 1 and 2 above are listed, and number 3 is not. Mr Gibson said he had traded from the various addresses and he paid the invoices. He was not able to explain why the price was the same for differing numbers of premises. He did not know what Mr Milligan did, but he denied that Spring Radio Cars did not get value for money paid. He said he had no complaints from his staff and so the security provided must have been satisfactory. He thought that one person drove by the various premises at night but he had never checked it himself. He said that the invoices stopped coming from Mr Milligan and he did not immediately contract with anyone else. He knew that Tony McGovern had been murdered, he thought at the end of 2000. I have found that Mr Gibson paid protection money to SRS.
[139] A number of invoices from RS or RS Construction
were produced by Scottish Ministers, having been found in Spring Radio Cars
files and in Mr Yousaf's files. There are discrepancies in these
invoices which were not explained by the respondents in evidence. Some are
headed "RS" and others "RS Construction" although all show the same address
and phone number. The invoices were all similar in narrative though not
identical. An example of an RS Construction invoice dated 26 October 2001 is broken down thus:-
"Management services г440
Marketing and Consulting г320
Property Maintenance г600
Advertising г650
Base Security г490".
Invoices from RS show the last two items as "promotions" and "health and safety". There was at least one date, 26 October 2001, for which there were two invoices, one from RS and one from RS Construction. The relevant production numbers are 6/25, 6/26, 6/95A and 6/99. Some invoices had figures inserted opposite each entry, while others did not. The total in each was the same. Counsel for Scottish Ministers asked Mr Gibson a number of questions about papers recovered from his accountants and established that he had paid various charges, for example to Noble Consulting Engineering for assistance in putting a proposal to the council to enable private hire cars to drive in bus lanes, to Web Design for a website, and to Maiden Outdoor advertising for a billboard. Mr Gibson said all of these were legitimate business expenses. Counsel asked why Mr Gibson had paid those listed above for advice and advertising if he was contracting with RS Construction for services including management services, marketing and consulting and advertising. He said had entered a contract with RS to pay these amounts. He was asked what he got for his money and he found it very difficult to say. He knew that RS was a partnership of Mr Stirton and Mr Anderson. He knew Mr Stirton at school, and said that he had not seen him for years before meeting him casually at a football match and getting into conversation with him. He said that there were synergies between his business and that of Mr Stirton but did not further explain what they were. He also said that the first contact was with Mr Anderson who came to see him to tell him that he and Mr Stirton were opening up a filling station in Springburn which they had developed from an existing small filling station. Mr Anderson offered him an account facility for his drivers. The arrangement was that taxi drivers could fill up with petrol at the filling station and the invoice for the petrol would be paid weekly by Spring Radio Cars, who would in turn recover from the drivers. Mr Gibson explained that this would be very attractive to the drivers, and thus to him as such a facility would enable him to keep drivers. RS would advertise Spring Radio Cars in the filling station. Mr Anderson promoted the company and Mr Gibson recalled one referral, McEwan Chauffeur Drive, which had come through him. He also thought some restaurant contract work had come through Mr Stirton. Further, Mr Anderson had helped to negotiate the purchase of another hire car firm, Kenmure Cars, and had succeeded in getting the price down. He thought that his partner Mr McLeod had been given some advice about sourcing tyres from abroad. So far as property maintenance was concerned, Mr Gibson said that his brother ran a painting and decorating business and he would get him to do such work, but that if property repairs were needed he could phone Mr Anderson who would make arrangements. He did not recall ever having done so. He thought that security patrols were provided at night but as he would leave the premises at 6 or 7 o'clock in the evening he never saw them. The windows were closed at night and so his staff would not know if there were any people driving by or not. Mr Gibson said that Mr Anderson gave him general business advice, and he thought Mr Anderson had a good business background. He was not concerned that he had been sequestrated as he said that many famous successful business men have in the past been bankrupt. He did agree that the fact that Mr Anderson had been for some years claiming benefits, and that Mr Stirton had for some years failed to make tax returns suggested they were not the first people one would go to for business advice.
[140] Mr Gibson said that Mr Anderson had
arranged to procure fifteen Skodas for the business in 2002. Mr Gibson
had been thinking of getting more cars, and on telling Mr Anderson that, Mr Anderson
had said he could arrange it. Mr Gibson agreed to pay г4,000 plus VAT
per week for 78 weeks to A & S Leasing, a partnership
consisting of Mr Stirton and Mr Anderson. He said that 6/25/5 was the agreement, which is headed
"Hire Agreement", but which he understood to be a sale agreement. The cars
were to be delivered to him in March or April 2002 but the repayments were not
due to start until November 2002. Mr Gibson said that was attractive to
him because he could start fifteen new drivers immediately and make money from
renting them cars and radios without having to pay for the cars. Counsel asked
him to agree that the price he was paying was г312,000 plus VAT, which he
did. He agreed that worked out at approximately г20,000 for each car, despite
the fact that sale price of the cars was approximately г10,000.
Mr Gibson maintained he was getting a good deal as he did not have funds
to pay for cars otherwise and even if he had obtained credit elsewhere he would
have had to pay VAT at the outset, which he could not afford. He was
attracted by getting the use of the cars for several months before paying for
them.
[141] Mr Gibson said that he was interested in
having a new purpose built building and that Mr Stirton was prepared to
try to find a suitable site and then build the building. In evidence many
months later Mr Stirton said that Mr Gibson had asked him if he knew
of anyone with land to sell and Mr Stirton told him he would assist him in
finding suitable land. I heard evidence from a solicitor and an architectural
technician about finding such land, and I accepted that Mr Gibson did want
such land, and that Mr Stirton and Mr Anderson attempted to find it. I
did not accept that the quest for land and a development on it was the reason
for the contract referred to below. Mr Gibson was referred to production 6/24/1, an agreement signed on 29 March 2001 and registered in the Books
of Council and Session on 2 April 2001. The document is executed by Spring Radio Cars
Limited and acknowledges receipt of a loan of г265,000 from RS Construction.
The company agrees to pay an initial payment of г50,000 within two weeks of the
date of the agreement and г2,000 per week over a period of ten years. In the
event of non-payment, interest at 20% per annum is due. In the event of
non-payment for four consecutive weeks, RS Construction are entitled to
transfer of a number of shares in Spring Radio Cars proportional to the total
sum still outstanding. It is confirmed that all shares in the company are in
name of Mr Gibson and it is provided that RS Construction's
permission is needed for sale or transfer of any shares within ten years; it is
provided that if any agreement for sale is reached in a sum in excess of г2 million,
then 25% of the price in excess of г2 million will be paid to RS Construction.
Finally it is provided that in the event of a resolution for winding up, or
appointment of a receiver or administrator, RS Construction shall be
entitled to call upon payment of sums outstanding. The deed is subscribed by
Mr Gibson and witnessed by Mr Anderson, describing himself as a
property developer, residing at 3 Dodside Gardens, Glasgow. Mr Gibson said he had signed
this agreement in the offices of Mr Anderson's lawyer. He said he did
not actually get the loan. He described the document as being a security for
Mr Stirton and Mr Anderson. He wanted to have a new building and
they were prepared to search for a site and build it. They did not want him
to be able to walk away half way through leaving them with a building for which
they had no use. When he was asked why he agreed to pay back over
г1 million on a loan of г265,000 he replied that it was never intended to
be enforced and was "just a security document." Mr Gibson said that it
was just between him and Mr Stirton, though I noted that Mr Anderson
was the witness. Mr Gibson did not tell his business partner
Mr McLeod about it, nor did he tell his accountant. When counsel for the
Scottish Ministers suggested to him that it was a ridiculous bargain from his
point of view, he disagreed. He said that he had left Spring Radio Cars in
2005 or 2006 and there had been no attempt to enforce it.
[142] Counsel then turned to the purchase of
Kenmure Cars and Mr Gibson said he had bought this business from Frank
Anderson and Robert Dempster in 2002. He paid a deposit of г140,000 and agreed
to pay a further г100,000 in instalments. Mr Frank Anderson gave
evidence. He was not able to recall much detail, and explained that he had
had many businesses and found paperwork tiresome. While I did not find him to
be an impressive witness, I accepted that the missives accorded with his
evidence and that of Mr Gibson. The missives were produced, confirming
the price. Mr Gibson was asked how he could afford to pay the deposit at
a time when he said he had no money to buy cars, and he said that he borrowed
from his father and from friends. He said that Mr Anderson agreed to
delay payments on the RS Construction account while the purchase price
Kenmure was being paid.
[143] Amongst the productions for the Scottish
Ministers were many papers recovered by police officers from Spring Radio Cars'
offices. Counsel asked Mr Gibson about them. He said that just because
things were found at his desk did not mean that he had seen them before, and he
said that he was inclined to scribble figures on paper and could not say now
what was meant. He said of some papers that the writing might be that of
Mr McLeod, but he could not be sure. An example is found at 6/23/13. Mr Gibson thought that the
writing might be Mr McLeod's. There are several pages and on looking at
the first page Mr Gibson said that he did not know what "г240,000 K/muir"
referred to. He said that "г108000 AS" would be г4,000 per week plus VAT for
cars. The next two entries "г67000 RS" and "г50000 back money RS" he could
not explain. On the next page he recognised his own writing and said he had
written:
"28 weeks at г4000 + г700 VAT,
г122,000-г19600 VAT
156 week deal = г624,000 +г109,200 VAT
Investment г260,000
г150,000
г410,000".
[144] Mr Gibson could not explain these entries.
Counsel suggested that there was a requirement to pay for the cars over
156 weeks, which he denied. She suggested the investment entry related
to г260,000 paid for Kenmure and г150,000 paid for cars but Mr Gibson
could not agree nor explain what they were. The next page had a number of
entries headed "A.S Paid" with various figures and calculations which
Mr Gibson could not explain. The following pages were similar. In
page 8 there was a note "г792,000 owed" and counsel asked why he had written
that, pointing out that it was a large sum. Mr Gibson said he did not
know and that he used to scribble documents at his desk but did not know what
they meant. At 6/23/27,
page 4 there are four typewritten pages of figures and notes.
Mr Gibson said he did not type but his colleague Mr Pert typed for
him. The heading on the first page is:
"ORIGINAL DEAL г1,000,000 AT г2,000 PER WEEK".
Thereafter some calculations are typed and then the following:-
"DEAL FROZEN DUE KENMURE PURCHASE. NOTHING ELSE TO GET PAID TILL KENMURE PAID IN FULL."
Mr Gibson said that he was allowed to stop making payments for the Skoda cars until Kenmure was paid for. He could not explain the rest of the entries. Counsel for Scottish Ministers put a theory to him as follows.
"Mr Stirton and Mr Anderson required Spring Radio Cars to pay in the region of г1,000,000 over a period of 10 years. Because they wanted security they created a loan document. It provided them with security. It set out the terms being г2,000 per week over 10 years being an initial г50,000 and then there was г265,000 lent to Spring Radio Cars. Because there was no loan in the books it was obvious that he had somehow to justify the г2,000 payments to his accountants and auditors, therefore he needed to create documents indicating what the payments were for. That was why the contract and the invoices were created. The contract allowed him to put through a legitimate business expense. But both the loan and the contract were shams. The contract was a device to legitimise payments in respect of the security documents. Thereafter Mr Anderson and Mr Stirton realised in 2002 that the initial term could be shortened if Spring could generate further income and so told him to buy fifteen Skodas and to buy Kenmure. Initially the Skodas were at 156 weeks at г1,500 per week but as the police started to get interested he could not justify 156 weeks and reduced it to 78 weeks. That resulted in a higher payment of г4,000 plus VAT. He had to pay г150,000 for the Skodas, г250,000 for Kenmure and a percentage, being 63%, of his income from the Skodas and Kenmure to Stirton and Anderson to settle the debt of г1,000,000. The increase in payments resulted in a reduction to 61/2 years for the term. Therefore Spring Radios paid twice for Kenmure, once to the owner and once to Stirton and Anderson. The payments that he made were not genuine payments for a legitimate transaction but rather for an illegitimate purpose being that he and his family would suffer harm from Mr Stirton and Mr Anderson or those associated with them if he did not make these payments."
Mr Gibson denied all of that. As I discuss below I did not have evidence before me to enable me to find the theory proved. I did however find Mr Gibson incredible when he denied knowledge of the meaning of these and other similar entries on papers found in his office. I was of the view that Mr Gibson knew much more about these entries than he was prepared to say. I drew from that an inference that Mr Gibson had business dealings with the respondents which he was not prepared to divulge in court.
[145] Mr Gibson denied having been the subject
of extortion and counsel proceeded to put to him a number of prior statements
which she said were inconsistent with that position. These included his
precognition on oath, which was lodged as production 6/22. It was taken
in Glasgow on 30 November 2004. Mr Gibson said in
evidence that he regarded it as very important as it had been taken in court
before a sheriff and he had been truthful in it. There was no dispute that he
had said that which is recorded in the transcript. In that precognition on
oath Mr Gibson was asked about other statements which he was alleged to
have made to police officers and officials of HMRC. He was also asked about
these statements in court and I find it convenient to discuss them below in the
context of my view of the evidence I heard from the police officers and
officials. It is useful however to consider Mr Gibson's position at the
precognition on oath. He seemed to me to be reluctant to state why he had
sold to Mr Viola, and had to be pressed before he did say that his
computers had been smashed up in 1995 or 1996. When asked if there were any
incidents relating to him personally at that time he stated there were not, and
when asked if any incidents relating to his family had happened he said that
his wife's car had been petrol bombed and also run off the road. He seemed
reluctant to admit to these incidents. He did not know who was behind the
incidents. On being asked if he had improved his security at the office after
the incident when it was smashed up, Mr Gibson explained that he had gone
from having one electric door to having double doors and cameras. He had not
maintained the cameras. He also said that a company called SR looked after
external security as part of an overall package. The name of the company is then
referred to by the Procurator Fiscal as RS and Mr Gibson confirmed that it
was run by Mr Stirton and Mr Anderson. He explained the
introduction to Mr Stirton and Mr Anderson in much the same terms as
when giving evidence in court before me. He said that he entered into an
arrangement for management services in 2001. He confirmed that he had paid in
excess of г20,000 for each Skoda which had been sold by the garage for г9,888.
He claimed that when buying cars with finance from a finance company he had
either to pay a deposit or find security. He confirmed he had always paid the
same amount each week under the management services contract. When asked
about advice under the contract he said he believed it might be Mr McLeod
who had asked Mr Anderson for advice regarding road traffic management.
Mr Gibson agreed that he could not say what he had got for г440 per
week. So far as marketing and consultancy were concerned, Mr Gibson
recalled getting a contract with McEwan Chauffeur Drive and some restaurants the names of
which he could not recall. In property maintenance he said he believed he
could phone Mr Anderson but he had not done so. In promotional
advertising he said he got leaflet drops and promotion of the company by the
garage stocking the company's monthly magazine. For security he said that he
believed that the premises were visited during the night. He could not recall
seeing any risk assessments. Mr Gibson said that since stopping the
contract about eight or nine months before, he had quotes from others but had
not entered into any new contract. For the eight or nine months that had
passed he said that his actual job totals had dropped since stopping the
leaflets, and that he had lost several account customers. Mr Gibson was
asked about papers recovered from his office and could not explain what the entries
meant. He could not say who "Frank" was in relation to Kenmure, despite the
fact that he had missives concluded with Frank Anderson for purchase and sale
of that business. He did not recall what a 156 week deal referred to.
He did not know what "INVESTMENT" referred to. These questions are recorded
over several pages and Mr Gibson said he had no idea what for example "the
main deal" was. Eventually the sheriff reminded Mr Gibson he was on
oath. He had no idea what "original deal 1 million" might mean.
Mr Gibson said that RS did not assist in the purchase of Kenmure except on
the basis of late paying of RS Construction invoices.
[146] In his precognition on oath, Mr Gibson
was asked about his meeting with Mr Donnelly and Mrs Robertson of
HMRC. Mr Gibson said:
"He [Mr Donnelly] brought up the invoicing and asked me why I needed security. I explained the area we were in, everything that had happened in the past to us and he said 'Protection' and I said 'security' and I said I believe security is a form of protection. When you secure something you protect it."
Mr Gibson went on in the precognition on oath to say that the had agreed to pay г75,000 tax on the basis that the invoices from 2001/02 were disallowed as deductions for tax and that while he had not filed his next set of accounts he was expecting to "take them back out of my accounts and pay tax". The expected amount was г180,000. The Procurator Fiscal asked why he did not show Mr Donnelly invoices to show that these payments were legitimate and Mr Gibson's response was that he had showed invoices but that was not enough for the taxman. Mr Gibson was asked to comment on the notes of meetings taken by Mr Donnelly and sent to his accountant Mr Neilson. He disputed the content and said that his recollection was that the conversation went something like this:- "Why do you need security? I need security because I have had hassle at our offices in the past and at my home." He went on to say that he thought meetings with HMRC were private. He also said that he did not pay the money out of fear and that he had never been frightened of anyone.
[147] The Procurator Fiscal then moved on to
statements made to the police. Mr Gibson agreed that while he did not
recall telling the following to the police, it was what he thought at the
time:-
"Deans and Rodden denied McGoverns involvement in the company but intimated they knew McGraw's name was associated with their business and it suited their interests because they didn't get any hassle from anyone."
[148] That evidence was significant as it describes
a belief by Mr Gibson of the way in which protection may be said to
operate. I did not make any finding that Messrs Deans & Rodden were
subject to intimidation as there is no evidence before me as to the truth or
otherwise of that assertion. Nor did I make any finding about Mr McGraw's
involvement with them. What I do take from the statement is that
Mr Gibson was aware that protection may operate in the fashion there
described, that is that a person's name became associated with a business and
the business then did not get any hassle. In the precognition on oath, Mr Gibson
described the events concerning masked men and his family car in terms similar
to those in court before me. He had it put to him that he had told the police
that "I knew what was happening was all linked and it had to do with Spring
Radio Cars so I decided that I would sell the business." He said he did not
recall saying that, and when asked if it was true, said that he did not know,
because he had not sold the business until some months later. He accepted he
had signed the police statement but said he did so because he was anxious to
get out of the police station. He said that RS Construction did not have
a VAT number at first and he said that he rarely saw Mr Stirton, which I
regarded as odd as the contract states that services were to be provided
personally by Mr Stirton. Mr Gibson maintained to the sheriff that
he had not said to the police that he got nothing for the payments he made.
Rather, he said, he could not remember and so the police had put down that he
said he got nothing. When the Procurator Fiscal got to the last category,
that of Security/Health and Safety for г490 per week, he reminded Mr Gibson
that the police statement had him noted as saying
"RS Construction are supposed to provide us with security but in reality we use RS Construction because they are known in the areas and I know nobody will touch us or give us any hassle because of who's involved with RS Construction namely Russell Stirton."
Mr Gibson said he did not recall saying that. He was then asked, by the Procurator Fiscal, if it was true and said "I believe it to be true." He went on to say he did not know if it was true but it might be. He said "I believe it in my own head to be true." I found that significant. Mr Gibson then explained that he had been at the police station for eleven hours on 1 December 2003 and had had no breaks and was therefore prepared to sign the statement to get away. The Procurator Fiscal asked:
"You said you believed it to be true that no one would give you any hassle because Russell Stirton is connected with RS Construction?"
Mr Gibson's response was that he did not remember saying that. He was told he had just said it under oath. He was asked what he meant by it and he said he did not mean anything. He said he was just babbling.
[149] The Procurator Fiscal then turned to the
purchase of Skodas and Mr Gibson confirmed he was paying г4,000 plus VAT
per week for 78 weeks for fifteen Skodas, from A & S. Mr Gibson
finished his precognition on oath by denying that he had been the subject of
extortion.
[150] In court before me Mr Gibson maintained
he had not told the police or the officials of HMRC that he was the subject of
extortion or that he made payment for nothing in return. He accepted that he
had been interviewed by Mr Murray and Miss Ramsay at his office, but
denied telling them he paid protection money. I did not believe his denial.
According to Mr Gibson the police called at his office and asked him about
the murder of Alexander Blue. In evidence in court, he did not accept that he
had given any information to the police which he wanted to keep out of his
written statement. He did however state in evidence that the police indicated
they would like to see him again at the weekend. Mr Gibson said that he
and his partner Mr McLeod went away from their homes on the Friday night
and stayed away over the weekend. He said they wanted to discuss what to do
about the police. I regarded that as behaviour which supported the police
version of events which is that Mr Gibson had told them that he had been
the subject of extortion. He gave no other reason for his reluctance to speak
to the police again other than that he was busy in his office. Mr Gibson
said that the police interviewed him several times and that they often used the
phrase "we want you come onboard", meaning that they suggested that they wanted
him to say that he had been the subject of extortion.
[151] A number of letters and affidavits were
lodged by the respondents in which both Mr Gibson and Mr McLeod
stated that they were not subject to extortion, and in which they expressed the
view that Strathclyde police were harassing them by attempting to persuade them
to say that they had paid protection money.
[152] I have found Mr Gibson to be incredible
when he denied having been intimidated into making payments. Some of his
evidence was inherently incredible such as when he said that he was not sure if
the incidents with the masked men and the fire in the car were connected to his
reason for wanting to sell his business. He was incredible when he said that
his company paid out г2,500 plus VAT per week but he was not able to explain
what service he got for his money. He was incredible when he said that he was
content to pay a price for cars twice the retail price because he got the cars
several months before the payments started, and because he could not get commercial
finance. The fact that he had used commercial finance houses before and after
the purchase from A & S led me to disbelieve him when he
suggested that he could not get finance. The terms of the precognition on
oath were not in dispute and I found that Mr Gibson had been self
contradictory in that, which I found damaging to his credibility. I formed
the view that he was truthful when he said that he paid because people knowing
he was looked after by Russell Stirton meant that he was left alone. I was
not impressed by his blatant attempt to say he had not said that when plainly
he had been recorded as doing so. Nor was I impressed by the suggestion that
he was "babbling". I heard Mr Gibson's evidence before I heard from the
police officers or the officials of HMRC. Once I had heard all of the
evidence, I believed the officers and officials when they said that
Mr Gibson had made admissions which he now denied making. I set out
below what was said and what I believed, and why. I found Mr Gibson to
be evasive when he was asked about papers found in his office.
[153] As the proof proceeded I heard evidence which
showed that Mr Gibson had instructed his solicitor Mr Cockburn to
write to various people in authority including the Solicitor General complaining
of police harassment of Mr Gibson and his colleague Mr McLeod. It was
submitted on behalf of Mr Anderson that Mr Cockburn's carrying out of
those instructions supports an assertion that Mr Cockburn personally
thought that there had been no extortion. I did not accept that submission.
Mr Cockburn gave evidence to the effect that he took his clients'
instructions. While he would never make an assertion on behalf of a client
which he knew to be false, Mr Cockburn was careful to say that he had no
knowledge of the events; he simply knew what his client told him.
Mr Gibson and Mr McLeod denied being subject to extortion. When
Mr Anderson asked Mr Cockburn if he had asked if there had been
extortion Mr Cockburn said he had not and that there were some questions
one did not ask. Mr Neilson, who acted as Spring Radio Cars accountant
and auditor, gave a clear audit certificate for accounts containing payment of
г2,500 plus VAT which I have found to be extorted payments. Mr Neilson
explained that in the audit he sought invoices for the payments, and asked
Mr Gibson what they were for. He was told they were for services and
that there were invoices. He was satisfied with Mr Gibson's answers.
Thus as with Mr Cockburn, the information comes from Mr Gibson and
the accountant is not a separate source of evidence of the probity of the
payments. I discuss Mr Neilson's evidence in more detail below.
[154] So far as statements made to police officers
are concerned I believed Mr Murray and discuss his evidence and my reasons
for believing him below. I also believed Mr Donnelly and
Mrs Robertson from HMRC and discuss their evidence further below.
Mr McLeod, the other director of Spring Radio Cars said nothing in
evidence to make me doubt the police or the HMRC officials, and I found him to
be an incredible witness. I discuss my reasons for so finding below.
Mr McLeod
[155] Mr McLeod
gave evidence starting on Friday 29 January 2010. He was 49 years of age and
currently unemployed and had been so for the last eight months. He seemed to
me to be nervous and he explained that the involvement of the police in
investigation of the business of Spring Radio Cars and Mr Stirton and
Mr Anderson had caused him a great deal of trouble. There had been
publicity in newspapers which suggested that he was involved in crime. This
had affected his personal life. In particular, he had been involved in
training children in sport, and some parents had refused to let him continue
with their children. Mr McLeod was adamant that he had not been the
subject of extortion. I did not find him to be a credible witness for the
reasons I discuss below.
[156] He had an understanding with Mr Gibson
that he owned 25% of the company. He said his responsibilities were primarily
for personnel, licensing matters, insurance and matters to do with drivers and
operators. Mr Gibson did the banking and finance. He said that "he
knew what was going on finance wise most of the time but sometimes it was after
the event." He had worked for Glasgow City Council as a licensing officer and
brought that experience to Spring Radio Cars.
[157] Mr McLeod remembered giving statements
to the police and to Mr Donnelly of HMRC about tax. He said he had
answered truthfully but Mr Gibson did most of the talking.
Mr Gibson had been truthful in what he heard him say. He said he had
spoken to Mr Anderson several times since 2005 when precognitions had been
taken. The last time he spoke to him was the morning of the court case and
they simply discussed the football. Counsel for Scottish Ministers asked him
if he had attended previous hearings in the Court of Session and he said that
he had but it was legal discussion which he did not understand. He had wanted
to see Mr Gibson.
[158] Mr McLeod said that Spring Radio Cars
earned its money by renting radios and sometimes cars to drivers. He said
that Skodas were very reliable cars and Spring Radio Cars had bought about sixty
of them between 2000 and 2003 and, while he could not remember the exact number
nor the exact price, he was prepared to agree that they would cost between
г9,000 and г10,000. He said he did not know what percentage they had to pay
on finance. He understood that the company bought cars on hire purchase and
normally paid over 3 years, and at the end of the period the company owned
the cars. It was clear to me that Mr McLeod understood very well the way
in which ordinary commercial finance for purchase of cars works. He also
understood VAT as he explained that a company could not reclaim VAT unless it
had a VAT number and a VAT invoice. Counsel for Scottish Ministers put to him
6/23/5, which is agreed to be a file found in Spring Radio Car's office and
asked about handwriting over the following pages, 17, 19, 27, 28, 31, 55, 57,
58, 155, 156, 156A. Mr McLeod was very vague about it and said that it
might be his writing, but he was unsure and could not explain any of it.
[159] Mr McLeod said he was aware that
Mr Gibson's car had been petrol bombed after his wife and children had got
out of it and that he had sent his children away to their grandparents.
Mr Gibson had told him that he was waiting for someone to come and speak
to him about these things but nobody did. He said that he knew the name Tony
McGovern from the newspapers and that he had heard of the McGovern family being
associated with crime. He said that he recalled a meeting with Bobby Rodden
and Davie Deans about Mac's Cars. He did recall discussing who the "real
owner" was and being told it was Tam McGraw. He said that at one stage Rodden
and Deans had said that McGraw was not associated with them but it suited them
to have other people think that he was. When Mr Viola bought the
business Mr McLeod went to work for a firm called "Comware" in Fife, with the intention that
Mr Gibson would join him there after working for some months with
Mr Viola. Mr McLeod wanted to get out of the private hire car
business because it was twenty four hours a day, seven days a week and he wanted
something that was more nine to five. The sale to Mr Viola had fallen
through when he was imprisoned and Mr McLeod had returned to work with
Mr Gibson.
[160] He said that he was never under the
impression that someone was putting the business under pressure for protection
money to be paid. He was aware that someone called James Milligan provided
some sort of security service but he was not sure what. His business was
known as SRS. Mr McLeod had
never seen him doing any work for Spring Radio Cars. He knew any connection
between SRS and Spring Radio Cars had
come to an end. He knew the name Russell Stirton and he knew that Spring
Radio Cars got services from him. He thought it had started in early 2000 and
he said that the services were various, including advertising, maintenance and
marketing but he could recall no more. He said there were thousands of
leaflets printed and distributed in a variety of ways including by the Royal
Mail and with the newspaper "The Glaswegian". He said that Mr Anderson
and Mr Stirton were something to do with the distribution and he did not
regard it as of major importance at the time. He and Mr Gibson knew from
their computer records where they got their business from so they would target
the areas in which they did not seem to be strong. Mr McLeod was asked
by counsel for Scottish Ministers exactly what Mr Stirton and
Mr Anderson did for the company and he said that his mind had gone a
blank. He said that he thought they could be called on to attend to repairs
but he could not recall ever contacting them to do so. He was asked what else
he could recall and he said that he was unable to think and asked if counsel
could come back to this later. The witness seemed to me to be frightened and
struggling. He said that Mr Gibson did not tell him everything and he
had no view about the value for money or otherwise of the г2,500 plus VAT per
week that they paid.
[161] When asked about the police Mr McLeod
was adamant that 27 November 2003 was a Wednesday and that a male and female police officer
came to see him on that day. He is wrong, as that date was a Thursday. The
police told him that they wanted to talk to him about the murder of Alexander
Blue. That was a murder which had happened in 2002 and he understood that the
deceased had had a connection to the taxi trade, and that police had
interviewed him before because he was in the same business. He had already
been interviewed but they wanted to see him again. They were there for half
an hour or longer. They came back later and he gave them documents about the
Skodas.
[162] On the next day of giving evidence,
Mr McLeod said that he knew that SRS was run by Jim Milligan. He never saw him doing any work
at Spring. Counsel showed him 6/25/7, page 18, which is an SRS invoice but he said that it had no
significance for him. Counsel put it to him that Spring were paying
protection money to SRS
and Mr McLeod disagreed.
[163] Counsel then asked him if he remembered
meeting Mr Donnelly of HMRC. He said that he did remember it but he did
not have a great recollection of it. He remembered Mr Donnelly saying
that the payments were for protection and Mr Gibson saying that it was for
security and it went back and forth like a tennis ball. Counsel put the notes
of meetings from productions 6/37 and 6/38 to him. Mr McLeod said
that he understood Mr Gibson was unhappy about the accuracy of the notes.
He said that Mr Gibson was very talkative and would tell people things.
He was sure however that Mr Gibson did not say that they had paid RS to
allow the firm to expand and grow with no problems. Mr McLeod said he
knew that Mr Donnelly said that some of the payments had to be
disqualified but he did not know much about it. Mr McLeod said that he
knew that they had to settle a tax bill of about г75,000. When counsel for
Scottish Ministers asked him why he accepted HMRC's position he said that he
did not want dirty laundry coming out. I asked him what he meant by that.
He said that it was "just a phrase". Counsel for Mr Stirton objected to
the question after it had been asked and answered on the basis that I was cross
examining Mr McLeod. I noted what Mr McLeod said but did not put much
weight on it as his evidence in court was to the effect that he knew nothing
about any unlawful conduct. He may have made a revealing slip of the tongue,
but he maintained his position which was that there was no unlawful conduct to
his knowledge. I did not believe him, for reasons additional to the answer
referred to above.
[164] Counsel pressed the witness again about the
services obtained by Spring Radio Cars. He agreed that it was the biggest
expense other than staff salaries but said he did not know what it was for.
He needed to have a break from giving evidence because he was becoming
distressed.
[165] Counsel for the Scottish Ministers asked
Mr McLeod if he had gone to see Mallard Associates, at the invitation of
the interim administrator. He said that he did go for an interview but that
he did not like being questioned by the police or anyone else. He had spoken
to Mr Anderson about whether or not he should go and was told that it was
a matter for him. Once again the witness became upset and needed a break.
Counsel for the Scottish Ministers put to him productions 6/26/15,
page 13 and 6/95/2, page 210 which are two invoices from RS to Spring
Radio Cars which have the same date but are not identical in their terms.
Mr McLeod could not explain this.
[166] Mr McLeod agreed on looking at 6/96B
that Spring Radio Cars had bought cars on hire purchase from Edinburgh Mortgage
Corporation Limited and Parks of Hamilton. His position was that he thought that Mr Anderson
and Mr Stirton had experience as car dealers but the matter was dealt with
by Mr Gibson, not by him. He said he knew nothing about the Skoda deal.
He could give no explanation why Spring Radio Cars had paid approximately
г20,000 for each of the Skodas purchased from Mr Stirton and
Mr Anderson.
[167] Mr Anderson cross examined
Mr McLeod. He said that he did know Jim Milligan and he knew that he
owned SRS but he did not know any
details of the business.
[168] In his precognition on oath, Mr Gibson
had indicated that Mr McLeod might know some details of the business which
Mr Gibson could not supply. It was perfectly plain in evidence that
Mr McLeod's position was that he knew no details and that matters should
be referred to Mr Gibson. In Mr McLeod's precognition on oath which is
production 6/22 he agreed that Spring Radio Cars had agreed to pay in
excess of the market value of the Skodas. He could give no credible
explanation for that, merely saying that "probably over the period the figures
would have worked out." Mr McLeod had the loan agreement put to him at
the precognition on oath and said he had never seen it before. That accorded
with Mr Gibson's evidence that he did not tell Mr McLeod about it.
Mr McLeod said at the precognition on oath that he was frightened by the
police, who tried to persuade him to say that he had been the subject of
extortion when he had not. He denied that he had ever told the police that
there had been extortion but that he had said he would not sign a statement to
that effect. He denied telling the police that he did not know what services
Spring Radio Cars got from RS Construction. The sheriff warned
Mr McLeod several times about perjury, as he appeared to be reluctant to
answer questions in a straight forward way.
[169] Mr McLeod was a witness for Scottish
Ministers. When his cross examination was completed, the respondents had
outstanding a commission for recovery of documents. They wished to ask Mr McLeod
about documents which they expected to recover. I therefore agreed that
Mr McLeod could be recalled for further examination by the respondents,
and re -examination if so advised once the commission had taken place. The
purpose of the commission was to recover documents relating to the movements of
Mr Murray and Miss Ramsay in late November and early December 2003.
Mr McLeod gave evidence that his first meeting with Mr Murray and
Miss Ramsay was on a Wednesday, whereas everyone else who gave evidence
about the meeting said it was on 27 November 2003, which was a Thursday. As
I understood it, the respondents wished to recover police notebooks to show
where the police officers had been at that time. He was recalled and examined
by Mr Anderson and re-examined by counsel for Scottish Ministers. Mr McLeod
said that Mr Murray wrote down whatever was said to him in a notebook. That
was contradicted by Mr Murray who said that he wrote on sheets of paper. I
preferred Mr Murray's evidence as he gave a reason for using sheets of
paper, connected to his police experience, and I believed him.
[170] I did not find Mr McLeod credible. I
formed the view that Mr McLeod was frightened and that despite his denials
he had been the subject of extortion. I did not accept that he knew as little
as he said in court about the affairs of Spring Radio Cars.
HMRC Witnesses, Robertson,
Donnelly and MacFie
[171] Three
witnesses were led by Scottish Ministers who were either currently working for
HMRC or had retired from posts in that organisation. I made an order under
section 18(2E) of the Commissioners for Revenue and Customs Act 2005 which
enabled the witnesses to give evidence of matters otherwise confidential.
There was no objection to my making such an order.
[172] On 25 June 2009 evidence was led from
Mrs Norma Robertson, an employer compliance officer at HMRC in Glasgow. She had been employed
by the Inland Revenue, (now HMRC) in that capacity for 29 years.
Mrs Robertson's evidence requires to be considered along with the evidence
of Mr Brian Donnelly, a tax inspector who retired from his post with HMRC
shortly before giving evidence.
[173] Mrs Robertson explained that she was
allocated cases to examine by others within HMRC. She understood that some
cases were selected for a particular reason and others were selected at
random. Her job involved examining PAYE and NI records and noting the
expenses and benefits paid by employers. She would be allocated a file and
would read the records which would include accounts and PAYE returns before
calling on the tax payer in order to examine their records, her purpose being to
check that the employers were operating to the Regulations. She had a duty of
confidentiality to tax payers and would discuss matters only with other HMRC
officers. If police sought information from her she would release it only if
they had a warrant in appropriate terms.
[174] Productions 6/37 and 6/38 are Inland
Revenue files relating to Spring Radio Cars. In 2002 Mrs Robertson was
asked to examine the records of Spring Radio Cars and wrote to them on 20 November 2002 advising that she would
call to see them 11 December 2002. She understood that the files had been chosen at
random. Production 6/38/79 is her note of her first meeting with
Mr Gibson and Mr McLeod on 11 December 2002. The note shows that
Mrs Robertson asked about items apparently for personal expenditure which
had been put through the company accounts; about phone bills for the directors'
home telephones and about consultancy fees and staff training expenses.
Mr Gibson and Mr McLeod asked her advice about record keeping and she
gave it. They undertook to get the information sought by her. Production 6/37,
page 215 is Mrs Robertson's letter to Spring Radio Cars of 13 January 2003 noting the meeting of 11 December 2002. It is consistent with
the note taken by Mrs Robertson. She explained in evidence that notes
which she took were not intended to be verbatim records of all that
occurred but were intended to be accurate summaries of important points. In
her letter Mrs Robertson asked for details of services provided in respect
of consultancy fees noted in the accounts in the sum of г52,861. That letter
was replied to by Messrs Neilson Renton on behalf of Spring Radio Cars by
letter dated 7 March
2003 in
which they enclose a schedule of consultancy fees for the year ended 21 October 2001 as follows:
SPRING RADIO CARS LIMITED
YEAR ENDED 31 OCTOBER 2001
CONSULTANCY FEES
г
J P S Management Services 17,850
Management services relating to information
technology, data training, roads campaign etc
Business Advisory Services 12,221
Consultancy advice re development of the
business, site visitation evaluation reports
grants advice
RS Construction 13,200
Provision of management services.
RS Construction
Provision of marketing, consultancy, property 9,600
maintenance, advertising and security
__________
52,861 [sic]
[175] Before receiving that letter
Mrs Robertson was told by her colleague Mr Donnelly that Spring Radio
Cars was to be subject to an investigation into corporation tax. Thereafter
she and Mr Donnelly attended meetings with Spring Radio Cars and their
accountants. At 6/38, page 60, is her note of a meeting on 7 May
2003 at HMRC premises in Glasgow at which Mr Donnelly, Mrs Robertson,
Mr Gibson, Mr McLeod and Spring Radio Cars accountants Mr Neilson
and Mr Reid were present. Mr Donnelly was the senior HMRC
officer. The note records that Mr Neilson said that there was a VAT
inquiry ongoing. He explained that Spring Radio Cars had previously been a
sole trader and had been incorporated as a limited company in 1997. It had
taken over Maryhill Cars in 1999, AC Radio Cars in 2000 and Kenmure Cars in 2001.
Mr Gibson explained that all drivers were self-employed. They rented a
radio and the necessary computer equipment to enable the radio from Spring
Radio Cars, the charge in 2000 being г60 per week. Some drivers also rented a
car from Spring Radio Cars which could be paid at г222.25 for car, radio and
insurance. In relation to consultancy payments the note is in the following
terms:
"Donnelly then asked about consultancy payments to JOP and E Chrystie. Neilson advised that JOP was Jim Pert, the previous owners of AC Cars, they had retained his services for a year after they purchased the company, but had not wished to take him on as an employee due to debt problems that he had when he owned AC Cars. Since then he was declared bankrupt and he is now an employee of Spring. Donnelly requested sight of the agreements concerning the engagement of Pert and Chrystie as consultants.
Donnelly then asked about the payments to RS Construction, Gibson advised that they had approached them after Gibson's car had been blown up at his house. The company provided VAT invoices for the services they provide and Spring Radio are allowed to carry on in business and expend (sic)."
Mrs Robertson said in evidence that that was an accurate note of what she recalled except that she had made a typing error in the last line and the word "expend" should be "expand". Mrs Robertson was visibly nervous when she gave evidence. She was certain that Mr Gibson had used the words "they were allowed to carry on in business". She had got the impression from what was said to her that there was a link between the payments and whoever had blown up the car. Mrs Robertson said that she had never been involved in anything of that sort before in her career and for that reason she remembered the case. She explained that she gave Mr Donnelly her typed notes so that he could compare them to his own and, on looking at 6/38, page 41, which were Mr Donnelly's notes, she agreed that they were fuller than hers. The notes at paragraph 2(f) state the following:
"BTD requested details of the management fee г56,075. The г17,975 to JOP Management is in respect of Jim Pert's services in return for 'consultancy advice' from Jim Pert of Shettleston for operations control. It seems Jim Pert was subsequently bankrupt and is now working as an employee for Spring Radio Limited. BTD requested sight of the contract for or of services as there could be PAYE implications. BTD requested similar information regards the JR Direct (E Cristie?) payment of г4,500. Note with regards the г33,600 payment to SRS Security Systems (p'ship Russell Stirton and Alex Anderson) there are doubts with regards the true nature of the payment. Gibson indicated the 'security' contract had been agreed following an incident at his home about 1999/2000 when his Range Rover was 'blown up' in his driveway ten minutes after had removed the children!! The matter was police reported but to no consequence. Neilson will try to provide greater detail of the payment with supporting documentation. BTD will further review the invoices. It seems the weekly payments to this security company are now г2,500-г170k pa!!"
Mrs Robertson agreed that Mr Donnelly's note reflected what had happened at the meeting. She said that the word "extorted" was used at the meeting. She was asked by counsel what she understood that word to mean and she said "taken under duress". She said that both Mr Gibson and Mr McLeod were fairly upset and that Mr Gibson in particular was almost in tears. She got the impression that they were angry because they had to pay the money. They told her that they had gone to the police about the car being blown up but felt that they had got no help. She gained the impression that they were angry at themselves because they felt that they were weak in not standing up to whoever was taking money from them. They were very concerned about confidentiality and did not want it to be known that they had paid protection money.
[176] In cross examination Mrs Robertson
explained that her work had been merged with Mr Donnelly's work between
December 2002 and March 2003. She accepted that he might note things which
she did not note. She accepted that there were some typing errors in her
notes. She was asked to comment if there should be evidence from
Mr Gibson to the effect that he was not the subject of extortion and she
said "that is not what he said to us". Counsel for Mr Stirton put it to
her that she must think that extortion and protection money are one and the
same thing and she agreed that in the context of the meeting that was
correct. Counsel then asked the witness if she could agree that a burglar
alarm was a form of security and if it would be correct to say that it would be
put in to protect the premises. Not surprisingly the witness agreed to that
proposition. Mr Anderson asked Mrs Robertson in cross examination
if she knew who SRS Security
was and she replied that it was Mr Stirton and Mr Anderson. She
could not remember who had said that they owned it but she knew that she had
been told that. She did not know who the owners of RS Construction
were.
[177] I found Mrs Robertson to be a credible
witness. I believed her when she said that she had never experienced anything
of this kind on any other occasion in her career and so remembered it. I
believed her when she said that in the context of the discussion Mr Gibson
and Mr McLeod were upset and told those present that they paid protection
money. I did not find her recollection to be perfect and she admitted that
her notes of the meetings had some errors in them. I found that neither
Mrs Robertson nor Mr Donnelly were very accurate in noting names. Mrs Robertson
consistently noted Mr Neilson's name wrongly as "Nelson", explaining that
she believed it was pronounced Nelson. Nevertheless she had his headed
notepaper on file. That error did not seem to me to be of any importance but
was illustrative of the fact that the notes were not formal documents. Neither
claimed have noted exact words spoken by anyone. Overall however I believed
Mrs Robertson to be a credible witness. I also believed her when she
said that she was given the impression that Mr Gibson and Mr McLeod
were angry with themselves for being in a situation where they felt obliged to
pay money. I did not accept the implication put to her that she was in some
way confusing the protection provided by paying protection money with the
protection provided by buying a burglar alarm. Mrs Robertson was
referred to 6/39, page 98-101 which was a note of her meeting on 7 May 2003. It was pointed out to
her that there is no mention there of money paid as protection.
Mrs Robertson agreed but adhered to her position that she had been told,
as is noted, that the money was paid to allow Spring Radio Cars to carry on in
business. Mrs Robertson explained that the next meeting between herself
and Mr Donnelly and the owners of Spring Radio Cars was on 19 August 2003. Her note of that
meeting is produced as 6/39, page 84. It includes the following
paragraph:-
"Donnelly then asked about payments to SRS Security Systems. Gibson and McLeod both stated that these payments were protection payments which started after the business and McLeod's home/car were vandalised.
The payments were initially г700 per week and have increased to г2,500 per week. Gibson stated that he had spoken to the police and the local MP but he had received no real help and had therefore agree (sic) to make payments to protect the safety of his staff and family. Gibson advised that only two employees knew about these payments.
Donnelly assured the directors of confidentially on this matter but advised that these payments may be disallowed in the computation of CT and this would be discussed with the directors and their accountants at a later date.
Both directors expressed their desire to have an early Revenue decision on this matter. McLeod agreed to provide details in confidence to Donnelly of all payments made to SRS Security."
[178] Mrs Robertson stated that her note was
in error when she referred to McLeod's home/car being vandalised as she
understood it was Mr Gibson who had had his car vandalised. She was could
not explain why she had made the mistake. Mrs Robertson's attention was
drawn to 6/39, page 86-88 which was Mr Donnelly's minute of the same
meeting. It includes the following:-
"3. Consultant
Security Payments
BTD produced 2 invoices in respect of security payments in the
ap. 10/2000. The invoice for RK Security Systems; Garscube Road of 16/12/1999 is genuine and is respect
of genuine security work done for the company at Anniesland.
The other and like invoices made out to SRS Security Systems; Balgrayhill Road dated 1 March 2000 it again was admitted is in respect 'protection payments' apparently extorted from the company in exchange for a trouble free time. Initially payments were г700 per week with monthly invoices for г2,800. Current payments are г2,500 +VAT invoiced and paid weekly!! The company premises and Gibson's home were seriously vandalised prior to this arrangement with Gibson openly admitting agreeing to make payment out of fear of safety for his staff and family. Gibson at one stage involved local MP (now Speaker) Michael Martin and also senior police officer Louis Munn from Baird Street largely to no avail. BTD repeated the Revenue's confidentiality processes however the matter of disallowing such deductions would be review and discussed at a future date with both directors and their accountants. Both directors were clearly frustrated and upset at their dilemma whilst accepting the probably [sic] Revenue stance. They were both anxious to have a Revenue decision on the matter early rather than later. In the meantime McLeod will prepare a summary sheet of all payments made to SRS Security to date and will deliver confidentially to BTD. Only 2 other staff members are aware of the situation. BTD will meet with the accountants once the personal S of Asset information etc has been obtained."
Miss Robertson stated that Mr Donnelly's note of the meeting was accurate.
Mr Donnelly
[179] Mr Donnelly
stated that he had been asked to investigate the payment of corporation tax by
Spring Radio Cars and that he was made aware that his colleague
Mrs Robertson was already involved. He took the lead when he became
involved. He confirmed that the minutes referred to above were an accurate
reflection of what was said at the meetings which he attended. He was in no
doubt that the directors of Spring Radio Cars indicated to him that they paid
money to allow their business to be carried on. He agreed that that would
normally be called "protection money". It was apparent from the papers in the
productions referred to above that the name of the recipient of the protection
money varied between SRS and RS. Mr Donnelly seemed surprised when he was
referred to that in productions. I formed the impression that he did not
recall that there had been different names. I did not find that significant,
given that the names were similar and that the events took place nearly six
years before the evidence was given.
[180] I was impressed by Mr Donnelly as a
witness. I believed him. It seemed to me that he had muddled the name of
the company or had been given a muddled version of the name of the company. I
agree with the submission made by Scottish Ministers that the name of the
person extorting the money was not of prime importance to Mr Donnelly. He
was concerned with the company which was the tax payer. As his notes showed,
he gave some thought to whether Mr Gibson was actually a victim. I
understood him to mean that he considered whether Mr Gibson was truthful, or
was covering up for some unlawful conduct of his own. Mr Donnelly came to
the view that he believed Mr Gibson. I did not find the fact that Mr Donnelly's
notes had muddled versions of the names SRS and RS to be of significance. The
essential fact was that he was told by Mr Gibson and Mr McLeod that
they paid protection money.
[181] His further evidence was to the effect that
following the meetings he sent the minutes of the meeting to
Messrs Neilson Renton whom he knew to be Spring Radio Cars' accountants.
He did not receive any correspondence from them disputing the accuracy of the
notes. Mr Donnelly spoke to production 6/39, pages 56-57,
being a minute of a meeting held on 11 November 2003 at the offices of
Messrs Neilson Renton. They include at paragraph 2 the following:
"2. BTD advised that having now viewed the company records; met with the directors and visited the company premises he was 'without prejudice' prepared to confine Revenue adjustment proposals to 2 areas, viz:-
a) Payments to JOP Management Services (г17,975 for ap 10/2000) were in effect disguised emoluments paid to Jim Pert for services and should have been subjected to PAYE. Neilson advised he couldn't disagree and apparently had indicated the same to director Gibson. It seems Pert's finances/records for AC Radio Cars (Anniesland Taxis) were in a mess when Spring Radio Ltd took over the business in 2000. Neilson understood Pert was placed on payroll from 2001.
b) Kenny MacLeod had produced figures of protection monies in the guise of management expenses paid to RS Security on a sheet handed personally to BTD on 27 August. The sums involved are г33,600 ap 10/2000; г75,000 ap 10/2001 and г155,000 ap 10/2002. Neilson advised he had only become aware of the true nature of the payments at the May meeting. BTD asked why the 10/2001 and 10/2002 sums had been allocated into 3 different ledger account headings (Advertising: Mgt Fees; Repairs etc) - Neilson explained they were posted in accordance with the invoice description which it seems varied. Discussions followed with regard the legislation of ICTA88/S577A(1A) which specifically disallows expenditure involving crime regardless that the payer may well be seen as the victim. Neilson accepted that on the basis his client had openly admitted the payments as in the form of protection money he had no argument against S577. Indeed he had said as much apparently to his client following the May meeting. The rise in payments from г700 per week to г2,500 + vat per week again is apparently related to the 'acquisition' of Kenmuir Cars which was it seems compulsory made available to Spring Radio in 2001.
3. In concluding BTD to receive the balance of the personal information via Ian Reid from the directors whereupon personal lifestyle etc to be reviewed. Also vending machine information to come. Assuming no further discoveries BTD to prepare 'w p' settlement proposals early 2004 on the basis of 2(a) and (b) above and this will form the basis of any final settlement discussion. Neilson to consult and advise BTD within next few weeks if client's prepared to settle on this basis. Full certificate of disclosure will be requested later from each director and is conditional to any settlement. Usual health warning re. disclosure given for Neilson to pass on. Meeting can be arranged at anytime if Neilson or clients wish further discussion."
I found it significant that Mr McLeod had handed Mr Donnelly a sheet of paper with figures for protection money in the guise of management payments. That seemed to me to be a clear admission that protection payments were made. Further, Mr Donnelly's minute made reference to the way in which payments had been allocated in accounts which was later confirmed by Mr Neilson, the accountant. I had no reason to doubt the essential accuracy of minutes from the HMRC officials.
[182] Mr Donnelly explained that in his
opinion the payments made by Spring Radio Cars as protection were not allowable
expenses in light of section 577A of the ICTA 1988. He reported on the
case to his superior in HMRC and received confirmation of his own opinion.
Thereafter negotiations ensued with Spring Radio Cars and their accountants and
Mr Donnelly referred to 6/38, page 5, which was his minute of a
meeting which took place at Spring Radio Cars' premises on 5 February
2004, which is in the following terms:
"DATE: 05 February 2004 (1000 - 1100)
VENUE: Unit 2 Atlas Industrial Estate; Foundry Street; Springburn
BETWEEN: Brian T Donnelly (BTD) : I.R.
Norma Robertson : I.R.
Allan Gibson : Company Director
Kenneth McLeod : "
George Neilson : Neilson Renton & Co CA
Ian Reid : "
TAXPAYER: Spring Radio Cars Ltd
REF: 817/MU02/22936-12605/BTD
_____________________________________________________________________
Discussions took place in the company boardroom with all parties present.
1. Update BTD opened proceedings with reference to the last meeting between himself; Neilson and Reid on 11 November. While acknowledging the considerable media coverage and police involvement since that time BTD advised Revenue were prepared to honour the 'without prejudice' proposals put forward at that November meeting. These comprised some employer compliance adjustments and the disallowance of certain company expenditure previously claimed.
Neilson advised it was his client's view that anything said in relation to the previously mentioned security payments were 'off record'. BTD pointed out he had no recollection of any such comment nor was there a record of such comment in the meeting note(s) of 7 May; 19 August or 11 November all of which had been forwarded to Neilson Renton and to which no challenge to accuracy of content had been received.
2. Employer Compliance Both Gibson and McLeod challenged the employer compliance computations with regards whether credit had been given for tax and Class 2 and 4 NIC already paid by Jim Pert during his period of alleged self employment. Robertson advised she would check out the situation in general terms with BTD pointing out on confidentiality grounds there could be no specific discussion of Jim Pert's tax etc affairs without proper authority. The matter was left with Revenue to ascertain and if necessary to make adjustment for in the Employer Compliance computation for Spring Radio.
3. Confidentiality On the theme of confidentiality BTD confirmed he had received 2 visits from Strathclyde Police Serious Crime Squad officers requesting information on current discussions. In the continued absence of any mandate signed by Spring Radio directors or of any court warrant/production order BTD advised no information had been given as within the terms of S182 FA1989 (disclosure of information).
Both Gibson and McLeod indicated they were signing nothing for the police with Neilson suggesting the police case rested on Gibson giving evidence in their favour. It seems per Gibson the police had seized unknown documents in a recent visit on the company premises. Both Gibson and McLeod have been held without charge on separate occasions at the Govan office. Neilson also confirmed he had also received a police visit with no information/documents taken on the basis of client confidentiality.
BTD reaffirmed Revenue confidentiality would remain intact in the continued absence of director authority or specific court order and that liaison with the Revenue Solicitor is and would be maintained.
4. Settlement Discussions Draft 'w p' settlement computations (as attached) were handed out by BTD for discussion. On the basis of the computations the Revenue was inviting an offer in settlement of about г78000 for the periods described. Additionally signed certificates of full disclosure would be required from each director. The importance of full disclosure was emphasised to the directors by both BTD and Reid and their attention drawn to the statement on the reverse of the disclosure form. In later discussions BTD reduced the total settlement to г75000 to allow for the NIC adjustment as aforementioned in para 2 above.
BTD pointed out that regardless of the police activity the Revenue could not put on hold the current inquiry discussion. It was the Revenue's view that either an offer in settlement was made within a reasonable time or the more formal processes of revenue closure notice(s); determinations etc would be pursued. BTD added the Revenue were prepared to honour the 'w p' proposals now on the table with no pursuance of other areas but only for a limited time.
The wording of the proposed contract letter of offer was discussed in depth prior to Messrs Gibson; McLeod; Neilson and Reid leaving the room for private consideration of 5-10 minutes. On their return BTD and Robertson were advised that the director's were prepared to make an offer in settlement on the figures discussed but that the disallowable case 1 expenditure should be specifically cross referenced to S74(1) ICTA 1988 which disallows monies expended not wholly for the purposes of the trade. Neilson advised his client seek legal advice as to the wording of the proposed offer before the company directors put to signature.
5. Conclusions The meeting concluded on the basis that an offer in settlement would be forthcoming by the end of February. Also if submitted completed certificates of disclosure and updated statement of assets to be completed by the directors. Reid will advise BTD on progress by the end of February. If no offer is received say within a month the Revenue will withdraw its 'w p' proposals and shall commence the formal processes as aforementioned."
Mr Donnelly was able to confirm that 6/39, page 8-9, which is Mrs Robertson's minute of the same meeting, was, while different from his in detail, accurate. It is in the following terms:-
"Company: Spring Radio Cars Ltd
Venue: Unit 2, Foundry Street, Glasgow
Date: 5 February 2004
Present: Brian Donnelly Inspector Ian Reid Accountant
Norma Robertson ECO Alan Gibson Director
George Neilson Accountant Kenny McLeod Director
Donnelly opened the meeting by reviewing the points discussed at the last meeting with the agents on 11 November 2003. Donnelly issued copies of computations to the directors and explained that the main issues were the payments to RS Security and the payments to J Pert, which had not been subject to PAYE. Nelson queried the recovery of employee NIC on the payments to Pert and asked if the Class 4 NIC paid by Pert had been taken into account. Robertson agreed to check this out.
Nelson stated that the discussions about payments made to RS Security had been 'off the record'. Donnelly did not think this had been the case and the minutes of meeting did not reflect this and the minutes had not been disagreed.
Donnelly then spoke about IR confidentiality and advised that Revenue would not disclose any information without the director's consent although the police can go to court for an order to produce. Nelson advised that the police had been at his offices 2 or 3 times but no information had been provided due to client confidentiality.
Donnelly then produced a letter of offer and asked if the directors were willing to make an offer in settlement. Gibson was unwilling to sign any document if section 577 was mentioned. Donnelly advised that nowhere in the letter of offer was the section mention it only referred to CT, NIC and voluntary tax.
Donnelly advised that the case could not be put on hold because of police activity. There would have to be a letter of offer or the Revenue would issue a closure notice and go to the commissioners and all information would then be put in the public domain as commissioners hearing are open to anyone.
Nelson asked if the letter of offer could be changed to show that the expenses were being disallowed under a section 74 rather than section 577. Donnelly again stated that the letter of offer did not refer to any sections of ICTA. The agents and the directors then left the room for 10-15 minutes to have a private discussion.
On their return the directors agreed that they would make an offer if the letter would reflect that the expenses had been disallowed under section 74 however, Nelson stated that settlement may be a problem as due to the current situation the banks are unwilling to lend any money.
Nelson agreed to have 2003 statement of assets completed by his clients and will sign certificate of disclosure. They will speak to their lawyer before signing letter of offer.
With no further matter to discuss Donnelly thanked the Directors and the agents for their time and the meeting was concluded.
(sgd) Norma Robertson
Employer Compliance Officer
6/2/04"
Mr Donnelly explained that in due course the sum of approximately г75,000 was paid by the tax payer. I noted that the minutes were to some extent ambiguous regarding the reference to the statutory reason for disallowance. The evidence was clear; Mr Gibson did not wish reference to be made to section 577A of ICTA; Mr Donnelly had no difficulty with the request. Mrs Robertson's evidence was that the usual settlement letter made no reference to the statute.
[183] It was suggested to Mr Donnelly that the
tax payer had agreed to make payment of the г75,000 because Mr Donnelly
had threatened that if payment was not made there would be a commissioners'
hearing which would be expensive. Mr Donnelly's position was that he had
advised that if no agreement could be reached, then the matter could go to a
commissioners' hearing but he denied any suggestion that he had made any
threat. It was also suggested to Mr Donnelly in cross examination that
he was wrong in saying that the deduction was made because the tax payer had
admitted that the money was paid for protection. It was suggested to him that
the money was paid for security and that that was not an illegal payment, and
was deductible. There was no suggestion made to him as to why a payment which
was not illegal would result in a recalculation of tax due by the tax payer and
a payment of г75,000 being required.
[184] After hearing Mrs Robertson and
Mr Donnelly I was left in no doubt that Mr Gibson and Mr McLeod
had told them that they paid money to be allowed to carry on with their
business and that payments were made after an incident involving an attack on
their work premises and on Mrs Gibson's car. I came to that view because
Mr Gibson himself gave evidence to the effect that there had been an
attack by masked men on his premises; that his wife's car had been set on fire;
and that his wife's car had been the subject of an attack in which she was
almost driven off the road. He said that he went to the police and to his
MP. I noted that narrations of these incidents had appeared in the notes
taken by both Mr Donnelly and Mrs Robertson. It was not disputed
that they had been told about these incidents. It was however disputed that
they had been told that Mr Gibson and Mr McLeod were paying
protection money. It seemed to me inherently unlikely that Mr Gibson and
Mr McLeod would tell them about those incidents unless they were going on
to explain the significance of them. I found Mrs Robertson and
Mr Donnelly to be impressive witnesses who had no reason to lie. I found
that their minutes backed up their evidence. I therefore had no doubt that I
should prefer their evidence to that of Mr Gibson and Mr McLeod where
there was a conflict. Further there was no suggestion put to Mr Donnelly
and Mrs Robertson as to why they should be involved in recalculating tax
due by the tax payer if there was no illegality in the payments being made.
The fact that a further г75,000 worth of tax was paid seemed to me to be
confirmation that the tax payer, Spring Radio Cars, owned by Mr Gibson and
Mr McLeod, accepted that the tax required to be recalculated. Their
accountant Mr Neilson when he gave evidence explained that his partner
Mr Reid had advised them to pay on the basis that they did not want to
have a full investigation as matters might get worse. While he was not
precise about it, I had the impression that Mr Neilson meant to indicate
that an investigation might lead to other matters, not necessarily matters
relating to extortion or unlawful conduct, coming out. I understood him to
mean that settlement was in the commercial interests of his clients. While I
was able to accept that Mr Reid may have taken that view, I was not able
to accept that Mr Reid and Mr Neilson did not know that the reason
for the recalculation of the tax was that the tax payer had admitted they paid
protection money. Amongst the correspondence was a letter from the firm of
accountants stating that Mr Gibson said that he had retracted the
admission made to Mrs Robertson and Mr Donnelly and that anything
that he had said was "off the record". Both of those assertions indicate that
the accountants knew that admissions had been made. Further, the notes quoted
above make clear that the accountants knew what had been said and acknowledged
that the consequence would be a recalculation of tax.
[185] I was aware that Mr Donnelly and
Mrs Robertson were not "perfect witnesses" as is submitted on behalf of
Mr Stirton and Mr Anderson. They have made mistakes about the name
of the company to which protection money was paid and Mrs Robertson had
made a mistake by saying that Mr McLeod's property had been blown up.
Nevertheless, I came to the firm view that their evidence was credible when
they said that Mr Gibson and Mr McLeod told them that they made
payments not in respect of any services but as protection money.
[186] I therefore found it proved that
Mr Gibson and Mr McLeod told Mrs Robertson and Mr Donnelly
that they were making payments firstly to SRS and then to RS Construction as
protection money to allow them to carry on in business. As will be seen
below, I find that they were accurate when they said that.
[187] In cross examination, Mr Anderson asked
Mr Donnelly about his interview by the police. Mr Donnelly
remembered that DC McLintock was the police officer who interviewed
Mrs Robertson. He was interviewed by another police officer at the same
time. Mr Donnelly thought that he had first spoken to the police in
January 2004. Mr Anderson put to him 6/74, page 9 which is a note dated
4 December 2003 to Mr Nolan of HMRC from Mr MacFie of HMRC which
shows that Mr Donnelly had discussions with the police "in a recent
meeting". Mr Anderson suggested to Mr Donnelly that he must have
spoken to the police before that date. Mr Donnelly agreed that he must
be wrong and said that he had guessed at 2004. Mr Anderson suggested
that Mr Donnelly had discussed the case with the police at an early stage
and had got information from them and given information to them.
Mr Donnelly denied that and said that he only gave the police information
when they had a warrant. I accepted that Mr Donnelly did not speak to
the police until they had a warrant. Mr Anderson suggested, albeit tentatively,
that Mr Donnelly and the police were in a conspiracy whereby
Mr Donnelly fabricated his evidence. Mr Donnelly denied it. I
rejected any such suggestion.
Mr MacFie
[188] Mr MacFie gave evidence on 1 and 2 July 2009. He was an
inspector of taxes based at the HMRC office in East Kilbride and at the date of giving
evidence was aged 48 and had been an inspector for ten years. He explained
that he had been dealing with another case in 2002 with the accountant
Mr Yousaf who said he had a client who had failed to make returns in the
past and who would like to do so now. Mr MacFie invited him to send them
in for his attention. He received tax returns completed on behalf of
Mr Stirton for the period between 1996/97 and 2000/01. Mr Stirton
signed a mandate to enable Mr Anderson to represent him in discussions
with HMRC. Production 6/29/1 page 108 is a letter from Mr Yousaf to Mr MacFie
dated 19 June
2002 in
which Mr Yousaf said that Mr Stirton was under the impression that
his agent, Mr Davies of MD Associates, Montrose Street, Dundee had posted all his returns.
Mr Yousaf stated that Mr Davies had died and that Mr Stirton had
been unable to get access to his business records. Counsel for Scottish
Ministers took Mr MacFie through files 6/27, 6/28 and 6/29 which
contained papers showing the work that he carried out with Mr Yousaf and
Mr Anderson to obtain tax returns in respect of Mr Stirton. The
evidence was that Mr Anderson explained that Mr Stirton had not
completed tax returns. No reason other than Mr Davies having lost his
papers was given. Mr Anderson and Mr MacFie worked together to
complete returns on behalf of Mr Stirton. Mr Anderson described
these as being "lifestyle" returns. Mr MacFie's position was that he
asked that the business records be reconstructed if they had been lost. It
was clear that Mr MacFie asked on many occasions for information and the
correspondence did not produce much information. Mr Anderson said that
Mr Stirton had run a construction business and also a business known as
Loveboat which dealt in lingerie and adult toys.
[189] As regards the business known as Loveboat,
Mr MacFie was told by Mr Anderson that Loveboat had not made any
money and had in fact made a loss. At page 162 of production 6/74
Mr MacFie records that Mr Anderson said that Loveboat had been a
failure and had made a loss. He was not given any paperwork to prove it and
he was prepared in the circumstances to agree that it had not made any money
but would not agree to its having made a loss.
[190] Mr MacFie's involvement with this case
consisted of him trying to get information from Mr Yousaf and from
Mr Anderson. Production 6/74 pages 1 to 40 contain
correspondence and also contain a report to Mr Nolan, who was Mr MacFie's
superior in HMRC, which conveniently sets out Mr MacFie's position. In
that he says that the case had come to a stage when it should be brought to a
conclusion. He noted that Mr Stirton had paid in excess of г100,000 in
tax and penalties since the start of Mr MacFie's involvement, the whole
business having been brought to attention by his agent Mr Yousaf. He stated
that there were few records to consider. He considered the various items
separately as follows:-
(a) Balgrayhill Project. This was an old church bought for г45,000 in 1992. It was demolished and permission was given for it to be redeveloped. A shopping centre was built and then sold for г420,000. No records were provided in connection with the costs incurred in the project but at a meeting with Mr Anderson and Mr Yousaf it was estimated that the labour element was one-third of the contract value, which was estimated at being г140,000 for labour.
(b) Loveboat Products.
Review of the internet revealed that Mr Stirton dealt for a time in the sale of adult products via mail order using a website "Loveboat Products". Folio B38. The agent advised at Folio B74 that the business traded for only a short time and made considerable losses. Two bank accounts relating to this aspect of the business were obtained, Folio B2 but they suggested trade was not substantial. I have advised that I intend to disregard any claim they make that losses were incurred but I do not intend to add anything to profit.
(c) Spring Radio Cars Limited. Services were being provided for this taxi firm. I queried why approximately г2,800 per week was being paid for management services. It was now established that the money was protection payments extorted from Spring Radio Cars Limited over a period of three to four years. Brian Donnelly had Spring Radio Cars Limited under inquiry. There were returns which show profits for the period 2000-2001 and 2001-2002 of г101,000 and г123,000. This fully covered the payments received from the source and that he held sales invoices at Folio C6 to confirm this.
[191] Mr MacFie noted that Mr Donnelly
passed to him invoices dating back to October 1999. These were from SRS Security and show
149a Balgrayhill Road, Glasgow as that business's address. Mr MacFie took the view
that that was sufficient to suggest that the payments went to
Mr Stirton. These invoices are produced as production 6/25/7. I noted that the Scottish
Ministers did not seek to rely on them to show that the money went to
Mr Stirton (the conclusion drawn by Mr MacFie) nor to show any connection
between Mr Stirton and SRS, perhaps because it was not disputed that Mr Stirton
sold the development at Balgrayhill Road to Mr Mirza in 1998, whereas the
invoices are for a period after that. I made no finding that the SRS invoices were paid to Mr Stirton,
although I have as already explained found that Mr Stirton was aware of
them and that he began to collect protection money when these invoices stopped
after the murder of Tony McGovern.
[192] I found Mr MacFie to be an impressive
witness. His evidence was clear, to the effect that Mr Anderson, acting
under a mandate from Mr Stirton, was unable to reconstruct
Mr Stirton's business in paper. Mr Stirton (through Mr Yousaf)
had approached HMRC with a view to making returns and payment of tax for a
period during which he had failed to make returns or payment. Mr MacFie
was prepared to agree sums to be paid by Mr Stirton on the lifestyle basis
which Mr Anderson outlined in his evidence. As I explain elsewhere, I
found that Mr Stirton did some building work and had a business known as
Loveboat, but I did not have evidence before me to show that he made the income
claimed on application forms for loans. I did not regard HMRC's agreement of
tax on a lifestyle basis as a determination binding on me that Mr Stirton
had made the sums of money used to calculate tax.
Police Evidence
[193] The
Scottish Ministers led evidence from DI Midgley who was involved in
Operation Maple. He explained that it was an operation concerned with
allegations of money laundering and of extortion. He had been seconded to the
operation in October 2003 and understood that covert enquiries with banks and
with Shell had been going on for four to six months prior to that. Production
orders had been obtained before his secondment, by DC Shaun Ramsay. Mr Midgley's
role was that of Office Manager and as such he had overall responsibility for
information received in the course of the inquiry. The witness explained the HOLMES
system, which is an acronym for Home Office Large Major Enquiry System and is a
database into which police officers put data at dedicated terminals. He
explained that it was password protected and gave some details of the way in
which it worked. Mr Midgley also explained that Alexander Blue had been
murdered in June 2002 and the inquiry into that murder had also been dealt with
on the HOLMES system. The witness explained that he could get access to that
database on a "view only" basis. He confirmed that there was also an inquiry
into the death of Tony McGovern who had been murdered in 2000. Mr Midgley
explained that the Senior Investigating Officer in the Alexander Blue inquiry
decided to send Miss Ramsay to take a statement from Mr Gibson
concerning that inquiry. The Senior Investigating Officer of Operation Maple,
DI McCusker, was aware of that and decided to send an officer concerned
with Operation Maple along with Miss Ramsay to interview Mr Gibson.
He explained that the statement taken by Mr Murray and Miss Ramsay
was put into the Alexander Blue inquiry database. Mr Midgley gave
evidence about the way in which the HOLMES system worked, explaining that
statements were read and if appropriate actions were decided upon in light of
the statements. Mr Midgley explained that he arrested Mr Anderson
on the petition warrant produced at 7/10/15. That petition warrant
has Mr Anderson's name as "Alexander Ferguson Anderson" and his date of
birth as 10 January
1953. Mr Midgley
accepted that the name and the date of birth were both wrong. Mr Midgley
gave evidence about 6/60/10, page 77 which was a financial statement ostensibly
prepared by S Yousaf and Co Limited. I noted that on other notepaper
Mr Yousaf did not bear to trade as a limited company. Mr Yousaf did
not give evidence. Various witnesses referred to him and a number of
productions included papers on which it seemed he had worked. As there was no
evidence from him I have not relied on any evidence which would have required
me to hear an explanation from him. Mr Midgley interviewed Mr Gibson
on 11 January
2005. The
transcript of that interview is produced as 6/45/6. In that interview
Mr Gibson declined to answer questions, saying that he had made many
statements to the police and other authorities and that he did not wish to make
any statement at all. According to Mr Midgley at a comfort break the
tape recording equipment was switched off and Mr Gibson spoke to him. Mr Midgley
said that Mr Gibson spoke about his private hire car business and that he
seemed to be passionate about it. He said that Mr Gibson told him that
he felt he had been let down by the system and that there was no way that he
was going to speak against Mr Stirton or Mr Anderson. Mr Midgley
told him about police protection and Mr Gibson said that he had no
confidence that any scheme would work. Mr Gibson denied making any such
statement. I believed Mr Midgley's evidence.
[194] In cross examination counsel for
Mr Stirton went through the HOLMES system in detail with the witness.
Counsel then asked the witness if he agreed that Mr Murray had gone to see
Mr Gibson along with Miss Ramsay and had not told Mr Gibson the
truth. Counsel was referring to the fact that Miss Ramsay explained that
they were there to take a statement concerning the Alexander Blue inquiry. Mr Midgley
agreed that the officers had not told the witness the underlying purpose in Mr Murray
being there and that they had done so deliberately. Mr Midgley's
evidence was helpful in assisting me to understand the way in which Operation
Maple proceeded, and I accepted him as a credible and reliable witness, despite
his recognition that Mr Murray and Miss Ramsay had not been frank
about the underlying purpose of their visit to Mr Gibson.
[195] The evidence from Mr Martin Murray was
that on 27 November
2003, that
is after Mr Gibson had spoken to the officials from HMRC, he went to see
Mr Gibson along with his colleague Miss Ramsay. The deceased,
Alexander Blue, had been connected to the taxi trade and enquiries were to be
made of others in that trade. Mr Gibson and Mr McLeod were thought
to be paying protection money and were therefore to be interviewed as part of
Operation Maple. According to Mr Murray he decided to accompany Miss Ramsay
in order to meet Mr Gibson and Mr McLeod. He thought it would be
useful for him to combine acting as corroborating officer for Miss Ramsay
while meeting Mr Gibson and Mr McLeod and as he put it, "getting the
lie of the land."
[196] The meeting shed no light on the Alexander
Blue murder inquiry, but Mr Murray said that he took a statement from
Mr Gibson and also that Mr Gibson told him things which he would not
agree to put in a statement. According to Mr Murray he wrote down rough
notes on loose paper. He said that his experience as a police officer taught
him that witnesses will not speak freely if they have said that they are not
prepared to give a signed statement, but can see that the officer is writing
everything in a notebook. He wrote out those things when he got back to the
office comparing what was said with his colleague and asking her what she
remembered. She then completed a statement in accordance with his statement. Mr Murray
said that when his colleague Miss Ramsay asked Mr Gibson about
Russell Stirton (which she did as he was a name that had come up in the
Alexander Blue inquiry) Mr Gibson's demeanour changed. He became
agitated and said to Mr McLeod that he was "going to tell them and he
should go and get it." Mr McLeod said something like "No we are not to
say anything." Mr Gibson said that he had "already put his foot in it by
telling the taxman." According to Mr Murray Mr McLeod went out of
the room and came back with an invoice from RS for г2,937.50. Mr Murray
asked what the payments were for and Mr Gibson said that they were
protection money "so that he didn't get any problems". He said it had been on
the go since about April 2001 and that Mr Stirton had produced the invoice
after Tony McGovern had been murdered. Mr Gibson went on to tell Mr Murray
and Miss Ramsay that he had been the subject of a raid on his premises in
1997 and that shortly after that Mr Viola made an offer to buy his
business. Mr Gibson said that he thought that Mr Viola was in some
way working on behalf of the McGovern family who Mr Gibson thought were in
some way connected to the intimidation that he had suffered. Mr Gibson
told the police that when Mr Viola was sentenced to a period of
imprisonment the McGoverns still wanted to get money from him and that he had
to pay г1,000 per month to Jim Milligan against an invoice from a business
known as SRS. Mr Gibson told
the police that he thought that business was in some way connected to the
McGoverns. When Tony McGovern died, according to Mr Gibson,
Mr Stirton stepped in looking for protection money but increased the
sum.
[197] It was suggested by the respondents that Mr Murray's
statement was made up by him at a later stage. He denied that. Reference
was made to 6/118 which is a police briefing note entered into HOLMES for
Operation Maple dated 28 November 2003. According to Mr Murray he
told the investigation team what he was told by Mr Gibson and various
actions were set out as a result. They included trying to get the information
that Mr Gibson would not put in a signed statement onto the record and
making inquiries of the Inland Revenue. The first paragraph of the briefing
note is as follows:
"Further to events of yesterday .... (when McLeod and Gibson were seen at Network Cabs under the Alexander Blue murder enquiry, by DC Anne Ramsay and DC Martin Murray) ... it is imperative that there [sic] statements are secured. These statements are required before enquiry can move on. Discussion took place re yesterday's interview."
Mr Midgley gave evidence about this briefing note and said that the reference to statements is a reference to statements from Mr McLeod and Mr Gibson. I took the view that that note is supportive of Mr Murray's position. I believed Mr Murray when he said that he knew nothing about any tax inquiry until Mr Gibson told him. I also believed Mr Donnelly when he said that he would not speak to the police unless they had a proper warrant. I found that Mr Murray had not spoken to Mr Donnelly before going to see Mr Gibson for the first time. Mr MacFie's correspondence shows that the first conversation with the police and HMRC appears to be in December 2003. I believed Mr Murray when he said that Mr Gibson told him he was paying protection money. I believed Mr Murray when he said that Mr Gibson was not prepared to put in writing the information that he gave about extortion.
[198] Mr Murray told Mr Gibson and
Mr McLeod that he would need to interview them again over the weekend. They
responded to that request by going away from home to a hotel so that they were
not available. Mr Murray called at their office and at their homes, and
got another statement from Mr Gibson on 1 December 2003 which is production 6/15/20 S3. In that statement
Mr Gibson said that they used RS Construction because of the
notoriety of Mr Stirton. He did not deny making that statement. In
court Mr Gibson said that he was feeling very harassed by the police and
he was prepared to sign anything to get out of the police station. I accepted
that Mr Gibson felt harassed when questioned by police officers but I did
not accept that he lied when he said that he used RS Construction because
of the notoriety of Mr Stirton. I did not accept that the police had harassed
him, but I did accept that the investigation of the matter was harassing for
him. I accepted that Mrs Robertson of HMRC was probably right when she
got the impression that Mr Gibson and Mr McLeod were annoyed with
themselves for having paid money. I found that they were distressed by the
matter being investigated, as they had paid protection money and did not wish
to have discussions with the authorities about it.
[199] Mr Murray went to see Mr Gibson
again on 6 March
2004. He
said in evidence that Mr Gibson refused to give a statement, saying he
could not do so because he was in fear of repercussions. He told Mr Murray
that he would commit perjury at any court case. On the next day, 7 March 2004 Mr Murray attended
at Spring Radio Cars' offices once more and spoke to Mr McLeod.
Mr Gibson was there at the time and Mr Murray was partnered by
DS Greer. The evidence from both policemen was that the directors of
Spring Radio Cars were not prepared to give statements. They said they would
be prepared to go to prison rather than give statements. They said that
Mr Gibson did tell them that he had cancelled the payments to
RS Construction and had to pay less for the Skodas then had previously
been demanded and was therefore in a better financial position. Mr Murray
said that "coming on board" was a phrase that he did use. Mr Murray's
evidence was to the effect that he had several discussions with Mr Gibson
and Mr McLeod in which he tried to persuade them to give a statement to
the effect that they had paid protection money. He said he did so because
they had told him that, but refused to say so in any official statement. The
position put forward by the respondents was that Mr Murray harassed two
citizens who had always denied being the victims of extortion. I believed
Mr Murray. I accepted his evidence that he explained to Mr Gibson
and Mr McLeod that he was involved in the investigation into money
laundering and extortion and that their evidence was important. He said that
he did explain to them that witness protection could be given to them. It was
not clear, on the evidence, if money was mentioned.
[200] Mr Gibson gave his precognition on oath
and I have explained my view on that elsewhere. He was detained by police
officers on 11 January
2005, having
met Mr McLeod at the lunch adjournment when Mr McLeod was being precognosced
on oath. He said nothing in his taped interview. According to Mr Midgley
he spoke "off the record" to him and told him that he was not going to say
anything against Mr Stirton or Mr Anderson. Mr Midgley said that
Mr Gibson said that the police had not helped him in 1996 when his
premises had been attacked. He said that no witness protection scheme could
protect him because he was in the private hire car trade. He wanted to
continue in that trade, living and working in Glasgow.
[201] Mr McLeod also provided a statement to
the police on 30 November
2003 which
is produced as production 6/15/21 S2. I have explained elsewhere my views on
Mr McLeod's evidence. His statement did not explain what he got for his money
apart from to say that they paid money so that no one would touch them.
Mr McLeod said that he would say anything in order to get away from the
police. I believed that Mr McLeod felt under pressure when speaking to
the police because of the situation which he was in. He did not want to admit
that he had been subject to extortion. I did not believe that he had lied to
the police.
[202] I did not accept everything that the police
officers said. I thought that their evidence was not true on certain matters.
The first was that Mr Murray said that Mr Gibson gave him bank
account numbers from memory. I think that is extremely unlikely. The second
is that Mr McLintock and Mr Murray said that they interviewed
Mr Donnelly and Mrs Robertson at HMRC offices and that both police
officers were present when each person was interviewed. That was not the
evidence from Mr Donnelly and Mrs Robertson. They said that they
were interviewed separately. I accepted Mrs Robertson and
Mr Donnelly's evidence.
[203] The evidence from Mr Clarke of Rix
Petroleum was to the effect that Mr Murray and Mr McLintock came
to see him in Yorkshire. He said that they were
aggressive and they smelled of drink, but that they were not drunk. He said
that they suggested that his company should not deal with A & S Group
by supplying petrol to them. He asked if there was any legal reason why he
should not sell petrol and was told that there was not. The implication from
Mr Clarke's evidence was that he was not impressed by the police
officers. According to the police they did not smell of drink. My opinion
is that Mr Clarke was truthful when he said that he thought that they did
smell of drink. Mr Murray may have seemed to Mr Clarke to be
aggressive and he may have come over as suggesting to Mr Clarke that he
should not fulfil a contract for the sale of petrol which Mr Clarke wanted
to fulfil.
[204] I did not accept that Mr Murray had
concocted the statements taken from Mr Gibson and Mr McLeod. Mr Murray
said that Mr Stirton was known to police intelligence, as were members of
the McGovern family. He said that Mr McGraw was a well known criminal. According
to Mr Murray, certain families tended to control criminal activity in
certain areas of Glasgow. He believed that the McGoverns and Mr Stirton were involved in
the north of the city. He said that in his career he had come across
businesses which paid protection money to criminals, explaining that the
payment of money ensured that the business was allowed to continue as the
criminal receiving the money did not interfere with it, and neither did rival
criminals who knew of the involvement of the recipient of the protection money.
He said he had known such arrangements in various businesses including
private hire cars. I accepted his evidence. In submissions Mr Anderson
argued that many people in Glasgow go about their business with no involvement with crime, nor
any knowledge of crime. I accepted that assertion but did not find that it
contradicted the evidence given by Mr Murray.
[205] DC Daniel Connor was led on behalf of
Mr Stirton. In 2003 he had been appointed as the general administrator of
the HOLMES system for Operation Maple. He explained that statements are
entered into the system and three copies are made and cross-indexed. He
stated that if a police officer had to submit a "self statement", that is a
statement from the police officer, then he should dictate it down a telephone
line to a bank of waiting typists and once it was typed up it would be
electronically transferred and then put onto the Holmes system. The officer
in charge would receive the statement and, having read it, decide if action had
to be taken on it. He said that the time take for typing and decision making
varied but was normally done within two days. Mr Connor was asked to
look at 6/15/7, which is a statement by Mr Murray.
Mr Connor said that he did not know when his statement was written and
that the date that it had come into his possession was 24 February 2005.
[206] Counsel for Scottish Ministers called
Mr Anderson as witness. He gave evidence in chief over a period of days,
with a gap during which a motion in the interim administration process was
heard. He then gave evidence in cross, and was re-examined. There was no
cross examination from counsel for Mr Stirton. Mr Anderson was at
times difficult to understand as his answers were often long and involved.
[207] He began by saying his name was Alexander
Ferguson Anderson and then corrected himself, saying that this middle name was
not Ferguson. He said he was being
sarcastic. I found that an odd episode, as the question of Mr Anderson's
correct name and date of birth had come up previously and been the subject of a
hearing before Lord Emslie. Mr Anderson had been adamant that Ferguson was not his middle
name. After consideration I decided to put no weight on this and I accepted
that Mr Anderson had been attempting to be sarcastic. Counsel asked if
he ever used an address at 1/3 Dodside Gardens,
Shettleston, Glasgow. He said that was his
brother's address and he had stayed with his brother to assist him in recovery
from illness. Mr Anderson said he was a publican and owned Thomson's Bar
as a sole trader and employed staff to run it. Mrs Stirton helped in the
bar at one time. Pineloch Limited held the license. He emphasised that he
had taken advice on licensing matters from Brunton Miller who had advised that
the licence should be in the name of the company. Mr Stirton helped his
sister in law Miss Craig but never had any ownership of the bar. According
to Mr Anderson, Mr Stirton had registered for VAT as a partnership
with Miss Craig, running the business known as Thomson's Bar, and had a
bank account under the name "Russell Stirton trading as Thomson's Bar" to help
Miss Craig out. He had repaid a loan from the bank to enable Miss Craig
to leave the partnership she had been in with Mr Milligan, and he paid for
refurbishment of the bar, all because of his family relationship with
Miss Craig. I did not believe that evidence and instead found that Mr Stirton
did have an ownership interest in the business. When Mr Stirton was
unrepresented and moved me to adjourn in order that he might apply for legal
aid, he said that he and Mr Anderson had considered selling the bar but no
one wanted to buy it. I accepted that the title to the property was not in
his name but I found that he had an interest in the business and influence over
it.
[208] Counsel for Scottish Ministers asked
Mr Anderson about his attitude to co-operating with the police.
Mr Anderson said that he thought it proper to co-operate, and if he had
declined to talk to the police it was on legal advice, for example in January
2004 he had received legal advice to say nothing to the police. He said that
he was arrested in March 2004 by Mr Midgley who threw him to the ground.
He had made a formal complaint through his solicitor but had had no
satisfaction. He had asked Mr Gibson and Mr McLeod not to speak to
Miss Rivers as he believed that she was an employee of MI5. He was aware
that Mr James McFarlane McDonald accompanied Mr Yousaf when he was
interviewed by Miss Rivers, but that was not at his insistence.
Mr McDonald had helped him with advice about the case.
[209] Counsel asked him about production 6/24/1, the loan agreement. He said he
had instructed it to be it drawn up by Mr Vaughan, solicitor, telling him
a development was going to take place. He said had not told Mr Vaughan
everything, but he did not elaborate on what he had omitted. He and
Mr Stirton were looking for land and needed security in case Mr Gibson
lost interest in the project. Mr Anderson agreed that the annualised
rate of interest was 38.4% and the total amount of money to be paid back would
be г1.08 million. He agreed the paperwork did give him a veto on the
sale of Spring Radio Cars, but said it had not worked out that way.
[210] There was a lengthy examination by counsel
for Scottish Ministers of information provided by Mr Anderson to HMRC and
produced by him as production 7/11. Mr Anderson said that they were
all estimates. He said that he and Mr Stirton had shared 50/50 at one
stage, and said that he and Mr Stirton were not in partnership in
RS Construction until 2002 but that he did not take income from that.
Then he said was not a partner until 2003/4, but did not declare any income
from that. When asked why not Mr Anderson said that after he had been
arrested he did not think that what had happened was right and so he did not
declare his income. He sent in estimated tax returns in the course of one day
four years after the event.
[211] He said that he had an arrangement with HMRC
that he would not be held to his estimates and that when the current case was
over he would discuss everything fully. He said that the profit from
RS Construction was г150,000 per year but he had not declared that. He
confirmed that A & S Group ran the filling station from January
or February 2002. A & S Leasing provided the Skodas in 2002,
and so the year from 2002 to 2003 would include income from that.
Mr Anderson stated that he had "helped Mr Stirton out" but had only
got a share of profits from the year 2003 to 2004. He thought the share was
probably 50/50 but could not say because his records had been seized. Counsel
asked why the tax return for the year 2002 to 2003 gave income as г14,000 and
asked if that was a reasonable estimate. Mr Anderson said that "he had
made estimates, and the taxman was not interested in what you actually made but
rather in the bottom line." When asked to look at the accounts for Thomson's Bar,
Mr Anderson said that production 6/27 contained a draft. He had had
a draft drawn up in his own name as Pineloch Limited owned the heritage but he
did the trading. In any event the accounts were only a draft. Counsel asked
why differing figures were given within the accounts, such as at page 14
the figure for staff costs was г53,752 whereas at page 17 it was г58,587,
and his reply was that it was a draft, or it could be that it was due to
holiday pay, or due to the staff being over paid. Mr Anderson said that
the figure given in page 15 for net profit, г171,000 might not be
accurate. He said that Mr Yousaf did accounts for HMRC but he could not
confirm that he had asked Mr Yousaf to draw up 6/29 and could not explain
why within that document differing figures were given for capital. In giving
evidence about his own work history Mr Anderson said that he had started
with Fine Fare as a teenager and had become a supermarket manager and had
worked overseas developing supermarkets. He had been sequestrated. He had
given advice to Spring Radio Cars for about 9 months without any payment.
[212] Counsel asked about the source of money to
lend г265,000 to Spring Radio Cars. According to Mr Anderson the money
would have come from the development at Balgrayhill Road. Production 6/29,
a solicitors' ledger card, showed that the money to buy the ground for that
development had been paid in four separate credit entries between April and May
1992 amounting to г47,950. Mr Anderson's position was that he had
supplied the cash to Mr Stirton and did not know why he had paid it to the
solicitors on four separate occasions. He had the money in cash some of which
he kept at home and some in his brother's house. Mr Anderson did not
invest the money directly himself but made it available to Mr Stirton to
do so. By agreement set out in the notice to admit, Mr Anderson agreed
that he took money out of Mr Stirton's account up to at least г201,000 in
differing amounts, which he said was from the proceeds of that development.
He did so at Mr Stirton's request, and the money was kept at
Mr Stirton's home. Mr Anderson said that some of the money was used
to buy the Skodas. Counsel asked him why, at productions 6/6 and 6/29,
there were letters from Mr Yousaf to Mr MacFie to the effect that the
profit from Balgrayhill
Road was
г41,000. He had no explanation. Mr Anderson maintained good records
but Mr Stirton had sent them to Mr Davies in Dundee who had lost them and then died
without having carried out work on them. At that stage Mr Anderson was
unsure of the date of Mr Davies' death and I indicated that I required a
death certificate to be lodged. In due course the certificate was lodged
showing that he died on 14 July 1999. Counsel asked about record keeping and Mr Anderson
said that he did no financial statements for Pineloch Limited as he was not
required to. He confirmed that that company did not have a bank account. He
said his figures for tax return and accounts since 2003 were all estimates
because his papers had been seized.
[213] Mr Anderson confirmed that
Mr Hughes had negotiated the price and taken the money to St Andrews
Garage to buy the Skodas. He said he used him because he was knowledgeable
about cars. Turning to the business Loveboat, Mr Anderson said that it
had made half a million pounds to July 2000. He knew Frank Luke as a person
whom he had employed on a casual basis but he had not seen him since 2003 at
the latest.
[214] Mr Anderson gave evidence about the
transfer of the bar from Pineloch Limited to him. I found his position
incomprehensible. He said that it was a paper transaction, necessitated by
Habib Bank requiring a security over property owned by him. He mentioned
goodwill which he said would affect the value of the premises as a going
concern. He seemed to accept that the money was transferred in the circular
way described by Mr Thomson in his report, referred to below. He did not
explain where the money to fund the director's loan had come from. He
disagreed with the proposition that the dormant company accounts lodged with
Companies House were materially different from the information given to Habib Bank.
He asserted that the transaction had been carried out by Mr Steele, a
solicitor and that there was no difficulty with it, and that Mr Steele would
not have agreed to act if there had been any difficulty.
[215] Counsel for Scottish Ministers asked Mr Anderson
about the report from Mr Milliken and he said that his own witness,
Mr Hamill would give evidence about it. Mr Anderson explained that
the profit in a filling station came not from the petrol pumps but from the
shop. He had never planned to run a petrol station for the rest of his life,
but rather to develop it and sell it on. Mr Anderson said that the flat
at Carleston
Street had
been bought because it was above the pub, and as there are often complaints
from people who live in such flats, when a chance arose to buy it they did
so. As it happened Mr Stirton had a relation who was looking for a flat
to rent out so they sold it to her. I did not believe his evidence about the
flat.
[216] When Mr Anderson was asked about the services rendered
to Spring Radio Cars he said that after about a year, they were really paying
for his business acumen. When asked if that meant that he would advise on
obtaining finance on the best terms, he said not necessarily, as he too had to
make a profit. He maintained however that the arrangement with the Skodas was
a good deal for Spring Radio Cars as they had no funds to buy the cars. He
said that Mr Gibson approached him. Mr Anderson denied that the
contracts and the payments were a cover. Mr Anderson agreed that the
true cost to Spring Radio Cars for the Skodas was as counsel suggested,
approximately twice the price paid to the dealer, but asserted that it was
still a good deal. He denied that Spring Radio Cars had been forced to take
on Kenmure. He denied knowledge of the various papers found in which longer
payment periods for the cars and other figures and investments were apparently
discussed. When it was put directly to him that he had obtained money by
extortion, Mr Anderson denied that. He said that Spring Radio Cars was a
cash business and if he wanted to get cash it would have been easier just to
take it as cash. He emphasised that he had no link with McGovern family, and
that Mr Stirton's link was only by marriage. Counsel sought to have his
comment on the report by Mr Thomson. He said he had no comment to
make. He did not regard the report as impartial and had not studied it in
detail.
[217] Counsel for Scottish Ministers asked
Mr Anderson about a licensing law course which he had attended, giving his
address as 27 Aynort
Street, Glasgow. She put it to him that
the address was that of Mr Stirton's sister Alison. Mr Anderson
agreed and said that someone on the course had made an error as he did not use
that address. Counsel asked him about Miss Leonard using addresses in
Carntyne and Garrowhill on application forms. He recognised one as her
mother's address and said that she stayed with her mother from time to time to
assist her, but did not recognise the other address. Counsel asked if he
could explain why Mr Stirton should use the address 3 Kelvin Road, Glasgow when applying to State
Credit for a loan. Mr Anderson's explanation was that it was
Mr Stirton's mother's address but he had no explanation why it would be used
by him.
[218] When examination in chief was complete I allowed
a short adjournment to the next day before Mr Anderson had to give his
evidence in cross. I told him he should make a statement about facts and not
go into submissions at this stage. He began by drawing my attention to the
petition in the criminal case which was about extortion and then to the
detention forms which were about extortion and mortgage fraud.
[219] He said that in mid 2001 the Shell station
came up for sale. He decided it would be good to develop. He made it into
one of the largest filling stations in UK. He was very aggressive in pricing
as the opposition was Tesco and Shell who were very aggressive. His
relationship with Keith O'Neill of Shell was not good and he started to demand
payment 24, then 48 and then 96 hours in advance. In October 2003 he and
Mr Stirton made it known that the business was for sale. They had spent
г151,000 on acquiring the main site, they had acquired the land adjacent and had
spent approximately г600,000 on development costs, and were offered
г1.9 million for it by Mr Sams. He was sceptical about Mr Sams,
but he did make the offer. In the end Rix Petroleum bought the business in
September 2004 for г1.25 million. Mr Anderson explained that the
funding for the development came from Habib Bank,
A & S Leasing, RS Construction, Thomson's Bar, and
profits from the petrol station. He and Mr Stirton kept control of costs
and Mr Stirton did much of the work himself.
[220] On the subject of Loveboat, Mr Anderson
said that the business had been his idea. He noted the business known as "Ann
Summers" had a turnover of г50 million per year and no opposition. He
and Mr Stirton discussed this in February 1998 and discovered a supplier
of adult toys, Scala, in Amsterdam. They set up a website and a system of selling through
parties. They contracted with ex-employees of Ann Summers as team leaders and
they set up a network of women who worked by inviting friends to parties and
selling the goods to them. Mr Anderson named several people, from
various parts of the UK as the team leaders. He drew my attention to
production 6/66 which is a number of cheque stubs showing payments made
for advertising. He said that they also sold lingerie, and that they supplied
goods to gay sex shops. They paid VAT in Holland where they bought their supplies and
so did not pay VAT in the UK. They dealt with other suppliers as well as Scala. Mr Anderson
said that the money they made in the two and half years which they traded, to
end 2000, was about half a million pounds. They stopped because there was
publicity linking Mr Stirton to pornography which was inaccurate but
embarrassed his family. There was according to Mr Anderson a dispute with Scala
about goods which he returned. He denied owing money to Scala.
[221] Mr Anderson gave evidence about
Mr Stirton working as a self employed builder. He said that he could and
did do all types of work. He renovated flats in which Mr Anderson had an
interest, and he worked for other people. At no time did he say that
Mr Stirton had been in the TA. He said that he understood Mr Stirton had
worked as mechanic in a garage which he thought was in the west end of Glasgow.
[222] I found Mr Anderson's evidence confused
and confusing. He made no attempt to distinguish between turnover and
profit. He did not attempt to show what profit if any Loveboat had made. He
assured me that Mr Stirton had been personally involved in Loveboat and
had gone with him to Amsterdam. Later, I heard evidence from Mr Gore, Scala's agent,
who said he had never heard of Mr Stirton before the current case
started. I preferred Mr Gore's evidence. Mr Anderson said that,
despite the terms of the invoices, Spring Radio Cars paid г2,500 plus VAT every
week for his business acumen. I found that inherently unlikely. Mr Anderson
did not acknowledge that the deal Spring Radio Cars entered into for the Skodas
was very expensive for Spring. He insisted that it was a good deal because at
the end of it Spring Radio Cars owned the Skodas, and they were able to rent
them to drivers. They got a free period at the beginning. He did not accept
that the deal was the same as normal hire purchase, which would also result in
Spring Radio Cars owning the cars at the end of the period, and that the true
cost should be spread over the entire period and written up in the accounts
under accruals. His evidence about the partnership arrangements between him
and Mr Stirton was self contradictory. He said that arrangements between
them for profit sharing might be 70/30 or might be 50/50, or that Mr Stirton
might get his investment back before any sharing. He had no explanation for
the papers from Mr Yousaf which were put to him. It was clear that he
had given figures to HMRC which he could not explain. He was determined that Mr Murray
had concocted evidence against him. He had no explanation for the evidence
from Mr Gibson of his precognition on oath, or for the evidence of
Mr Donnelly and Mrs Robertson of HMRC. I did not believe him when
he said that there had been no extortion. I formed the view that
Mr Anderson and Mr Stirton had extorted money from Spring Radio Cars.
I found that they had used money which had come from Spring Radio Cars and from
sources which were unexplained to buy the Skodas, and to develop the garage. I
found that Mr Anderson had obtained a loan secured over Thomson's Bar by
falsely pretending to Habib Bank that Thomson's Bar had been transferred to him
for value and that the was the owner of 37 Cowan Wynd.
[223] Scottish Ministers led evidence of
three accountants as expert witnesses, Mr Milliken, Mr Thomson and
Mr Murray. Mr Meek, also an accountant, was led as an expert on
behalf of Mr Stirton. I discuss below the evidence given by each of them
and my conclusions. I found it helpful that I had evidence from differing
perspectives about the facts of this case. As stated above, the fact of
payment by Spring Radio Cars to both RS Construction and A & S
Leasing was not in dispute. By the end of the proof I had heard evidence from
Spring Radio Cars' owners as those who made the payments, from Mr Stirton
and Mr Anderson as those who received them, evidence of statements made to
others about the payments, evidence from Mr Neilson about the accounting
treatment of the payments, and from the other accountants, expert evidence of
analysis of accounts and inferences properly to be drawn from them. I also
had the benefit of expert evidence about the funding of the filling station
development. Mr Meek was instructed late and his report was not lodged
timeously. Counsel for Mr Stirton moved me to allow him to be called and
I decided that the interests of justice required me to allow the motion. As I
was prepared to allow him to be called as a witness I allowed his report to be
lodged though late, as I took the view that it was in the interests of justice
that an expert witness should speak to a report available to all parties and
the court rather than simply giving oral evidence. Once all of the evidence
had been led and the submissions made it was clear to me that the respondents
had developed the filling station by using money gained by unlawful conduct. The
submission by Scottish Ministers that much of the case is proved by the
evidence from HMRC alone is probably correct. However I did not, of course,
decide it on that evidence alone but on all of the evidence which I heard. I
found that the evidence taken together pointed very strongly to an inference
that property had been obtained by unlawful conduct.
The Lenders
[224] Mr Hayward
of Habib Bank was led by the Scottish Ministers. His evidence was to the
effect that the bank would not have lent had the transfer of the public house
not been at arm's length and not for value. Counsel for Mr Stirton had
no cross examination. Mr Anderson confined himself to asking if the
bank's risk was covered by the fact that this was lending secured on
heritage. The witness confirmed that was so. Mr Anderson appeared to
be of the opinion that the question before the court was whether or not the
bank's risk was covered. That of course is not the question; rather it is
whether or not the loan was obtained by fraud.
[225] I have found that the transfer was not at arm's
length nor was it for value. I therefore find that the lender was induced to
lend by fraud.
[226] Counsel for Scottish Ministers led witnesses representing
various lenders, namely Gerard Campbell, Claire Rees, and Susan Yeardley who
said that the societies and companies they were employed by would not lend if
the information on the forms was inaccurate. Cross examination was to the
effect that the lenders had lost nothing because the mortgage payments had been
made and were continuing to be made. This is a further example of the
respondents failing to recognise that the issue before the court is not whether
the lenders suffered any loss but rather whether they were induced to lend by
means of fraud.
Mr Milliken
[227] Mr Milliken
was a partner in the firm KPMG, experienced in forensic accounting. For each
of the last few years he had prepared ten or twelve reports on forensic
accounting and had appeared in court in England and prepared reports for court
in Scotland. He had been instructed both by the authorities and by those suspected
to have been involved in money laundering. He was instructed by the police in
the course of Operation Maple and prepared 6/44/2, being a report.
[228] Mr Milliken explained his brief by
saying that the police told him that they had collected a significant amount of
paperwork which they wished him to analyse as it related to A & S
Group. He was required to report on the money apparently invested in the
development of the filling station between 14 January 2002 and 31 August 2003. Counsel took
Mr Milliken through his report. He found that the gross margin in the
trading of the filling station was approximately 4%, taken as an average. He
noted that sales figures and VAT returns appeared to correlate to each other.
He found that the gross profit on fuel was marginal at about 1.2% and that
gross profit on non-fuel was much higher at 33.7%. Mr Milliken noted the
price of fuel at other garages in the area and at a table, 3.4.10, set out the
prices and discounts at varying stages. He noted that there appears to have
been a loss on fuel in August 2003, apparently explained by Shell withdrawing a
discount that they had previously offered. Mr Milliken thought that
staff costs appeared to have been underestimated in the books for the filling
station but agreed in cross examination by counsel for Mr Stirton that he
might have overestimated staff costs.
[229] In cross examination by counsel for
Mr Stirton the witness said that he and his staff were engaged by the police
and paid a fee but they were free from any assumption that there had been
wrongdoing.
[230] Mr Milliken's conclusion was that there
was not enough cash made by the business to fund the development. He found
the amount of free cash to be approximately г43,000.
[231] Mr Milliken was asked why his report
included the word "draft". At first Mr Milliken said that it may be
there by mistake but then agreed that he had listed further work that could be
done and agreed that the police had not instructed any further work. I formed
the view that his report was a draft and that he had never been instructed to
complete it.
[232] There was no report from any other accountant
suggesting that Mr Milliken had failed to carry out the task set him, nor
was there any cross examination to the effect that he had made errors apart
from over estimating staff costs. It was submitted by Mr Anderson that
Mr Milliken did not explain why he ignored stock and trade creditors. I
disagreed. In his report Mr Milliken explained that he did not have
figures for stock and trade creditors because he was not given these figures. Mr Anderson
also submitted that the figures given by Mr Milliken had been "made to
look foolish by Shell". Once again I disagreed. I did not have any evidence
before me of contradiction of Mr Milliken by figures from Shell. On behalf of
Mr Stirton it was submitted that Mr Milliken was paid to assist the
police. If it is meant by that that Mr Milliken's firm charged a fee for
the work done, then of course that it correct. If it is on the other hand
intended as a submission that the police told Mr Milliken what they wanted
him to write then I did not accept that. It was submitted on behalf of
Mr Stirton that Mr Anderson was well placed to contradict
Mr Milliken's evidence due to his role in the running of the filling
station. Counsel did not elaborate on what criticisms Mr Anderson made
nor did he note any contrary position put to Mr Milliken by
Mr Anderson. I did not note any contrary position put to
Mr Milliken by Mr Anderson other than that noted above concerning
stock and trade creditors. Mr Anderson's position about that was that
they should not have been ignored. He did not put to Mr Milliken what
the figures were and what difference they would have made to the report.
Mr Milliken's position was that the absence of figures for stock and trade
creditors was an absence that would reflect in a higher amount of free cash,
thereby being an error in favour of Mr Stirton and Mr Anderson rather
than against them.
[233] In his written submissions Mr Anderson
submitted that I should consider evidence with the aid of an independent
accountant if necessary. This arose out of evidence led by Mr Anderson
on 13 May
2011 from
Mr Stirton about the running of the filling station. Mr Anderson
asked Mr Stirton to look at 6/99, pages 3 to 13, being a document from
Shell produced Scottish Ministers. There is a column headed "Gross Income". Mr Anderson
by a series of leading questions endeavoured to have Mr Stirton confirm
that the column showed the figure for profit. I told him that I did not
understand how that could be so as the cost of sales would need to be deducted
to get a figure for gross profit and further deductions would be needed for a
net profit figure. Mr Anderson did not ask any more questions of Mr Stirton
to elucidate this matter nor did he lead evidence from any other witness to do
so. The proof is now closed and so I cannot hear any more evidence nor can I
seek independent advice. I did not accept the evidence from Mr Stirton
that the figure in the column of the production referred to represented profit.
Mr Anderson led evidence from Mr Hamill, a retired filling station
owner. He confirmed that petrol was sold at a small margin, and that the
money made by the owner of a filling station came largely from the shop
attached.
[234] In my opinion Mr Milliken's evidence
that the cash generated by the working of the garage was approximately г43,000
remains effectively uncontested.
Mr Kenneth Murray
[235] Mr Kenneth
Murray, who was called by counsel for Scottish Ministers, qualified as a
chartered accountant in 1986. When he gave evidence he was employed by
SCDEA. His employment history is given in his report 6/44/1. He expanded
the information given in paragraph 1.2.1 by stating that he had worked in
private practice for some time and had been involved in advising investors as
to whether or not they should invest in particular companies. He had suffered
illness and had decided on a change of direction. He had moved to London from Scotland. He wanted to move back
to Scotland due to personal reasons
and obtained a job within the legal department of ICAS. He had been
responsible for the establishment of its Forensic Investigations Unit. He had
spent some time seconded to Strathclyde Police. Mr Murray was asked by
counsel for Mr Stirton about his salary, which he gave. He also asked him
about his personal reasons for changing direction and Mr Murray said that
he had been ill with depression for some time. He had also been getting
married and wanted to return to Scotland. He had previously earned more in his work in England than he did when first
came back to Scotland.
[236] Mr Murray claimed expertise in forensic accountancy,
and knowledge of the operation of organised crime. Counsel for
Mr Stirton objected on the basis that he was not an expert on organised
crime. Mr Murray had been involved in between 12 and 15 police
investigations. He said that he had attended academic conferences on the
subject. I repelled the objection. He said that in his opinion businesses
operated by organised crime groups are many and varied, but often have features
in common. They operate apparently free of competition. They have a large
share of the market, even in areas which have low barriers for entry by new
entrants to the market. If a business was apparently able to operate in a way
not explicable by normal commercial standards, then his suspicions would be
aroused that organised crime might be involved. Mr Murray explained that
in his career prior to specialising in forensic accountancy, he had considered
whether or not companies were attractive to investors. In order to do so he
had to be aware of the performance and financial strength of a company, by
looking at the architecture of the business, including their relationship with
customers and suppliers, their reputation, their ability to innovate and
respond to changes in the world around them, and their strategic assets, such
as natural logistic advantages over competitors. He found that experience
useful in his current work, as he felt that he had ability to look at a
business's behaviour and differentiate between competitive behaviour and
behaviour where there was no commercial motive. Mr Murray explained that
on occasion there was no obvious motive for behaviour, but an explanation could
in fact be given by the business man. Further, he knew that on occasion
business men made mistakes and took a course of action which turned out to be
disadvantageous but which was not an indication of involvement with organised
crime. Counsel for Scottish Ministers asked the witness about fear of organised
crime. He said that his knowledge of that matter came from police
intelligence. Mr Murray said he felt limited in what he could say.
Counsel for Mr Stirton took objection to the line, on the basis that all
intelligence was hearsay, and that cross examination was hampered because the
original intelligence reports were not available. I decided to allow the
evidence under reservation. I have decided that it is admissible. Hearsay
evidence is admissible, and the difficulty identified by counsel about cross
examination goes to weight rather than to admissibility. Mr Murray said
that he understood that there was fear of violence from organised crime. He
explained that in some businesses the directors do not take the decisions for
which they should have responsibility; there is another power behind the
throne, in the shape of organised crime. In those situations the witness
believed there was an undercurrent of threats of violence.
[237] Counsel for Scottish Ministers took
Mr Murray to production 6/9 and he explained that in the original
books of Spring Radio Cars, payments to RS had been logged as dividends. That
had been altered after the end of the year. Making adjustments to accounts
after the year end was not unusual in itself but that he found this case
unusual. The payments had been categorised as dividends and then had been
split into five categories. The invoices seemed to have been processed late,
and in batches. He found that odd. Mr Murray explained the meaning of
the word "accruals" by saying that if a service is received but not billed or
paid for the cost should be entered into the accounts as an accrual. Counsel
referred to production 6/96B from which Mr Murray said that
commercial finance to buy cars had been obtained by Spring Radio Cars at 15.5%
per annum. The agreement between Spring Radio Cars and A & S
Leasing, production 6/25 provided for interest at over 300% per annum.
Mr Murray found it inexplicable that a business would pay such a rate when
they should have been able to get a much lower rate.
[238] Counsel then asked Mr Murray to
explain his involvement in the current case. Mr Murray said he was asked
by Dr McMorrow of ICAS to attend a meeting with Mr McCusker in March
2004. The outcome of that was that the police felt that Neilson Renton,
accountants, were not co-operating fully with them in their investigation in
Operation Maple. Dr McMorrow instructed Mr Murray to visit them and
explain that the police had complained about their lack of co-operation, to
obtain their view of events, and to encourage them to fulfil their duty of
co-operation. Mr Murray visited Mr Neilson and discussed matters
with him. Mr Neilson believed he had been co-operative. Mr Murray
obtained agreement that he would review the files and act as a conciliator.
He did so and prepared his first report. Counsel referred him to
production 6/44/3. Mr Murray explained that he had set out a table
of money paid to RS or RS Construction, although there was a typing error
in that it was printed as RC. He also noted sums paid to A & S
Leasing. He found that the sums of money paid were significant and he thought
that the filing was scanty. His opinion was that an auditor should have asked
for more evidence of the value obtained for the sums paid. Mr Murray had
a discussion with Mr Neilson and found that he had accepted an assurance
from Mr Gibson. Mr Murray thought that as Mr Neilson and
Mr Gibson had both accepted that г75,000 tax was payable in respect of
sums wrongly deducted, there was a problem. Both of them, if the business was
legitimate, should have been able to explain what the payments were for. They
could not do so. He said this was an example of a situation in which he could
see no commercial logic in what had happened.
[239] Mr Murray wrote a second report,
production 6/44/1 in which the scope of work which he had been asked to carry
out is stated at paragraph 1.3.1 of as follows:-
1. Preparation of a report which sets out the financial results of Spring Radio Cars Limited (source for information obtained from Strathclyde Police) from 1999 to 2004 and consider in context of those results the payments made in the period to RS Construction and A & S Leasing.
2. To express an opinion on the treatment in the company accounts (including reference to the tax treatment) over the review period of the expensed payments made to RS Construction in the light of a loan agreement dated 29 March 2001 between the company and RS Construction.
3. To express an opinion on the terms of the leasing agreement between the company and A & S Leasing commencing in November 2002 and the treatment of those payments (including reference to the proposed tax treatment) in the draft accounts of the company for the eighteen month period ending 20 February 2004
4. To comment on the terms of acquisition Kenmuir (sic) Radio Cars in July 2002.
[240] In paragraph headed "2.1 Operation Maple"
Mr Murray stated that he had been told by the police that Operation Maple
was an investigation into the activities of the proprietors of
RS Construction and A & S Leasing, namely Mr Stirton
and Mr Anderson. He noted that Spring Radio Cars Limited was the company
which had as its principal activity the administration and operation of private
taxi hire. The bulk of its revenue came from the hire of radio sets to privately
owned taxi cars; further revenue came from leasing cars to drivers who do not
possess their own car and revenue also came from certain contracts in which the
taxi driver carried out work which has been contracted in advance. In those
circumstances the charge to the customer, being higher than the fare paid to
the taxi driver, earned revenue for Spring Radio Cars.
[241] Mr Murray noted at 2.3 that
RS Construction was an unincorporated business vehicle owned or controlled
by Mr Stirton, with which Mr Anderson had a connection. Its sole
business was the supply of services to Spring Radio Cars. A & S
Leasing was an unincorporated business vehicle owned or controlled by
Mr Stirton and Mr Anderson in partnership, the sole business of which
was the supply of leased motor vehicles to Spring Radio Cars. In
paragraph 3 Mr Murray set out details of payments made by Spring
Radio Cars to RS Construction. In paragraph 3.1 he summarised the
financial results of Spring Radio Cars in the years to October 2000, October 2001,
October 2002 and the eighteen month period to April 2004. He noted that the
accounts for the periods ending 2000 to 2002 were prepared and audited by
Neilson Renton & Co, Chartered Accountants. The results of the eighteen
months to April 2004 were also prepared by Neilson Renton & Co but were not
audited as the company, having a turnover of less г5.6 million, did not,
as a result of a change in legislation, require to be audited.
[242] In paragraph 3.2.1 Mr Murray set
out a table of the sums of money paid by Spring to RS Construction. He
noted the terms of an agreement, apparently signed and dated 20 March 2001
although printed as 26 March 2001, productions 6/23/26 or 6/100
apparently being a contract for weekly payments to be made by Spring to RS Construction
in respect of services -
"to be provided personally by Mr R Stirton of RS as follows:-
(a) Management services (not to exceed г440 per week) with regards to vehicular fleet operations, purchase, service, repair, testing and road traffic accident management.
(b) Marketing and consultancy (not to exceed г440 per week) advice and guidance on company profile and business referral.
(c) Property maintenance (not to exceed г600 per week) all general property maintenance for three offices under the direct control of the company.
(d) Promotional advertising (not to exceed г650 per week) business and ad hoc referrals etc.
(e) Security (not to exceed г370 per week) management and risk assessment of premises under the direct control of the company."
[243] In accordance with the terms of this contract
Spring had agreed to pay RS Construction a combined sum of up to г2,500
per week which is an annual sum of г130,000 per year payable in cash, in weekly
instalments. At 6/96B, page 168, there is a photocopy of a sample
invoice dated 5 July
2002 in
which the following is set out as a table.
|
" |
Description |
Total |
||
|
1 |
Management Services |
440.00 |
||
|
1 |
Marketing & Consultancy |
320.00 |
||
|
3 |
Property Maintenance |
600.00 |
||
|
1 |
Promotions |
650.00 |
||
|
3 |
Security/Health & Safety |
490.00 |
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
Sub-total г2,500.00
VAT г 437.50
Balance Due г2,937.50"
Mr Murray noted that the invoice is stamped "received" and in handwriting is written "In System 29/11/02".
[244] Mr Murray discussed the accounting
treatment given to the invoices in the books of Spring, drawn up by Neilson
Renton & Co. The audit file for the year ending 30 October 2001 recorded that when the
accounts were finalised for audit, reclassification of management charges was
made which had the effect of separating the management charges into four
constituent charges of management services, marketing and consultancy, property
maintenance and promotional advertising. The audit file for that period
contained a schedule of "dividends" paid by the company indexed as K20. These
payments were later reclassified in the way outlined above. For the reasons
given by Mr Murray in his report it can be seen that this was not done
until January 2002 at the earliest.
[245] Mr Murray stated in evidence that there
was a typing error in paragraph 3.4.11 of his report on the third line and
"2004" ought to read "2005". He said that he was
present at an interview at the police station where Mr Neilson confirmed
that the invoices supporting the payments to RS Construction during the
year ending 31 October
2001 were
not made available to him prior to March 2002. He confirmed that the decision
to reallocate the charges to the five separate expense accounts was not and
could not have been taken prior to March 2002.
[246] Mr Murray noted in his
paragraph 3.4.12 that review of the audit files indicated that the
auditors had relied on the explanations given by Mr Gibson as regards the
nature of the payments to RS Construction. Mr Neilson confirmed in
evidence that that was so. Mr Murray's opinion was that, given the
materiality of the amount charged by RS Construction, a competent auditor
should have undertaken substantive audit testing to ensure that the payments
related to that to which they purported to relate. Mr Neilson disagreed.
Mr Neilson took the view that he had asked his client what the payments
were for; he was given a reply which was on the face of it perfectly acceptable
and that he required to do no more. Mr Neilson stated that the auditor
was to be seen as "a watchdog not a bloodhound" and that it was not his task to
investigate information given to him by his client. Rather he had to check
that the papers provided by the client were internally consistent and that the
client had, for example, invoices in respect of payments made.
[247] In his paragraph 3.5 Mr Murray
narrated that he was shown an agreement dated 29 March 2001 between
RS Construction and Spring Radio Cars Limited, registered for preservation
and execution in the Books of Council and Session on 2 April 2001. He
agreed in evidence that he had inaccurately noted in paragraph 3.5.1 that
Mr Alexander Anderson had signed it on behalf of RS Construction.
In fact Mr Anderson was a witness to the signature.
[248] Mr Murray explained the terms of the
agreement in his report. Assuming that interest was charged on a straight
line basis, meaning that interest and capital repayments are spread evenly over
the life-time of the loan, he had calculated the interest rate at 38.4%. He
noted that the loan was not recorded anywhere in the accounts of the company.
There was no issue taken by any party about the calculation of the rate of
interest or about the non-existence of the loan in the accounts of the company.
[249] Mr Murray came to the view at 3.5.7 that
the payments made under the RS Construction contract of 20 March 2001
were in reality the repayments under the loan of 29 March 2001. He gave
as his opinion that if there was no capital transfer of funds from
RS Construction to Spring under the loan, then the payments made by Spring
to RS Construction were not loan repayments and that the reason for Spring
making payments must have been on account of some other undisclosed duress or
obligation.
[250] Mr Murray discussed in his report the
tax treatment of various payments. In so doing he had considered documents
recovered by the police and produced in the case, being the files of HMRC. He
noted that Mr Donnelly made claims that the directors of Spring Radio Cars
had said that the payments were made as protection money and he noted that HMRC
sought payment of a sum of г75,000 as settlement figure for unpaid tax.
Mr Murray noted that the accountant (Mr Reid) wrote to Mr Gibson
of Spring Radio Cars Limited on 5 February 2004 in the following terms:
"As discussed you stated that you retracted the comments on the security payments in a telephone conversation with Mr Donnelly of the Inland Revenue and therefore are unable to agree to payments being disallowed under ICTA 1988 section 577A. As a compromise to the Inland Revenue we acknowledge that the payments were excessive and proposed disallowance under a separate section of ICTA 1988 section 74, albeit the settlement figure of г75,000 remains unchanged."
[251] The section of ICTA referred to provides that
payments made in respect of criminal activity, of which protection payments are
one example, are not deductable before calculation of tax. I accepted that I
should infer from the letter that Mr Reid had had a discussion with
Mr Gibson in which Mr Gibson had said that he had retracted comments
previously made about security payments and that due to his retraction he was
unable to agree that the payments be disallowed under ICTA section 577A.
I took from that that Mr Gibson had, at an earlier stage, said that the payments
were such as would be disallowed under that section; that he had retracted
that statement; and that he was no longer prepared to agree that sums be
disallowed under that section. The evidence from Mr Donnelly was to the
effect that it was not normal in HMRC practice to narrate the reason for
deduction or non-deduction of sums in a settlement letter and that while he was
well aware that Mr Gibson did not wish them to be deducted under that
section, he, Mr Donnelly, was clear that the reason for the deduction
being disallowed was that the sums of money were paid as protection money.
[252] In paragraph 4 Mr Murray discussed
payments made to A & S Leasing and the acquisition of Kenmure
Radio Cars. He based his report on information which he gained from the
police, from conversations with Neilson Renton & Co and from perusal of
documents. He found that Spring Radio Cars entered into an agreement with
A & S Leasing some time between March and April 2002 for the
lease of fifteen Skoda Octavia cars. He noted that the original requirement
seems to have been over 78 weeks and that Spring Radio Cars was to pay to
A & S Leasing г4,700 including VAT per week. The total amount
payable over 78 weeks would be г312,000 net of VAT, or г20,800 net per
car. If the term of the agreement was extended to 103 weeks, that would
give rise to an overall payment of г412,000 net, or г27,466 net per car. He
had been advised that the recommended retail price of the relevant model at the
relevant time was in the order of г10,000 net. He had been advised by
Strathclyde Police that it had been claimed by Mr Gibson that the apparent
premium he was willing to pay was justified by the fact that he got the cars in
April 2002 but did not require to start paying until November 2002. During
the "free period" he could use the cars to generate car hire and radio hire
income in the sum of г300 per week including VAT. He could therefore generate
г117,000 or г7,800 per car. Mr Murray stated that there was a typing
mistake in his report and that the figure per car was г7,800 not г7,133.
[253] In 4.1.4 Mr Murray applied his mind to
whether or not he found that justification credible. He did not. He said
that on a 78 week deal the excess cost of each car would be of the order
of г3,677 which is approximately 36% of the cost of the car. Over a
103 week deal the figure would be correspondingly higher. Mr Murray
corrected the figure given in 4.1.4 of 24.4% to 20%. The reasoning, that
there was a free period, was not reasoning that would be applied by any
businessman. He explained that any sums due but not actually paid should be
put in the accounts as accruals. He saw no such entries. A businessman would
calculate the true cost over the whole period, including any free period.
[254] In his paragraph 4.1.7 Mr Murray
considered what would have been achievable if the financing of the cars had
been secured on normal commercial rates of interest. He found that a finance
agreement with a normal interest rate of 8% would give rise to monthly payments
of г591.40 equating to weekly payments of г136 per car. Thus the total weekly
payments for fifteen cars would be г2,047. He found that the acceptance of
the deal with A & S Leasing cost Spring Radio Cars nearly 60% of
the benefit that ought to have been earned as a result of having the additional
cars on the road. I understood that to mean that Spring Radio Cars would have
been better off had they obtained finance elsewhere at a lower rate of
interest. Mr Murray thought that finance could have been obtained by
Spring Radio Cars for the cars on normal commercial rates.
[255] Mr Murray went on to consider the impact on Spring's
profits of the payments made to RS Construction and A & S
Leasing as though they were a tax on profits, and set out at table page 22
as follows:
|
Period |
18 months to 29.2.04 |
12 months to 31.10.02 |
12 months to 31.10.01
|
||
|
Turnover |
2,928,300 |
1,328,256 |
1,018,967 |
||
|
Profit before tax (PBT) |
529,123 |
145,060 |
58,192 |
||
|
RS Construction Payments (A) |
210,000 |
144,896 |
75,000 |
||
|
AS Leasing 'excess' payments (B) |
206,918 |
0 |
0 |
||
|
(A) + (B) |
416,918 |
144,896 |
75,000 |
||
|
RS/AS 'TAX' rate (1) |
44.07% |
49.97% |
" |
[256] In his report Mr Murray gave his opinion
of the acquisition of Kenmure Cars. He found that Mr Stirton was able to
exercise a material influence over Spring Radio Cars' affairs. He came to
that view because the payments due to RS Construction referred to above
were suspended in light of the acquisition of Kenmure. I agreed with him that
that shows influence. Mr Anderson submitted that it showed influence the
other way, that is that Mr Gibson of Spring was able to refuse to pay
while he was buying Kenmure. I did not accept that.
[257] In his paragraph 4.3.6 Mr Murray
discussed a loan made available from Southside Radio Group which he found hard
to explain. This was explained by Mr Neilson. He said that if contract
customers were obtained by Spring Radio Cars on the south side of the city, for
example, the Victoria Infirmary, the drivers from Spring Radio Cars did not
wish to do the work. The difficulty was that they would go to the south side
of the city and deliver the passenger in the example from the Victoria
Infirmary to his home in Castlemilk and would then be on the wrong side of the
city for any other further work that was coming in. It had to be remembered
that these taxis are not black hackney carriages and therefore cannot be
stopped in the street. Therefore the arrangement was that while the contract
was with Spring Radio Cars it would in effect sub-contract to Southside and the
actual work would be done by a Southside driver. The money would be paid by
the contract customer to Spring Radio Cars and they would forward it to
Southside. The arrangement that was arrived at was that they would simply not
forward some of that money. According to Mr Neilson the proprietors of
Southside were prepared to do this because they were prepared to lend
Mr Gibson money, and this method was convenient. I do not think that
Mr Murray was aware of that. I also note that the standard way of buying
a taxi firm according to all of the evidence I heard is that a deposit is made
and the rest is paid up weekly. I did not therefore find it sinister that
payments are made weekly.
[258] In paragraph 4.4 Mr Murray recorded
his view of the analysis of deal summaries found in Spring Radio Cars'
premises. There were papers, either in print or in hand writing, with a
variety of words and figures and Mr Murray attempted to make sense of
them. Both witnesses from Spring Radio Cars, Mr Gibson and
Mr McLeod said that they did not know what they were and could not help
the court on them. Mr Murray set out his analysis at 4.4.3.
[259] Mr Murray stated that on page 27 of
his report there were two typing errors. In the first paragraph under "main
deal" the figures should be 341 not 241. In that same paragraph the figure
for 30 March
2007 to 12 October 2007 should be 29 weeks not
52 weeks. The total given there is correct at 341 weeks.
[260] Mr Murray set out his conclusions under
his paragraph 5. He found that Spring Radio Cars constituted all, or at
the very least nearly all, of RS Construction business activity in the
period under review. He is correct in that and it is not disputed. He
asserted that the date on the RS Construction contract of 29 March 2001 is false and has been
backdated from a date occurring not before March 2002. The treatment of the
invoices supports that assertion in my opinion. Mr Murray then asserts
that the contract ostensibly dated 20 March 2001 was to obscure the terms
of the loan agreement of 29 March 2001 and the fact of its existence. I understood
Mr Murray to have come to that view after reading the various sheets of
paper produced. I heard evidence from Mr Gibson and Mr McLeod and
while I did not believe their denials of knowledge of the papers, I was not
able to find that the payments made were as a cover for payments due under the
loan document. Mr Murray correctly found that there is no record of the
sum of г265,000 ever being received by Spring Radio Cars. That is not in
dispute. The terms of the loan agreement were that if any repayment was
missed, RS Construction could take control of the company.
Mr Murray commented that in allowing a payment holiday when Kenmure was
being purchased, the company was being allowed to breach that condition thereby
risking RS Construction enforcing it. I agreed with Mr Murray that
the loan agreement and the payment holiday, taken together, show that Spring
Radio Cars was under the influence of the respondents. Mr Murray noted
that Spring Radio Cars had accepted that the payments to RS Construction
were not allowable expenses for tax purposes. As I have already indicated
that was correct and in my opinion that was an indication that the payments
were paid as protection money. Mr Murray noted that no evidence was
obtained or documented by the auditors that Spring Radio Cars actually received
any value in respect of the payments it had made to RS Construction. The
auditors chose to rely on verbal assurances by the company director,
Mr Gibson. He is correct in that, and as I explain elsewhere that had
the effect of preventing Mr Neilson being relied on, as Mr Anderson
seeks to do, as a separate source of evidence of the legitimacy of the
payments. The auditor did not know of the existence of the loan agreement.
Mr Murray expressed the view that the terms of the A & S
Leasing deal were are excessively onerous to Spring Radio Cars and cannot be
justified on commercial grounds. I agreed with him. Mr Henry of
St Andrews Garage, who sold the cars to Mr Hughes on invoices made
out to Spring Radio Cars, gave evidence to the effect that Spring Radio Cars
could have obtained the cars on normal commercial hire purchase without having
to pay a deposit. No reason was given by Mr Gibson or by
Mr Anderson why Spring Radio Cars would enter into the very expensive
arrangement provided by A & S Leasing. Mr Murray expressed
his view that Mr Stirton and Mr Anderson had demonstrated that they
were in a position to exert significant influence over Spring in that they
appeared to be able to determine what major payment obligations Spring should
take on, the terms under which these payments should be made and order
revisions of these terms as and when they see fit. I agreed with him.
[261] Mr Murray expressed a view that the
"excess" payments of the A & S Leasing deal were derived from a
requirement to generate revenue sufficient to recover the cost to Spring Radio
Cars of the acquisition of Kenmure Cars amounting (with equipment deposits) to
г260,000. As I understood him, Mr Murray thought that Spring Radio Cars
were required by Mr Stirton and Mr Anderson to pay twice for Kenmure.
I did not understand his reasoning and am not prepared to make such a
finding. I noted that Mr Neilson when asked about this said that he
could not understand what Mr Murray meant.
[262] Mr Murray concluded by stating that
Mr Stirton and Mr Anderson are the beneficiaries of all the payments
made under the terms of the loan agreement and are also the beneficiaries of
the deal variously discussed as the "A & S Leasing" deal or the
"Cars/Kenmure" deal. He took from his findings that Mr Gibson was not able
to exercise over Spring Radio Cars the control normally associated with the
role of managing director and owner of a business. The dominant influence in
the affairs of the company would appear to be Mr Stirton and
Mr Anderson. I agreed with this. I also take the view that they have
that dominant influence because of unspoken threats.
[263] Counsel for Mr Stirton suggested to
Mr Murray that he had "done his master's bidding" and had written a report
which did not reflect his own views but which reflected the views of
Strathclyde Police. Counsel suggested that he had obtained an increase in
salary because he was prepared to do this. Mr Murray denied it.
Counsel did not suggest to Mr Murray what parts of his report were false
or what omissions he had made from his report. I regarded the suggestion that
Mr Murray had made a false report on instructions of police as
unfounded. Mr Anderson suggested to Mr Murray that he had written a
false report in terms instructed by CRU. Mr Murray denied that. I
accepted his denial and I found that no basis for counsel and Mr Anderson
making these allegations was put before me. In submissions for Mr Stirton
it was suggested that Mr Murray knew the views of Strathclyde Police and
knew that he was required to produce a report supportive of their views. I did
not accept that.
[264] In cross examination Mr Anderson brought
out evidence to the effect that Mr Murray had attended conferences on
money laundering and had written an article produced as 7/14 on that subject.
In it he was of the view that taxi firms were often targeted in the Strathclyde
area. In his report Mr Murray had considered that the paperwork showed
that payments were made in order to cover the payments which Mr Stirton
and Mr Anderson demanded in respect of the loan apparently made to Spring.
I was not prepared to find that there was a scheme such as that suggested by
Mr Murray as I did not feel that I had before me sufficient evidence to
enable me so to do. I was however prepared to find that the payments in
respect of services, the payments in respect of the Skodas, and the ability to
stop paying invoices while the Kenmure acquisition was paid for showed that
there was undue influence by Mr Stirton and Mr Anderson. I also
noted that in his evidence Mr Anderson said that there was a necessity in
the Skoda deal for both parties to make a profit. That appeared to me to be
an admission from Mr Anderson that he was not advising Mr Gibson
about the best way to go about his business but was entering into a contract
with him whereby each party made a profit. Had I come to the view that
Mr Gibson had simply made a bad bargain, then I would have no basis for
finding that the money in respect of the Skodas was paid because of undue
influence. However the amount paid for the Skodas was so high, taken together
with the other evidence concerning the services and the existence of the
agreement registered in the Books of Council and Session, as to require me to
hold as an inference that the payments were made as a result of undue
influence.
[265] I accepted most of Mr Murray's evidence
because I found that he had expertise which enabled him to consider the
financial arrangements shown in the productions and to give opinions on them.
He was able to justify and explain his views. There were two areas in which I
did not accept his evidence. The first is outlined above and related to the
purchase of Kenmure. The other related to a table in his report giving
figures for contract work. The evidence was very muddled and I formed the
view that Mr Murray could not explain clearly where he had obtained
figures from. He said that he thought they came from a conversation with
Mr Neilson. Mr Anderson asked many questions about this. While I
did not find Mr Murray's evidence clear, I could not understand the importance
which Mr Anderson sought to put on it. I did not regard Mr Murray's
credibility as greatly damaged by it. I did not understand that any figure
for contract work would make any difference to the view that Mr Murray
expressed about the vital facts, that is the three contracts between Spring
Radio Cars and the respondents.
[266] The respondents' attack on Mr Murray's
evidence in cross examination and in submissions was based on his good faith.
Many questions were asked about the role of ICAS and his instructions from
Dr McMorrow. It was suggested to him that he had written a report in
terms required of him by the police and by CRU in return for promotion and
increases in salary. It was not suggested to him in any way which I could
understand what in his narrations of fact and opinions was inaccurate or
insupportable. I found Mr Murray's perspective, that of an accountant
with an interest in forensic accountancy and organised crime to be useful, and
as stated I accepted most of his evidence.
Mr Neill Thomson
[267] The
Scottish Ministers lodged production no. 6/105 in April 2009 which
consisted of a report written by Neill Thomson, a forensic accountant, employed
by the CRU. In October 2009 they produced a further version of the same
report dated 4 October
2009 in
which amendments are made and noted in red ink. The front sheet of the
production sets out the import of the changes as follows:
"With the exception of text highlighted in bold red, the content of the attached report dated 4th October 2009 is unaltered from the report dated 20th April 2009 and lodged at the Court of Session, Edinburgh on 21st April 2009. The main differences are as follows:
╖ the changes made to Appendix A1 are, with exception of a reallocation of г20,000 income from 'round sum receipt from unknown source' to 'transfer to/from RS Construction account 00213738', for presentational and clarification purposes only. The figures contained within Appendix A1 have not otherwise been altered;
╖ the changes made to Appendix A4 include a reference to the FIFO allocation in paragraph 2.3.6 of the report. Otherwise they are for presentational and clarification purposes only;
╖ the changes in the narrative of the report incorporate the reallocation of the г20,000 as described above. Otherwise they are made with the sole intention of clarifying points for the reader and to provide additional information; and
╖ there are some changes to the document references although the actual documents relied upon have not altered. Some additional document references have been added, again for the benefit of the reader."
I allowed the production to be lodged, though late. It became 6/105/4a.
[268] Mr Thomson gave evidence on 20, 21 and
22 October and 2, 3 and 4 November 2010. His CV, produced as the
last page of production 6/105/4, showed that he obtained a BSc in
mathematics at Heriot
Watt University in 1990. He was employed as a
police officer with Lothian and Borders Police between August 1992 and
September 2002. When he left the police he had the rank of acting Sergeant.
He started to study accountancy while still employed as a police officer and in
2002 joined McDonald, Gordon & Co Limited, accountants in Edinburgh. I advised parties that
that firm had at one time acted for me personally although I had never met
Mr Thomson and, from memory, thought that the firm had ceased to act for
me prior to 2002. No objection was taken to my continuing to hear the case.
Mr Thomson worked for RSM Robson Rhodes LLP and Grant Thornton LLP between
2004 and 2008. For a period during that time, between 2005 and 2007, he was
seconded to the CRU. From 2008 to 2009 he worked for Deloittes LLP in Edinburgh as a forensic accountant
and from April 2009 until the date of his giving evidence he had been employed
as a forensic accountant at the CRU. He qualified in 2003 as a member of the
Association of Chartered Certified Accountants (ACCA). Mr Thomson said
that he had obtained some limited experience of financial investigations in the
police. His interest was in forensic accountancy and most of his professional
work in accountancy had been in that field.
[269] Counsel for the Scottish Ministers took
Mr Thomson through his report in detail. He had prepared the original
report in about four weeks, as his first task on taking up his appointment. He
would have preferred to have had his report read and signed off by another
accountant before it left the office but in this case there was no time to do
that. He had been able to do the task assigned to him in the time available
by dint of working long hours and weekends. He had been instructed that the
report was required by 20 April 2009 and he produced it on time. He was not called to
give evidence in the first tranche of the case and he explained that he was
offered the chance to have his work read over by a Mr Cleghorn, a forensic
accountant contracted by the CRU, who had 40 years of experience.
According to Mr Thomson, Mr Cleghorn made certain suggestions about
improvements in the report. Mr Thomson considered the suggestions and
agreed with them and incorporated them into his new report. He stressed that
the decision was his and that had he disagreed with Mr Cleghorn he would
have said so and would not have made the amendments. Thus it was the amended
report to which Mr Thomson spoke. In discussing Mr Thomson's evidence
below I make reference where appropriate to other evidence which was relevant
to my decision.
[270] Mr Thomson's report is a detailed and
lengthy piece of work. In cross examination he said that he had been
instructed to analyse bank accounts because the solicitors in CRU felt that there
was insufficient analysis done in the reports of the interim administrator.
For reasons given elsewhere in this Opinion I have not relied on the reports by
the interim administrator, but in my view analysis such as that carried out by
Mr Thomson would be expected in a report by an interim administrator, such
analysis being a large part of the function of that officer of court. I would
expect respondents to be aware of the report and to set out in pleadings issues
taken with analysis. In this case counsel for Scottish Ministers took
Mr Thomson through his report and referred him to the underlying
documents.
[271] His terms of reference are as set out in
paragraph 1.1.1 namely that he has analysed the funding of property
identified by the interim administrator in her first report. He makes clear
that he has relied on factual information supplied to him rather than making
any investigations of his own. Hence the title of his report:-
"Analysis of the source of funding of assets identified as recoverable".
That is a vital point which the respondents and Mr Meek did not grasp. Mr Thomson was not concerned to investigate unlawful behaviour, but to analyse accounts and comment from them on the source of funding. He explained two techniques of analysis used by forensic accountants, being, FIFO, an acronym for first in first out, and the global method. In FIFO one assumes that money withdrawn from an account comes from the money first deposited in that account. Thus funds used to pay for a particular item can be traced to ascertain where they came from by checking the provenance of the funds deemed to be used for the item. However, if a sum is deposited very shortly before an identical sum is withdrawn, the assumption may not apply as the deposit may have been made to cover the withdrawal. The global method is used when several deposits are made on one day. In that situation it is impossible to tell in what order funds were deposited. Therefore one looks at the deposits in an effort to determine if they are business or personal, to assist in deciding which funds have been used for which payments. Mr Thomson explained that one had to use commons sense when analysing bank accounts.
[272] Mr Thomson began by discussing Thomson's
Bar. It had been owned by a firm run by Mr Milligan and Miss Craig
between 1993 and 2001. It was owned by Miss Craig for one year from 2001
to 2002 and between January 2002 and March 2003 it was owned by a company,
Pineloch Limited, which in turn disponed it to Mr Anderson. None of that
was in dispute and Mr Anderson confirmed in evidence that the pub had been
owned by Mr Milligan and Miss Craig and that when Miss Craig's
husband, Tony McGovern, died, he said she became the owner of the pub. It
was not in dispute that Mr Milligan had apparently transferred any
ownership interest he had in the pub to Miss Craig for no consideration.
Miss Craig did not give evidence and Mr Anderson said that she did not wish to
run the business and that her brother in law, Mr Stirton, helped her as
she was not a business woman. There was a loan secured over the pub from the
Bank of Scotland, standing at г51,000 in January 2001 which was repaid by
Mr Stirton from his bank account number ending 860, under the name of
Mr Stirton trading as Loveboat Products, by his paying a total of
г52,121.93. In paragraph 2.2.16 Mr Thomson analysed the source of
funds used to repay the loan and noted that г42,020 came from money lodged by
Mr Anderson in cash. The bank account typically had lodgements in
hundreds of pounds and so this transaction was not normal for that account.
Mr Thomson in paragraph 2.2.19 noted that the source of the cash was
unclear and that it did not appear likely to be trading income of Loveboat as
it was atypical in the account, and Mr Anderson had told HMRC that that
business had made significant losses. In February 2001 Thomson's Bar was
registered for VAT under the name of a partnership consisting of
Miss Craig and Mr Stirton. Mr Stirton opened a bank account at
Lloyds TSB ending in 568 in the name of Russell Stirton trading as Thomson's Bar on
which Mr Anderson was a signatory. Mr Anderson's evidence was to
the effect that Mr Stirton required to open a bank account in order to
help Miss Craig. She did not have a good record with the suppliers such
as brewers and Mr Stirton did. In his evidence, Mr Stirton said
that Miss Craig had been in an awkward position after her husband's
death. According to Mr Stirton "Mr Milligan had been up to no
good." He said that Mr Milligan had interests in other licensed premises
and that he had moved stock to them. Miss Craig was not a business woman
and was not interested in running the bar. As she was the widow of
Mrs Stirton's brother, Mr Stirton helped her. Both Mr Stirton
and Mr Anderson were adamant in evidence that Mr Stirton did not have
any ownership of the pub. They also said that Mr Stirton had paid for
refurbishment of the bar and had been repaid his outlay.
[273] Mr Thomson traced the transfer of
ownership from Miss Craig to Pineloch Limited noting that that company was
incorporated on 21 November 2001 and in January 2002 the property was sold
to Pineloch Limited for г220,000 to be paid within a period of three years from
3 January 2002. A total of г12,000 was traced by Mr Thomson as
having been paid to Miss Craig. On 16 December 2002 Pineloch Limited's
solicitors wrote to Miss Craig's solicitors requesting that the security
be discharged as the debt had been paid by a combination of payments directly
to Miss Craig and settlement of an outstanding tax liability. Thus the
payment period of three years had apparently contracted to less than one year.
Mr Thomson noted that the tax liability was not identified in any
correspondence and, as set out in his report, Miss Craig's own solicitors
wrote to her seeking confirmation that the amounts due to her under the
agreement had actually been paid. He did trace two cheques totalling
г16,687.05 paid in December 2002 and January 2003 to HMRC in respect of
Miss Craig's tax liability. In any event, in early 2003 Miss Craig
discharged the security and the premises were then held by Pineloch Limited.
Mr Anderson was the sole shareholder and director of Pineloch Limited.
He had sought a loan facility from his bank, Habib Bank, and offered to a grant
a security over the public house. The bank was not prepared to lend unless
the loan was secured on a personal asset belonging to Mr Anderson.
Ultimately, Pineloch Limited disponed the premises to Mr Anderson as an
individual, all as set out in paragraphs 2.2.41 to 2.2.61 of
Mr Thomson's report. Pineloch Limited had lodged dormant company accounts
with Companies House in December 2002, which would indicate that the company
had undertaken no significant transactions and had no significant assets or
liabilities. That could not be correct as the company had purchased Thomson's
Bar in January 2002. Mr Anderson's position when faced with this was
that he had made a mistake. Production 6/11/186 comprised a balance
sheet apparently prepared by Mr Yousaf for Pineloch Limited in which the
company was said to own the heritage at 275 Springburn Way, that is the pub, valued
at г178,390. Its only liability was a director's loan from Mr Anderson
in the sum of г178,388. There was no explanation either in the documents or
in evidence from Mr Anderson of this. Nor was it explained why the
heritage was valued at less than the price paid for it; nor was there any
explanation of where Mr Anderson had obtained the money to lend it to the
company. I accepted Mr Thomson's evidence to the effect that the
transfer was a fabrication for the purpose of deceiving Habib Bank. The key
to this is found in paragraphs 2.2.46 to 2.2.61 where it is noted that in
the balance sheet of Pineloch Limited the company's sole asset was said to be
the premises of Thomson's Bar, with the inconsistencies in accounts discussed
above. The bank's agents obtained a valuation of the bar at г250,000.
Mr Anderson then offered to pay from his own resources the difference
between the bank's valuation and the figure shown in the company's accounts,
being г71,612. That sum was paid to Mr Anderson's solicitors from the
A & S Group bank account. It was transmitted by them to the
agents for Pineloch Limited, who deducted their fee and sent the money back to
the same account. Pineloch Limited had no bank account of its own.
Mr Anderson's position was that he owned Pineloch and so could direct what
happened to the funds that the company received for sale of the bar. If there
had been a Pineloch Limited bank account he could have withdrawn the money from
it and put it in the A & S Group account. The accounts
submitted on behalf of Pineloch Limited in 2003 did not reflect the transaction
said to have taken place. I accepted Mr Thomson's conclusion at
paragraph 2.2.69 that funds were moved in a circular manner and Pineloch
Limited did not receive any money. I accepted Mr Thomson's evidence set
out at paragraph 2.2.66 to the effect that Mr Anderson represented to
Habib Bank that his main residence at 37 Cowan Wynd was an asset held by
him. It was not, Miss Leonard having purchased it following his sequestration.
I therefore find that Mr Anderson obtained the loan from Habib Bank
fraudulently by pretending to them that Pineloch Limited had transferred its
interest in the pub to him at arm's length and for value and by pretending that
he owned the house at 37 Cowan Wynd.
[274] I took from the evidence about Thomson's Bar
that both respondents had an interest in it. I did not accept that
Mr Stirton had no interest or control, because he was in a partnership
which registered the business for VAT, he had a bank account for the bar in his
name, he paid money for its refurbishment and he paid to redeem a loan over
it. Nor did I accept that Miss Craig had been paid г220,000 for her
interest in the bar. The respondents' position appeared to be that funds
would be transferred when needed between various businesses operated by them
such as Loveboat and Thomson's Bar. While the respondents were adamant that
Mr Stirton had no ownership in Thomson's Bar they led evidence about his
expending money on it. According to Mr Meek whose evidence I discuss
elsewhere, legitimate business men may move money quite properly between
businesses which they own. I accepted that, which showed that movement of
money would indicate that the person involved had an interest of some type in
both businesses. In any event I would have expected to see evidence in the
business books of proper recording of such transfers. In this case I did
not. Mr Anderson maintained that he had no business books for a number
of reasons. The police had taken his records in 2004; Mr Davies had lost
records before his death in 1999; and Loveboat records had been left in
premises in Milngavie
Road, Glasgow when that business was
closed down. I did not accept this evidence. In my view a properly run
business could re-construct records if they were lost.
[275] In section 2.3 Mr Thomson considered
funds which came from the sale of the filling station and shop, amounting to
г1,203,345.43. This was the largest amount of money in the case and a vitally
important part of the case. In order to comment on that money it was
necessary to consider where the funds to buy the filling station and develop it
came from. The rest of the section is concerned with that. The cost of the
ground was not in dispute, but the cost of development was.
[276] Mr Thomson's table at 2.3.6 identified
the sources of funds. He concluded that г90,425 which came from the trading
account of Thomson's Bar was used to pay part of the price for the filling
station, and for the reasons given that there was no evidence that those funds
were the product of unlawful conduct. He concluded г49,233 came from money
paid by Spring Radio Cars and was used as 28% of the price. I have found that
that money from Spring Radio Cars was paid as a result of unlawful conduct.
Mr Thomson then analysed the other sums used to make up the purchase
price. No source of the other sums of money used for the purchase was
suggested by the respondents. Mr Thomson took the view that round sum
deposits were unlikely to be from trading, and that Mr Stirton's tax
returns shed no light on possible sources as they did not include all that was
paid by Spring Radio Cars, still less give any clue as to where other money
might come from. He therefore came to the conclusion that 48% of the cost
came from either Spring Radio Cars or other sources which were unexplained. I
accepted from Mr Thomson's evidence that the funding for the purchase of
the filling station to the extent of 48% as set out in paragraph 2.3.23
has been funded from money unlawful conduct. I found his reasoning compelling
and I accepted it.
[277] In paragraphs 2.3.24 to 2.3.46
Mr Thomson analysed the source of the funds to purchase the additional
ground adjacent to the filling station. The price was made up of г23,609.66
from the purchase and sale of a flat at Carleston Street and г8,500 as a cheque
from an unnamed account. Mr Thomson analysed the purchase and sale of
the flat, which was above Thomson's Bar. This purchase and sale was another
example of Mr Stirton taking an interest in Thomson's Bar. He bought the flat
at auction, paying a г2,500 cash deposit and then a balance of г21,000 and
г227.84 of interest in respect of late settlement. It was then sold on to a
relative, Jean McGovern, who got a building society loan to fund her purchase.
The balance came from a cheque from the A & S Group account.
Using the methods of analysis described above Mr Thomson concluded the
purchase had been funded by a payment into the account which was likely to have
been from A & S Group trading. Analysis led to a similar
conclusion regarding the cheque for г8,500. Mr Thomson explained that
the trading income had been estimated at about г43,000 between January 2002 and
end November 2003, which if it were estimated for January 2003 would be about
г22,400. However, he also noted that the respondents claimed to have funded
much of the development from trading income. He therefore came to the view at
paragraph 2.3.46 that the money came from non trading activity in that
account. With reference to Appendix F of his report he estimated that
69% of non trading activity on that account came from unlawful conduct, thereby
implying that г21,045 came from unlawful conduct. I accepted this reasoning
which was not seriously disputed by the respondents. They confined themselves
to disputing that there had been any unlawful conduct at all. I would have
been prepared to hold that the transaction of buying and selling the flat at Carleston Street was a device used for
money laundering, as I did not believe Mr Stirton and Mr Anderson
that they bought it to solve a problem of neighbours complaining of noise, it
being a flat above the pub. Rather it seemed to me to be a method whereby money
was put in to purchase a flat at auction, and the flat was thereafter sold on
to a relation who obtained a loan to fund her purchase. The net effect was that
funds were laundered. Therefore as regards the purchase of the additional
ground for the development of the garage, I accepted Mr Thomson's
reasoning as set out in Chapter 2 and culminating in 2.3.46 that 69% of
the fund came from unlawful conduct.
[278] Mr Thomson's analysis of the funding of
the development of the garage is contained in his report in Chapter 2 from
2.3.47 to 2.3.117. As I understood his evidence he had considered the cost of
the development as advised by CRU and had examined bank accounts and business
records to ascertain where the money to develop the filling station came from.
He understood that the records were not complete and so he did not have an
accurate note of the money spent on the development. In order to understand Mr
Thomson's evidence it is necessary to describe the position taken up by
Scottish Ministers on the cost of redevelopment.
[279] Counsel for Scottish Ministers in submissions
stated that despite calls in pleadings and in the shopping lists the
respondents failed prior to proof to state details of the amount paid, and the
source of funds for the development. Therefore Scottish Ministers instructed
a surveyor, Mr Martin, to estimate the cost. That resulted in
Mr Stirton instructing another surveyor, Mr Eadie, as the respondents
believed that Mr Martin's estimate was excessive. They did not do so timeously
and did not set out their position clearly in their pleadings. I allowed Mr
Eadie to be called as a witness and his report to be lodged late, with some
hesitation.
[280] Mr Martin's evidence in chief was
helpfully agreed as being set out in his report production 6/105/1 and he
was cross examined and re-examined. His CV is printed at
production 6/105/2. He was a qualified building surveyor. Mr Martin
stood by his report and was not shifted from it in cross examination. He had
estimated the cost of development of the filling station at г1,070,000.
Mr Eadie of the Hogg Eadie partnership was led by the respondents to
counter Mr Martin's evidence. Mr Eadie was instructed very late in
the day and his report is dated January 2011, more than 18 months after the
proof began. I allowed it to be lodged though late. Mr Eadie's CV is
set out at the last page of his report, from which it can be seen that he is a
qualified quantity surveyor, having started as an apprentice in that profession
in 1966 and having obtained fellowship of the RICS in 1984. His estimate of
the cost was set out in his report, in the sum of г746,000. In
Appendix B (REV.
A) of his report he helpfully compared like with like and found that Mr Martin
gave a figure of г1,070,000 against his own figure of г640,000. In evidence it
transpired that Mr Eadie had not been told of changes to the plans for the
filling station and so his report could not be seen as entirely accurate. I
took the view that neither of the two surveyors could give an exact figure for
the cost of development, nor did they claim to do so. They were carrying out
an exercise of estimation after the building had been completed. Neither
claimed to be able to be absolutely accurate. Mr Stirton and
Mr Anderson who developed the filling station should have been able to
give the court documents from re constructed bank statements to show the cost,
but did not do so. In his pleadings Mr Anderson estimated it at г500,000
and in evidence he estimated it at г600,000. They should have had detailed
pleadings about the cost and the source of funds but did not do so. There was
some evidence from Mr Wilson and Mr Bremner, contractors, that
estimates in Mr Martin's report for the cost of work which they carried out
were too high. Various witnesses, including Mr Frew, Mr Hamill and
Mr Webber thought that the filling station would not have cost over
г1 million. I accepted the evidence from Mr Bremner, and to some
extent from Mr Wilson, though I noted he was rather vague and took wide
latitude in his own costs. I did not regard the other witnesses as reliable
on this point because, while connected to the trade, they had not developed
filling stations at the time in question, if at all, and had no reason to be
knowledgeable in any detail about the cost of doing so. I considered that
both Mr Martin and Mr Eadie were qualified as experts in estimating
the cost of the building. It was submitted by Mr Anderson that I should
prefer Mr Eadie as he was a quantity surveyor. I was not inclined to do
so as Mr Martin's qualifications seemed to me to be relevant. Both
witnesses proceeded by the same method of consulting industry guides, and
information about prices to which they both had access in the course of their
practices. As Mr Eadie was instructed late in the proof his report could
not be commented on by Mr Martin. In all of the circumstances I could not
make a finding about the cost of the development other than to find that it on
balance of probability it cost between г800,000 and г900,000.
[281] Returning to Mr Thomson's
work on analysis of the sources of money used to develop the filling station,
he explained that he analysed payments and sources of funds, using the same
methodology as described above when considering the purchase of the land. He
assumed that funds from Spring Radio Cars were received in respect of unlawful
conduct. He assumed that round sum deposits from unexplained sources were
from unlawful conduct. If money was transferred from one account to another
before being used to pay a supplier, he considered whether the original account
or a portion of it was deemed to have been obtained by unlawful conduct.
Mr Thomson was aware of Mr Martin's report, but not of
Mr Eadie's due to its being lodged late. He also had access to the
productions lodged by Scottish Ministers which included draft accounts prepared
by Mr Yousaf. In his paragraph 2.3.59 Mr Thomson reported that
he found payments totalling г544,609 made to contractors and others who may
have carried out work on the development of the garage. г451,498 came from
A & S Group account, and the rest from RS Construction and
A & S Leasing accounts.
[282] In his analysis of the source of funds to pay
the г544,609 identified, Mr Thomson considered the report by
Mr Milliken of KPMG and accepted that the cash flow figure of г43,000 was
approximately correct. In paragraph 2.3.80 Mr Thomson found that
the daily trading of the garage had not been suggested to be unlawful, and that
therefore any development funded by this would not be from unlawful activity. I
noted that Scottish Minsters did not submit that this approach was correct in
law in light of the terms of section 307 of POCA. Mr Thomson then
considered bank accounts and found that г451,498 was met directly from the
A & S Group account ending 139. He found on a full analysis of
that account that general trading expenditure in it amounted to approximately
98% of general trading income. Having accepted Mr Milliken's view that
the amount of free cash was approximately г43,000 Mr Thomson was of the
opinion that the underlying sources of funds could not be trading income. He
analysed those sources and gave a table at paragraph 2.3.91 showing that
non-trading income amounting to г733,951 was paid into that account, from the
sources there given. These sources included the loan from Habib Bank, which
had already been described by Mr Thomson as obtained by fraud. Other
sources were RS Construction, A & S Leasing account ending
900, A & S Leasing account ending 028, round sums from unknown
sources, VAT reclaim and Thomson's Bar accounts. Mr Thomson analysed
these accounts fully. His analysis showed that he was entitled to come to the
conclusion at 2.3.116 that г544,609 of the cost of the cost of the development
came from accounts in name of A & S Group, RS Construction
and A & S Leasing. г385,876 of that came from unlawful
conduct. The actual cost of redevelopment was unknown to Mr Thomson when
writing his report, and so he proceeded on the estimate given by
Mr Martin. He set out his reasoning in paragraph 2.3.117 to the
effect that if the estimated cost was г1,039,500 then at least 37% was derived
from unlawful conduct. If one also assumed that the development cost was as
stated, and that the difference between the traced payments of г544, 609 and
that cost, being г451,890 was funded by unknown and unexplained payments, then
81% was derived from unlawful conduct. In his paragraphs 2.3.118 to
2.3.129 Mr Thomson explained taking all expenditure together, on the
assumptions outlined, 76% of the sum received for the garage in December 2004
came from unlawful conduct. The sum received on sale was г1,203,345, of which
76% is г910,820. In his calculation Mr Thomson consistently applied the
logic described above.
[283] Mr Thomson considered the purchase of
the house known as The Limes, by Mr and Mrs Stirton. It was not disputed
that they had obtained a loan from Skipton Building Society for г220,000 and
paid the rest of the price, г370,000 by bridging finance until the proceeds of
sale of their previous house, Vida Ventura, were available. Thus the purchase
of The Limes was by funds from sale of Vida Ventura and a loan from the
building society. Mr Thomson examined those sources of funds in
paragraphs 2.4.5 to 2.4.34 he concluded at least 94 % of the price of The
Limes came from unlawful conduct, if Scottish Ministers averments are proved.
[284] Mr Thomson sought to amend
paragraph 2.4.13 by inserting that there was an RS Construction account
in 1998 to 2000. Counsel for Scottish Ministers took him through his report
from which it could be seen that Mr Thomson reviewed the mortgage
application for the loan for Vida Ventura. Mr Stirton claimed to have
been a self employed building contractor for seven years prior to 1996
operating as Parkgate Properties. However Companies House records showed that
Parkgate Properties Limited was in existence between 1995 and 1998.
Mr Stirton explained this by claiming that he had traded under that name
before incorporation. His accounts submitted with the loan application showed
his gross and net profit as equal for three years, and projected an equal gross
and net figure for the year to 31 December 1996. Mr Thomson explained why he
found this inherently improbable at paragraph 2.4.9 of his report. I
agreed with him. The figures are set out at paragraph 2.4.8 and show
gross and net profit of г51,479 for the year ended 31 December 1993, gross and net profit of
г54,783 for the next year, and gross and net profit of г61,479 for the year
ended 31 December
1995. Gross
and net profit of г65,000 is projected for the year to end in December 1996. Turnover
in the year ended December 1993 was said to be г177, 346. That was not
consistent with Mr Stirton's settlement with HMRC in which for the tax
year ending April 1997 he claimed a net profit of г44850. Nor was it
consistent with his claim to have been a mechanic earning г14,000 per year in
1993. Further, Mr Stirton claimed to have been working overseas or not
working at all nor claiming benefits during at least part of the period in
representations put to HMRC on his behalf. I have explained elsewhere that I
have found that Mr Girvan lent Mr Stirton г20,000 to assist in the
purchase. I have therefore found that the mortgage for Vida Ventura was
obtained by mortgage fraud. There was no evidence as to where the remaining
г7,000 came from, and in all of the circumstances I inferred that it came from
unlawful conduct. I have therefore found that г127,500 + г7,000 of
the free proceeds of Vida Ventura came from unlawful conduct.
[285] The purchase of The Limes was in part funded
by a loan which Mr Stirton obtained from Skipton Building Society
supported by financial statements in respect of the business known as
Loveboat. As I have found elsewhere Mr Anderson told HMRC that Loveboat
had made a loss, and contradicted that in evidence by saying it had made half a
million pounds, although he did not distinguish between turnover and profit.
Mr Thomson found that the loan application was made on the basis of
financial statements prepared by Mr Yousaf showing net profit of г71,607,
г77,239 and г79,144 in the years ended March 1999, March 2000 and March 2001.
In HMRC files Mr Yousaf said he had no records for Loveboat but understood
it had traded from July 2000 to December 2000. Mr Anderson told Mr MacFie that
Loveboat had made a loss. Mr Thomson analysed the bank accounts for
Loveboat and found that they operated for the four year period between April
1999 and April 2003 and found that they did not support the claims made to the
Skipton Building Society. I agreed with him. In paragraph 2.4.15
Mr Thomson noted that Mr Stirton described himself as "managing
director" of Loveboat Products while that business was a sole trader or
partnership. Mr Thomson expected that the titles of those managing its
operation would be owner or partner. Mr Meek on the other hand stated
that many of his clients who were sole traders would call themselves directors.
Mr Stirton said he regarded himself as owner of the business and that was
much the same as being managing director. I accepted Mr Meek's evidence
and Mr Stirton's and did not find that the description by Mr Stirton
was fraudulent. I did however find that the evidence about the claims made by
Mr Stirton to the building society when read with the claims made to HMRC,
and the evidence from the bank accounts, showed clearly that the loan was
obtained by fraud. In my opinion г220,000 + г127,500 + г7000
of the total price paid г370,000 (96%) came from unlawful conduct.
[286] Mr Thomson set out his findings on the
purchase of 3 Kelvin
Road,
Milngavie at chapter 2.5. Once again, the narrative was not disputed.
As I stated elsewhere I did not accept that Mr Stirton was employed as an
auto electrician at a salary of г14,000 per annum. Nor did I hear any
evidence which I believed about the source of the г4,000 deposit. I accepted
Mr Thomson's reasoning and I have found that the house at Kelvin Road was acquired with funds
obtained by unlawful conduct.
[287] Mr Thomson set out his analysis of the
purchase of 37 Cowan Wynd, Glasgow in Chapter 2.6. Miss Leonard's
mortgage application form had an incorrect date of birth and National Insurance
number. Had that been the only difficulty I would have accepted that it
showed a lack of care but no fraudulent intent. However, Miss Leonard
claimed to have been self employed for three years in a business concerned with
sale and development of flats. She produced a certificate from Mr Davies
who said she had been in business for five to six years. Her earnings were
г28,000. She claimed to have had a particular bank account for five years. Examination
of the bank account showed that it had been opened only two years before the
form was completed. Miss Leonard stated on the application form to open
that account that her income was г13,000. On the face of it she had said
contradictory things. I found her completely incredible. I explain
elsewhere my decision on admissibility of evidence concerning Miss Leonard's
police interview and my view of her evidence. In her police interview she
said she had never earned г28,000. I have found that Miss Leonard gave
false information on the application form for her mortgage by stating that she
was a property development consultant earning г28,000 per annum.
[288] Mr Thomson analysed three policies in Mr
and Mrs Stirton's names. He found that the money to pay for them could
not be shown to have come from a known source. I accepted his evidence.
[289] I found Mr Thomson's reasoning
compelling, although the evidence was difficult and required careful attention
to his report and to his oral evidence. Mr Anderson had said in his own
evidence that he did not regard Mr Thomson as impartial and had not
studied his report carefully. In my view the evidence from Mr Thomson
was very important. There was no cross examination which attacked his
methodology or his conclusions in any effective way.
[290] In cross examination on behalf of
Mr Stirton, counsel mounted an attack on Mr Thomson's qualifications
and integrity. He began by suggesting that Mr Thomson's degree in
mathematics indicated that he was "good at figures" to which Mr Thomson
replied that there was more to mathematics than figures, while agreeing that he
was "good at figures". Counsel then asked if he was friendly with police
officers to which Mr Thomson responded that he did have a couple of
friends who are police officers. Counsel then asked if he was interested in
the police and if he supported the work that police do. Mr Thomson said
that he supported the work done by police as he would expect most citizens
would do. Counsel suggested to him that he found the courts frustrating,
which the witness denied; he then asked the witness if he was "keen on civic
duty" and Mr Thomson said that he was. Counsel then asked about his
experience prior to writing this report, to which Mr Thomson replied that
since 2004 his work had all been in the field of forensic accounting and had
included work on one large fraud case as well as other cases. Counsel
suggested that he was unusual in having been a police officer first and the
witness agreed, saying that he knew of only one other forensic accountant who
had been a police officer first. Counsel discovered that the witness knew
that there had been a criminal investigation but no prosecution in this case.
Mr Thomson was asked if it can be frustrating to the police when no
prosecution is taken after a police investigation and Mr Thomson said that
he had seen that on occasion. In explaining his work in this case
Mr Thomson said that he was given the report by the interim administrator,
the Record and over 100 lever arch files of papers. Amongst them were police
statements and he skim-read them, spending more time on those that he deemed to
be relevant. He spoke to others who worked in the CRU who advised what they
considered relevant. He saw the reports by Mr Milliken and
Mr Murray. He checked the methodology used by Mr Milliken,
accounting being his field. He also read the report by Mr Martin but did
not check his figures as he no expertise in surveying. Counsel asked
Mr Thomson if he had been influenced by what was pled in the Record and the
witness replied that his instruction was to concentrate on the assets, which he
had done. He accepted that there is an element of subjectivity in his
views. Counsel asked him why he was of the view that it was impossible for a
business to have gross income and net income in the same figures.
Mr Thomson explained that everyone has some expenses, even if it is only
travel expenses, accommodation expenses and accountants' fees. Counsel then
suggested to the witness that he had "produced what the CRU wanted".
Mr Thomson denied that and said that he had upheld his own professional
standards.
[291] Counsel for Mr Stirton did not suggest
any parts of the report were wrong, nor did he suggest that the report had
missed out areas which should have been included. He appeared to suggest that
Mr Thomson may have been influenced by having been a police officer, and
suggested directly that Mr Thomson had produced the report which was not
his own opinion but was written to the order of his employers.
[292] In written submissions on behalf of
Mr Stirton it was incorrectly stated that this witness was told by CRU
employees that he need not read police statements. It was submitted that he
was influenced by the interim administrator's report, in particular with reference
to г17,000 which neither he nor the interim administrator noticed as takings of
the petrol station. That I understand to be a reference to an amendment
Mr Thomson sought to make to his report after Mr Anderson was able in
cross examination to show that paragraph 2.3.82 is wrong where it is
stated that a listing for the quarter ended 28 February 2003 was not available.
Submissions were then made in paragraphs 1.58 and 1.59 of the written
submissions to the effect that Mr Thomson's report was prepared under
pressure in a short period of time. The analysis was on the basis of
selective material only. No one had been interviewed by Mr Thomson.
Reference is made to evidence led from Mr Meek, a chartered accountant
called on behalf of Mr Stirton. In Mr Meek's report he notes:
"It is my view that the reports produced by Mr Thomson had been prepared on the assumption that the Scottish Ministers' case that the monies in question have been obtained from unlawful conduct is proven."
On behalf of Mr Stirton it is submitted that that assumption is a common theme of the expert reports and that if the court were to find that there was no unlawful conduct then the various reports would require to be assessed accordingly.
[293] I discuss Mr Meek's evidence below. In
my view there is no substance in any of the submissions made by counsel for
Mr Stirton about Mr Thomson's report. The submissions proceed on a
misunderstanding concerning Mr Thomson's function. He states quite
clearly at the beginning of his report that he has not made investigations of
his own into unlawful conduct.
[294] Mr Anderson in cross examination of
Mr Thomson led evidence that the witness had written between 15 and 20
reports in similar cases and had never given evidence in court before.
Mr Anderson took him in some detail through the report. He elicited that
Mr Thomson had examined records from Companies House available on the
internet relating to the limited company Pineloch Limited. There was
objection to Mr Anderson's questions, which I allowed under reservation.
I have decided to allow the evidence. It was to the effect that
Mr Thomson was of the view that the dormant company accounts for Pineloch
Limited could not be correct if, as suggested by Mr Anderson, there had
been a loan from Mr Anderson to Pineloch Limited. Mr Anderson put
it to the witness that the dormant company accounts would be "all right if
Pineloch Limited was not trading, and if Miss Craig had signed the pub
over to him". Mr Thomson said that all of that should be shown in the
accounts and it was not.
[295] In the course of his cross examination
Mr Anderson pointed out certain errors which Mr Thomson accepted.
He regretted that these had been noticed neither by him nor by
Mr Cleghorn. Mr Anderson elicited that Mr Thomson had made a
mistake in relation to production 6/29/2, page 83 where
Mr Thomson said that invoices from Balmore had been double counted three
times when in fact they had only been double counted twice. In Appendix B
of the report, which is a print-out of a spreadsheet comprising four pages
showing an analysis of petrol station redevelopment expenditure identified from
available bank accounts, Mr Anderson correctly pointed out that the first
entry on each page is the same, being an entry for 5 March 2004 from
account number 00407028 paid to Gilbarco Veeder in the sum of г4,139.
Mr Thomson agreed that that was an error and that the same invoice had
been included as the first line of the spreadsheet on each page which it should
not have been. Mr Thomson apologised for the error and expressed
surprise that neither he nor Mr Cleghorn had noted it. His evidence was
that if he had added in the sum of г4,139 four times instead of once then it
was an error that was in favour of the respondents.
[296] Mr Anderson questioned Mr Thomson
on the method of analysis known as FIFO. Mr Thomson had described that
as being a system whereby a forensic accountant looks at a bank account and
assumes that money paid out of a bank account comes from the first amount of
money to have been paid into that bank account prior to the extraction of
money. This is not a universally applied principle according to
Mr Thomson as on some occasions a sum will be paid in and then immediately
paid out and in that situation one can assume that the payment in was for the
purpose of making the payment out. Mr Anderson put to Mr Thomson
that it simply did not make sense. Mr Thomson disagreed.
[297] Mr Anderson submitted after proof that
"the pressure on [Mr Thomson] to produce 'a result' was clear". He
commended Mr Meek's report to the court. He submitted that
Mr Thomson was instructed to perform the role of accountant and not the
role of investigator.
[298] In my opinion there was nothing in
Mr Anderson's written submissions nor in his cross examination which led
me to find Mr Thomson's evidence unreliable. While it is plainly
unsatisfactory that mistakes have been made, I did not find that the mistakes
undermined the entire report. In my opinion Mr Thomson was a credible
and reliable witness. On behalf of Mr Stirton and Mr Anderson no
substantive errors of any importance were found. There were no pleadings to
set up any different interpretation of the information that Mr Thomson had
looked at from that to which he came.
[299] Mr Thomson's evidence led me to find
that the purchase of Thomson's Bar from Jacqueline Craig by Pineloch Ltd then
by Mr Anderson were not normal transactions. The relevance of this is
that Miss Craig was the widow of Tony McGovern who, as I have said
elsewhere in this Opinion, was said to be connected to the payments made by
Mr Gibson of Spring Radio Cars. I have found that Mr Anderson made
a circular transfer of funds intended to pretend to Habib Bank that there was a
transfer for value. I did not accept Mr Anderson's explanation of this
and I did not accept that he had accidentally lodged inaccurate accounts for
Pineloch Limited.
[300] In their written submissions, the Scottish
Ministers on page 173, paragraph 20 submit that the development of
the petrol station has not been explained by the respondents and that there is
no evidence of where a large portion of the money came from. I agreed with that
submission. In his submission Mr Anderson at page 72 asserted that
between 2001 and 2004 the respondents had a growing income and made no secret
about where their money came from. In my opinion, however, the respondents
did not at any time make clear where the all of the money to develop the
filling station came from. I have found that the filling station was
developed with funds from unlawful conduct making up the majority of the
purchase and development costs.
[301] Counsel for Scottish Ministers did not
suggest to Mr Thomson that his methodology was in any way incorrect or required
revisal. I understood that Scottish Ministers relied on Mr Thomson's
report. His conclusion at 2.3.120 was that if the averments of Scottish
Ministers on unlawful conduct were proved, 76% of the funding of the filling
station was derived from unlawful conduct. Thus 76% of the price received on
sale of the filling station would be recoverable. In the pleadings for the Scottish
Ministers at Statement VI.6 they offer to prove the following:-
"The purchase and improvement of the subjects at 911 Springburn Road was financed in large from recoverable property. The petitioners estimate the proportion of the funds obtained from recoverable property to be at least 76%. But for the said percentage, the Respondents would not have been in the position to purchase and improve the subjects. Further and in any event, the subjects at 911 Springburn Road were obtained through money laundering. The Respondents obtained the subjects by concealing, disguising converting and transferring criminal property. The proceeds of sale of the subjects at 911 Springburn Road are therefore recoverable property."
Thus the Scottish Ministers averred that Mr Thomson's figure of 76% is the least which is recoverable and they averred why a higher percentage may be recoverable. In their written submissions in chapter 14 Scottish Ministers argued that a higher proportion than 76% was recoverable. At paragraph 52 they argued that trading income of the filling station was recoverable in light of section 307 of POCA. They argued at paragraph 58 that trading income left out of account by Mr Thomson when analysing the A & S Leasing account, as set out in his Appendix A2 should have been taken into account for the same reason. In paragraph 66 of their written submissions Scottish Ministers argued as follows:-
"What has been established is that the Respondents made substantial sums from unlawful conduct and very little or no money from other activities. It would be eminently reasonable to infer that the funds that have not been traced to lawful activities have been obtained from unlawful conduct. This is what was done in SOCA v Gale."
At paragraph 69 Scottish Ministers argued that 90% was recoverable. In chapter 15, paragraph 14 they argued that the cash recovered as takings from the filling station is recoverable under section 307. All parties had an opportunity to read each others' written submission prior to final submission. Counsel for Mr Stirton did not submit that the Scottish Ministers arguments were wrong. Mr Anderson did, to the extent that he raised it in paragraph 30 of his chapter on the filling station. He argued that the final day's takings, г17,964.41 were not recoverable. Mr Anderson in paragraph 31 argued that none of the funding or trading represented illegal activity, that neither Mr Thomson nor the interim administrator commented on it, and lastly that Scottish Minsters were acting inconsistently as г65,000 in the A & S Group company bank account and г106,000 paid in advance for fuel were returned to the respondents by CRU.
[302] As a matter of statutory construction it is
correct, in my opinion that money made as a result of a business obtained by
unlawful conduct is in terms of section 307 recoverable. It is
irrelevant that no comment has been made by Mr Thomson, or the interim
administrator, although as I have said elsewhere I have not relied on her
reports in any event. As Scottish Ministers had not taken issue in their
submissions with Mr Anderson's assertion that CRU handed back money I
proceeded on the basis that was correct. However, inconsistent actings are
irrelevant to a question of statutory interpretation. In my opinion Scottish
Minsters were correct in their interpretation of section 307 of POCA. I
noted that section 307(1) applies to a person who has recoverable property
and who obtained further property consisting of profits accruing in respect of
the recoverable property. In terms of section 307(2) the further
property is to be treated as representing the property obtained through
unlawful conduct. By section 305(1) property which represents
recoverable property is also recoverable property. Scottish Minsters made
clear in evidence and in submissions that they did not seek to argue that the
trading in the filling station had been tainted for example by money
laundering. Mr Webber's evidence was to that effect and Scottish
Ministers took no issue with it. Rather they argued that the trading profits
of the filling station could not have been obtained were it not for the
unlawful conduct which provided money to buy and develop the filling station. They
argued that if they are right in that, then the profits are recoverable
property. They also made the argument set out above based on section 307
of POCA. I accepted their arguments. There was no suggestion that money
shown to come from Thomson's Bar trading was recoverable property and if I
understood Mr Thomson's evidence correctly he excluded such money. Money
which came from filling station trading, in contrast, was said to be
recoverable. I have decided as a matter of statutory interpretation that is
correct. I am prepared to accept that 90% was a reasonable proportion of the
total to regard as recoverable, as I accepted Scottish Ministers argument that
there was very little evidence of any legitimate source of funds.
Mr Neilson
[303] Mr Neilson
was called by Mr Stirton, having been on the Scottish Ministers' list.
His firm had acted for Mr Gibson and Mr McLeod and for the company
run by them. His evidence concerned work that he had carried out.
Mr Neilson had been detained by police officers in connection with
suspected money laundering offences. No proceedings were taken against him.
I formed the impression that Mr Neilson was naturally upset at having been
detained. I accepted most of his evidence and found him to be truthful about
most matters. He was concerned to assure the court that he had carried out
his professional duties properly and so his evidence, perhaps understandably, focussed
on his actions as an auditor. I found that he was not frank when discussing
the HMRC involvement with Spring Radio Cars. As I have stated elsewhere it
was clear from correspondence that Mr Neilson must have known that his
client Mr Gibson had told HMRC that the had been the subject of
extortion. I accepted that Mr Neilson did not know that to be true, but
he must have known that Mr Gibson had told HMRC. Counsel for Mr Stirton
led him through 6/89 of process which was a transcript of his interview with
Mallard Associates. Counsel read out much of the interview and asked the
witness if he agreed with what he was noted as having said. There were
various typing errors and parts which were inaudible but Mr Neilson
broadly confirmed that he had said what was noted in the transcript and that it
was correct.
[304] Mr Neilson was contacted by
Mr Kenneth Murray of ICAS who told him that a complaint had been made by
the police to the effect that Mr Neilson had not co-operated as fully as
he should with a police inquiry into his clients, Spring Radio Cars. His
evidence was to the effect that he was somewhat bewildered that such a
complaint should be made. While Mr Neilson qualified in England, he was under the
jurisdiction of ICAS as his practice was in Scotland. Mr Neilson gave me the
impression that he was not very impressed by ICAS nor by Mr Murray. He
felt that no one in ICAS advised him. He was prepared to co-operate with the
police but was concerned about client confidentiality and thought that he
should have got more advice from ICAS than was in fact available. He said
that he was told by Mr Murray that he should continue to act for Spring
Radio Cars and should complete their accounts as failure to do so might render
him in contravention of a 'tipping off' offence. Counsel for Scottish
Ministers took objection to his evidence about that advice and I heard it under
reservation. I have decided that it is admissible. Thus Mr Neilson
prepared accounts (which did not require to be audited due to a change in the
threshold for audit) in the knowledge that his client was under
investigation. In the event Mr Gibson declined to sign the accounts
off. Mr Neilson said that he did not regard Mr Murray as entirely
independent because he was not in private practice. While Mr Neilson is
correct in saying that Mr Murray is not in private practice, I did not
regard that as destructive of his objectivity or integrity. Mr Neilson
was asked by counsel for Mr Stirton for his opinion of Mr Murray's
reports and in reply, while explaining that he did not feel they were of a high
standard, indicated that he had seen them briefly when being precognosced. I
accepted that Mr Murray's reports have typing mistakes and are not of the
standard expected as productions in court. However, Mr Murray having
been in the witness box for some considerable time, I was of the view that his
views were explored fully. Mr Neilson's own views on Mr Murray's
reports were of necessity formed very quickly as he had not been asked to study
the reports prior to his giving evidence, but had seen them only briefly.
[305] Mr Neilson's position was that he acted
for Spring Radio Cars and that he trusted Mr Gibson as he had no reason
not to do so. He said that if did not trust Mr Gibson then he could not
continue to act for him or his business. He explained that his assistant,
Miss Law, was the accountant who dealt with the day to day work of
auditing Spring Radio Cars. Mr Neilson knew that she had put various
postings into the system for invoices which were received late in the sum of
г2,500 plus VAT for management services. The payments had been posted as
dividends at first and then adjusted. Mr Neilson asked Mr Gibson
what these invoices were for and was told that they were for management
services. Mr Neilson was satisfied by that because there were invoices
and because his client said that he got services in respect of them. He did
not ask what the services were, nor did he ask for any evidence of services having
been received. Mr Neilson was asked about the proper role of an
auditor. He explained that an auditor had to carry out various tests of
business books which were designed to ascertain among other things if there
were invoices to back up payments and if bank reconciliations had been carried
out accurately. He said that an auditor was not there to investigate what had
been obtained by way of services. It would be very difficult to give
objective evidence of services having been received, when by definition there
was no item or goods which could be seen. In any event his position was that
it was not part of an auditor's duty to inspect evidence. He stated that an
audit is not designed to pick up the payments made by extortion, so long as
there are invoices.
[306] As regards the money paid by Spring Radio
Cars for the fifteen Skodas supplied by A & S Leasing,
Mr Neilson explained that he did not have to decide whether he could
accept that there was nothing suspicious about that because he carried out the
work under instruction of the police, having been advised by Mr Murray as
outlined above. Mr Neilson drew up accounts which were not audited. In
his evidence Mr Neilson made it plain that he regarded the payments for
the Skodas as difficult to understand. He did state, as is submitted by
Mr Anderson and on behalf of Mr Stirton, that Mr Gibson had
difficulty in raising funds for the purchase of cars. However he could not
explain why he paid approximately twice the price for cars and at one stage he indicated
that he was glad that he had not had to carry out an audit involving these
payments.
[307] Mr Neilson explained that he had been
present when Mr Donnelly had indicated that payments made for protection
could not be deducted for tax purposes, under section 577A of ICTA.
Mr Neilson said that Mr Gibson did not wish to agree that payments
had been made for protection and that he instructed Mr Neilson to agree
the payment of tax on the basis that it would not anywhere be stated that disallowed
payments were protection payments. In light of the correspondence and notes
of meetings referred to above, I formed the view that Mr Neilson knew that
Mr Gibson had told the officers of HMRC that he had made protection
payments.
[308] Mr Neilson's evidence did nothing to
alter my view of the evidence already given by Mr Gibson, Mr McLeod,
Mrs Robertson and Mr Donnelly. I did not make any finding that
Mr Neilson knew of the protection payments at the time that they were
being made. I cannot make any finding about the adequacy or otherwise of his
auditing, that not being a matter before me. I found Mr Neilson's
evidence helpful in understanding how the business of Spring Radio Cars was
conducted and I accepted the submissions made on behalf of Mr Stirton and
Mr Anderson that he was well informed about that business. I did not,
however, find from his evidence anything to assist me on the veracity or
otherwise of the evidence of Mr Gibson and Mr McLeod.
Mr Neilson did not know what services had been obtained in respect of the
payments of г2,500 plus VAT per week. He did not know why Spring Radio Cars
had bought fifteen Skodas from A & S Leasing, which was not a
recognised car dealer and why the payment for them had been approximately twice
the price that the garage had charged for the sale of the cars. He knew
nothing about the agreement which was registered in the Books of Council and
Session.
Mr Giffin
[309] Mr Walter
Giffin was called on behalf of Mr Stirton. His evidence was that in the
early 1990s he worked for Mr Pat Kidd of West of Scotland Auto Electrics,
on a part-time basis putting Mr Kidd's business books in order. He
attended at a garage in Paisley run by Mr Kidd where he came across Mr Stirton.
Mr Giffin said from memory that Mr Stirton was working there when
Mr Giffin started to work there which was late 1990 and that
Mr Stirton left about the end of 1993. The witness himself left in
February 1994. He did VAT, income tax, and National Insurance paperwork for
Mr Kidd and made up wage packets which were in cash. He said that
workers were paid a basic of г10,000 but received a lot of overtime. By the
time he left he thought that the wage was probably up to г13,000 or г14,000 a
year plus overtime. According to Mr Giffin he had heard from
Mr Kidd, the owner, that Mr Stirton was leaving because he was going
to work abroad in the construction industry. He recalled one of the other
workers as Robert Thomson. Mr Thomson gave evidence. He was an
engineer working for a firm in Glasgow and said that in 1990 he had worked for West of Scotland
Auto Electrics. He started working there in late 1989 and stayed until mid or
early 1994. Russell Stirton started with the firm shortly after him and left
shortly before him. Mr Thomson said that his weekly wage was usually
between г230 and г250, take home pay, including overtime. He thought that
Mr Stirton might have been paid more than him but remarked that it was
none of his business. I did not find that this evidence enabled me to make
any finding other than that Mr Stirton had worked in some capacity for the
business. I could not tell if he was employed or contracted, and I did not
know how much he earned. I noted that in his evidence, Mr Anderson had
little knowledge of Mr Stirton's employment with this business. As
Mr Anderson had taken responsibility for pleading Mr Stirton's case
at an early stage, I would have expected him to have discussed matters with
Mr Stirton. He did not know where the garage was situated, thinking it was
in the west end of Glasgow, not in Paisley.
Mr Stirton himself was vague about his earnings. Taken with other
evidence showing that Mr Stirton had no history of payment of income tax
to national insurance, and his own varied claims as to his earnings, I have found
that he had made fraudulent claims to lenders.
Mr Steele
[310] Mr Thomas
Steele, a partner in Brunton Miller Solicitors in Glasgow gave evidence. He referred to production 6/83/3
which was an offer on behalf of A & S Group to purchase ground at
Cowlairs Road in Glasgow. Mr Steele
remembered that as being an open site which his clients, Mr Stirton and
Mr Anderson, wanted for development as an industrial centre with light
industrial units. There was difficulty concerning planning and he was
instructed to withdraw the offer. Mr Steele then gave evidence about the
ownership of Thomson's Bar. He said that Mr Anderson wanted to raise a
loan over the pub from Habib Bank. The title to the pub was in the name of
the limited company Pineloch Limited. Mr Steele asked the bank's agents
if the limited company could grant a security but the lender would not agree to
that. Mr Steele therefore arranged for another agent to act for Pineloch
Limited and for Pineloch Limited to dispone the pub to Mr Anderson as an
individual, for whom Mr Steele continued to act. Mr Anderson then
granted a security to the bank. Mr Steele did not require to ask
Mr Anderson about the director's loan and therefore did not do so.
Mr Anderson sought to argue that Mr Steele, having acted in this
transaction, must have understood that the transaction was entirely
legitimate. In my view that is a misunderstanding of the position, similar to
the misunderstanding concerning Mr Cockburn, solicitor to Spring Radio Cars.
I have no doubt that Mr Steele carried out his instructions efficiently
and properly (as did Mr Cockburn) but those instructions did not entail
his discovering whether the company Pineloch Limited was in fact indebted to
Mr Anderson. Therefore in my opinion Mr Steele's involvement in the
transaction adds nothing to the evidence in this case.
Mr McKay
[311] Mr Angus
McKay, a mortgage broker, gave evidence on behalf of Mr Stirton. He said
that in 1994 and 1995 he had his own business known as A M Consultancy
Services. He recalled Mr Stirton as a client for whom he had obtained a
mortgage as an agent for State Credit. He confirmed that the paperwork was at
6/21/1. He understood that
this was bridging finance which Mr Stirton required for premises at
Balgrayhill. Mr McKay noted that in the first part of it in his
handwriting were the names of four children, which he said he now were
incorrect because the names are not the names of Mr Stirton's children. He
said that he could not explain the mistake but thought he must have taken
separate notes and then got them muddled up somewhere. He noted that on
page 4 of the form Mr Stirton's address was given at 3 Kelvin
Road, Milngavie and said that he knew that Mr Stirton had two houses, one
at that address which his mother lived in and another elsewhere in either
Bearsden or Milngavie. Mr Anderson's cross examination ascertained that
Mr McKay remembered Mr Stirton working on the site when he visited
it.
Mr Wilson
[312] On
behalf of Mr Stirton, Callum Wilson gave evidence. He was a director of
a company called Balcon Limited which used as its trading name Balmore
Contracting. He had carried out work at the filling station in Springburn
between 2002 and 2003. He worked along with his colleague Keith Brown over a
period lasting for about six months. Mr Wilson said that Mr Stirton
was there nearly every day and was personally involved and helped with the
work. He said that Mr Anderson co-ordinated things and Mr Stirton
acted as a labourer. Mr Anderson in cross examination ascertained that a
figure of г53,000 in production 6/105/1, the report by Mr Martin, for work done
by him was too high. Mr Wilson did not have any invoices to compare to
the estimates given in 6/105/1. He said in answer to Mr Anderson that as
an example the concrete forecourt is put in as a figure of г66,000. While
Mr Wilson could not remember his own charge he thought it would have been
between г10,000 and г20,000. He noted a tarmacing figure of г23,000 and said
that his own figure would have been г10,000 and г12,000. At page 26 of
the report he noted that a price was given at г55 per linear metre. He
thought that his own charge would be between г10 and г12 per linear metre.
[313] Mr Keith Brown gave evidence. He
worked in the building trade for Carron Contracts Limited. He had previously
worked for Mr Stirton at the filling station in 2003 and before that in
his home in 2002. He was trading then as Balmore Contracting along with his
partner Callum Wilson. He recalled the site as a small petrol station before
any work had started. He was there for six or seven months as he had to be
there at the beginning of the contract and at the end, that being the nature of
ground work. Mr Stirton kept an eye on everything and at times pitched in
and helped. He would help to lay cement and he wanted to drive the
machines. Mr Brown would get there at eight in the morning and leave at
five but Mr Stirton would be there before him and left after him. He was
as good as any contractor and if there were any problems that needed solved he
would step up. Mr Brown said that a job that size needs a project
manager. Mr Stirton and Mr Anderson took on that work. There was
no main contractor and they were in charge. He found it hard to estimate how
much of the profit of such a job would go to the main contractor if there was
one, but it could be a quarter or even more. He did not see anyone paid in
cash. Mr Anderson asked what Mr Brown had seen Mr Anderson
doing and he said book-keeping and acting as project manager. He did not know
Louise Rivers or Mallard Associates. If he was asked to work again for
Mr Stirton and Mr Anderson he would do it. He saw Mr Stirton
as a typical, hard working client who wanted to get the job done. They had a
good working relationship both with him and other contractors.
Mr Girvan
[314] I
heard evidence from Thomas Girvan, on behalf of Mr Stirton.
Mr Girvan said that he was retired but had been a grocer all of his working
life. He knew Mr Stirton because Mr Girvan's father and
Mr Stirton's father had been friends and he recalled meeting Russell
Stirton, certainly before his father died in 1983. Mr Girvan thought
that Mr Stirton came to see him in or around 1996 and asked if he could
lend him г20,000. Mr Girvan was happy to do so because Mr Stirton's
father had been very helpful to Mr Girvan's father. He said that he had
the money because he had several endowments and one of them had matured on 4 May 1994. It was for about
г36,000. Production 7/18 was paperwork from the bank showing that a
policy had indeed matured in the sum of г36,135 and that г5,000 had been
retained by the bank and the balance sent to Mr Girvan. The witness said
that he had also got another policy shortly before that. He kept the money in
cash in his house in a safe. He volunteered that while the court might think
that was odd, he did it because that is what his parents did. He said that he
lent г20,000 to Mr Stirton in or around September or October of 1996. He
got a chit from Mr Stirton in respect of it but did not keep it.
Mr Stirton paid the money back several months later. According to
Mr Girvan, Mr Stirton had arrived with a cheque and Mr Girvan told
him he would prefer cash. Mr Stirton came back with cash.
[315] Counsel for Mr Stirton asked
Mr Girvan about convictions and he said that he had two convictions for
reset, one in 1975 for which he was fined and one in 1985 in the High Court for
which he was sent to prison for 30 months. In response to counsel asking
him what he would say if it was suggested that he was dishonest, Mr Girvan
said that he had simply made a mistake buying something which was stolen. It
was an honest mistake and if anybody suggested he was dishonest then they were
taking a liberty as he had done a lot of good in his life and he was telling
the truth.
[316] In cross examination by counsel for Scottish
Ministers Mr Girvan said that he had given up his grocery business in 1990
and after that did a little business in buying and selling cars. He explained
that he had invested in various policies on the advice of his bank manager and
had been amazed at the sums that he received for them. Counsel asked why he
did not keep his money in the bank where it would earn interest. He said that
he did not do so because he was quite happy with the sums he had received. He
was not concerned that it might be stolen because he had a good safe hidden
beneath his floorboards. He had about г40,000 in the 1990s in his safe. He
explained that the cash returned by Mr Stirton was in bundles of г1,000.
I accepted from this witness that he knew Mr Stirton and that their
fathers had been friends. I also accepted, in light of the productions that
he had been paid the proceeds of a savings policy. I was concerned about
Mr Girvan's conviction for reset in the High Court which had led to a term
of imprisonment. While I was not prepared to regard Mr Girvan as an
entirely credible witness, in light of the conviction and his explanation of
it, I was on balance prepared to find that he had lent Mr Stirton the
money as stated. I accepted that Mr Stirton had returned it to him in
cash.
Mr Gore
[317] Mr Clive
Gore gave evidence on behalf of Mr Stirton. He is the company secretary
and sales manager of Scala Agenture which is a company based in Holland. Mr Gore said that
he had run the UK
branch of the company since 1998. The company is a wholesale dealer in sex
toys, lingerie and equipment. The main business in Holland has a turnover of about
г50 million. He said that in 1998 to 1999 retailers would be able to
sell at a mark-up of six times or more in the case of some of the cheaper
lines. Mr Gore said that he had never heard of Mr Stirton until he was
contacted to be a witness in the case. He did know of a business entity
called Loveboat as a company which he had supplied in the past. He recalled
being introduced, in Amsterdam, to Mr Anderson. He was told that Mr Anderson
was dealing with the Amsterdam office of his business and as Mr Gore was about to open
up the UK office he was asked to
take on the account. He said that Mr Anderson traded as Loveboat and
took a wide range of goods from him. He understood that Loveboat was
predominantly selling through party plans and that they may also have had some
mail order customers. He understood that the connection had continued until
April 2000. As far as he knew there was a good relationship and goods were
delivered to Scotland and paid for monthly.
He recalled that something appeared to have gone wrong because payments slowed
and he had to chase Mr Anderson for the money. Mr Anderson phoned
him to say that he was coming over to pay the money but then told Mr Gore
that his money had been confiscated. Then a large number of goods were
returned. Mr Gore's position was that when his company stopped trading
with Mr Anderson of Loveboat, Mr Gore's company was owed about
г12,000. He said that he tried to recover it through Edinburgh solicitors but had no success.
[318] In cross examination Mr Anderson
ascertained that payment from Loveboat was on some occasions by cheque and on
some occasions by cash paid in Holland. I found that Loveboat had traded and
had taken goods from Scala and other suppliers, spoken to by Mr Stirton and
Mr Anderson in his evidence, but I had no evidence before me of any profit
made by Loveboat. I was aware from his evidence that Mr MacFie had been
told that Loveboat made a loss. I therefore did not accept that Loveboat provided
funds for the development of the filling station.
Mr Meek
[319] Mr Jeffrey
Meek was called on behalf of Mr Stirton. He was an accountant, a partner
in French and Duncan. Counsel sought to lodge a report, which became 7/19 of
process as I allowed it to be lodged though late. In evidence Mr Meek
explained that he had been instructed at a late stage and had been sent certain
papers which were insufficient for him to complete his instructions. He had
therefore sought further papers. I found the method of his instruction to be
odd and unhelpful in the case. Nevertheless I allowed the report to be
lodged.
[320] At paragraph 1.3, he set out the work he
was asked to do, being to comment on the report prepared by Mr Thomson of
CRU. In doing so he considered the report prepared by Mr Milliken, and
the report written by Kenneth Murray. He also had regard to a number of
productions which he set out, the Record, and the copy HMRC settlement with
Mr Stirton dated 18 December 2003. He carried out no interviews.
[321] In his paragraph 1.5 headed "Conclusion"
he stated that in his view the reports produced by Mr Thomson had been
prepared on the assumption that the Scottish Ministers' case that the monies in
question had been obtained from unlawful conduct is proven. He is correct in
that. Mr Thomson gave evidence to that effect. Mr Meek said that
within the reports themselves there were a number of material assumptions made
by Mr Thomson which, if invalid, would call into question the basis of his
conclusion that monies referred to in his report had been obtained
unlawfully. Mr Meek concluded as follows:-
"It is my view that the information provided in Mr Thomson's reports does not support his position."
[322] After hearing Mr Meek's evidence I was not
persuaded that his last paragraph of his conclusion was justified.
[323] In paragraph 2.2.1 of his report
Mr Meek stated that he did not intend to comment on Mr Thomson's
pages 7 to 21 because they focused on Thomson's Bar, which Mr Meek
believed to be irrelevant. In paragraph 2.3 Mr Meek set out the
sums of money that Mr Thomson noted that the Scottish Ministers offered to
show represented the proceeds of extortion. He stated:-
"Mr Thomson does not make any reference to any documents to support this position although I have seen a taxi car rental agreement that provides for г312,000 ex VAT to be paid by Spring Radio Cabs (sic) over a 78 week period."
I took the view that Mr Meek has misunderstood the position. It is not in dispute amongst parties that there is a car rental agreement, although it is said by all parties to be a hire purchase agreement. The question before the court is the larger question as to whether that agreement was entered into voluntarily or whether it was the result of extortion or other pressure. That is for the court to consider in light of all of the evidence.
[324] At paragraph 2.3(i) Mr Meek noted
that Mr Thomson concluded that money from Thomson's Bar was not from
unlawful conduct. That is not in dispute. In the next paragraph, 2.3(ii),
Mr Meek noted that Mr Thomson offers no reasons or documents as to
why money from Spring Radio Cars could be assumed to be derived from unlawful
conduct. In my opinion Mr Meek misunderstood matters. The money from
Spring Radio Cars, which was in respect of invoices sent by
RS Construction and by A & S Leasing, is one of the matters
before the court.
[325] When he came to deal with the funding of the
purchase of the land adjacent to the garage and funding the development of the
garage, Mr Meek narrated what Mr Thomson had said in his report. He
repeated that Mr Thomson assumed that funds came from unlawful conduct.
He noted that Mr Thomson assumed that he was starting with the cost to
renovate the garage of г1,150,000 based on the Malcolm Hollis report.
Mr Meek correctly noted that the report from the Hogg Eadie Partnership
indicated a lesser figure of г592,412. In the last paragraph of
section (c), which is headed "Funding of Redevelopment of the Original
Garage and Land", Mr Meek stated the following:-
"At 2.3.65 Mr Thomson comments on the formality of businesses to finance capital expenditure projects using borrowed funds. Whilst, as a prudent accountant, we would suggest this to clients, we certainly have clients in the past who only make capital expenditure out of trading receipts on the basis that they do not wish to be indebted to the bank."
I asked Mr Meek if there was a typing error as I did not understand the word "formality" in the context of that sentence. He assured me there was not. He told me that he was thinking of a particular client who had a chain of hotels and who never borrowed money to buy a new hotel but used trading receipts. The point was that if Mr Stirton and Mr Anderson used trading receipts to finance the development of the garage then they were not unique.
[326] Mr Meek at page 8 of his report in
a paragraph headed "1 Cash from AS Group Trading" noted that
Mr Thomson had referred to the KPMG report and had noted that report found
that the A & S Group did not have sufficient profits generated
during the period to "cash flow" the development activity. He noted that the
figures referred to by KPMG and Mr Thomson did not provide for any
movement in stock, debtors or creditors when calculating periodic profit or
loss. He is correct in that. As I understood Mr Milliken's evidence,
he did not have the requisite information. He found that lack of figures for
that would be in favour of Mr Stirton and Mr Anderson. Mr Meek
made the point in the next sentence that a petrol retailer is a cash business,
who gets in money from the members of the public who buy the petrol, but may
not have to pay it out to his supplier and therefore has cash in his
business. There is no evidence that that was so in this business as
Mr Anderson said that he had to pay for his petrol in advance, the period
varying between 24 and 96 hours. Mr Meek had no other information on
which to base any different theory or figures. In the last paragraph on page 8
Mr Meek decided that the money raised on Thomson's Bar cannot be said to
be unlawful activity because Thomson's Bar does not form part of this recovery
action. In my opinion he is wrong in that as the Scottish Ministers' position
on this is that money was raised from Habib Bank as a loan secured on Thomson's
Bar and used in the redevelopment of the garage. Mr Meek had not
considered the point taken by Scottish Ministers firstly to the effect that the
loan was raised by misrepresenting the position to the bank and secondly that
the money was used in the redevelopment of the garage in order that the garage
be sold.
[327] Mr Meek argued, in his paragraph
numbered 6 on page 11 that Mr Thomson had made an assumption
against the respondents. Mr Thomson had found that there were no
payments in personal accounts known to be held by the respondents which could
be seen to be to garage development suppliers. As Mr Thomson carried out
no interviews with the respondents he should simply, according to Mr Meek,
have concluded that he did not know whether any such payments were made.
While Mr Meek may be correct in what he says, there has been no evidence
before me from the respondents that they did make payment out of personal funds
for garage development. Mr Meek, having raised the point, was not able
to state in evidence that any such payments had been made. His function
appeared to be that of making a critique of Mr Thomson's work rather than
presenting any positive information to the court. The assertion made by
Mr Thomson has not been displaced.
[328] In considering Mr and Mrs Stirton's
purchase of the house The Limes, Milngavie, Glasgow, Mr Meek stated that
he had seen correspondence consisting of negotiations with HMRC which in his
view would support the income that Mr Stirton claimed he had when applying
for funds from the building society. In my opinion he is incorrect in that
assertion and in any event in this proof I have been asked to look at
Mr Stirton's position rather than to look simply at what he told the
Inland Revenue his position was. Mr Meek also states when considering
mortgage fraud that he needed to know whether the building society had asserted
that they had suffered any loss in the transaction. In my opinion he is wrong
in that. Counsel for Mr Stirton and Mr Anderson took evidence from
various lenders to the effect that they had suffered no loss because mortgage
repayments had been made. In my opinion that does not matter. The lenders
all took the stance that had they known that the income claimed on the
application forms was not correct then they would not have made the loans.
[329] Mr Meek had read Mr Murray's report
but made no comment on it either in his own report or in evidence.
Mr Meek's report has many typing and spelling errors. He explained that
he had first been approached concerning the case in October 2010, but had
received no instructions until the last week of January 2011. He was given
Mr Thomson's report on 27 January and when he requested other papers
they were supplied over a period of three days ending on 4 February
2011. He began his evidence shortly thereafter. I formed the impression
that his work had been done hurriedly. Counsel for Scottish Ministers
established from him that he had worked on the following assumptions:-
1. there were legitimate explanations for Spring Radio Cars paying money to RS Construction and to A & S Leasing.
2. any transaction involving Thomson's Bar was irrelevant to the case.
3. that Mr Stirton's income declared to HMRC for the period between 1996 and 2001 came from a legitimate source.
4. that Mr Stirton having settled with HMRC for that period is conclusive regarding the amount of income, the source of it, and its being legitimate.
5. that the fact that no one had been charged with mortgage fraud was relevant to the proof.
In my opinion none of these assumptions were justified. Having considered carefully all that he said, I did not find Mr Meek's evidence helpful. I formed the view that this report was incomplete and that the assumptions made by him precluded his considering matters which I had to consider. I noted that he had made no comment at all on Mr Murray's report, and very little comment on Mr Milliken's report. I did not accept his criticisms of Mr Thomson's report.
[330] Mr Ian Denney gave evidence on behalf of
Mr Stirton. He was an architectural consultant who had been self
employed since 1990. His experience prior to self-employment was working for
Glasgow City Building Control Department dealing with building warrant
applications. He had known Mr Anderson since the late 1980s when they
had worked together as Mr Anderson developed flats and had to obtain
building warrants. Mr Denney had assisted with drawings for the site at Balgrayhill Road and had also done some
drawings for the filling station. The main drawings had been done for the
filling station by Parry Hughes but Mr Denney had done the drawings for a
small extension. He was paid in cash. He had been asked to attend a meeting
regarding a possible unit for a taxi firm to be built at Cowlairs Road and he confirmed that he
had drawn a plan which was annexed to the offer put in by the solicitor
Mr Steele. Mr Denney said that he had met Miss Leonard, whom
he thought was married to Mr Anderson. He understood that she worked
with him as a receptionist in his business in which he found flats for
development. I accepted Mr Denney's evidence and did not feel that it
added anything to the case.
Mr Bremner
[331] Mr Anderson
called Alan Bremner, an electronic security engineer. Mr Bremner had run
his own business, Bremner Security Systems for a number of years. He had
installed a CCTV camera and alarm system at the shop and forecourt of the
filling station. His charge for the installation was г13,800. Mr Anderson
showed him the figure suggested by Mr Martin for this work, being г19,702.
Mr Bremner thought that too high as he had charged г13,800. He had
acted on Mr Anderson's instructions and had seen Mr Stirton working at
the site. He did not see any main contractor when he was there. He was paid
by cheque and his maintenance charges thereafter were also paid by cheque. He
remembered that the cheques came from Habib Bank, because he had not had a
cheque from that bank before. He explained that the cables for the system he
put in were in the loft area, to which he got access by lifting tiles from the
ceiling. The ceiling was not made of gyprock. I understood the significance
to be that Mr Martin had made assumptions about the building. Mr Bremner
had no difficulty with the contract and thought that Mr Stirton and
Mr Anderson were hard working people. He had been interviewed by the
police who asked him if he knew the McGovern family, to which he had replied
that he had read about them in the newspapers. Counsel for Mr Stirton
asked if the police suggested he was in some way involved in illegal work, and
Mr Bremner said they made no such suggestion, but that during the
interview it had felt as though they did think that. I accepted Mr Bremner's
evidence and found from it that a camera and alarm system had been installed
for less than the estimate in Mr Martin's report; that the ceiling was as
described by Mr Bremner, and that he had found the police questioning
forceful.
Mr Cockburn
[332] Mr Cockburn
was called by Mr Anderson on Friday 11 February
2011. He
is a solicitor in Morisons at 53 Bothwell Street, Glasgow. When giving evidence he was
aged 60 and had qualified in 1972. He had been a partner in Tilston
McLaurin until it amalgamated with Maxwell Waddell and became Maxwell McLaurin
and then amalgamated with Morisons. He had been a partner in one firm or
another since 1974. He acted for Spring Radio Cars Limited and he knew that
the principal shareholder or the owner of the business was Allan Gibson. They
had originally been clients of his partner, John Kerrigan, who had been in the
firm Maxwell Waddell. Mr Cockburn had come to know them through that
connection. He also knew that Mr McLeod was some sort of associate of
Mr Gibson. He knew that the business also used the name "Network".
Mr Anderson asked Mr Cockburn if he knew from his client that the
client had been taken to the police station regarding questioning about a
matter in 2004. Mr Cockburn said that the client phoned him and came
into the office to discuss it. Mr Anderson asked what was discussed Mr Cockburn
said he had concerns about client confidentiality. Counsel for the Scottish
Ministers said that she had anticipated this as a problem and had prepared for
the court extracts from Walkers on Evidence.
[333] I asked the witness to leave the court. I
then asked Mr Anderson to address me. He said that the court had discretion
to tell the witness to answer all questions and that there was no need to look
at any book produced by counsel. I asked Mr Anderson if he wanted to ask
the witness about letters written by him which had already been spoken to by
either Mr Gibson or Mr McLeod and he confirmed that he did and when I
asked him if he wanted to know more than was in the letters he confirmed that
he did. He repeated that it was a matter for my discretion. I decided that
I should hear counsel for Scottish Ministers on this. Counsel addressed me
starting with paragraphs 10.2.1 and 10.2.5 of Walkers on Evidence.
She made reference to the case of Three Rivers District Council v Governor and Company of the Bank of England [2005] 1 AC 610 at page 646 and paragraphs 23, 25 and 27. She argued that
it was not a matter of discretion. She referred to the speech of
Lord Rodger of Earlsferry at paragraph 54.
[334] I asked counsel for Mr Stirton if he had
any input into this and he stated that the case referred to by counsel could be
distinguished but he did not explain in what way. I asked Mr Anderson
for his submissions and he said he needed time. I told him that it was up to
him to be in a position to lead his evidence but that I would give him some
time. I asked him if he had asked Mr Gibson if he would waive confidentiality
and he said that he had not. I adjourned and when the court resumed,
approximately one hour later, I was advised that Mr Stirton had visited Mr Gibson
who had signed a letter to Mr Cockburn waiving confidentiality. It was
arranged that Mr Cockburn would have an opportunity to check this with
Mr Gibson by telephone and he then resumed his evidence.
[335] Mr Cockburn then explained that
Mr Gibson had wanted him to write to Messrs Fleming & Reid to get
a copy of the petition warrant on which Mr Anderson and Mr Stirton
had appeared. Mr Cockburn said that he told the client that the
allegation on the petition warrant was that of extortion. Mr Cockburn said
had not asked the client if he was a victim of extortion. Mr Cockburn
went on to say that he was concerned for his client who seemed to be at
breaking point and he was worried about his mental health. He said that
Mr Gibson was a highly strung person.
[336] Mr Anderson went to 7/10, which is a
copy letter from Maxwell McLaurin dated 5 May 2004 which Mr Cockburn
had written either at the instruction of Mr Gibson or Mr McLeod or
both of them. He had correspondence with the Registrar of Companies to
explain that his clients could not complete their company records because their
correspondence was kept by the police. Mr Cockburn said that the clients
wanted the disruptions to their business stopped and Mr Cockburn advised
that he would write to the Chief Constable. His clients' position was that
there had been so much contact by the police and the clients had so often told
the police that they were making no complaints that they began to think that
they were being pursued to the point of the police being malicious. They got
to the stage where they were not prepared to co-operate voluntarily. Mr Cockburn
said that neither of the clients ever said they had been subject to violence
from Mr Stirton or Mr Anderson.
[337] Mr Cockburn was advised by Mr Reid
that Mr Anderson and Mr Stirton were on bail with a special condition
that they were not to contact Mr Gibson or Mr McLeod.
Mr Cockburn said that his clients told them that they wanted to meet
Mr Anderson despite the existence of the bail condition. Mr Cockburn
wrote to the Crown on their instructions confirming this. He also wrote on
instructions of his clients to the Solicitor General explaining that they felt
that they were being harassed by the police who were trying to persuade them to
say that they had been subjected to extortion.
[338] Mr Anderson then moved on to contacts
from the licensing section of the police and Mr Cockburn said that he went
to a meeting with his clients and the licensing section of the police. He
thought at first that Mr Anderson and Mr Stirton were not mentioned
by name at the meeting but when asked by Mr Anderson to look at letters
produced as 7/10/14 and 7/5/3 Mr Cockburn accepted that
Mr Anderson and Mr Stirton must have been mentioned by name.
Mr Cockburn explained that Mr Gibson had told him that the
investigation into Mr Anderson and Mr Stirton was extremely stressful
from Mr Gibson's point of view. He was thinking about putting his
business up for sale and he wanted to know that there would be no objection
from the police if he transferred it to a purchaser. That was
Mr Cockburn's purpose in writing. Mr Cockburn confirmed that 7/10/9 was a letter written under his
reference and when Mr Anderson asked him why he wrote it, Mr Cockburn
said that he was paid to do so. He explained that he would never assert in a
letter or orally something on behalf of a client which he knew to be wrong.
He went on to say that there are questions that you do not ask of a client.
[339] In my opinion Mr Cockburn's evidence
added nothing to the proof. Mr Cockburn was very careful to say that he
acted on his clients' instructions and that they never told him that they were
the subject of extortion. He made it perfectly clear that he did not have a
view as to whether they were the subject of extortion or not and explained that
there are some questions you do not ask. Therefore Mr Anderson is wrong
in his submissions to say that Mr Cockburn lends weight to his submission
that there was no extortion.
Superintendent Clelland
[340] Mr Clelland
was called on 11 February
2011 by
Mr Anderson. He was in charge of the licensing section of Strathclyde
Police between March 2003 and April 2005. He knew that Mr Gibson and Mr McLeod
owned the business known to him as Network and he had no licensing problems
with them. He asked for a meeting with then because he had had a report from
Operation Maple that Network Cars were making payments to Mr Anderson and
Mr Stirton on a weekly basis which were thought to be protection money. Their
lawyer Mr Cockburn attended which was not unusual in licensing matters. The
report to him suggested it might be appropriate to interview Mr Gibson and
Mr McLeod regarding their continued suitability to be licence holders.
The witness said that he arranged a meeting and told Mr Gibson and
Mr McLeod that their suitability as licence holders would be in question
if they continued to contract with Mr Stirton and Mr Anderson. He
said that they emphasised that any relationship had been ended and that is how
it was left. Mr Clelland was rather a vague witness and when he was
asked if he mentioned Mr Stirton and Mr Anderson by name he said he
thought he must have. I took the view that that made sense because the
licence holders could hardly have said the relationship had finished if he did
not tell them which relationship he was talking about. Oddly, Mr Cockburn's
initial evidence was that names had not been mentioned but he accepted from
documents that they must have been. Thus both Mr Cockburn and Mr Clelland
shared the same rather unclear recollection. It was clear to me on reading
the documents that Mr Clelland had had a meeting with Mr Cockburn, Mr Gibson
and Mr McLeod at which he had informed Mr Gibson and Mr McLeod that
Mr Stirton and Mr Anderson were the subject of police attention and
that Spring Radio Cars should cease trading with them if they wished to maintain
fitness to be a licensee.
[341] Mr Anderson asked him if he was aware that
he and Mr Stirton were licensees. The witness said that he was not. He
did not know that they had had a licence for the off-sales facility at the
filling station. Nor did he know that Mr Anderson had a licence for the
public house. The witness then said that he had given general advice to
Mr Gibson and Mr McLeod, not to engage with anyone who was
inappropriate and might be linked to criminal activity.
[342] There was an objection from counsel for
Scottish Ministers to the effect that it had not been proved that the licence
for the public house was in Mr Anderson's name as an individual. Counsel
for Mr Stirton said that he wanted to hear about this and used the following
words, "This is important as it goes to my position that this is all a
fit-up. The witness was sent out to get the ammunition."
[343] The court adjourned in order that
Mr Anderson might take medication and when the court resumed I asked
Mr Anderson if he wanted to ask questions about the licence for Thomson's
Bar being in the name of a limited company but he declined to do so.
[344] Counsel for Mr Stirton in cross
examination asked the witness if he expected the court to believe his evidence
and the witness said he certainly did. Counsel brought out that nine months elapsed
between the request coming from Operation Maple and the witness taking action.
The witness agreed with that and said that he was busy. Counsel for
Mr Stirton suggested to the witness that police officers in Operation
Maple had been pressing Mr Gibson and Mr McLeod to give incriminating
statements regarding Mr Stirton and Mr Anderson and asked the witness
what knowledge he had of that. The witness said he did not know anything
about it. He did not report back to Operation Maple as he was of the view
that he had been told by Operation Maple that there may be a licensing issue
and he dealt with that. Counsel suggested to him that he had put pressure on
citizens either knowingly or unknowingly. The witness disagreed and explained
once again that he was concerned with licensing.
[345] In my opinion this witness did not advance
matters any. He did not seem to have a very clear recall of events but I
accepted from him that he was concerned only with licensing. I believed him
when he said that he did not report back to Operation Maple. It appeared to
be being suggested by counsel for Mr Stirton that this witness was part of
a conspiracy involving the officers in Operation Maple. I regarded that as
completely unfounded.
Mr McRae
[346] Mr McRae
was called on behalf of Mr Stirton. He was 71 years age and
practiced as a consultant forensic document examiner. He had been a police
officer for 25 years and during 17 of those years had specialised in
examining forensic documents. His report, 7/9/20, was put before him.
Mr McRae's evidence was to the effect that police statements should be
fully completed and should state when they were drawn up. He thought it was
unusual that police notebooks should be lost. He had considered statements
from production 6/15. He thought that Miss Ramsay had altered her
statement so that it was the same as Mr Murray's statement. The first
example was where Miss Ramsay had inserted the words "and that this was
all documented." Mr McRae commented that one could see that that had
been written after the full stop and that the writing was smaller. He
inferred that Miss Ramsay had added that to make her statement identical
to Mr Murray's statement. He came to the conclusion that
Miss Ramsay's statement was not written immediately after Mr Gibson's
statement was taken. He compared Mr Gibson's statement at which
Mr Gibson apparently said at page 5 that his car had been set on fire
but Miss Ramsay's statement and Mr Murray's statement both said that
Mr Gibson's wife's car had been set on fire. He thought it odd that they
did not remember that at the time and inferred that they had found it out at a
later stage. From that Mr McRae inferred that the statement had been
written later. In that he was referring to both Mr Murray and Miss Ramsay.
He noted that Miss Ramsay's self statement was in much neater writing than
the statement taken from Mr Gibson. He inferred that she was sitting at
a desk when writing her own statement. He noted that Mr Gibson's first
name was written as "Allan" in his statement, where it appeared 11 times
and was always spelt with two "l's". In Miss Ramsay's statement the name
is written as "Alan" and it appears 22 times and only has one "l". That
indicated that the second statement must have been written some considerable
time after the first, as he would have expected the spelling of a name to be
consistent if the two statements were written within a short space of time.
In the last line of page 6 of Miss Ramsay's statement she had used
the words "that day" which he thought odd because if the writer of a statement
is referring to "today" then that word would be used rather than the words "that
day". Cross examination from counsel for the Scottish Ministers elicited that
the witness' view was that Miss Ramsay had copied from Mr Murray
rather than both officers sitting down together and asking each other what they
could recall. He explained that Miss Ramsay had plainly made several
alterations and that that indicated that she was copying from Mr Murray.
He thought that she had written the statement much later than he had written
his and that it could be days, weeks or months. I found Mr McRae to be an
impressive witness. I did not however accept that Mr Murray had found
out later that it was Mrs Gibson's car which had been damaged. I did not
think, having heard Mr Gibson give evidence, that he was likely to have
been very precise as to whether it was "his car", "our car" or "the family car",
and so I thought that Mr McRae had drawn a conclusion which was not
warranted in the circumstances. I accepted that Miss Ramsay did alter
her statement by copying Mr Murray's statement. That accords with the
evidence of Mr Murray.
Mr Sams
[347] Mr Sams
was called as a witness by Mr Anderson. He was a construction manager
with RG Group Limited aged 42. In 2000 he worked for Shell Gas, which
was a company formed by Shell and Calor Gas. The purpose of the company was
to promote alternative fuel and in the course of his work, between 2002 and
2004, he became aware of Springburn Service Station. He saw the plans for
developing the service station. He gave a statement (now production 6/110)
on 15 January
2004 to Mr Murray
and Mr McLintock. Mr Sams seemed to me to be a very excitable
witness. Providing the statement to police had been the most harrowing moment
of his life. The police had phoned wanting to meet him. He was in a hotel
at the time but he had a sister who lived in Balornock in Glasgow and so he told the police
he would meet them at her house. When he got there "it was a scene from Hollywood with lots of police
officers everywhere." They told him he had to go to Baird Street Police Station,
which he did. His police statement was put before him in court and he was
asked why the opening sentences of the statement were redacted. Mr Sams
said that the opening part of the statement was concerned with his personal
circumstances and in particular with the fact that the man he regarded as his
father was actually his stepfather. According to Mr Sams the police knew
that and used their knowledge to apply pressure to him. He did not however
explain what he was put under pressure to do or say. The evidence which
Mr Anderson led from Mr Sams was to the effect that he wanted to buy
the garage. Mr Anderson had said in his own evidence that he had been
concerned as to whether Mr Sams would be able to produce the funds and,
having heard Mr Sams give evidence, I would tend to share
Mr Anderson's view. Counsel for Scottish Ministers took objection to
Mr Sams' evidence and I allowed it under reservation. I have decided
that the evidence is admissible. Mr Sams' evidence was to the effect that
the filling station was worth about г1.5 million and that he made an offer
for that amount. The purchase did not go ahead because Mr Anderson and
Mr Stirton were arrested. According to Mr Sams police officers came
to see him in Yorkshire and told him that
Mr Anderson and Mr Stirton were being investigated for money
laundering. He said that the officers were very aggressive and rude when they
came to see him and that their conduct had upset his fiancщe. She had broken
off the engagement as a result of their conduct.
[348] I did not find Mr Sams to be an
impressive witness and would not be prepared to believe his evidence unless
there was other evidence to support it. In any event, his evidence did not
seem to me to advance the case any.
Mr Webber
[349] Mr Webber,
aged 72, was a sales support person for Torex, which had formerly been called
Arciris. The company sold state of the art computer equipment to petrol
filling stations. He sold a system to the filling station at Springburn. He
was later asked by the police to consider the computer records of the filling
station. He explained that there were very extensive records and that the
computer system was such that any interference with it would be obvious to
him. He said that he found everything to be in order. I understood him to
mean that there was no indication of any money laundering offence, which may in
some cases be indicated by evidence of interference with the computer system,
or by unusual patterns of business being recorded. He was asked for his
opinion of the development cost of the filling station, on the basis that he
had dealt with many filling stations in his professional career. He felt that
it was likely to be less than г1 million.
Mr Clarke
[350] Mr Anderson
called Mr Rory Clarke of Rix & Sons Limited of Hull. He was 51 years of age, a
company director of a number of companies connected to Rix Petroleum, a large
business with over 450 employees and a turnover in excess of
г350 million. Their interests include a petrol supply company, petrol
filling stations, caravans, ships and shipbuilding. He had been a director
for 20 years, having been a credit manager in another company before that
and having been a lieutenant in the regular Army. He said that he knew Mr Anderson
from having supplied the fuel to the filling station in Springburn. He
recalled that Mr Anderson had got in touch with his petrol retail
representative to start a supply. He was aware that there had been a police inquiry
and that Shell had withdrawn from supply but he was not aware of any of the
details.
[351] He said that the Glasgow police visited him and he recalled
the occasion in some detail but not the date or the names. It took place in
his office in Hull. They called to say
that they were coming as they were going to see someone else in the area,
either in Leeds or somewhere else in West Yorkshire. He was not sure, but
he thought it might be Messrs Murray and McLintock. Mr Clarke was
correct about that. He said that they smelled strongly of drink.
Mr Anderson asked him what the discussion was about he said that they were
asking why the filling station would sell fuel at a small margin, or no profit
at all. He explained that this is common within the trade. He said that the
profits ran from a fraction of a penny to four or five pence in some rural
stations. He said that the police suggested to him that as they had visited
his company he might want to think about stopping the supply. The witness
asked outright if there was a legal reason why he should stop and he was not
given any such reason. The police said that they could give no legal reason
but said that the filling station was subject to inquiry.
[352] Mr Clarke continued to supply petrol to
the filling station and then a company in the group for which he worked bought
the filling station. He thought the price was г750,000.
[353] The only cross examination was about when the
police arrived and the witness said he thought it was either nine or ten o'clock in the morning.
[354] I formed the view that Mr Clarke was not
impressed by the police. I believed him when he said that he thought that
they smelled of drink, although the police denied that. He did not say that
they were drunk. Mr Clarke thought that the police had spoken to him
aggressively and that they were trying to stop him contracting with the filling
station, even though there was no legal reason why his company should not
contract with it. I formed the view that Mr Clarke thought that the
police were interfering in his legitimate business. In his own way Mr Clarke
seemed to me to be describing a reaction similar to that of Mr Bremner
when he was interviewed by police. Mr Sams also found his encounter with
the police unnerving, although I did have reservations about his evidence. I
did not find that such reactions were particularly unexpected or revealing, and
did not damage police credibility where it was in question. I found that the
police did ask Mr Clarke to consider stopping selling petrol, and I
accepted his evidence that he smelled drink on the breath of one or both of the
officers. Neither of these findings affected my view of the truthfulness of Mr Murray
when giving evidence about the information given to him by Mr Gibson. I
did not think that Mr Clarke's evidence added anything to the case.
Mr Frew
[355] Mr Leonard
Frew, sales manager for High Cross Forecourt Canopies gave evidence. His
company had been involved in work on the filling station in 2003, supplying and
fitting a canopy. He had met both Mr Stirton and Mr Anderson and
they had provided drawings from Parry Hughes Architects which were very good.
He thought that the work carried out by his company was invoiced at г87,000.
He negotiated the price with Mr Anderson and was paid by cheque. His
police statement, 6/110/14 was put to him and he noted that he had told the
police that the total cost was г72,016.92. He could not understand why he had
thought it was г87,000 but said he would have told the police the correct
figure. He said that he often saw Mr Stirton working on the site. In
his opinion it was unlikely that the total cost of the garage would exceed
г1 million. I accepted Mr Frew's evidence for what it was worth but
did not feel that he contributed anything to the case.
Mr Gittens
[356] Mr Anderson
called Mr Ian Gittens. He explained that he was semi-retired from the
world of commercial finance. Up until 2004 he had also been involved in
domestic finance. He met Miss Leonard in 1994 or 1995 in
Mr Anderson's office. She was concerned in finding properties which
could be developed and sold on. On two or three occasions she introduced
clients to Mr Gittens. Mr Gittens said that he knew Maurice
Davies. He had a company called MD Associates which did accountancy and
bookkeeping from an office in Dundee. Mr Davies had acted for Mr Gittens for about
six months but Mr Gittens was not happy with the work and severed his
connection with Mr Davies. Mr Gittens had introduced
Mr Stirton to Mr Davies. Mr Davies, so far as Mr Gittens
knew, did work for two businesses run by Mr Stirton being a property
business and an adult leisure business. Mr Anderson took from
Mr Gittens that he was aware of rumours in Dundee that Mr Davies' work had not
been satisfactory for a number of clients. The witness said that when
Mr Davies acted for him, Mr Davies wanted signing authority on his
cheque book but Mr Gittens was not prepared to allow that. He had not
heard that any clients' funds had gone missing. Mr Gittens had acted for
Miss Leonard in or around 1997 or 1998. He looked at
production 6/48/2/47 which is an application form for a loan from
Mortgages Plc. He said that he had assisted Miss Leonard in applying for
the mortgage and that the company was known for sub-prime lending.
Mr Anderson asked the witness if he knew that Mr Anderson had been
sequestrated and that he had a trustee in sequestration. Mr Gittens was,
in my opinion, careful in his answers. He did not at any time say that he knew
about the sequestration. It was pointed out to the witness that there is an
error in Miss Leonard's date of birth in the form. He did not know why
that should be and in the end I did not regard it as significant. The witness
said that he had always found Miss Leonard to be trustworthy. I accepted
this witness' evidence but did not find it of assistance in the proof.
Mrs Harris
[357] Mr Anderson
led as a witness Mrs Lorna Harris, who is a solicitor. Mrs Harris
stated that she was 61 years of age and, until three years before the
proof, had been head of the CRU. Mr Anderson told the witness that he
did not intend to ask any questions which would give her difficulty with client
confidentiality and that if he did ask any such question she should tell him
and he would withdraw the question. Mrs Harris indicated that she
understood and would do so.
[358] Mr Anderson proceeded to ask the witness
if she was aware of Operation Maple, to which she replied in the negative. He
then asked her about the application for an interim administration order and
she explained that she was aware that there had been a criminal petition in
2004 and, because she is aware of the law, she knew that if an indictment were
to be served on those who had appeared on petition it would have to be served
within 12 months of that appearance. Mrs Harris knew that the
petition for the interim administration order had been drawn up on 3 February 2005 and she said that she
thought she knew on the Friday prior to that that no criminal proceedings were
to be raised. She was going on holiday and her recollection was that she knew
before she went that a petition for an interim administration order would be
required. Mr Anderson asked the witness about her duties in drafting a
civil interim administration order and objection was taken by counsel for
Scottish Ministers that this was a matter of law. I excused the witness and
heard parties. I decided to allow the question under reservation and I have
decided that the evidence is admissible. Mr Anderson then asked the
witness to explain in general terms "how the petition came about".
Mrs Harris explained that she knew that there exists a statutory test,
that there has to be probabilis causa litigandi. She explained that
her unit would consider whether or not there was property that should be
preserved and whether or not the statutory test would be met. In the present
case she knew that there had been restraint orders which would no longer apply
if no criminal proceedings were taken and that if property was to be preserved
it would be done by means of an interim administration order. Mrs Harris
explained that she did consider these matters prior to leaving on holiday and
that she discussed matters with her colleague Mr Keir, a solicitor in her
unit. On being asked about Miss Rivers as a name to be put forward to be
interim administrator, Mrs Harris explained that within her unit they were
aware of several people who might be suitable and, before suggesting a name,
they would consider whether or not that person was available for the work.
She explained that so far as she knew Miss Rivers had been appointed three
times in Scotland. Mr Anderson asked
about the witness' knowledge of Miss Rivers' budget being cut.
Mrs Harris explained that when an interim administrator is appointed there
is no way of knowing how much work will be needed. It would be normal for her
unit to ask for an indication of cost. There was no point in her unit telling
an interim administrator that they were limited in cost at the outset because
there was no way of knowing whether the funds would be sufficient or not. Her
unit might however ask for an indication of cost and might instruct an interim
administrator that if the expense was going to exceed that figure then they
should report back to the unit.
[359] Mr Anderson asked Mrs Harris about
an affidavit that she had given, produced at 7/5/18. Mrs Harris said
that it had been required by the court in proceedings concerning the interim
administration order. She had given the affidavit when she was working in Brussels. Mrs Harris said
that she was aware that there had been difficulties in this case but she did
not at this stage recall the details.
[360] Mr Anderson proceeded to ask the witness
if the allegations of unlawful conduct had been checked by her office and
counsel for Scottish Ministers took objection to the line, as being irrelevant.
The history of the petition for the interim administration order was known and
the Opinions given in that process were before the court. The matter
currently before the court, according to counsel, was whether the averments in
the civil recovery action were proved. Mr Anderson's response was that
he had many challenges that he wanted to make. He explained that his defence
in the proof was that things were concocted and that it all related to the
credibility of the police. He wanted to establish that Strathclyde Police
were using criminal evidence in a civil court. He said that the witness was part
of a cog in what he described as the credibility of Strathclyde Police. I
told Mr Anderson that I found it difficult to understand his submission and he
said that he would withdraw it for the moment. He then put it to
Mrs Harris that the affidavit which she had signed was untrue and she
disagreed. He said that she had failed in her duties by putting in a false
affidavit and she stated that she had not put in a false affidavit.
[361] Mrs Harris was cross examined by counsel
on behalf of Mr Stirton. Counsel for Scottish Ministers objected to a
line, which began by a question about her work as a civil servant. Counsel
for Mr Stirton in response said that he wanted to challenge the witness'
credibility. He said that she had gone on holiday and deserted her duties
under POCA. He wanted to attack her good faith and show that she had been
wrong in failing to explain that allegations of extortion had been withdrawn.
He made reference to Lord Glennie's Opinion. The respondents had sought
recall of the interim administration order on the grounds that the Scottish
Ministers had failed to aver that the alleged victims of extortion had
withdrawn any allegations. Lord Glennie refused the motion. I enquired from
counsel why this matter was being raised before me given that Lord Glennie
had ruled on it. Counsel said that it added to his submission to the effect
that various organs of law did the bidding of Strathclyde Police. He said
that he wanted to show that Strathclyde Police had undue influence over CRU.
He indicated that people may sometimes be used as innocent dupes or may be
conspirators. I asked him to direct me towards averments of conspiracy in the
Record and his response was that he did not have any such averments and did not
need them.
[362] I found the matters which counsel wished to
raise were not relevant to the case before me. Counsel then asked the witness
if the petition would have been drafted by a solicitor in the office or if it
would have been sent to counsel. Mrs Harris said that she thought it
unlikely that it would have been drafted in its entirety by a solicitor in her
office but it may have been. Counsel then asked if the CRU would know what
was happening with the criminal case. The witness had already said that she
did know that there were to be no criminal proceedings.
[363] Counsel then moved on to asking the witness
if she knew Miss A. Mrs Harris said that she did and that so far as
she knew she was an independent insolvency practitioner. At that stage counsel
sought to lodge photographs of an address at 34 Buckingham Palace Road which showed that it was
a box office address. Mr Anderson had no objection to these photographs
being lodged. Counsel for Scottish Ministers was concerned as to relevancy. Whilst
she had no objection to the photographs being lodged, she gave notice that she
would take objection to questions about a conspiracy, there being no Record for
that. I allowed the productions. Counsel for Mr Stirton said that the
purpose was to show what kind of business Mallard Associates was. The
photographs were of an accommodation address which was not so far as I knew in
dispute; the Public Interest Immunity certificate lodged many months before
made reference to interim administrators using such addresses.
[364] Counsel wanted to ask Mrs Harris about
steps that had been taken after Lord Glennie's Opinion which criticised
her unit. Counsel for Scottish Ministers objected on the basis that that was
collateral and was in any event subject to privilege. Counsel for Scottish
Ministers made reference to the Three Rivers case. I upheld the
objection.
[365] Mr Anderson called Mr Mark Ramsay,
of Mallard Associates. He said that he was Director of Investigations with
Mallard Associates. He had worked on POCA cases since 2003. He attended
Thomson's Bar on 3 February 2005 when the interim administration order had been granted. He
acted under instruction of Miss Rivers. There had been a briefing
meeting both in England and in Scotland. He thought that the
meeting in Scotland was at a police station
which he thought was in Helen Street in Glasgow. Mr Ramsay explained that a solicitor from CRU had
visited his office in London with a view to examining papers which had been recovered
by Mallard Associates in order to establish if any papers were such as could
not be released as part of the evidence. He thought the solicitor was a
Miss Meikle. He said that Mrs Harris had not been to his office.
He was asked who became in charge if Miss Rivers was off ill or on holiday
and he said that if it was an investigation matter he took charge and if it was
about management of funds Ian Jones took charge. He confirmed that "Mark
Ramsay" is a pseudonym and that he had no accountancy experience. He agreed
that the question of whether or not unlawful conduct had taken place was not
one for him or his colleagues but was for the court to decide.
Mr Anderson asked him if he was aware of correspondence coming from
himself and Mr Stirton to Mallards and the witness said that he was. He
said that the amount of correspondence was average for cases of this type.
Mr Anderson put to the witness 7/8/1 which is a copy of a letter dated
9 April 2008 in which complaints are made by Mr Anderson about the
way in which the witness had carried out his work. Counsel for Scottish
Ministers objected to the line on the basis that a number of letters addressed
to Mallard Associates had been lodged but without replies. She thought that
the whole correspondence had not been produced. In any event, counsel for
Scottish Ministers argued it was irrelevant. Mr Anderson's response was
that he wanted to know what the interim administrator did. He maintained that
the interim administrator had a duty to report to the court anything that might
undermine the Scottish Ministers' case. He wanted to show that in fact the
interim administrator had done nothing. I decided that Mr Anderson's
line was inadmissible as the interim administrator's view of whether or not
there was unlawful conduct was not determinative for the court case.
Mr Anderson sought leave to reclaim. He submitted that my decision
hampered him in such a way that he could not get a fair hearing. He said that
his defence had been "totally taken from him and that justice was not being done".
Counsel for Scottish Ministers opposed leave being granted on the basis that
there was no error of law. I refused leave to reclaim. I allowed
Mr Anderson a short adjournment to consider what line he wished to
pursue. Mr Anderson put to the witness 6/73/14 which is a report from
the interim administrator. The witness said that he had not written the
report. Mr Ramsay said that he had interviewed Mr Yousaf,
Mr Gibson and Mr McLeod. Mr Anderson concluded by suggesting
to the witness that he told lies and that he had failed to investigate
properly. The witness denied that. In cross examination counsel for
Mr Stirton asked the witness about material said by the solicitor from the
CRU to be sensitive. The witness said that he could say only that he had been
told that it was connected to the Public Interest Immunity certificate. In
re-examination Mr Anderson asked to be told more about these papers and
the witness said that as far as he knew some papers had kept from the case due
to their sensitivity. Mr Anderson asked the witness if he had power to
do that and I told him that that was a matter of law. I regarded this as an
obscure piece of evidence as the only certificate put before me related to the
identity of interim administrators.
Mr Stirton
[366] Mr Stirton was called as a witness by Mr Anderson. He
began by describing his employment in the 1990s and said that he had worked for
West of Scotland Auto Electrics until late 1993. His salary was about г10,000
at first and then went up to г14,000. He could get as much overtime as he
wanted. His employer was Mr Kidd and he remembered other employees being
Stevie, Bobby, a young trainee called Scott and Mr Giffin who worked as a
part-time book-keeper. He was referred to 6/93/8 which was a mortgage
application to the Bradford and Bingley Building Society in which he had given
Mr Kidd as a referee. He said that he was aware that the reference had
been taken up.
[367] Mr Anderson then asked Mr Stirton
about the г4,000 deposit which Mr Stirton paid for the house at
3 Kelvin Road a house which Mr Stirton bought for his mother who
lived there. Objection was taken by counsel for the Scottish Ministers on the
basis that there were no pleadings which disclose where this money came from
and in the shopping list no further specification was given. She objected on
the basis that it was unfair to the Scottish Ministers if they were taken by
surprise. Mr Anderson accepted that there was no record but argued that
he should be allowed to ask the question because he himself had been asked
about his mother's house and I had allowed that despite there being no
record. I checked the portion of evidence referred to and discovered that it
related to an address used by Mr Anderson. It did not seem to me a
similar situation. I upheld the objection. Mr Anderson sought leave to
reclaim my decision on the basis that it was wrong in law and that I was biased
against him. Counsel for the Scottish Ministers opposed leave on the basis
that it was an interlocutory matter and that no submissions had been made to
show what the error in law was, nor why there was any indication of bias. I
refused leave to reclaim. Counsel for Mr Stirton then requested that it
be noted in the Minutes that he had not been called on to address the court.
He was correct that I had not called on him to address the court, the reason
being that I did not think that he had a locus.
[368] Mr Anderson asked Mr Stirton about
tax records, turning to production 7/11/1, a letter from HMRC. He
asked Mr Stirton what work had been carried out by HMRC. I upheld an
objection from counsel for the Scottish Ministers on the basis that
Mr Stirton could not know what work HMRC had done. Mr Anderson then
asked Mr Stirton to look at 6/80/296, which is a form from Pearl Assurance
which Mr Stirton had his agent complete, stating that his income was
г16,000. Once again counsel for Scottish Ministers took objection on the
basis that there was no notice anywhere that Mr Stirton wished to prove
that he had income of г16,000. I upheld the objection.
[369] Mr Anderson asked Mr Stirton if he
had been interviewed by the interim administrator and he said that he had and
that he had told her everything. Mr Stirton said that after leaving West
of Scotland Auto Electrics he went to work on the continent, mostly in Holland and Belgium. Mr Anderson asked
Mr Stirton to give more detail and counsel for Scottish Ministers objected
on the basis that this had been sought in the pleadings but had not been
given. Mr Anderson agreed to reconsider and asked Mr Stirton what
type of work he did. He explained that he did all sorts of building work.
He was not qualified as an electrician but would do all other types of work.
He had worked overseas for about three years, and he said that when he came
back he had renovated flats for a person named Stevie Fraser.
Mr Anderson then put it to him that he had done this type of work for
AB Builders and Mr Stirton agreed. Mr Anderson asked who owned
that company and Mr Stirton said that Mr Anderson owned it.
Mr Anderson then asked him if it was not in fact owned by Tommy Smyth and
Mr Stirton said that he thought it was owned by Mr Anderson and Tommy
Smyth. Mr Stirton said that he worked for a company called Sefton Homes,
which was owned by two people called Pete and Derek. He recalled dismantling
shops used for fast food where the work involved was dirty work. He said that
he was generally paid in cash and counsel for Scottish Ministers took objection
to that line going any further. I upheld the objection there being no notice
of the line.
[370] Mr Anderson then moved on to the funding
of the house purchase for the house Vida Ventura. He asked the witness to
looked at 6/49/2 which forms of application to the Nationwide Building
Society. I allowed this evidence despite objection from Scottish Ministers.
Mr Stirton said that his gross income was г65,000 per annum and his net
income was the same because he did not have any overheads that he could
deduct. He said that г7,000 came from his own savings and that he borrowed
г20,000 from Mr Girvan. Mr Stirton said that his wife was selling a
house at 93 Findlay Rise and that some of the money came from that.
[371] Mr Anderson then asked Mr Stirton
questions about the development at Balgrayhill Road. Mr Stirton said that he had
bought it for г45,000 which he had paid in cash and that the cash had come from
Mr Anderson. Once again Mr Anderson led the witness by asking him,
for example, the following question:-
"Do you recall me informing you that I told the Inland Revenue that you had casual labourers?"
which elicited a positive response from the witness. Mr Stirton said that he had got quotes for builders to do the work, namely AB Builders and New Brick Limited, but did not appoint them because they were both too expensive. He had obtained a loan from State Credit through a broker, Angus McKay. He looked at 6/21/1 which was the application form. On that form it was stated that New Brick Limited were appointed as contractors and when I asked him about that Mr Stirton said that they had been appointed but their prices had gone up and he had to get rid of them. On page 5 of the form Mr Stirton said he had given an estimate of his income. That was in the sum of г63,445. Mr Anderson asked him to look at 6/75/266 which related to his bank account for RS Construction and showed the sale price of Balgrayhill Road coming in under deduction of the loan to be repaid to State Credit and the lawyers fees. The resultant credit in the bank was г305,217. Mr Stirton then gave evidence about г201,000 taken from that account by Mr Anderson. Counsel for Scottish Ministers advised that she had no objection to leading as this was agreed in the notice to admit. Mr Stirton said that Mr Anderson took the money out of the bank for him. Mr Stirton had had a dispute with the bank manager because he had refused him a loan to develop the property. He got the loan elsewhere as narrated above. Because of that dispute he did not want to put the free proceeds in the bank and therefore kept it in his house in a safe.
[372] Mr Stirton said that he had had a
business known as Loveboat but could not recall when it started. It was his
idea to start it after he saw a programme on television about the Ann Summers
chain of shops. Having worked in Holland, he was familiar with the city of Amsterdam and knew that there was a
big sex industry there. Mr Stirton said that he sent his wife to an Ann
Summers party. He thought that the items which she bought were cheap
rubbish. He got to know Franz Bergman, who was the owner of a company called
Scala in Amsterdam. He also sold lingerie
and in particular bought underwear in Barcelona which had transparent straps which was a very
successful line as he was the first person in this country to sell these
items. Most items were sold by party planners whom he paid in cash. He said
he also sold things on his website. He supplied adult sex shops in Glasgow and gay shops in Edinburgh, his suppliers being
Scala and a firm known as Scintillation. Counsel for Scottish Ministers took
objection to evidence about that supplier on the basis of there being no
notice. I allowed the evidence as there had been earlier reference to it
which had not been objected to. Mr Anderson then asked Mr Stirton
to look at 6/66/1 which was a chequebook from which the cheque stubs appeared
to be evidence that money had been paid for advertising and also to party
planners, although Mr Stirton had said he paid them in cash. His
evidence was not clear as I understood that the party planners held parties at
which goods were sold and then remitted the money to Mr Stirton. I would
have thought that it would have been simplest had they deducted their share at
that stage. In 6/68/1 there were seven cheque stubs made out to
Scintillation. Mr Anderson asked Mr Stirton about 6/77/145 which
was a bank statement addressed to him at 180 Milngavie Road, Bearsden, Glasgow, which
Mr Stirton said was a wooden hut which he used as his office for
Loveboat. On the statement one could see that Mr Stirton had transferred
money to various women, for example Mrs McIntyre, Mrs Halley and Mrs Oxton.
He said they were all party planners. Mr Stirton said that his friend
Mr Gittens had introduced Maurice Davies in or around 1998. He gave him
all his paperwork in order that he could do his accounts. Mr Stirton
said that Mr Anderson had no ownership of Loveboat. He had offered
Mr Anderson payment for the work he did but Mr Anderson would not
take it, saying that there were some legal issues. Mr Stirton thought
that it was none of his business and did not ask any questions. He could not
recall when Loveboat closed but said that it happened because the press were
hounding him and it was affecting his home life. The press said that he was
selling pornography, which was not true. When the business was in operation
Mr Anderson dealt with the cheques and other paperwork and Mr Stirton
himself put the goods into bags and took them to the post office. When the
business finished a Mr Gray, a slater, wanted to take over the hut.
Mr Stirton said that he left all of the paperwork in the hut because he
was "fed up with the whole thing" and told Mr Gray that he could take it
all and dump it.
[373] Mr Anderson asked Mr Stirton about
his presence at the importation of drugs in Dover. Mr Stirton said that he had
not been present and had only travelled on the ferry between Calais and Dover many years ago when he
was in the military. He did not know Mr Haig or Mr Hughson.
[374] As regards the incident on the M74 at
Abington, Mr Stirton said that he was coming back from France with Mr Anderson in
a hired car. They were going to Glasgow. He went into the slip road for the Abington
Services and, while there, a traffic police car stopped him. The traffic
policeman asked him if he had anything in the car which he should not have and
Mr Stirton said that he had г24,000 in cash. The policeman said that
that was a lot of money and Mr Stirton said "maybe to you but not to
me". That police officer told him that he was free to go but then another car
with plain clothes police officers arrived and told him he must go to Lanark
Police Station. He was interviewed on tape and told the officers all about
the money. He said that they asked him to produce financial evidence by way
of bank statements as to where the money came from and he did. He then called
at the Stewart Street Police Station in Glasgow and got his money back. He was
sure that it was in excess of г20,000. Mr Stirton said that he was never
told that he was being detained under the Misuse of Drugs Act.
[375] Mr Anderson then asked Mr Stirton
about the application for a loan from the Skipton Building Society.
Mr Stirton said that if he described himself as "managing director" it was
because he was the owner of the business and he thought that that was much the
same as being a managing director. He said that he was honest when he had
filled in the forms and that he had not committed mortgage fraud because if he
had he would have been charged.
[376] Mr Anderson then asked Mr Stirton
about his involvement or otherwise with Thomson's Bar. Mr Stirton said
that that Jacqueline Craig and Jim Milligan owned it in 2000. Mr Stirton
said that he helped Jacqueline Craig because her husband was shot dead outside
a pub. There were debts owned by Mr Milligan who was involved with other
licensed premises which were all in debt. Miss Craig wanted to depart
from Mr Milligan and go her own way. The bills at Thomson's Bar were not
being paid. She had a loan from the Bank of Scotland in the sum of г51,000
which Mr Stirton paid off. Mr Stirton knew of Mr Milligan but
he had never met him. Mr Milligan signed over the bar to Jacqueline
Craig. Mr Stirton thought that Mr Milligan was "up to no good" and
he decided to help Miss Craig. Mr Anderson, Miss Craig and
Mr Stirton went to a meeting in the boardroom of Tennents in Glasgow and were advised that
they should set up another account. Mr Stirton volunteered to put it in
his name because he had a good credit rating. He opened a bank account in the
name of Thomson's Bar but he himself never signed a cheque. He was adamant
that he had no ownership in the pub and by way of illustration Mr Anderson
asked him to look at 6/28/2 in which there were invoices addressed to Christine Brown
and Amanda McCrimmon at Thomson's Bar. Mr Anderson asked if that meant
they owned the bar, to which Mr Stirton replied that they simply worked
there. He said that he had refurbished Thomson's Bar because it needed it.
Miss Craig had never offered to sell it to him and he would not have been
interested if she had. Instead Mr Anderson bought it and did not give
Mr Stirton any earnings from the bar.
[377] Mr Stirton said that he had bought the
flat at Carleston
Street
because there was a neighbour complaining about noise. A relative, Jean
McGovern, was looking for a flat to rent out and so he sold it on to her. I
did not believe him and as I have said elsewhere I found that the purchase and
sale of Carleston
Street was
a money laundering exercise. As regards his own employment and businesses,
Mr Stirton said that when Mr Davies died he tried to get his papers
back but did not succeed. Mr Anderson advised him to declare himself to
the Inland Revenue and he asked Mr Anderson to deal with it for him.
Mr Stirton said that he did not understand the paperwork and so signed a
mandate to Mr Anderson so that he could do it for him. As regards his
own work he said that he had been in the TA and looked at 7/11/1 which was a document showing that in
1980 he had been in the TA but that he had paid no tax. According to
Mr Stirton he had been paid military pay and he did pay tax. He had
travelled abroad with the TA, and was based in Whiteinch in Glasgow.
[378] Mr Anderson then asked Mr Stirton
about his knowledge of Spring Radio Cars. He knew Mr Gibson because they
had been at school together and sometimes met at the football. Mr Gibson
told him about his business and asked Mr Stirton if he knew anyone with
land to sell. Mr Stirton told him that he would try to locate land and
he told Mr Anderson about it. Mr Stirton also knew from
Mr Anderson that Mr Gibson was interested in getting more cars but
did not have enough money. Mr Anderson put before him the contract for
services which Mr Stirton said had been put together by Mr Anderson
and Mr Gibson. He put to him production 6/80/20 which is a form for
A & S Leasing and Mr Stirton said that Mr Anderson
dealt with that. He then looked at 6/24/1, which is the loan
agreement registered in the Books of Council and Session and Mr Stirton
said that that was drawn up by the lawyer Mr Vaughan. He said that it
had been suggested by Mr Vaughan and Mr Gibson was certainly not
forced to sign it. Mr Stirton and Mr Anderson had looked at two
sites for a development and Mr Stirton said that he understood he needed
the agreement drawn up by Mr Vaughan to protect him. Mr Anderson
then led the witness by asking him if Mr Gibson had told him that he would
like to buy Kenmure Cars and the witness affirmed that he had.
Mr Anderson then said to the witness, "Did they ask me and did I tell you
that there should be delay in payments to assist them?" Objection was taken
on the basis that there was no Record. Mr Anderson withdrew the
question. Mr Stirton was then asked if it was agreed that there would be
no payment between April and November for the fifteen Skodas and he agreed.
He also agreed that there would be no payment of the services to
RS Construction at that time. In connection with finance for motor cars,
Mr Anderson asked the witness to look at 6/96B/2 from which he noted that
a deposit had to be paid when finance was available from Lombard. Mr Stirton
explained that so far as he knew 100% finance was not available to commercial
purchasers. He said that they supplied fifteen Skodas to Mr Gibson
because he had drivers ready waiting for the cars. The purchase price was
г148,000 paid in cash through Mr Hughes. He knew Mr Hughes through
his father, Donald Hughes, who was in the car industry. Mr Stirton said
that he had the money in his safe and that he gave it to Mr Hughes in a
carrier bag. Mr Stirton said that the payments were honoured until March
2004. Mr Stirton said that Mr Gibson had told him, at a football
match, that he was making about half a million pounds out of the Skodas.
Mr Anderson asked Mr Stirton about the value of the cars and I upheld
an objection from counsel for the Scottish Ministers on the basis that this was
not a witness with expertise in the valuation of a motor fleet.
Mr Anderson then asked the witness if he thought that the г4,000 plus VAT
per week paid by Spring Radio Cars could properly be described as
extortionate. Mr Stirton said that Spring Radio Cars made the same money
that he had, or more, and so he could not see how it could be called
extortionate. Mr Stirton explained that the management fees were in
respect of services and that he personally checked the taxi base, he gave
advice about parts for cars, he advised regarding setting up a garage with a
mechanic and he carried out leaflet drops. He did so by going to a hostel for
homeless people and getting people there to do leafleting. Mr Anderson
asked him if he had got any contracts for Spring Radio Cars and I allowed the
question despite objection from Scottish Ministers. Mr Stirton said that
had got contracts with the following businesses:- Sartis, Il Provone, Ho Wong, Gap Housing,
Glasgow North Housing and Buongiorno's. Mr Anderson then asked
Mr Stirton if he was told by him that the invoices should be changed to
one payment but it was in fact never done and Mr Stirton agreed with
him. Mr Stirton said that he never threatened Mr Gibson or anyone
else with violence and that he did not inflict violence on anyone. He had
never seen Mr Anderson threaten or inflict violence on anyone.
[379] Mr Anderson then asked Mr Stirton
about his knowledge of the police investigation. He said that Mr Gibson
told him that Miss Ramsay and Mr Murray came investigating the
Alexander Blue murder and then went on to ask Mr Gibson what he knew about
Russell Stirton. Mr Stirton said that at first he laughed but as he
began to think about it he became concerned that his name was being mentioned
in the course of a murder inquiry. Therefore a week or so later he went to
his solicitor, Mr Vaughan, and asked him to find out what Mr Murray
wanted. Mr Vaughan phoned in Mr Stirton's presence and told
Mr Murray that if wanted to interview Mr Stirton he should come
through Mr Vaughan. He understood that Mr Murray asked
Mr Vaughan how he knew that his name had been mentioned and
Mr Vaughan simply said that was none of his business. Mr Stirton
said that Mr Gibson was laughing when he told him about this and did not
mention extortion. Thereafter Mr Gibson kept him informed about the
police calling on him and asking for statements. Mr Stirton knew that
Mr McLeod was very upset about what had happened and that he said he had
been terrified by the police. Between 14 January 2004 and 1 March 2004 Mr Stirton was still
in contact with Mr Gibson and Mr McLeod. He was arrested on 3 March 2004. Mr Anderson asked
him to look at 7/10/15
which is the criminal petition on which he was arrested and Mr Stirton
said that he thought that it was nonsense but because the police had started
something they could not stop. Mr Stirton said that he was aware that
there was communication between solicitors as a result of which bail conditions
preventing contact with Mr Gibson were altered. Mr Stirton said
that he did not force Mr Gibson or Mr McLeod to do anything. The
police had put Mr Gibson and Mr McLeod under pressure to stop their
contact with Mr Stirton and Mr Anderson. The police had said that
they would inform their customers that Mr Gibson and Mr McLeod were
involved with gangsters. Mr Stirton had then told Mr Gibson that he
should terminate the contract with him for his own sake. Mr Stirton was
aware that Mr Gibson and Mr McLeod had written various letters and
affidavits confirming that they were not the victims of extortion.
Mr Gibson and Mr McLeod had told Mr Stirton that
Mr Donnelly of HMRC was alleging that they had paid protection money.
Mr Gibson had also told Mr Stirton that Mr McCusker, the senior
investigating officer, had threatened that he would close the business of
Mr Neilson, accountant to Spring Radio Cars. Mr Stirton said that
he had heard from Mr Gibson that he gave a precognition on oath and was
arrested thereafter. Mr Gibson and Mr McLeod both said that they
were unhappy with the process of precognition on oath because they were told by
the sheriff that they must just answer the questions. Mr Anderson asked
Mr Stirton what he thought of Kenneth Murray's evidence that the money
paid by Spring Radio Cars could not be justified and Mr Stirton said that
that was wrong. Mr Stirton said that Mr Gibson wanted to be the
biggest private hire firm in Glasgow and that Mr Stirton and
Mr Anderson were helping him to become so.
[380] Mr Anderson then asked Mr Stirton
about the contact with HMRC and Mr Stirton said that he believed that he
had settled with HMRC through Mr Anderson and that the tax declared for
1998/99 was similar to the amount in the Skipton Building Society application
form. Mr Stirton said that he had never been accused of committing a
crime by putting in late tax returns. He said that between 1998 and 2002 he
knew that Miss Leonard owned the house at 37 Cowan Wynd in Uddingston
and that he had helped her with mortgage payments to the extent of about
г9,000.
[381] Mr Stirton then gave evidence about his
work at the filling station. He did physical work in getting the ground
ready, along with Mr Wilson and Mr Brown and a Mr Jim Watson.
Mr Anderson dealt with ordering and quotations. He thought that the
report from Mr Peter Martin was incorrect in that it did not cost as much
as г1 million. One example he gave was that the sign at the filling
station belonged to Shell and therefore there should not be a cost of г10,000
attributed to the development. He did not volunteer what the development had
cost. Mr Stirton said that the reinstatement value by the insurers was
г253,000 which he thought was correct. Mr Stirton made plain that he
was, as he put, "not keen on paperwork" and that Mr Anderson dealt with
paperwork. He said therefore that 6/103/2 which was a draft financial
statement from Mr Yousaf did not mean anything to him. He did however
know that the way in which petrol stations make a profit is to keep the price
of petrol keen and to get customers into the shop. He said that they never
sold petrol at a loss and, on being asked to look at 6/103/5, he said that it
was wrong. He was then asked to look at 6/99/6 which was a document produced
by Shell. He said that the column headed "Gross Income" was the same as
profit. I asked Mr Anderson to ask further questions to elucidate as I
did not understand that evidence but he did not do so. Mr Anderson
finished his examination in chief by asking Mr Stirton if he co-operated
with the interim administrator to which he said that he did. He re-iterated
that he had never committed property fraud nor had he threatened violence to
Mr Gibson and Mr McLeod.
[382] Counsel for Mr Stirton cross examined
him and asked if he was involved in organised crime, drug dealing and extortion
to which Mr Stirton replied he was not. He had never had a false
passport. He was married to Jacqueline McGovern and knew the rest of her
family but did not associate with them. So far as hire car businesses were
concerned Mr Stirton thought that the key to success was advertising, hard
work and finding customers. Counsel asked Mr Stirton his view of the
suggestion that the management services contract between Mr Stirton and
Mr Anderson on one side and Spring Radio Cars on the other was not
commercially sensible. Counsel for the Scottish Ministers objected but I
allowed the question on the basis that Mr Stirton was a party to the
contract and therefore could comment. Mr Stirton said that it was
nonsense because Mr Gibson's business was getting bigger and bigger and he
was making plenty of money and therefore there was no problem. He said that
as regards the Skodas, Mr Gibson made half a million pounds therefore it
must make commercial sense. I asked Mr Stirton if Mr Gibson would
have made more if he had paid less for the Skodas to which Mr Stirton replied
that he would not have had the Skodas at all because he had no money to pay for
them. Mr Stirton said that the contract with Shell stopped because of
articles in the Daily Record and that he had wanted to sue for defamation but
had been advised by his lawyer not to do so. He and Mr Anderson resorted
to mediation in a dispute with Shell and succeeded in being paid г220,000.
[383] In cross examination by counsel for Scottish
Ministers Mr Stirton repeated that he had not extorted money from
anyone. He also repeated that he had worked as a soldier in the TA. When
asked about Mr Anderson telling HMRC that Loveboat was not profitable
Mr Stirton said that that was wrong because it did trade profitably but in
the end they had lost something on the stock. Counsel put to him 7/11/1 which were tax documents in which it
was said that there was no income declared on his behalf. Mr Stirton
said that the documents were incorrect.
[384] Counsel for Scottish Ministers asked
Mr Stirton if he associated with criminals. Mr Anderson objected on
the basis that he should have had notice if any particular names were to be
suggested. In reply counsel for Scottish Ministers referred to page 20
of the Record in which it was said that the McGovern family were criminal and
at page 21 various names were mentioned, all being male members of that
family. She argued that there had already been evidence led without objection
that Mr Stirton was associated with Mr McGraw, Mr Stevenson and
Mr Milligan, all of whom were criminals. Counsel for Mr Stirton
intimated that he wished to be heard as it was his client who was concerned and
stated that his position was that counsel for Scottish Ministers could ask
about what was in the Record but could not ask any wider questions. I allowed
the question on the view that there was notice in the Record. Mr Stirton
then said that he did not associate with criminals. Counsel for Scottish
Ministers then asked if Mrs Stirton and her brothers were well known for
being involved in criminal activity. Mr Anderson objected on the basis
of no Record as regards Mrs Stirton and counsel for Mr Stirton
supported him. Counsel for Scottish Ministers argued that there is a
reference to the McGovern family of which she is a member and that in any event
she did not require to give notice in order to challenge credibility. I
decided to allow counsel for Scottish Ministers to ask about Mrs Stirton's
previous convictions, if any, and Mr Stirton said that she had one
conviction in 1993 in the Sheriff Court for reset. Mr Stirton said that he did not associate
with Joseph McGovern who was an alcoholic and he did know if he had any
previous convictions. Counsel Scottish Ministers asked if he had a conviction
for assault to severe injury in 1998 and Mr Anderson objected on the basis
that there was no Record. Counsel Scottish Ministers argued that she did not
need to give notice under reference to the case of Clinton v Newsgroup
1999 SC 367 at 369D. Counsel for Mr Stirton argued that it was plain
that counsel for Scottish Ministers had a list of previous convictions which he
said she must have got illegitimately. He argued that they should be
lodged. He argued that Clinton could be distinguished because it was an action of
defamation and a jury trial. Mr Anderson associated himself with
counsel's argument. Counsel for Scottish Ministers argued that she was
entitled to ask on the basis of Clinton. I considered all that I had heard. It seemed to
me that the case of Clinton was authority for the proposition that
Mr Stirton having said that he does not associate with criminals, counsel
could put to him convictions to indicate that that was not so.
Mr Stirton then indicated that he understood that Joseph McGovern had been
convicted but then released on appeal. He had no idea if there were any
previous convictions for Thomas McGovern or James McGovern. He knew that Paul
McGovern had been convicted of murder and as regards Steven McGovern, who is
now deceased, he had no idea. He knew that Tony McGovern had been murdered in
September 2000 but did not say whether or not he had any previous
convictions. Counsel for Scottish Ministers asked Mr Stirton if he had
been questioned by police concerning the murder and he confirmed that he had.
She asked him if he had said that he knew who the perpetrator was but would not
co-operate and he denied that. He said he had been in France at the time. Counsel
for Scottish Ministers asked him if Billy Viola was a front man for the
McGovern family in 1986 and 1987 and he said that he had no idea. A similar
question and answer followed concerning Mr Milligan. Counsel for
Scottish Ministers then put it to Mr Stirton that following Tony
McGovern's death Mr Stirton took over Thomson's Bar but needed a cover and
so put in Jacqueline Craig and then Pineloch Limited as the owners.
Mr Anderson objected to the line but I decided to allow it. Counsel then
went on to suggest that Mr Anderson was a front for Mr Stirton and
Mr Stirton said that that was nonsense. Counsel for Scottish Ministers
asked Mr Stirton about Mr James McFarlane McDonald who had attended
at the interim administrator and Mr Stirton said that he knew him as a
paralegal but that Mr Anderson had dealt with the matter.
[385] Counsel for Scottish Ministers moved on to
the drugs importation in 1997 and asked Mr Stirton if he had handed drugs
over to Mr Haig. Mr Stirton said he had not and he did not know
Mr Haig or Mr Hughson. He said that Mr Quinn was wrong when he
said he saw him and pointed out that if he had been there he would have been
charged. He said that the witnesses were wrong when they said that there was
a passport with his photograph in Mr and Mrs Dickson's house. He said he
did not know Frank Luke and when asked by counsel if he recalled Mr Anderson
saying that he was a person who worked with A & S Leasing,
Mr Stirton said that Mr Anderson dealt with the employees. Counsel
for Scottish Ministers then asked Mr Stirton what he would have to say
about Mr Neil saying that he saw him in London talking to a serious criminal and
Mr Stirton said that that was the biggest fabrication he had heard and
that the witness was lying. In connection with the incident on the M74
Mr Stirton said that he had not been in Liverpool exchanging drugs but had instead got
off a plane either at Heathrow or another London airport and then hired a car. He
had come from Charles de Gaulle Airport in Paris.
[386] In re-examination Mr Anderson asked
Mr Stirton to look at 7/11/1, which were documents from the TA which showed
a small amount of National Insurance being deducted. Mr Stirton repeated
that he was certain he had been paid by the TA. Mr Anderson asked
Mr Stirton when he attended the interview with the interim administrator
why he did not tell her about Sefton Homes. Mr Stirton said that he
could not now say but he had answered the questions he was asked.
[387] I did not believe Mr Stirton when he
denied involvement in the drug importation. I had heard evidence from police
officers and from Mr Haig, Mrs Dickson and Mr Hughson. I then
heard evidence from Mr Stirton. I weighed it up and for the reasons
given elsewhere I preferred the police evidence. I did not believe him when
he said that the money in the car on the M74 was for business, for the reasons
which I give elsewhere. I did not believe that Mr Stirton and
Mr Anderson were involved in any business which required them to have a
large sum of money in cash. I was inclined to believe Mr Stirton that he
had been in the TA but he did not lodge any productions which would enable me
to find that he was paid. His own productions which were concerned with
National Insurance did not show him as being paid. I found that piece of
evidence rather unsatisfactory as I would have thought it likely that he would
have been paid in the TA but I have no basis to make any finding that he was.
In any event it was not suggested by either Mr Stirton or Mr Anderson
that his wages from the TA were such as to enable him to develop the filling
station. I did not believe Mr Stirton when he said he worked for
Mr Kidd at West of Scotland Auto Electrics for a salary of г14,000. I
was not satisfied that he had earned г14,000 per annum despite his filling in
the application form to that effect. As I have stated elsewhere I accepted
that he did some work there but I was not prepared to find that he had been
employed at that or any other salary. As a result of this chapter of
questioning I found that the source of the г4,000 deposit for the purchase of 3 Kelvin
Road was not known. Mr Stirton had not given any notice of any
legitimate source.
[388] Mr Stirton did not lead any credible
evidence to show what profit, if any, he made from Loveboat. In light of all
of the evidence I heard, from Mr Stirton, Mr Anderson, Mr Gore,
Mr Midgley, and Mr Macfie and the productions I accept that
there was a business known as Loveboat. I had not heard any evidence on which
I could come to a view as to whether that business made a profit and, if so,
how much. I did not believe Mr Stirton when he said that his building
business had made the figures given in the applications for mortgages. I
found his evidence that he had made the same amount gross as net to be
inherently incredible. I had heard evidence from various accountants who
indicated that at least travel expenses and accountants' fees would be
deducted. Mr Meek did say that he could conceive of a person working at
home carrying out consultancy work who had no expenses. Mr Stirton did
not claim to do that. I found that a building business would have various expenses
which could be deducted before tax.
[389] I found that Mr Stirton's attitude
towards Spring Radio Cars was that he and Mr Anderson had helped that
business to succeed and he could not see why it was suggested that he had done
anything wrong. Mr Stirton did not engage with the suggestion that the
amount paid by Spring Radio Cars was not value for money but simply stated that
he knew that they were doing well and therefore he could not see the problem.
As I have stated elsewhere, if I took the view that Mr Gibson and
Mr McLeod had simply entered into a bad business bargain then of course I
would not find that there had been any extortion or undue inference. In light
of all of the evidence however I did not so find. I have found that
Mr Gibson and Mr McLeod were paying protection money when they paid
for the services contract and for the Skoda motor cars.
[390] Much of Mr Stirton's evidence came as a
response to leading questions which meant that I put little weight on it. I
noted that Mr Stirton was prepared to say that AB Builders was owned
by Mr Smyth when it was clear that Mr Anderson led him to say that.
Mr Stirton led no evidence of profit made by him in a building business.
Thus while I accepted that Mr Stirton had done some work for various
companies I did not know what profit he earned.
[391] Mr Stirton obtained loans from building
societies by telling them he had income which he cannot now vouch. I am not
persuaded by an argument that as the HMRC accepted tax from him on a lifestyle
basis that he had legitimate income to the amount used in the tax
calculation. The building society forms seek legitimate income and he has led
no evidence to show that he had any such income. There is an odd part of
evidence regarding his time in the TA. Generally I found Mr Stirton to
be believable when he said he had been in the TA and I would have expected him
to receive pay for that. However the documents which he produced showed only
a very low figure and I have no other documents which would enable me to hold
that the earned more than is there stated. He did not claim to recall exactly
how much he got paid, and there is no evidence from any other witness about
this. I therefore have no evidence to contradict the pay slip evidence put
before me by Mr Stirton.
Miss Leonard
[392] Miss Leonard
bought Mr Anderson's house, 37 Cowan Wynd, Uddingston on 25 September 1998, Mr Anderson having
been sequestrated in May 1997. It is admitted in the notice to admit that she
paid г83,600 and obtained a loan of г82,800 from Mortgages 1 Limited. Miss Leonard
signed a loan application form, production 6/48/2. She claimed to be earning
г28,000 per annum. In my opinion the evidence showed that Miss Leonard
told the lenders that she had an income of г28,000 per annum when she did not. Objection
was taken by Mr Anderson to the admissibility of Miss Leonard's
interview with the police, under reference to the case of Cadder v HMA [2010] UKSC 43, and as I
understood Mr Anderson, further on the ground that it was evidence
unfairly obtained. I heard the evidence under reservation. Mr Anderson
sought leave to reclaim my decision to hear the evidence under reservation. His
position was that I was over ruling Cadder and had no power to do so.
I did remind him of the nature of my decision but he pressed his motion for
leave to reclaim. It was opposed. I refused it.
[393] I have decided that neither ground of
objection is made out and the evidence is admissible. I rejected the Cadder
ground as this is a civil case and Cadder applies to crime. Miss Leonard
was detained and asked questions in an investigation into mortgage fraud, although
she was never prosecuted. The question therefore was whether the evidence
which would have been inadmissible in a criminal case, following the case of Cadder,
was thereby rendered inadmissible in a civil case. Counsel for Scottish
Ministers referred to the case of Olden v SOCA [2010] EWCA Civ 143. It is not binding on me but I regard it as persuasive, being a case
under POCA from the Court of Appeal in England. The facts of the case were
similar in that the appellant had been convicted of offences relating to
mortgage fraud and his conviction was set aside as the evidence was unlawfully
obtained and therefore inadmissible. Thereafter a civil case was brought against
the appellant and a recovery order was made. The evidence used in the civil
case included that which had been ruled inadmissible in the criminal case. The
Court of Appeal decided that the evidence was admissible. The Court of Appeal
noted that it is built into POCA that there may be differing results in
criminal and civil cases based on the same facts. POCA provides to the interim
administrator the right to ask questions. Adverse inferences may be drawn from
failure to give explanation where such is required. Therefore I am of the
opinion that evidence obtained by police officers without offering the person
involved an opportunity to have legal advice, may be admissible. In
considering the second question that is whether this information was fairly
obtained, I have come to the view that in the circumstances it was. Miss Leonard
was detained within her home and I accepted her evidence that she found the
whole procedure to be upsetting. I did not accept her evidence that she was
so upset that she would have said anything to get away from the police station.
I heard evidence from Mr Ramsay who conducted the interview. He said
that she was anxious and that she did not want to be put back into a small room
where she had been asked to wait while the interview room was prepared. He did
not put her back there. He said that during the interview he applied no
pressure and that she appeared willing to answer his questions. The
transcript, production 6/45/4 was put before the court it having been agreed as
accurate. The tape was produced but not used in evidence. I have therefore
used the transcript and the evidence from Mr Ramsay and Miss Leonard
in making my decision on the fairness of the interview. I did not find that
there was any attempt to break Miss Leonard's will, or any trickery in the
questions, I therefore found that the transcript was admissible.
[394] In the interview Miss Leonard admitted
that she did not earn г28,000 per annum and that the certificate that had
accompanied her application, apparently prepared by Mr Davies of MD
Associates was inaccurate. She said that she had to buy the house as
otherwise it would be re-possessed. She was vague about where the г800 cash
deposit came from. She explained that she had had trouble paying the mortgage
from time to time, and had to sell items, and get money from her family. She
also got money from Mr Anderson and from Mr Stirton. Miss Leonard
claimed to have worked as a person who identified flats in Glasgow ripe for re-development
and who got referral fees for doing so. There was some evidence from Mr Denney
along similar lines. She did not claim to have made г28,000 gross from that at
the time of completing the application form, and there were no business books
to support that, nor was there any notice in the pleadings. Significantly,
Mr Anderson lodged HMRC records relating to Miss Leonard as
production 7/11 from which it appeared that there were no records of her
being in employment or self employment after 1994. Mr Anderson did assert
at one stage in the proof that he had further productions but none were lodged.
Her bank account did not show salary payments going in. As noted elsewhere answers
in the pleadings before amendment showed that at one time Mr Anderson
claimed that Miss Leonard was paid a salary by Mr Davies. Following
amendment he claimed that Mr Davies acted as her agent. I found that
damaging to Miss Leonard's credibility. As a result of weighing up all
the evidence and the pleadings, I accepted that Miss Leonard had obtained
the loan over 37 Cowan Wynd by falsely stating that she earned г28,000 per
annum. Further, the source of the deposit was unexplained. Miss Leonard
did not claim it was her own money, and if it came from Mr Anderson then
it should have been declared in his sequestration. The evidence from the
lender was to the effect that the loan would not have been granted had they
known that the declaration made was false. Therefore I have found that the
house was obtained by unlawful conduct.
[395] Thus I have found that Mr Stirton, Mr Anderson
and Miss Leonard obtained the loans by deception. Mrs Stirton's
interest in the houses (owned in joint names with her husband) was also
obtained by deception.
Procedural Decisions
[396] As
the proof proceeded there were a number of challenges made to the admissibility
of evidence, to the apparent or actual bias of the court, and to have warrants
for the arrest of witnesses issued. I narrate below certain decisions which I
made. Some decisions are discussed elsewhere. I set matters out
chronologically.
[397] I allowed various amendments to the pleadings
as the proof proceeded. I also allowed a variety of productions to be lodged
though late. On 5 June 2009, I allowed both Mr Stirton and Mr Anderson to
amend their answers to the notice to admit where they had made an admission by
mistake.
[398] As I have stated above, the interim
administrator became ill during the first tranche of the proof. She never
returned to complete her evidence. I discuss the decisions which I made fully
elsewhere.
[399] On 20 November 2009, counsel for
Mr Stirton indicated that as Mr Stirton was ill, he moved the court
to adjourn. As Mr Stirton was not a party litigant and as he was not
giving evidence at the time, I saw no reason to adjourn and I refused the
motion.
[400] The Scottish Ministers had called
Mr Anderson as a witness in their proof. He gave evidence over a number
of days. He made a motion to the effect that he should stop giving evidence
because he required to prepare to argue matters concerning the interim
administrator. I refused his motion.
[401] There was application by the Scottish
Ministers, in the process for an interim administration order, for a
prohibitory property order rather than for the substitution of Miss Rivers
by another person as interim administrator. After hearing parties I refused
the motion. In due course a motion for appointment of Mr Ian Jones as
interim administrator was made and granted. Counsel for Mr Stirton
sought to argue that I could not hear the proof, having heard the application
for the prohibitory property order. Counsel for the Scottish Ministers'
position was that the question raised by the Note and Answers, that is for the
prohibitory property order, was whether the court is satisfied that there is a
"good arguable case" that the property includes recoverable property. I
declined to recuse myself. I came to the view that I was able to decide
whether or not there was a good arguable case on the basis of the pleadings and
that the informed observer, as referred to by Lord Hope in the Helow
case, would not form the view that the court would be biased by so doing and
therefore unable to decide the proof fairly. The respondents both sought
leave to reclaim. That was opposed. I took the view that they did not
identify any error of law in their motions for leave to reclaim and I therefore
refused them.
[402] In the course of evidence led by the Scottish
Ministers from Mr Shaun Ramsay, a police officer attached to the Financial
Investigation Unit, he stated that one of his functions related to production
orders which are necessary to obtain documents from banks and other
institutions. His evidence was to the effect that there had been a Suspicious
Activity Report (hereinafter "SAR") which had led to Operation Maple being set
up. Evidence to that effect had already been given by Mr Murray and Mr Midgley.
The witness volunteered, without being asked, that he would not divulge where
an SAR came from. Mr Anderson sought some time to consider his position
which I allowed him. I was then advised that counsel for Mr Stirton
would make arguments which Mr Anderson would adopt, in arguing that I
should not hear the evidence unless the source was divulged.
[403] Counsel for the Scottish Ministers submitted
that SARs were confidential. The system of SARs depended on people making
reports to the authorities and in order to encourage that such reports should
be treated as confidential. She argued that the court would always have the
right to overrule such an objection taken by a party if the court was persuaded
that the public interest in litigants having a fair trial would be compromised
by failure to disclose and that such a failure was such as to outweigh the
public interest in maintaining confidentiality in all the circumstances of the
case. Counsel referred to the case of Friel v Chief Constable of
Strathclyde 1981 SC 1.
[404] In this case, counsel argued that there was a
public interest in confidentiality and there was the respondents' interest in
defending the action brought for civil recovery. She noted that the lawful
recovery of documents from Shell and from various banks was not in dispute,
having been agreed by joint minute. She further objected on the basis of
relevancy, arguing that evidence which is not relevant is inadmissible.
[405] Counsel for Mr Stirton then addressed
the court. It appeared that the position had altered somewhat from
Mr Anderson's first position. Counsel argued that it would be admissible
to ask what bank or institution had made the SAR and to find out what it
said. Counsel sought to argue that the evidence led so far was that the
operation of the filling station was the focus of Operation Maple and while
there was evidence led from Mr Midgley that there was no specific evidence
to speak to the averments on the petition warrant. Therefore he wanted to
know if there was a contradiction concerning Operation Maple:- was it about
money laundering or was it about extortion? He argued that there had been
contradictory evidence from differing police officers and he would want to make
submissions about the consequent lack of reliability of the witnesses.
Counsel argued that the Scottish Ministers were acting as judges in their own
cause as they were trying to decide what was in the public interest. Counsel
for the Scottish Ministers in her reply referred to the case of R v Lewes
Justices which showed that the Ministers had a duty to take due notice of
the public interest.
[406] Counsel for Mr Stirton argued that since
the passing of the Human Rights Act 1998, Scots law has taken a different attitude
towards disclosure in criminal cases. He argued that this case was quasi
criminal and that the court should pay particular attention to the serious
nature of the case. He referred to the case of Glasgow Corporation v Central
Land Board 1956 SC (HL) 1 case. He said that the evidence showed that the
police did not have a good case for money laundering and they knew that and so
they "went on an inquisition against Gibson and McLeod, using subterfuge".
Counsel argued that there was no danger to any individual if a bank was
identified as being the institution which produced the SAR, rather than an
individual person being identified.
[407] I took the view that I had to decide whether
or not the SAR should be confidential. I noted that the request for disclosure
of it came at a late stage after other witnesses had given evidence and that
what was argued was the wide proposition that the SAR itself could be described
by the witness. I took the view that the decision was for me to make and that
while Scottish Ministers were entitled to object, they could not decide the
outcome. I had to consider whether the respondents' right to a fair trial would
be compromised by not knowing the terms of the SAR or who Mr Ramsay thinks
made the SAR. I decided in light of the cases to which I was referred that I
had to accept that there was a public interest in maintaining confidentiality,
and to consider whether detriment to the respondents was such as to require
that public interest to yield to the respondents' interest in having the
information sought. Thus I had to consider whether there was any detriment to
the respondents and if so, I had to consider how material it would be. I
accepted the point made by counsel for Mr Stirton that disclosure would
not indicate an individual but only a large institution if it came from a
bank. I took the view that there was no prejudice or detriment put before me
which the respondents would suffer. The SAR in itself proves nothing. I
took the view that questions designed to achieve disclosure of the SAR would
not be admissible.
[408] On 9 February 2010 Mr Anderson was
present in court but stated that he was unwell. He had received a letter from
SOCA stating that they were taking over an investigation into his tax affairs
and he said that he was distressed and could not concentrate. He said that he
felt unwell and could not go on. I therefore adjourned to the next day. He
was not present and a letter from his doctor was sent. Counsel for Scottish
Ministers moved me to continue the case in the absence of Mr Anderson to
the extent of hearing argument between herself and counsel for Mr Stirton
about the admissibility of evidence which she intended to lead and to which she
knew objection was to be taken. She made reference to the case of Clark v Hay 2006 SCLR.
I took the view that I could not hear anything of the case in the absence of
Mr Anderson and continued to 15 February 2010. In my opinion the case
of Clark v Hay was not in
point as Mr Anderson was unwell whereas in that case there had been a
failure to obtemper orders of the court. I then had the case called By Order
on three occasions in order to be updated as to Mr Anderson's state of
health. He was not fit until 9 March 2010. It was necessary then to adjourn until
27 April 2010 when I heard a motion from Mr Stirton, who was
unrepresented, to the effect that he wanted the case to be in some way put off
until he obtained legal aid. I made no order but continued until the first
day of the next term.
[409] I had heard motions in the process for the
interim administration order to reduce the funds paid as exclusions for living
expenses in March and in May 2010. I refused the first motion and granted the
second, giving a written Opinion on 16 June 2010, which is reproduced as
Appendix III. On 19 September 2010, the first day set down for the new hearing of the civil
recovery proof, Mr Anderson moved me to recuse myself on the basis that my
Opinion in the interim administration process showed bias. When I heard the
motion to reduce the exclusions in March, I enquired if any party had any
concern about its being heard by me, rather than by another judge. None had. When
I heard the motion in May, I heard from counsel for Scottish Ministers on the first
day, and on the second day Mr Anderson stated that he wished to have the
motion heard by another judge. When I asked him why he had not said so before
the hearing started, in order that the matter might be discussed, he indicated
that he had not anticipated the line that was taken by counsel for the Scottish
Ministers. As he put it, he was not psychic and so did not know that counsel
was going to refer to evidence in the case. Mr Anderson did attempt to
object when counsel began to refer to evidence and I told him he would have an
opportunity to address the court in the usual way when counsel had finished her
submission. I refused the motion to recuse myself, and heard the motion to
reduce the funds paid as exclusions. I made the decision to reduce the sums
for the reasons given in my Opinion. Mr Anderson's submission was that he
would not be able to get a fair hearing in the recovery order proof. When the
court had heard a motion concerning money counsel for the Scottish Ministers
had made a submission about evidence in the case and he had objected to that.
The court had told him that he would have his opportunity to speak but he did
not get such an opportunity. His submission was that an ordinary member of
the public would form the impression that the court had already decided the
case against Mr Stirton and himself before his own case had started. He
had been giving evidence in the civil recovery proof and in the motion for the
alteration of the money paid I had paid no attention to what he had said. He
had given evidence over a matter of weeks and had said he was the sole owner of
Thomson's Bar. Mr Stirton had said in the hearing on 6 May that he
was not an owner of Thomson's Bar. From paragraph 28 of my Opinion it
was clear that I had decided that both Mr Anderson and Mr Stirton
were lying about Thomson's Bar. Thus I had made a vital decision on
credibility before I had heard all of the evidence and submissions in the recovery
order case. Mr Anderson's position was that I was in fact biased against
him, and Mr Stirton. I had shown bias in upholding the Lord Advocate's
certificate, in refusing to authorise a medical examination of Miss Rivers
by a consultant instructed by the respondents, by refusing him leave to reclaim
at least eight times, and by preventing him from giving his own evidence in the
way he wanted to give it. Further, he had been sent a letter by the court
authorities asking that he pay court fees. He had been told that I had
instructed that the invoice be sent. He submitted that I had no right to
interfere with fees and that I was being oppressive.
[410] I heard Counsel for Mr Stirton on this
motion and his submission was that the chronology as follows was important:-
1. SOCA wrote to Mr Stirton on 5 February 2010 stating that they had taken over from HMRC regarding tax.
2. On 7 February 2010 Mr Anderson was taken ill and the case adjourned to allow him to recover.
3. On 25 February 2010 legal aid was withdrawn from Mr Stirton and as there was a ruling in place by the Dean of Faculty concerning the solicitors instructed by Mr Stirton, counsel could not appear pro bono.
4. A motion to reduce the monthly allowance was heard on 11 March 2010 and was unsuccessful.
5. In May 2010 another motion to reduce money was heard and a decision was given on 16 June 2010 in which the money was reduced.
6. Legal aid was restored after 23 June 2010, but sanction was for junior counsel only and an appeal against that decision had been lodged.
7. On 15 July 2010 SOCA wrote to Mr Stirton and Mr Anderson stating that they have to pay tax of г750,000 and г250,000 respectively, being a complete change from their previous position.
Counsel argued that considerable pressure has been placed on two citizens. He submitted that the court process had been abused by the Scottish Ministers to apply pressure between March and September. He argued that Scottish Ministers "are responsible" for SOCA; that there is total sharing of information; that documents handed to one agency can be disclosed to another without troubling the courts. Therefore his argument was that the processes of the court had been abused by Scottish Ministers to apply pressure. He said that the hearing on the money had been unfairly conducted as both respondents were unrepresented and authorities had been given to Mr Anderson only one hour before and to Mr Stirton the day before. Both asked for a postponement but did not get it. No reason was given by the court. Leave to appeal the decision refusing a postponement was refused. There had been an argument by Mr Anderson that a change in circumstances was needed, but counsel for Mr Stirton stated that he did not support that submission. As I understood him, counsel appreciated that the decision in the interim administration order process had been made, but he wished to address me on the substance of the decision in support of his submission that the decision showed at least apparent if not actual bias. Counsel argued that the findings of fact made by me in my Opinion were not peripheral matters but were about matters at the heart of the case. I had expressed views on reliability and credibility. The central matter relating to his client was that the court had found that Mr Stirton was not truthful when he said he had no interest in the business known as Thomson's Bar. Reading paragraphs 27 and 28 together, it was clear that the court had decided that the amounts being paid were not reasonable; that Mr Stirton was not truthful when he said he had no interest in Thomson's Bar; that the court did not believe him when he said he did no work; and that therefore Mr Stirton had lied. Counsel said that he exonerated counsel appearing in court from any wrongdoing but that Scottish Ministers must have known that the following were happening:-
1. The court was seeking fees and the letter asking for it had been sent under the authority of the judge.
2. SOCA were demanding tax be paid.
3. Scottish Ministers enrolled a motion and it was granted.
According to counsel the ordinary man in the street would say that all this was no coincidence and could not be accounted for by chance.
[411] Counsel said that he was not casting any
aspersions on the court or on Scottish Ministers. He was not saying that
anything improper had happened and he would never say that in any other
court. He was not saying that the court had been influenced by anybody. He
did however argue that in this case the court had disqualified itself from
hearing anything further. He produced a book entitled "The Rule of Law"
written by Lord Bingham and asked me to read chapter 9. He then
referred to the case of Helow and reminded me of the facts. He then
turned to the Australian case of The Queen v Watson ex parte
Armstrong (1976) 136 CLR 248 HC of A in which a judge in a
family case had said that he would not, following interlocutory proceedings,
accept evidence from either party without corroboration. On appeal the court decided
that the judge at first instance had formed a view at an early stage without
hearing any evidence. The court in this case was in the same position. It
would not matter if everything that the court did hereafter was fair, as I had
shown that I had already made up my mind. Counsel referred to the case of Director
of the Assets Recovery Agency v Lovell [2009] NICA 27, in order to
distinguish it. He argued that the question before the court in the case had
not been central to the whole case. The judge had not believed Mr Lovell
when he claimed to have instructed counsel, but that was not a central matter. In
the present case, according to counsel, the matter of Thomson's Bar was central
and I had stated that I did not believe Mr Stirton , or Mr Anderson,
on the question of ownership of it. He referred to the case of Vakauta v
Kelly [1989 167 CLR] HC of A and distinguished it by noting that
it referred to a witness in another case, but nevertheless argued that pages
571 and 587 were relevant. He said that this was essentially the fault
of Scottish Ministers as they had asked the court to make the decision and
should not have done so. Counsel summed up his position by saying that an
impartial observer would look at the case and would say:-
"You have decided he is a liar, and that goes to the heart of the action. Therefore you cannot hear any more."
[412] Counsel for the Scottish Ministers opposed
the motion and articulated the test as follows:-
"Would a fair minded and informed observer be of the view that there is a real risk or a real possibility that the respondents would not get a fair hearing in the application for a recovery order as a result of the motion made and opinion given following argument in the interim administration process for variation of the exclusion order."
She submitted that the answer would be a resounding no. She argued that a court was entitled to form an interim view and that unlike the judge in case of Armstrong, the court here had not said that it would not believe anything that was said by the parties. In this case what the court had been asked to decide was if an amount excluded was required for living expenses. She relied on the case of Lovell. She argued that judges are accustomed to making decisions at an interim stage. Counsel referred to Thompson v Crowe, arguing that a judge sitting alone in a summary trial, hearing a trial within a trial, is not thereby disabled from hearing the trial. I asked to be addressed in the case of Sengupta v G M C [2002] EWCA Civ 1104 in which a judge of the Court of Appeal had refused permission for leave to appeal on the papers. The question was whether he could sit on the appeal when it was heard as others judges had decided that leave should be granted. The decision was that he could sit in the appeal. Counsel for Scottish Ministers also referred to Locabail (UK) Ltd v Bayfield Properties Ltd (CA) [2000] QB 45, and in particular paragraph 25. In reply counsel for Mr Stirton argued that Sengupta was not in point as the credibility of parties was not in question in that case. He sought to distinguish Thompson v Crowe on the same basis, that the judge decided in the trial within a trial only on admissibility, not on credibility. He declined to address me on Locabail. Mr Anderson adopted all that had been said by counsel for Mr Stirton. He submitted that if there was any doubt, I should recuse myself. He summed up his position by saying that at paragraph 28 I had clearly stated that I did not believe him and so I should not carry out any more duties in the case.
[413] I refused to recuse myself. I accepted the
submissions made by the Scottish Ministers. I took the view that the decision
which I had made in the interim administration process, to reduce living
expenses, was made on the basis of submissions put to me in that process together
with information given by Mr Stirton when he sought a sist to apply for
legal aid. Counsel for Scottish Ministers referred to evidence heard in the
petition for a recovery order, and I did make use of that evidence. I stated
that I was aware I had not heard everything and so did not have a concluded
view. I did not disable myself from taking a different view after hearing all
of the evidence. I did not either have, or express, a view about
Mr Stirton actually carrying out work; rather I asked him why he could not
work. The central question in the civil recovery process was whether or not
there had been unlawful conduct and, if so, whether or not assets had been
obtained as a result of that unlawful conduct. That was a different question
from that before me in the other process which was concerned with reasonable
living expenses. In the other process I had some degree of detail before me
as to the respondents' living expenses and as to their assets. I had no
discussion about unlawful conduct. When hearing the motion concerning funds
for living expenses I allowed both Mr Anderson and Mr Stirton to make
their submissions and did not refuse Mr Anderson an opportunity to do so.
I accepted the submission that the informed observer described in the case of Helow
would not see a real risk or real possibility of my being biased as a
result of the Opinion of 16 June. Further, I did not accept that such an
observer would be concerned that the events referred to by counsel for Mr Stirton
showed that there was a real risk or possibility that the court was in some
fashion biased. The court fees were an administrative matter applicable to
every litigant. I regarded the case of Locabail as supportive of the
Scottish Ministers, as the court at paragraph 25 makes clear that a judge
may hear and decide matters as a case progresses. I accepted, on reflection,
that the case of Sengupta was not in point, as no decision on
credibility was required. Leave to reclaim was sought. Counsel for Mr Stirton
argued that the case had several witnesses still to be heard and that time
would be wasted by going ahead now. Mr Anderson submitted that my
decision was wrong, and that it was a crucial matter. He argued that he had a
right to defend the action and submitted that I was "taking that right away". Counsel
for Scottish Ministers opposed leave being granted. I refused leave, having
come to the view that the law was set out in the case of Helow, and that
neither counsel for Mr Stirton nor Mr Anderson had argued that there
was an error of law.
[414] Mr Anderson then stated that he would
not be available for the next ten days as he had had an assessment of this tax
by SOCA and he needed time to answer it. I refused to grant an adjournment.
[415] There was then a discussion about the
admissibility or otherwise of evidence that the Scottish Ministers sought to
lead from Mr Lauder, an employee of SCDEA. I decided that such evidence
would be admissible but in the end the Scottish Ministers did not lead it. As
I did not hear any of the evidence it formed no part of my decisions and therefore
I do not rehearse the arguments put before me.
[416] On 28 September 2010 counsel for Mr Stirton
addressed the court on a motion to have a commissioner appointed to recover
documents. I granted that motion. There was discussion about the court
sitting on the weeks beginning 18 and 25 October. I advised that the
court would sit on the week beginning 18 October, but not on that
beginning 25 October as I was on leave that week. Mr Anderson then
stated that he wished to move a motion to have the case dismissed due to
oppression, which he had enrolled and which had been marked as opposed. I
told Mr Anderson that I would require to be addressed on the competence of
the motion, and that I would not hear it until evidence was completed. In
response Mr Anderson said that he would not be in court the next day as he
felt ill. He said that I was acting oppressively by not enabling him to be on
leave during the week of 18 October. Counsel for Mr Stirton
interrupted to seek a brief adjournment, which I allowed. On resuming,
counsel for Mr Stirton told me that his junior and his agent had been concerned
about Mr Anderson's health earlier that day. He understood that Mr Anderson
had arranged an appointment for the next day with his doctor. Counsel told me
that Mr Anderson wanted to proffer an apology if his behaviour had been
rude. Counsel suggested that Mr Anderson should ask his doctor to be in
touch with court and that the court could convene the day after. I understood
that counsel was endeavouring to assist the court as he thought that Mr Anderson
was under stress. I therefore agreed to his suggestion. Counsel for
Scottish Ministers intimated that she reserved her position and might move the
court in two days time to proceed. There then followed correspondence between
the Clerk of Court and Mr Anderson's doctor. On 30 September Mr Anderson was absent and a
certificate from his doctor was available stating that he was unfit and would
be reviewed on 5 October. Counsel for Scottish Ministers moved me to
continue in his absence. She referred to the case of Scottish Ministers v
Smith [2010] CSIH 44 in which a reclaiming motion was refused as not insisted
in when the reclaimer failed to appear having left a medical letter at the court
reception on the morning of the hearing. I declined to allow the motion. I
did not regard the situation as similar to that in the case of Smith. Mr Anderson
had been present over many days of proof, and he had produced a letter from his
doctor. I did not consider it fair to proceed in his absence. On 1 October
I had one court hearing, in chambers outwith Mr Anderson's presence in
order that I might advise counsel for Miss Rivers that I wanted an update
on her medical position. I had advised Mr Anderson that I intended to do
so. On my instructions the Clerk of Court was in touch by letter email and
telephone with Mr Anderson's doctor.
[417] Mr Anderson was not fit to resume until 8 October 2010. He advised that he
would need regular breaks due to his medical condition and the necessity of
taking medication. I agreed.
[418] On 14 October 2010 counsel for
Mr Stirton sought in cross examination of Mr Kenneth Murray to ask
questions about the lawfulness of recovery of Mr Neilson's files. It had
been agreed in the first joint minute as follows:-
"9. That production 6/95/1 and 6/95/2 are files from Neilson & Renton Accountants relating to Spring Radio Cars Ltd Audit of Accounts for year end 31 October 2001. That they were lawfully obtained. The contents, insofar as copies, are the equivalent of originals. The contents are what they bear to be under reservation of the parties' rights to challenge any entry or document as false or inaccurate."
Paragraphs 10 and 11 of the joint minute recorded an identical agreement for productions 6/96A and 6/96B, and productions 6/37/1 and 6/40/1, all of which were also Neilson & Renton files. Counsel for Mr Stirton sought to ask Mr Murray if files had been handed to the police, and counsel for Scottish Ministers took objection to the line. She argued that Mr Murray's evidence in chief had been taken regarding the files without objection, which was not surprising in light of the joint minute. She made reference to the cases of The London and Edinburgh Shipping Company Ltd v The Admiralty 1920 SC 309, Carswell & Son v Findlay SLR Vol XXIV 643 and The Scottish Marine Insurance Company of Glasgow 10 ER 483. Counsel argued that a joint minute was contractual and once agreed could not be departed from. She referred to the Opinion of Lord Dundas at page 318 of the first case, in which he said:-
"In this case the parties elected to renounce probation upon an agreed joint minute of admissions in fact. Such a course has its advantages but also its risks. The adjustment of such a minute is in my judgment one of the most difficult and delicate tasks which fall to the lot of counsel. An unguarded admission, or an inadvertent omission, may be fatal. But, once adjusted, the minute forms the evidence in the case; it is the proof at large, in synthesis and its statements of admitted facts must be accepted as final."
Counsel argued that the joint minute in the current case was final as regards the matters agreed in it. She also addressed me on the prejudice which the Scottish Ministers would suffer if the court did allow counsel for Mr Stirton to renege on the agreement. She argued that her case had been conducted in reliance on the agreement; certain witnesses had not been called at all as the agreement rendered their evidence unnecessary. Counsel for Mr Stirton replied to the effect that the joint minute properly construed meant that the files had been lawfully obtained by the representative of ICAS, Mr Murray, but not that they had been lawfully passed on to police or anyone else. He referred to Walkers on Evidence, paragraph 11.2.2. I decided that the line of evidence which counsel for Mr Stirton sought to lead was inadmissible. His construction of the joint minute involved reading in the words "by Mr Murray as an officer of ICAS". There was no necessity to do so in order to make sense of the Minute. It seemed to me that the joint minute had been agreed between the parties in the action and must therefore mean that the files had been lawfully recovered by the party producing them. Counsel for Mr Stirton sought leave to reclaim. He submitted that the decision was wrong and that failure to allow him to lead the evidence would mean that evidence was lost. He submitted that the court had once again ruled against a "perfectly sensible submission". Mr Anderson stated that he had an interest in the matter and that he supported counsel for Mr Stirton. Counsel for Scottish Minsters opposed leave to reclaim arguing that no error in law had been identified. I refused leave to reclaim.
[419] Mr Murray's evidence was spread over
several weeks, with gaps necessitated by his being overseas and so unavailable,
and the court not sitting due to commitment to criminal cases. When Mr Anderson
completed his cross examination, on 17 November 2010, counsel for Mr Stirton
indicated that he wished to re-open the question of the joint minute. He said
that important new information had been gathered. His motion would be to
allow evidence to be led about the files despite the agreement that they had
been lawfully recovered. Counsel for Scottish Ministers completed her re-examination
and then I heard counsel for Mr Stirton on 18 November. He submitted
a bundle of correspondence between his instructing solicitors and ICAS. From
that he said it could be seen that Dr McMorrow had requested that Mr Neilson
hand over files to Mr Murray, which request had been complied with. Thereafter
there was an email from Mr Murray to the effect that he intended to return
the files on 6 April
2004, and a
letter from ICAS to Mr Stirton's agents stating that their papers
indicated that the files had been returned on that date. In productions, it
appeared that Mr Neilson claimed to have attended at the police station to
sign labels for files, whereas police statements indicated he had handed in
files. Counsel submitted that he wished to test police credibility. He appreciated
that he had signed the joint minute (this argument was presented by junior
counsel, who had been instructed alone in the first tranche of the case) but
argued that the joint minute might be an "illegal contract, or an attempt to
oust the jurisdiction of the court". When I asked why he had signed the joint
minute he indicated that he did not wish to say something had been missed. Rather
he would say that there was a great deal to be done in short time and that the
funds available did not run to precognition. I asked him what point he wanted
to make if he were allowed to lead evidence about the files. His reply was to
the effect that the evidence of the files would not necessarily be admissible
but that as extortion was alleged it was important to know what had happened.
Mr Anderson did not adopt counsel's submission, saying that his position
was much simpler. He wanted to lead evidence about the files in order to
undermine Mr Murray's credibility. Counsel for Scottish Ministers argued
that the court had already decided that the joint minute was binding and that
decision should stand. She argued that the letters produced were only half
the correspondence, and it was clear from a letter from ICAS that they appeared
to think that Mr Stirton's agents acted for Neilson Renton, which they did
not so far as she knew. She argued that productions 6/106 and 6/45, lodged
timeously, contained statements suggesting that Mr Neilson had handed the files
to the police. Thus the bundle of documents was incomplete and the court
should not rely on it. In any event there was no record for Mr Murray
being involved in any conspiracy. She submitted the purpose was obfuscation. She
invited me to refuse the motion. I considered that the joint minute was
binding on parties and nothing had been said which indicated that there was new
material on which I should reconsider that decision. I refused the motion.
Mr Anderson sought leave to reclaim on the basis that the decision was
wrong, that I was removing his right to a fair trial, that perjury had been
committed and that justice was not seen to be done. Counsel for Mr Stirton
adopted his submission. Counsel for Scottish Ministers opposed the motion for
leave, arguing that no error in law had been identified. I refused the
motion. Counsel for Scottish Ministers moved for expenses. Mr Anderson
and counsel for Mr Stirton moved me to reserve expenses. I took the view
that the motion was entirely without merit and had taken up time in the proof
unnecessarily. I granted expenses. Counsel for Mr Stirton sought
modification but had not lodged a legal aid certificate. I refused
modification in hoc statu.
[420] On 23 November 2010 the Scottish Ministers
case came to an end. Counsel for Mr Stirton moved me to adjourn for two
weeks in order that he might prepare to lead his evidence. Counsel explained
that there had been difficulty in having precognitions taken, as legal aid had
not been granted for precognition. I was surprised by that request and
granted an adjournment for one week. No list of witnesses had been lodged in
terms of the Practice Note but I allowed a number of witnesses to be called as
I was aware that witness lists had been intimated to parties though not
formally moved. During discussions about which witnesses the court would
allow Mr Stirton to call, counsel noted that the court was oppressive as
it asked far more questions of him than it did of counsel for the Scottish
Ministers. Mr Anderson said that he wanted leave to reclaim the
interlocutor allowing only certain witnesses to be called for Mr Stirton
and I told him he had no locus, it not being his motion. Counsel for
Mr Stirton then said that he wanted leave to reclaim, not having asked at
the appropriate time. I refused it.
[421] On 14 January 2011 counsel for
Mr Stirton moved the court for permission to call four witnesses,
Mr Giffin, Mr Thomson, Mr Anderson and Mr Wallace. I
allowed Mr Giffin and Mr Thomson, who were people who spoke about
Mr Stirton's employment with West of Scotland Auto Electrics. I did not
allow Mr Anderson and Mr Wallace. Counsel explained that both these
men were taxi drivers and the purpose of leading them would be to ask them
about the amount they required to pay to hire a taxi. The taxi drivers regarded
the amount they had to pay as high but recognised that there was a market and
they paid the required amount. He wanted to lead that evidence in order that
he might make a submission that what one person thought was exorbitant was not
in another person's opinion exorbitant. I regarded that as irrelevant and
refused it. Counsel for Mr Stirton sought leave to have me reconsider
the decision, having failed to seek leave to reclaim it. He submitted that
the duty of a first instance judge was to allow evidence and that evidence
should be excluded only in very unusual circumstances. He made reference to
the case of Clarke v Stuart 1950 JC 8. In that case, a sheriff
sitting in a summary criminal trial refused evidence from a police surgeon in a
prosecution under road traffic legislation. The Crown appealed by means of
stated case. The decision of the Court of Criminal Appeal illustrates the
difficulty if evidence is wrongly excluded in a summary prosecution. Counsel
argued that the court was in a similar position in this case. On inquiry he
confirmed that he did not argue that the court should allow all evidence
without making a decision on relevancy. He argued that the evidence he sought
was relevant. Counsel's position was that I had power to review my own
decisions. Counsel for the Scottish Ministers submitted that it was not
competent for the court to reconsider its own rulings. I agreed with that
view. Had I been asked for leave to reclaim at the appropriate time I would
have refused it on the basis that the evidence was so plainly irrelevant that I
was not persuaded that there was arguably an error in law. Thus had I been
persuaded that I did have power to review my decision I would have refused the
motion to have these witnesses called as I did not regard their evidence as
relevant.
[422] Mr Neilson was asked by Mr Anderson
if he had been given an incentive to change his view. I upheld an objection
from Scottish Ministers, there being no pleadings to enable such a question. I
refer to Mr Neilson's evidence elsewhere.
[423] I was aware in January 2011 from counsel for
Mr Stirton and Mr Anderson that they intended to move the court to be
allowed to cite Miss Ramsay as a witness. She had been on the list of
witnesses for the Scottish Ministers and had been cited by Mr Stirton's
agents in November 2010. The respondents thought that she was evading
citation and wanted to have her arrested. I refused. Counsel had mentioned
several times that he would wish to call Miss Ramsay as a witness and Mr Anderson
had indicated he too wanted to call her. A motion to do so was formally
made. I was told that she was a vital witness whom each wished to call.
They understood she had retired from the police due to ill health. I was told
that Scottish Ministers had cited Miss Ramsay for the proof and had been
advised by her that she was not fit to give evidence due to ill health.
Counsel for Mr Stirton produced letters which I allowed to be lodged and
which became production 7/16. They consist of a letter dated
16 July 2009 to the agents for Scottish Ministers from Dr Evelyne
Millings, Chartered Counselling Psychologist in which it is said that
Miss Ramsay had an extreme stress reaction which was manifest in symptoms
of Post Traumatic Stress Disorder for which she received psychological
intervention, having thirteen sessions over a four month period from February
2005. She had been permitted to leave her employment as a police officer on
grounds of ill health in February 2006 and the period leading up to that had
been stressful and anxiety provoking. Miss Ramsay had not been in touch
with Dr Millings thereafter until the beginning of July 2009 when she had
attended to discus the effect that citation to give evidence had had upon her.
Dr Millings administered psychometric tests which indicated that she was
suffering from severe depression and severe anxiety for which she needed
psychological treatment. Dr Millings requested that she be exempt from
attendance. The next letter produced was from Dr Millings to
Mr Stirton's agents dated 29 July 2009, in reply to a letter not produced.
Dr Millings stated that being a witness at all was likely to encourage
painful memories for Miss Ramsay and was most likely to negatively affect
her mental well being. The request for excusal was re-iterated. The last
letter was a hand written note dated 25 November 2010 faxed to
Mr Stirton's agents from Dr D Spence of the Maryhill Health Centre in
which a copy of Dr Millings' letter was attached, and Dr Spence
stated that Miss Ramsay "has ongoing issues and I currently do not feel
she is fit to appear as a witness. This is an on soul and conscience
statement". Miss Ramsay wrote to the court by letter dated 4 February 2011. Her letter was in the
following terms:-
"Friday 4th February 2011
Dear Mr Martin,
I am writing to you in relation to the case against Russell Stirton being heard by Lady Stacey at Edinburgh Court of Session.
I was cited to attend this case as a witness initially by the prosecution (Morton Solicitors) and defence solicitors (Robertson & Robertson) two years ago.
I am a retired police officer and suffered from a breakdown in 2005. I was diagnosed with post traumatic stress and was on antidepressants for year as well as receiving ongoing treatment from a psychologist and my GP.
When I received the initial citations I suffered from a great deal of anxiety and had to revisit the psychologist. I was badly bullied within the police force after serving 14 years and it took a great deal of time and recovery to leave to force (sic) and maintain a normal healthy life.
Both the GP and psychologist felt it would be detrimental to my health to appear as a witness and as such issued a soul and conscience on these grounds.
I believe that the prosecution (Morton Solicitors) presented the soul and conscience at that time and it was accepted by the court.
The reason for my letter is due to the ongoing harassment I have received from the defence solicitors' Mr Robertson.
Over the past year he has issued me with at least four citations to appear as a witness causing me to have to revisit my GP each time to get a fresh soul and conscience. I have had numerous visits from his precognition agent Mr Anderson to my home address to try and obtain a statement from me, including him posting my statement through my door. I have already received a threatening letter sent to my home address by Mr Anderson indicating that he would get me arrested.
He also wrote to Strathclyde Police and indicated I had my police notebooks and I received a visit from them last year. I contacted him by phone and asked that he leave me alone.
The last citation I got was last week. I contacted Mr Robertson directly and asked him why he was doing this to me. I told him I felt threatened and bullied by him and his precognition agent. He told me at that time that he accepted that I wouldn't be appearing. I thought that was the end of the matter.
I believe he has never submitted my soul and conscience to the court.
At 5pm yesterday (Wednesday 3rd February) my GP contacted me and stated that Mr Robertson had written to him and is still trying to pursue me as a witness. I feel I can't take this any more.
I have contacted the Independent Scottish Legal Services Complaints as well as writing this letter. I feel that I have nowhere else to turn and this situation is causing me to suffer from a great deal of stress and I am reliving how I was treated in the past. I do not want to go back to having these feelings as it's taken me years to get over the traumatic experience I suffered. Please can you help.
Kinds regards,
Anne Ramsay"
I was not inclined to the view that Miss Ramsay had deliberately ignored a court citation. Rather I took the view that Mr Stirton's solicitors and Mr Anderson had known for some time that the witness claimed that she was unfit. Counsel submitted that the letters were unsatisfactory and that she ought not to be excused in light of them. Counsel for Mr Stirton moved me to issue a warrant for the arrest of Miss Ramsay, although both he and Mr Anderson indicated that while they wished a warrant to be issued, they would be content that a letter be written advising Miss Ramsay that such a warrant had been issued and inviting her to attend before she was arrested. I refused the motion as I was not satisfied that the witness was deliberately avoiding citation. When I gave my decision counsel for Mr Stirton and Mr Anderson both wished to lodge a book which Miss Ramsay had apparently written as a late production. So far as I understood them, they wanted to suggest to Miss Ramsay that she and Mr Murray had collaborated in concocting a statement. I was perfectly prepared to accept, (as I explain elsewhere) following the evidence of Mr Murray and Mr McRae, that Miss Ramsay had altered her statement. As I understood counsel for Mr Stirton and Mr Anderson they hoped to lead evidence from Miss Ramsay to show that Mr Murray was lying when he said that Mr Gibson told them that he had been the subject of extortion. Neither could explain to me the purpose of lodging the book as a late production and so I refused the motion.
[424] On 20 January 2011 counsel for
Mr Stirton stated that he wished to know whether the court knew the
identity of the interim administrator and he wanted to have her medically
examined. I reminded counsel that there was a sealed envelope in process
containing the true name of the interim administrator. I refused the motion
for medical examination.
[425] On 22 February 2011 I refused
Mr Anderson his request to call Miss Rivers, Mr Hughes, Mr Brown,
Miss A and Miss Ramsay as witnesses. I did so as I took the view
that I had already excused Miss Rivers on health grounds and had been
given no new information. Mr Hughes was a person who had drawn up plans
for the development of the filling station. I had seen his plans already and
had heard witnesses on the subject and was not told that his evidence would be
of any materiality. Mr Brown had given quotes for work to be done at the
filling station. I refused to allow him for the same reasons as my refusal of
Mr Hughes. I refused to allow Miss A to be cited as I was told that
she was an experienced interim administrator and the evidence to be adduced was
an opinion of the work carried out by Miss Rivers. I considered that
irrelevant. I was also concerned that this was another attempt to go behind
the Public Interest Immunity certificate. I refused to allow Miss Ramsay
to be cited as I had already decided when counsel for Mr Stirton moved for
a warrant for her arrest that no proper steps had been taken to arrange her
attendance, and I was told no new information. I allowed Mr Anderson to
call Mr McCusker and to recall Mr McLeod. I was told that Mr Anderson
might wish to ask Mr McLeod questions following the commission of recovery
of documents which I had allowed. As he was a party litigant I made an order
for him to find caution. I decided to allow Mr Anderson to give further
evidence himself as he said that there were certain things he had forgotten to
say when he was called by counsel for the Scottish Ministers. Mr Anderson
did not wish, at the end of his proof, to give further evidence. Mr Anderson
said that this was an astonishing decision and that he required time to
consider. I adjourned briefly. He then sought leave to reclaim, on the
grounds that I was biased against him and that he was not getting a fair
trial. Counsel for Scottish Ministers opposed leave being granted. I
refused leave to reclaim. Mr Anderson then made a motion for me to
recuse myself. He submitted that he had sought leave to reclaim on several
occasions and had been unsuccessful each time. Thus the court showed bias
against him. He submitted that he had had four hundred questions prepared for
Mark Ramsay and had been prevented from asking them. He submitted that I had
refused to allow him to ask the questions he wished to ask of Mrs Harris
and so he had been deprived of his rights. He submitted that pressure was
being put on the court because of the length of the case and the financial
implications. He submitted that he was suffering because he was last of three
to present his case and that the court was concerned about time. I asked him
if he was saying that pressure was being put on the court by some third party
and he said that was his position. In reply to his motion counsel for
Scottish Ministers submitted that he had failed to address the test for recusal
of a judge. She referred to the Helow case. The court had determined
many motions, some made at the Bar. A decision adverse to a party does not
demonstrate bias. There was no basis for the allegation of the court being
subject to pressure. I refused Mr Anderson's motion. He sought leave
to reclaim, submitting that my failure to give full reasons for my decision immediately
was in itself enough to entitle him to leave to reclaim. Counsel for Scottish
Ministers opposed that motion. I refused it. Mr Anderson then moved for
the case to be stopped so that he might apply for legal aid. He said that he
did not feel that there was equality of arms as he was surrounded by lawyers. He
said that he was not feeling well. Counsel for Scottish Ministers opposed
that motion arguing that Mr Anderson had had legal representation until
about 2007. He had since then appeared for himself. It was now too late to
delay the case further while he sought legal representation. I refused the
motion to adjourn, and the motion for leave to reclaim which followed, all as
explained fully elsewhere. I asked Mr Anderson if he was fit to continue
or not. He said he had had witnesses waiting for days therefore he would
continue and he did so, leading the witnesses who had been waiting. Mr Anderson
did not appear next day and sent word to the court via Mr Stirton's agents
that he was ill. By 3 March 2011 Mr Anderson's GP had communicated by email that
he was not fit and I therefore adjourned to 10 May 2011.
[426] On 10 May 2011, Mr Anderson began
by stating that he had attempted to have Mr McCusker cited by messengers-
at- arms as a witness but Mr McCusker had failed to answer the citation. Mr Anderson
as a party litigant had obtained the court's authority to cite Mr McCusker
and instructed sheriff officers Messrs Stirling Park to do so. He submitted
a letter from Messrs Stirling Park addressed to him at 1007 Argyle Street,
Glasgow (the address of Mr Yousaf) dated 9 May 2011 together with a
certificate bearing to be under RC 36.2-C. Mr Anderson moved for a
warrant to arrest Mr McCusker on the basis that he had failed to answer
the citation. He indicated that would agree that an invitation to attend
should be issued prior to any warrant being executed. As witnesses were
waiting to give evidence, I told Mr Anderson that in light of the terms of
the letter from the sheriff officers I was not persuaded that I should grant a
warrant, and that I might have expected affidavits. I also indicated that I
was concerned about the validity of the citation, which was not witnessed. There
was evidence to be heard and a witness present and I so advised parties that I
would hear them fully later in the day after hearing the witness. I wished to
proceed with the evidence being heard, rather than keep the witnesses waiting.
[427] At the lunchtime adjournment I was advised
that Mr McCusker had made contact with the Petition Department of the
Court of Session by email, which email was sent to the Clerk of Court. On my
instruction the Clerk of Court spoke by telephone to Mr McCusker. He told
the Clerk of Court that he was not in Scotland and that he was involved in work which he regarded as
confidential and of an extremely sensitive nature. He understood that parties
had tried to cite him as a witness and although he had not received a citation
he would make himself available for court on a Friday. The Clerk of Court
asked Mr McCusker to write explaining the position and enclosing vouching
of his employment. I told parties of these developments, and exhibited the
email to them, under deletion of the phone number. On 11 May 2011
Mr Anderson raised as a preliminary matter the events of the day before
concerning Mr McCusker. He submitted that there had been collusion in
the court. He had raised an issue before the court at 10:00 am about Mr McCusker,
and at 12:52 pm Mr McCusker had sent
an email. Therefore he believed that someone had contacted Mr McCusker
and told him what had happened in court. In doing so, the course of justice
had been perverted. There should be a police inquiry into Mr McCusker
attempting to evade citation, and the collusion of the court. The sheriff
officers had not been believed by the court, and the conclusion was that Mr Anderson
could not get a fair trial. Mr Anderson submitted that I should recuse
myself, as it was clear to him that I was part of the collusion which was
hampering him in his defence of the case. It was, he submitted, obviously
suspicious and if I did not understand that then it was clear that he could not
get a fair trial.
[428] Counsel for Mr Stirton addressed the
court, claiming to have a locus to do so as he too had tried to cite Mr McCusker.
His instructing solicitors had contacted Strathclyde Police some weeks
before, during the course of the proof. They had agreed to relay to Mr McCusker
the message that he was required as a witness. They responded to the effect
that Mr McCusker was unwilling to attend. Counsel submitted that it was
clear that Mr McCusker must have become aware that a warrant might be issued
for him and so had sent the email. He submitted that something had then "gone
seriously wrong" as the Clerk of Court had spoken to the witness and reported
to the court. Parties were entitled to know all that had transpired. Parties
should at least know if the reason why the witness was unavailable was in the
nature of a medical reason, or a state security reason.
[429] Counsel for Scottish Ministers then addressed
the court and explained that permission to cite Mr McCusker had been
granted by the court in February 2011. Counsel for Mr Stirton had told
her that there were problems in contacting Mr McCusker, and she had asked CRU
to contact the police to ascertain if any information as to his co-operation
could be obtained. Nothing came of that and when the court had to adjourn due
to illness she had instructed her agents to write to Mr Anderson stating
that if he supplied an address for Mr McCusker then Scottish Ministers
would take over responsibility for citing him. There was no reply from Mr Anderson.
Counsel explained that she had listened to Mr Anderson on 10 May
and had read the certificate and the letter from the sheriff officers. She
asked those instructing her to contact CRU and to ask them to contact the police
and ask them if they could reinforce to Mr McCusker the importance of
answering any citation. She had done so in good faith to assist the court in
hearing the proof. She opposed the motion for recusal as there was no
indication of actual or perceived bias.
[430] Mr Anderson replied submitting that he
had told Scottish Ministers that he did not want any help in citation as he
regarded it a suspicious that they should offer to help him; and that the
information given now by counsel for Scottish Ministers showed that there had
been perversion of the course of justice.
[431] I adjourned for the morning break
necessitated by Mr Anderson's medical condition and on resuming advised
parties that the reason given by Mr McCusker was broadly in the state
security category although I emphasised that there was no Public Interest
Immunity certificate. I refused the motion for recusal. I took the view
that the Clerk of Court had received an email from a member of staff in the
Petition Department of the Court of Session which he had reported to me; I had
asked him to telephone the witness and I had reported to parties as much as I
could about these events. Mr Anderson and counsel for Mr Stirton
had correctly stated that the email appeared after a discussion in court about
a warrant and that there might be a connection between the two events. Counsel
for Scottish Ministers had confirmed that there was such a connection, and had
explained the actions she had taken, which were in good faith and which seemed
to me to be sensible. The outcome was that the witness had been in contact
and had agreed to attend. I did not accept that the events would indicate to
the informed bystander that I was biased against Mr Anderson. Mr Anderson
sought leave to reclaim. He submitted that I hampered his defence and treated
him insultingly. He gave notice that he would make a motion later to have the
court adjourned so that he might report it all to the police. I refused leave
to reclaim as I did not accept that Mr Anderson had identified an error of
law. He then sought an adjournment in order that he could to go to the
police. I refused, telling him he could report to the police after court
hours.
[432] Later that day Mr McCusker sent a faxed
letter from which I satisfied myself that he was involved in sensitive
matters. I then advised parties in open court that I was satisfied that
Mr McCusker was not in Scotland and that he had confirmed his position in writing. He had
indicated that he would be able to come to court on a Friday. On my
instruction the Clerk of Court had spoken to him and asked him if he would
attend next Friday. He had agreed to do so. I told Mr Anderson, being
the party who wished to call him as a witness that his cost in attending would
require to be deducted from the caution consigned by Mr Anderson as a
party litigant. I explained that I was satisfied that Mr McCusker had
good reason for contacting the court direct and not contacting Mr Anderson
but that I could not disclose any more information than that. I stated that I
would not allow the witness to be asked about his current address or
employment, nor whether he had attempted to evade citation. Counsel for
Mr Stirton stated that it was unsatisfactory that the court knew more than
the parties did. I explained to him that the information concerning
Mr McCusker was confidential and that I had satisfied myself that I should
not disclose it to parties but would keep it in a sealed envelope. I did
so. Mr McCusker attended court on 20 May 2011. I was advised by both
counsel for Mr Stirton and by Mr Anderson that they had asked him to
give a precognition. He declined. Counsel for Mr Stirton explained that
he had intended to seek a precognition on oath but had come to view that he
could not do so in a civil case. Mr Anderson informed me that he had
decided not to call Mr McCusker.
[433] A question as to the validity of the citation
arose. As explained above events overtook the motion for a warrant to arrest before
I was fully addressed on the subject but I have been asked to write on it.
[434] Chapter 16 of the Rules of Court is
concerned with service, intimation and diligence. The terms of Rule 16.1
are as follows:-
"(1) Subject to any other provision in these Rules or any other enactment, service of a document required under these Rules on a person shall be executed -
(a) in the case of an individual -
(i) personally, by tendering the document and any citation or notice, as the case may be to that individual;
(ii) by
leaving the document and any citation or notice, as the case
may be, in the hands of a person, or failing which, depositing it, in the
dwelling place where the person executing service, after due enquiry, has
reasonable grounds for believing that that individual resides but is not available;
(iii) by leaving the document and any citation or notice, as the case may be, in the hands of a person at, or depositing it in, a place of business where the person executing service, after due enquiry, has reasonable grounds for believing that the individual carries on business; or
(iv) by posting the document and any citation or notice, as the case may be, to the known dwelling place of that individual;"
Rule 16.3 is in the following terms -
"(1) Service by a method mentioned in rule 16.1(1)(a)(i), (ii) or (iii), shall be executed by messenger-at-arms who shall-
(a) explain the purpose of service to any person on whom he executes service;
(b) complete a citation or notice, as the case may be, and a certificate of service in Form 16.6; and
(c) send the certificate of service to the pursuer.
(2) Such service shall be witnessed by one witness who shall sign the certificate of service (which shall state his name occupation and address.)"
Rule 36.2 is in the following terms -
"(1) A witness shall be cited for a proof by service on him of a citation in Form 36.2-A-
(a) by registered post or the first class recorded delivery service, by the agent for the party on whose behalf he is cited; or
(b) personally by a messenger- at- arms.
(2)......
(3) A certificate of citation of a witness-
(a)...
(b) under paragraph 1(b) shall be in Form 36.2-C."
By Act of Sederunt (Rules of the Court of Session Amendment No. 3) (Miscellaneous) 2011, Form 36.2C was amended to the extent that no witness is required. Thus there may be a conflict between the terms of RC 16.3(2) which requires a witness to service by messenger-at-arms, and 36.2(3)(b) which provides for certification of service by messenger-at-arms without a witness. I note that Rule 16.1 is "subject to any other provisions in these Rules". The amendment of the rules by the Act of Sederunt has the effect of amending the certificate. The question is whether it is correct to amend a rule by amendment of a certificate, rather than by amendment of the rule itself. I was not fully addressed on this and as it is academic in any event, I prefer to reserve my opinion.
[435] In light of all the evidence and submissions,
I have arrived at the view that the relationships between Spring Radio Cars and
the respondents as shown in the contract for services, the car leasing or
purchase contract, and the loan document, were such as to require explanation.
They do not indicate a normal business relationship. I do not believe
Mr Gibson and Mr McLeod when they said in evidence that there was a
normal business relationship in which they participated voluntarily. I do not
believe Mr Stirton and Mr Anderson when they stated in evidence that
there was a normal business relationship, in which either they provided management
services, or inconsistently with that assertion, that there was a normal
business relationship in which both sides made a profit. I accept evidence
from Mr Martin Murray and Mr Kenneth Murray of the way in which
protection money was paid in other cases, that is one business paid money to
another in order to be allowed to continue and to obtain protection from others
who might wish to interfere. I accept evidence from Mr Murray that the
contract for services was treated oddly in the books of Spring Radio Cars. I
accept evidence from Mr Murray and Mr Neilson that the car leasing or
purchase agreement was inexplicable from Spring Radio Cars' point of view, as
it was a very expensive way of obtaining cars which according to the car show
room owner, Mr Henry, could have been obtained on ordinary commercial
finance terms at a much reduced cost. I accept evidence from Mr Murray
that the loan agreement was very onerous and I do not accept that it was
entered into voluntarily by Mr Gibson to ensure his continued interest in
a building project. I regard it as significant that he told no one else about
the loan agreement. I find that it was drawn up to exert influence over
Spring Radio Cars.
[436] I believe the evidence of Mr Donnelly
and Miss Robertson of HMRC that Mr Gibson and Mr McLeod told
them that they were making payment of protection money. I have no reason to
disbelieve their evidence, and I find that it provided an explanation for the
payments. I regard it as significant that Spring Radio Cars had agreed to
make payment of large sums in respect of tax which previously they had sought
to avoid by deduction of the sums paid to the respondents as legitimate
business expenses. I do not accept the evidence from Mr Gibson,
supported by Mr McLeod, that they had agreed to make payment as a
commercial settlement to avoid a Commissioners' hearing.
[437] I find that the purchase and
development of the filling station at Springburn Way, Glasgow was financed largely by the proceeds
of unlawful conduct. That unlawful conduct included involvement in
importation of controlled drugs and a handgun and possession of a large
quantity of cash in circumstances showing involvement in controlled drugs or
money laundering. I make that finding in light of my acceptance of the
evidence from police officers and my rejection of the evidence of both
Mr Stirton and Mr Anderson. I find that unlawful conduct consisting
of extortion of money from the business Spring Radio Cars took place. I make
that finding in light of my acceptance of evidence from police and HMRC
witnesses of statements made by Mr Gibson and Mr McLeod outwith
court, my acceptance of the consequences of the accounting and tax treatment of
the payments made, and my acceptance of evidence of the culture of the payment
of protection money. The respondents did not dispute that part of the funding
of the filling station development came from money paid by Spring Radio Cars. I
find that money was paid as the result of extortion. The respondents argued that
the rest of the funding came from businesses run by them, being a construction
business and the business known as Loveboat. I find that there was no
evidence acceptable to me that either business made a profit. I therefore
find that the development was funded by unlawful conduct. I find that the
investments held by Mr and Mrs Stirton were obtained by unlawful conduct,
except for the child benefit, and are therefore recoverable property. I find
that the loans on heritage were obtained by fraud. I find that the majority
of funding of the heritable property came from unlawful conduct and that the
heritage thereby funded is recoverable property. Having decided that the respondents
obtained property including heritage and cash by means of unlawful conduct, I
am bound by POCA to make a recovery order.
[438] An interlocutor detailing the recovery order
shall be issued in due course. Prior to that interlocutor being issued I
require, within fourteen days of today's date, by written intimation from Scottish
Ministers the name of a person suitable to be appointed as trustee for civil
recovery. I shall allow three months, from the date of that interlocutor,
before any decree for ejection can be implemented.
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OUTER HOUSE, COURT OF SESSION
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OPINION OF LADY STACEY
in the cause
THE SCOTTISH MINISTERS
Petitioners
against
RUSSELL STIRTON First Respondent
and
ALEXANDER ANDERSON Third Respondent:
ннннннннннннннннн________________
|
Petitioners: Crawford Q.C., Heaney; SGLD
Respondents: Party and Party
16 June 2010
[1] The Scottish Ministers enrolled motions in
this case under the Proceeds of Crime Act 2002 for variation of the interim
administration order by the reduction of the monthly allowance paid to the first
respondent from г6,960 per month to г2,250 per month and a motion to
reduce the allowance paid to the third respondent, to nil.
[2] The motions as enrolled included several
paragraphs under the heading "Reasons for the Motion". Counsel for the Scottish
Ministers also produced written submissions at the hearing. There was a
difficulty with them in that Mr Anderson had not received them in
advance. Counsel made her arguments orally. Both respondents included several
paragraphs of explanation in their forms of opposition to the motion. I
endeavoured to take into account all that the respondents had written, as well
as their oral submissions.
[3] Neither Mr Stirton nor Mr Anderson had
legal representation at the hearing. Mr Stirton began by asking me to
postpone the hearing on this motion until September. The ongoing proof in the
proceeds of crime case had been adjourned until 21 September partly in order
that a petition for judicial review of a decision of the Scottish Legal Aid
Board might be heard. Mr Stirton submitted that this motion should be
continued to that date. He explained that he needed legal aid because he was
not capable of making submissions on his own behalf. He said that his use of
language could be loose and that people took from what he said things that he
did not necessarily mean. Further he found it difficult to understand what the
Scottish Ministers submitted in the written submissions they had supplied and
he required help to understand the points against him. He is dyslexic, and he
had not had much time to consider it. He emphasised that he had other matters
on his mind as he had been asked to pay court fees and further he had family
difficulties in that one of his daughters has been ill. He stated that he did
not seek to delay matters but that he felt that it was unfair to him to
proceed.
[4] Mr Anderson also submitted that the hearing
of the motion should be postponed. He said that it was clear that Mr Stirton
did not have the ability to address the court. Mr Stirton had however been
given a folder by the Scottish Ministers containing authorities and an outline
of their written argument at 6.30pm the previous day. He, Mr Anderson, had not had this folder
delivered at all. It had been given to him less than an hour before the motion
called and it contained a report by a surveyor that he had never seen before
about his premises, Thomson's Bar. He stated that that was unfair to him and
he was severely prejudiced by this. Mr Anderson also stated that his
understanding of the position was that Mr Stirton could not apply for legal aid
for this motion while his judicial review of the Scottish Legal Aid Board's
decision in the matter of his application for legal aid for the proof was
outstanding.
[5] In reply on this preliminary matter counsel
submitted that the parties had had proper notice of the motion. The file
containing the authorities and the written submission and the surveyor's
report, along with sale particulars had been couriered to both parties the day
before and Mr Anderson's had been returned as no one was at home to accept it.
Nevertheless Miss Crawford maintained that the motion cannot have come as any
surprise to the respondents and that the thrust of her written submissions was
that the amounts paid to them were excessive in respect of their living
expenses. She maintained that the respondents had made it clear by their
attitude that they did not intend to engage in this when all that was required
was that they gave details of their living expenses. She urged me to hear the
motion now. In reply Mr Anderson said that when he had lodged motions in the
course of the case he had always been told by the officials of the court that
he required to lodge an inventory with the motions. He referred to Rule of Court 23.2(2)(a)
and said that it was unfair if Miss Crawford could proceed with an
inventory which had not been lodged at the time of lodging the motion. He
submitted that even if that was not the effect of the rule, it was unfair that
he had no notice of the matters lodged.
[6] I considered what was said and decided that
I should proceed to hear the motions, but that I would not permit Miss Crawford
to refer to the surveyor's report as Mr Anderson had had no notice of it.
I will allow reference to the sale particulars, as Mr Anderson was
familiar with them.
[7] Mr Anderson sought leave to appeal my
decision to hear the motions on Mr Stirton's behalf as well as on his own
behalf. Miss Crawford opposed leave to appeal. I decided not to grant leave
to appeal on the basis that this was a motion, intimated and opposed, and there
was no certainty when, if ever, Mr Stirton would have representation.
Mr Anderson's lack of notice of the surveyor's report had been dealt with
by my refusing to allow reference to it.
[8] I then heard counsel on the merits of the
motion. It may be useful to refer to some of the history of this case. I had
heard a motion in similar terms on 11 March 2010. Counsel addressed me on
competency of such a motion on that occasion, and the respondents replied.
Parties also addressed me fully on the merits. At the end of the hearing I
indicated that I found the motion competent, although I refused it on the
merits. I therefore advised parties that I did not require to be addressed on
competency on this occasion.
[9] Counsel submitted that Section 261(3)(a) of
the Proceeds of Crime Act 2002 ("the Act") gives a discretionary power to make
exclusions for reasonable living expenses. It is not an unfettered discretion
as subsection (6) of that section provides that the power to make exclusions
must be exercised with a view to ensuring so far as practicable that the
satisfaction of any right of the enforcement authority to recover property
obtained through unlawful conduct is not unduly prejudiced.
Section 260(3) provides that the court can at any time vary or recall an
interim administration order. Counsel maintained that there is no need to read
a gloss on the legislation to the effect that there requires to be a change of
circumstances before a variation can be made. Counsel made reference to the
case of Bisset v Bisset 1993 SCLR 284 which is a case
concerning family law as authority for the proposition that a variation of
interim aliment could be made even though there is no change of circumstances.
Counsel's position was that the respondents need to show that there are no
other funds available before they can use funds subject to the interim
administration order for living expenses. She made reference to the decision
of ARA v Creaven [2006] 1 WLR 622. Counsel argued that the law was correctly set out by
Stanley Burton J and in particular referred to paragraphs 22 to 25. While
the question before the court in that case related to the English provisions of
the Act concerning payment of legal expenses out of the fund, counsel argued
that it set out the principle which applies to exclusion from the fund.
[10] She referred also to the case of SOCA
v Szepietowski [2009] EWHL 1560 (Ch) as a further example of
an English case in which the court had accepted the analysis in the case of Creaven.
Counsel noted from paragraphs 51, 70 and 71 of the Szepietowski case
that failure by the person whose funds have been frozen to make full and clear
information about his finances may lead to the court drawing adverse
inferences.
[11] Counsel submitted, without prejudice to her
argument that there was no need for a change of circumstances, that there had
been two developments, namely that the proof has been adjourned and that
Thomson's Bar is a thriving business which Mr Stirton has indicated he has
some interest in. The sales particulars for Thomson's Bar which had been
lodged advertised it for sale and suggest that finance of 70% could be obtained
by a prospective purchaser. Counsel argued that that Mr Stirton clearly
had some connection with Thomson's Bar as he was at some time a co-signatory on
the cheque account; he was involved in the acquisition of the bar by Miss
Craig; Mr Stirton's business, Loveboat, paid off a secured loan over the
bar;. Mr Stirton and Miss Craig were registered for V.A.T. in 2001; in 2002
Miss Craig gave a disposition to Pineloch Limited; in 2003 the title was
transferred from Pineloch Limited to Mr Anderson. However Mr Stirton paid
for refurbishment of the bar. Mr Stirton is mentioned in the paperwork
from the brewers, Tenant Caledonian.
[12] Counsel argued that Mr Stirton had a
source of income from Thomson's Bar. Further, the adjournment which we sought
and obtained had the effect of lengthening the period of the proof, during
which time the fund would be depleted.
[13] Counsel then submitted that the amount
presently being paid to Mr Stirton amounts to about г83,000 net per annum,
which equates to an income of about г125,000 gross per annum. From his tax
returns which are lodged as 7/11 tab 1 he declared income in the year 01/02 of
г121,000. In the year 02/03 he declared г17,000 and in 03/04 г34,000. He
lives with his wife and she has lodged tax returns saying that she works in
Thomson's Bar earning about г12,000 after tax. While it is accepted that he
has children, counsel submitted that some at least must be grown up as they
were mentioned as teenagers in the mortgage application in 1996.
Mr Stirton's mortgage is about г1,300 per month and his council tax is
г300 per month. If there are exceptional matters such as exceptional repairs
to the house they should be treated separately. This has been done when there
had been exclusions for tax bills.
[14] Counsel submitted that if the particulars
for Thomson's Bar were accurate then it was for Mr Anderson to say what the
profit was as the turnover was stated to be in excess of г360,000. This is a
resource available to both respondents. It is worth according to the
particulars around г450,000. There must be accounts, as the particulars refer
to them. Thus counsel argued that both respondents had a resource in Thomson's
Bar.
[15] Counsel argued that the court is entitled at
an interlocutory stage to reach a view adverse to the respondents and to take
into account evidence led in the proof. She referred to the case of ARA v Lovell [2009] NICA 27. If the respondents do not choose to produce vouching they cannot
complain if an adverse inference is drawn.
[16] Mr Stirton in reply said that he would adopt
what Mr Anderson was about to say about the law. He said that he cannot
go out and get work. He would not get employment at his age and also the
publicity which has been created by the police against him would prevent his
getting a job. His wife no longer works at Thomson's and he has nothing to do
with it. His youngest daughter, aged 10, has colitis. This involves
extra family expense. He said that he felt that the estimates of time in this
case were wrong and that had caused trouble for him as he had planned for a
shorter case. He had been wealthy and he was a well known business man in Glasgow but he found that when
the police got involved in investigation of him it affected his business. He
said that he often said things in a rather loose way and for example would use
the word "We" when he means "I".
[17] Mr Anderson, on the second day of this
motion, said that he moved me to decline jurisdiction and have this case heard
by another judge. He said that there was a danger that I could be perceived as
biased. I had heard some but not all of the evidence in the case and so I
should not be making this decision. It would not be possible for me to form a
fair minded decision. I asked Mr Anderson why he had not said anything about
this at the outset of the hearing. He had no explanation. I had heard a
similar motion on 11 March 2010 and at the outset had raised with parties whether they had
any objection to my hearing it. They did not. I decided that I should
continue to hear the case.
[18] Mr Anderson submitted that it was not
competent for Scottish Ministers to seek this variation. The interim
administrator had responsibility for the funds and he alone could seek a
variation. Mr Anderson submitted that there had been no material changes since
a similar motion had been refused on 11 March. Therefore the motion was
incompetent. He submitted that the Scottish Ministers should have reclaimed
the decision of 11 March if dissatisfied with it, but they had not done
so. Instead they had enrolled a new motion and were now "cherry picking" what
Mr Stirton had said. I understood him to be referring to
Mr Stirton's remarks about raising money from Thomson's Bar.
[19] He said that he wanted to precognosce
witnesses and lodge affidavits. In the written opposition on behalf of
Mr Stirton, which I understood was prepared by Mr Anderson, he listed
the people from whom he wanted to take precognitions and lodge affidavits.
They included his former agents and counsel, the former interim administrator
and counsel then instructed for the Scottish Ministers. I asked him to tell me
at least an outline of what he wanted to put before the court in affidavits.
His answer was not clear to me. It seemed to relate to the undisputed fact
that the court had pronounced an interlocutor following an agreement having
been reached by counsel for the parties and the interim administrator.
[20] As regards his personal circumstances,
Mr Anderson said that he had run Thomson's Bar for several years but did
not work there personally. He employed staff. It has not been making money in
recent years. Mr Stirton had nothing to do with it.
Discussion
[21] These motions came late in a proof which has
a long history. The interim administration order was made in 2005 but the
proof did not start until May 2009. The proof had continued over many
weeks; it had been adjourned over the summer vacation of 2009 and is not yet
complete. It had been adjourned for four weeks in 2010 due to the illness of
Mr Anderson, a party litigant. The exclusions from the fund were ordered
on 31 March
2005 and had
been paid every month since then. Other payments had also been made, for
example, for payment of income tax. The fund was then being depleted, a
consequence envisaged by the legislature in enacting the Act.
[22] I had made a decision on 11 March 2010 that a motion by the
Scottish Ministers to vary an exclusion for reasonable living expenses was
competent. I refused the motion and that refusal was not the subject of an
application for leave to reclaim. At the hearing of that motion, counsel began
by asserting that the business run from Thomson's Bar had at the time been part
of the property frozen by the interim administration order, and had
subsequently been released. She corrected that assertion during the hearing.
The business had never been affected by the order. Counsel was not able to
give any reason why Scottish Ministers, having agreed to substantial sums being
paid for reasonable living expenses, had decided to seek variation of that
after nearly five years. I was told that in March 2005 it was not
expected that the case would go to proof; nor was it envisaged that any proof
would start in May 2009 and not be completed by March 2010. I refused the
motion on 11 March
2010 because
I was not satisfied by the arguments before me. While I accepted that the
legislation provides for variation and does not require a change of
circumstance, failure to seek a variation for five years weighed against the
Scottish Ministers. There was some confusion about the business known as
Thomson's bar. In all of these circumstances I was not prepared to grant the
motion.
[23] Events moved on between the hearing of the
motion on 11
March 2010
and the motion currently before me. The case has been continued on the respondents'
motion to 21 September
2010. That
came about in the following way. When the proof started in May 2009
Mr Stirton was represented by Mr Frain-Bell, instructed by
Messrs Robertson and Ross. During the summer vacation Mr Taylor, QC
was instructed as leading counsel. He appeared along with Mr Frain-Bell
until the case was adjourned in February 2010 due to Mr Anderson
taking ill. The case called by order during that period to ascertain
Mr Anderson's state of health and I was advised that Mr Stirton had
applied for legal aid in summer 2009 and had had a certificate issued under
emergency provisions. Mr Taylor and Mr Frain-Bell had been
instructed on a legal aid basis. The full legal aid application was then
determined, and legal aid refused. Therefore Messrs Robertson and Ross no
longer acted, and Mr Frain-Bell and Mr Taylor were without
instructions.
[24] Mr Stirton made the motion to adjourn the
proof. He explained that he had instructed agents and junior counsel on a
private basis for the proof starting in 2009. He was able to do so because Mr
Anderson took out a loan secured on Thomson's Bar to assist him. He had
anticipated that the case would last about eight weeks, as predicted by the
Scottish Ministers. When the case continued for longer, he ran out of funds
and applied for legal aid. He thought it had been granted but now understood
it was an emergency certificate and the full application had been refused. He
said that he considered selling Thomson's Bar to raise funds but that was not practical.
He had instructed an application for judicial review of the refusal of legal
aid. His lawyers were prepared to act for him in that. He understood that the
first hearing was set for late in June. Mr Stirton explained that he was
not capable of conducting the case himself and that he wanted it to be
adjourned until after the hearing of his application for judicial review.
[25] I decided to adjourn the case to
21 September. I did so in light of Mr Stirton having no
representation, and also in light of the case having taken much longer than its
estimated duration. The time available for the case during the term beginning
on 26 April was limited by the court having commitments to criminal cases.
[26] In the hearing of the motion currently
before the court, counsel submitted that no change of circumstances was needed
to enable a variation to be made. However, counsel argued that circumstances
had changed, in that the case was now adjourned, on the motion of the
respondents. Further, Mr Stirton had indicated that he had some interest
in Thomson's Bar, as he had said that he had thought of selling it to raise
funds. Thus, she argued, the amount of the exclusion was not reasonable in all
the circumstances.
[27] I took the view that the amounts being excluded
every month were not reasonable. While Mr Stirton and Mr Anderson had
these amounts negotiated on their behalf in March 2005, they did not seem to me
to be reasonable amounts for living expenses. I was not shown any vouching.
Further, I was not persuaded that there was no other income available to either
of the respondents. Mr Anderson is the owner of Thomson's Bar, for which
I have seen no accounts. I have however seen sale particulars which claims
that it has a substantial turnover. Both Mr Stirton and Mr Anderson
claimed that Mr Stirton had no interest in that business. Mr Anderson
said that he raised cash on the bar to pay for Mr Stirton's representation
because they were old friends and business partners. Mr Stirton said he
had referred to selling the business loosely, and that it was an example of his
saying things he did not mean.
[28] I did not accept that Mr Stirton had no
interest in the bar. I decided that I would take into account evidence which I
had heard in the proof. I bore in mind that I had not heard all of the
evidence and so could not come to any concluded view. However it seemed to me
clear that in the past Mr Stirton had been involved with the business. I
did not accept he had made a slip of the tongue in referring to it as something
he had considered now. In any event I did not accept that Mr Stirton is
precluded by the proof from earning his living. According to the evidence
heard he is a capable tradesman and has supervised other workers. While the
proof no doubt takes up his time and energy to some extent, I do not accept
that he is obliged, and has been obliged since March 2005, to refrain from
work and to use the exclusions from the fund to live off. Neither of course is
Mr Anderson. I noted that he does not claim to do no work, as he runs
Thomson's Bar, although he has been at pains to emphasise his role, which is
supervisory only.
[29] I took the view that the petitioners'
motions should be granted. It seemed to me correct to say that the respondents
had declined to enter into any meaningful defence as they had failed to produce
any vouching.
[30] In all of the circumstances I decided to
grant the Scottish Ministers' motion and to vary the interim administration
order by reduction of the monthly allowance paid to the first respondent in
respect of reasonable living expenses to г2250 per month, and by reduction of
the monthly allowance paid to the third respondent in respect of reasonable
living expenses to nil.
[31] The reduction will take effect from 1 July 2010.