Scottish High Court of Justiciary Decisons

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URL: http://www.bailii.org/scot/cases/ScotHC/2006/HCJ_11.html
Cite as: 2007 GWD 4-61, [2006] HCJ 11, 2007 SLT 407, [2006] ScotHC HCJ_11

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HIGH COURT OF JUSTICIARY

[2006] HCJ11

OPINION OF LORD WHEATLEY

in Petition of

HER MAJESTY'S ADVOCATE

Petitioner;

against

MICHAEL GEORGE VOUDOURI

Respondent;

and

TRUSTUNION LLC

First Minuter;

and

CHRYSTALLA VOUDOURI, NICOLETTE VOUDOURI and GEORGINA VOUDOURI

Second Minuters:

________________

Petitioner: Divers, A.D.; Crown Agent

Respondent: Belmonte, Solicitor Advocate; Belmonte & Co., Edinburgh

First Minuter: Targowski, Q.C., Hughes; Trainor Alston, Coatbridge

Second Minuters: Keegan, Solicitor Advocate; Fairbairns, Edinburgh

21 November 2006

[1] On 23 October 2001, the respondent appeared on petition at Alloa Sheriff Court charged with a contravention of section 72(1) of the Value Added Tax Act 1994 and various other offences. On 11 May 2004, the respondent pled guilty to the contravention of section 72(1); the essence of this charge was the fraudulent evasion of Valued Added Tax. The respondent had engaged in a complex VAT fraud scheme which was concerned with the large scale purchase and resale of computer parts. The scheme involved what is termed a carousel fraud, based on the fact that VAT is not levied on goods imported into this country from another Member State of the European Economic Community. The respondent then charged VAT on the resale of these goods to other companies under his control, without VAT being accounted for. These other companies then disappeared, so that the VAT could not be recovered. The total amount of the respondent's fraudulent evasion of tax was £3,041,114.07.

[2 ] On 11 May 2004, when the respondent tendered his plea of guilty, sentence was deferred until 8 June 2004, on which date the appellant was sentenced to four years imprisonment. On this latter date the petitioner served upon him a statement under section 9 of the Proceeds of Crime (Scotland) Act 1995. The statement specified the amounts that the petitioner then claimed were the proceeds of the respondent's criminal conduct, and also described the realisable property said to be then owned by the respondent. Among other things, this consisted of heritable property at 3 Clackmannan Road, Alloa, 20 Shawlands Close, Edmonton, London, and The Manse, 34 Kennilworth Road, Bridge of Allan, Stirling. In addition there were several bank accounts in various names, 12 motor vehicles and a cherished number plate. The petitioner sought an order from the court in terms of the statement confiscating all of these various items of heritable and movable property.

[3 ] The petitioner's motion on 8 June 2004 was opposed by the respondent, who lodged answers to the prosecutor's statement. In addition, minutes of appearance were lodged by Trustunion LLC, the first minuter, in whose name title to the property at 34 Kennilworth Road is taken. Further, the respondent's wife and daughters, who claimed ownership of some of the realisable assets described in the prosecutor's statement, and who resided with him at 34 Kennilworth Road, also lodged answers.

[4 ] Certain key figures were agreed for the purposes of the confiscation proof that was then heard on the prosecutor's statement and the answers for the respondent and the other minuters. In particular, it was agreed that the total amount of the fraudulent evasion of VAT by the respondent, in respect of the charge to which he pled guilty, was £3,041,114.07. It was further agreed that his realisable property for the purposes of the present action included the house at 3 Clackmannan Road, Alloa valued at £130,000; a one-half share of the potentially free proceeds of sale of the property at 20 Shawlands Close, Edmonton, London with a value of £85,000; the sum of £56,106.07 held at Barclay's Bank plc Account No.40229628; a one-half share in Barclay's Bank plc Account No.80923494 totalling £959; a sum of £10,407.77 held in the Bank of Cyprus Account No.01417601; the sum of £24,950 held in the Bank of Scotland Account No.07007587; 4 named motor cars with a total value of £80,000; and a cherished number plate worth £6,000. It was therefore agreed that the total realisable value of the respondent's assets was at least £392,942.34. In addition, the petitioner claimed that the property at 34 Kennilworth Road should also be included in the respondent's realisable assets, and this was disputed by the first minuter, who claims title to the property. The respondent and the second minuters played little or no active part in this dispute, which by the time of the proof was the only live issue in the case.

[5 ] The circumstances of the acquisition by the first minuter of the property at 34 Kennilworth Road were as follows. In early 2002 the trustees of the Chalmers Church of Scotland Congregation in Stirling instructed their solicitors, Messrs JM and J Mailer, to sell the former manse at 34 Kennilworth Road, Bridge of Allan. The property was thereafter advertised at an upset price of £390,000. On 21 February 2002 the respondent viewed the property, and left his telephone number with the solicitors' property manager, saying that he would be putting in an offer. Some time later, the solicitors drew up a list of those who in fact had made offers, and the list included the name of the respondent. It was clear to the sellers' solicitors at this point that, in their understanding, they were dealing with the respondent personally in his attempt to purchase the property. At a later stage, he then told the solicitors' property manager that he would be making an offer on behalf of the first minuter. On 25 February 2002 the sellers received an offer to purchase the property in the sum of £600,000, from a firm of solicitors, Paul Gebal & Co. That offer was in the name of Trustunion LLC, the first minuter in the present action. The sellers' solicitors then sought and received confirmation from Paul Gebal & Co that the offer from Trustunion was the same offer that they had been discussing informally with the respondent. The sellers' solicitors thereafter continued to be of the understanding that while the offer was in the name of Trustunion, it came in fact from the respondent. This understanding was confirmed by a letter to the sellers' solicitors from Paul Gebal & Co dated 20 March 2002 which, following the completion of missives, enclosed the principal disposition for signature, and which designated the respondent as the purchasing client. A further formal letter from Paul Gebal & Co to the sellers' solicitors, also dated 20 March 2002, again gave the respondent's name as the client in the transaction. On 21 March 2002 Paul Gebal & Co sent to JM & J Mailer a cheque for £600,000 drawn on their client account, and again identified the respondent as their client in the accompanying letter. In addition it was specifically the evidence of Stanley Moffat, a partner in Paul Gebal & Co, that throughout this transaction the respondent was the client for whom they were acting, and this view was amply confirmed from an examination of his firm's files.

[6 ] Thereafter the disposition of the property was delivered to the respondent's solicitors. The deed was dated 21 March 2002 and the title was disposed in favour of Trustunion LLC, who were described as being incorporated in the State of Delaware, United States of America, and having its registered office at 1 Commerce Centre, 1201 N Orange, Suite 762, Wilmington, Delaware 19801.

[7 ] It was therefore the view of both sets of solicitors that throughout this transaction the solicitors who offered to purchase this property were acting on a day to day basis on the instructions of the respondent personally. The sellers' solicitors also became aware that the respondent had been given a Power of Attorney by Trustunion LLC, and this deed was produced in evidence. The Power of Attorney bore to be granted by Trustunion LLC to the respondent on 21 January 2002 and gave to the attorney wide powers. In particular, the deed included the following clauses:

"1 To transact, manage, carry on and do all and every business matters and things requisite or necessary or in any manner connected with or having reference to the business and affairs of the company and for such purpose to sign, execute, complete, alter, modify or cancel any contracts or submit any applications and effect any payment or undertake any obligations in relation to the signing or execution of any contract, as aforesaid.

...

3 To accept and register in the name of the company any property moveable or immovable and give valid receipts and make and sign any declarations.

...

8 To sign execute and deliver all deeds or other documents necessary or desirable for the purpose aforesaid any of them or for the management and development of the business of the company.

9 Generally to do all acts necessary or expedient in the interest of the company or its business as fully and effectively as the company might do, and to concur in doing any of the acts or things hereinafter mentioned in conjunction with any other person or persons interested in the business and to employ professional assistance for the better and more effectually executing the power or authorities aforesaid or any of them."

[8 ] Following the delivery of the disposition, the respondent took up residence in the house at Kennilworth Road, together with his wife and daughters. Thereafter, the respondent paid for the buildings and contents insurance of the property in the sum of £3,080.11 on 15 September 2004 by means of his credit card with Lloyds TSB. There was no other evidence in respect of any of the other financial arrangements which may have existed between the respondent and the first minuter in respect of the respondent's occupation of the property.

[9 ] Prior to the purchase of 35 Kennilworth Road, the respondent in 2000 had instructed a firm of solicitors, Walter Rule & Company, in the purchase of the property at 3 Clackmannan Road, Alloa. The solicitors understood that they were acting in that matter for the respondent personally, and were put in funds by him for the purpose of buying the house. A fee note was issued to him in respect of the purchase on 29 June 2000, and appears to have been paid by him. The process of purchasing the property was protracted, and it was clear that the respondent issued instructions throughout to the solicitors, who regarded him as their client. On 25 July 2000 the respondent and his wife wrote to Walter Rule & Company, advising that the property was to be taken solely in the name of Mrs Chrystalla Voudouri, who is the respondent's wife and the first-named of the second minuters. At that time Mrs Voudouri had no income, and it was plain that the respondent had instructed and controlled the conveyancing process. The purchase price was £74,000 and there is neither a Standard Security nor any charges over the property. Despite the fact that the property is in the name of Mrs Voudouri, it is accepted by the respondent that it falls to be included in his realisable property, with a value of £130,000. It appears that the property is presently occupied by Mr Nikolas (otherwise Nicos) Savva, who is the respondent's father-in-law.

[10 ] On 10 September 2004, the petitioner sent Letters of Request to the competent authorities in the United States of America seeking assistance in the investigation then being conducted into the respondent's money laundering activities, following his criminal activities. The Letters of Request outlined the position as alleged by the petitioner, and sought assistance in particular in respect of any documentation concerning the formation of Trustunion LLC, to identify the directors, representatives and employees of the company. Information was particularly sought about those who might have knowledge of the transfer of funds to an account in the name of the first minuter from a bank in Athens, which appeared to have been used to purchase the house at 34 Kennilworth Road. The Letters of Request also sought general financial information about the company in respect of the respondent, his wife, his father-in-law Nikolas Savva, and Mr Savva's wife. By letter dated 3 March 2005 in response from the US Department of Justice, it was made clear that while any corporation registered in the State of Delaware must have a registered office and appoint a registered agent, there was no requirement to specify the nature of the business carried on by the company, nor any need to supply any information about the principals, the principal place of business, or the specific business activities of the corporation. It was also indicated that there was no requirement that the principals of any such corporation should ever set foot in Delaware, nor was it normal for the agents to have any personal knowledge of the individuals involved in the business dealings of the corporation. Such information as became available to the petitioner about the first minuter indicated that as from 5 October 2001, Nikolas Savva was the principal officer, and indeed sole member, of Trustunion LLC. No trading records or accounts of this company could be, or were, produced. Had the company been registered in the United Kingdom, trading and other accounts, and other financial information, would have been available to the prosecution authorities. Further, the petitioner's investigations revealed that for the years from 2001-2004 the respondent declared that his only income in this country was the sum of £4,000 yearly from property rental, and that Mr Nikolas Savva has made no income tax returns, nor made any application for tax credits during that period, but since 2001 has been in receipt of a retirement pension only.

[11 ] In these circumstances the petitioner requests the court in this process to make an appropriate confiscation order against the respondent's assets. The petitioner and respondent were in agreement as to the legal basis on which such an order should be

made. Section 1 of the Proceeds of Crime (Scotland) Act 1995 reads (inter alia) as follows:

"(1) Subject to the provisions of this Part, where in respect of any offence to which this Part applies -

(a) the accused is convicted, whether in solemn or summary proceedings; or

(b) in the case of summary proceedings (without proceeding to conviction) an order is made discharging him absolutely,

the court, on the application of the prosecutor, may make an order (a 'confiscation order') requiring the accused to pay such sum as the court thinks fit.

...

(6) The sum which a confiscation order requires an accused to pay in the case of an offence not mentioned in sub-section (5) above, must not exceed the lesser of -

(a) the amount of the benefit -

(i) from the commission of the offence; or

(ii) where section 2(4) of the Act applies, from the commission of the offence and any other offence, not being a drug traffic offence, to which this Part of this Act applies; and

(b) the amount that might be realised at the time the order is made."

Section 4 of the Act provides:

"(1) In this Act 'realisable property' means, subject to sub-section (2) below -

(a) the whole estate wherever situated of a person -

(i) against whom proceedings have been instituted for an offence to which this Part of this Act applies; or

(ii) in respect of whom a restraint order has been made by virtue of section 29(3) of this Act;

(b) the whole state wherever situated of a person to whom any person whose sole estate is realisable by virtue of paragraph (a) above as (directly or indirectly and whether in one transaction or in a series of transactions) made a gift caught by this Part of this Act or, as the case may be, an implicative gift;

(d) any income or estate vesting in a person mentioned in paragraph (a) or (b) above."

[12 ] Against that statutory background, both the petitioner and the respondent were in agreement that the question of whether and how the court should come to make a compensation order in a case such as the present should be considered in five stages.

[13 ] The first question which has to be determined is the amount of benefit which arises out the respondent's course of offending. In the present case, this exercise is straightforward; it is agreed between the parties that the amount of benefit to the respondent in the present case is £3,041,114.07, which was the sum involved in the respondent's plea of guilty to the charge of fraudulent evasion of Value Added Tax.

[14 ] The second matter which has to be considered in terms of the statutory provisions is the amount of the respondent's realisable property. In the present case, the extent of the respondent's realisable property is in some measure agreed. As indicated above, the values of the respondent's property interests, his bank accounts, motor cars and other items which are to be held as falling within the description of his realisable property is £392,942.34.

[15 ] The third decision which has to be reached in terms of the statutory provisions is what is the lower of these two amounts. In the present case it is clear that, even with the added value of the property in Kennilworth Road, the respondent's realisable property will be lower than the benefit which he obtained from his criminal activities.

[16 ] The fourth issue which has to be settled is whether any disputed items should or should not fall within the definition of the respondent's realisable property, within the meaning of section 4 of the Proceeds of Crime (Scotland) Act 1995. What is in dispute in the present case is whether the property at 34 Kennilworth Road should be regarded as part of the respondent's realisable property. It is however not in dispute that the value of this property is £900.000.

[17 ] Finally, if the court does take the view that any disputed asset falls within the definition of realisable property, the court has a discretion as to whether that asset should be added to the respondent's realisable property, and further to decide upon the value of that property which should be added to the total amount.

[18 ] Whether any disputed asset falls within the realisable property of an accused in any particular case depends upon the terms of section 4(1) of the Act cited above. In terms of section 4(1)(c), read together with section 1(a), provides that realisable property includes any (other) property in possession or under control of a person convicted, whether in solemn or summary proceedings. If, therefore, it is shown that the house at 34 Kennilworth Road was in the possession or control of the respondent at the time the prosecutor's statement was served on him, that house would be liable to confiscation.

[19 ] In assessing the evidence, the Advocate Depute accepted that the onus of proof was on the petitioner to establish that the house was under the respondent's possession and control. Although this may not be wholly clear from the terms of the Act, the Advocate Depute accepted that this was what Parliament intended, and in this context referred to the report from the Scottish Law Commission which had led to the present Act. In particular, he submitted, the Scottish Law Commission Report (No.147) at page 51, paragraph 6.11 made it clear that what was proposed was that the prosecution would always have to prove beyond reasonable doubt that any disputed assets should fall within the respondent's realisable property. If the court decides that it does, then it has a discretion as to whether that asset should be included in the realisable property, and if so what value should be attributed to that asset. This approach was endorsed by counsel for the first minuter.

[20 ] In these circumstances, therefore, the petitioner required to satisfy the court that on the evidence led, the respondent enjoyed control and possession of the house property at Kennilworth Road in terms of section 4(6) of the Act, if a confiscation order was to be made in respect of that property. The Advocate Depute submitted that there were four areas of the evidence in support of his submission. First, he relied on the Power of Attorney granted by the first minuter to the respondent in 2002, some of the terms of which are cited above. It was abundantly clear that this gave to the attorney wide powers to intromit in any way with the assets of Trustunion LLC. The only asset owned by Trustunion LLC, so far as the evidence disclosed, was the house at 34 Kennilworth Road. In particular, in terms of the Power of Attorney the respondent had the power to buy the property, and by logical extension he must also have the power to sell. This proposition was not in any way challenged by any of the other parties, particularly the first minuter. In these circumstances the Advocate Depute maintained that short of outright ownership, it was difficult to see how much more control an individual might have over any piece of heritable property.