Hamidi & Anor, R. v [2010] EWCA Crim 66

[2010] EWCA Crim 66Case No 2008/974/C3Case No 2008/977/C3IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM NORTHAMPTON CROWN COURT
HHJ ALEXANDER QC
T20057175
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 02/02/2010
Before
LORD JUSTICE PITCHFORDMR. JUSTICE OWENTHE RECORDER OF LONDON
Between
ReginaRespondentKhaled HAMIDI and Babak CHERAZIAppellant
Sir Derek Spencer QC and Mr J Kinnear for CrownMr Simon Mayo QC and Mr Gregory Fishwick (instructed by Edward Hayes) for Appellant HamidiMr Adam Davis (instructed by the Registrar) for Appellant CheraziHearing Hearing date : 15 th January 2010
Judgment
[1]The applicant, Khaled Hamidi, renews his application for leave to appeal against conviction following refusal on a single ground by the single Judge, Beatson J. The appellant Babak Cherazi, appeals against conviction with the permission of Beatson J. Mr. Hamidi seeks to renew his application on new grounds, first that the trial Judge should not have left to the jury an inference under section 35 subsection 2 of the Criminal Justice and Public Order Act 1994, a ground upon which the single Judge granted leave to Mr. Cherazi and, second, a discreet ground that the trial Judge failed to give appropriate directions to the jury concerning “bad character evidence”. We grant leave to Mr. Hamidi. The appellant Cherazi renews his application for leave to appeal against sentence following refusal by the single Judge. We grant leave on both new grounds.[2]On 23rd January 2008, following a trial before HHJ Ian Alexander QC and a jury at Northampton Crown Court, the appellants were convicted of a conspiracy to cheat the revenue. One of their co-accused, Peter Pomfrett, appealed his conviction. On 8th October 2009 his appeal was dismissed (see (2009) EWCA Crim 1939). We shall with gratitude borrow extensively from the judgment of the court delivered by Richards LJ for a description of the subject matter of the trial, the nature of the prosecution case and its outcome.[3]Commencing at paragraph 3 of his judgment Richards LJ described the nature of the conspiracy as follows:
“3 A chain or carousel fraud of the kind that occurred in this case involves a series of transactions (or nominal transactions) starting with the import of goods into the United Kingdom from a supplier within the European Union, followed by onward supplies from a number of “buffer” traders within the United Kingdom and ending with the re-export of the goods from the United Kingdom. The import and export transactions are zero rated for VAT, whereas the onward supplies within the United Kingdom are subject to VAT. The importer, however, is a missing or “hijacked” trader who does not account to HMRC for the VAT payable on the supply to the next trader in the chain. The exporter pays VAT on the goods supplied to it by the previous trader in the chain; but since the export is zero rated, the exporter is able to claim back from HMRC the VAT that it has paid. The overall effect is the HMRC incurs a loss, whereas the fiscal position would have been neutral if the trading had been genuine and the VAT had been accounted for properly. 4 In this case the goods were computer processing units (“CPUs”). The nominal importer was a firm by the name of PJ Spencer, a company which had its identity hijacked for the purposes of the fraud. 5 The first line buffer was Aurum Jewellery Wholesale Limited (“Aurum”). A man by the name of Pravin Jogia was a director of Auram. Between 25th June and 19th July 2002 Auram purportedly made 56 purchases of CPUs from PJ Spencer at a total price of £169.2 million pounds and a VAT charge of over £25.2 million pounds. The invoices were a sham and the VAT was not accounted for to HMRC. 6 The second line buffers were Lightcare Limited (“Lightcare”) and Vendon (UK) Limited (“Vendon”). Jonah Adali-Mortty was a director of Lightcare, and Arash Masoumzadehwas a director of Vendon. Aurum’s records showed 51 sales to Lightcare and 3 sales to Vendon, at a total price of £169.5 million. 7 The third line buffers were Globalactive Technologies Limited (“Globalactive”) and Beronvine Limited (“Beronvine”). [Peter Pomfrett] was a director and company secretary of Globalactive; Mustafa Mehmet was another director of the company; and Timur Mehmet, the nephew of Mustafa, was an employee of the company. Globalactive is considered in greater detail below. Babak Cherazi was a director of Beronvine; Khalid Hamidi took over the role of company secretary of Beronvine on about 11 July 2002. According to the invoices found, Lightcare made 46 sales to Globalactive at a total price of £135.6 million (with a VAT charge of £20.2 million) and 4 sales to Beronvine at a total price of £13 million (with a VAT charge of £1.9 million); and Vendon made 3 sales to Globalactive at a total price of £14 million (with a VAT charge of £2 million). 8 Of the individuals identified above, Jogia pleaded guilty at an early stage to the conspiracy alleged. Mustafa Mehmet changed his plea to guilty at the beginning of the trial. Masoumzadeh was outside the jurisdiction, in Dubai, and was not tried. Adali-Mortty, [Peter Pomfrett], Timur Mehmet, Hamidi and Cherazi faced trial on an indictment alleging, in the particulars of the offence charged, that “between the 1st April 2002 and the 23rd July 2002…. [they] conspired together and with Pravin Jogia, Mustafa Mehmet, Arash Masoumzadeh and other persons to cheat Her Majesty the Queen and The Commissioners of public revenue, namely monies being or purporting to be Value Added Tax payable…”
. Timur Mehmet did not answer to his bail at the commencement of the trial and was tried in his absence but was represented throughout by counsel. The remaining four defendants were present and represented at the trial. All those who were tried were found guilty by the jury. 9. On 28 January 2008 [Peter Pomfrett] was sentenced to 10 years’ imprisonment (with 4 days in custody on remand to count towards sentence) and was disqualified under section 2 of the Company Directors Disqualification Act 1986 for 14 years. Adali-Mortty was sentenced to 6 years’ imprisonment and disqualified for 10 years. Mustafa Mehmet was sentenced 4 years’ imprisonment and disqualified for 10 years. Timur Mehmet was sentenced in his absence to 8 years’ imprisonment and disqualified for 12 years. Hamidi and Cherazi were each sentenced to 4 years’ imprisonment and disqualified for 8 years. Sentencing of Jogia was adjourned because he had recently had a serious medical operation, and we do not have details of the sentence later imposed on him. 10 Although the indictment referred to the period from 1 April to 23 July 2002, the prosecution put its case at trial on the basis of a conspiracy to carry out a dishonest scheme during 20 days of trading between 25 June and 22 July 2002. The entire trade was said to have been rigged. 11 The position of the defendants at trial, and what the prosecution said about them, was explained as follows in the prosecutions’ opening note:
“3. The defendants do not dispute there was a conspiracy to cheat. The defendants Adali-Mortty, Timur Mehmet and Babak Cherazi admit they did acts which furthered the conspiracy because they carried out the deals. But they say they did not know of any VAT fraud and acted honestly. They say they are the victims of other people’s dishonestly. They were used or hoodwinked by others who were dishonest, such as Jogia and Mustafa Mehmet. In the case of any defendant where that may be so you will acquit. The prosecution say these are lying defences, each of these defendants was dishonest because he too agreed to help what he knew was a VAT fraud. The central issue in the case, therefore, is whether any of theses defendants had a dishonest state of mind. You will decide that by looking at all the evidence including what they did or did not do or said. 4… in the case of Hamidi he denies being involved in any way whatsoever. If that might be so you will acquit. The prosecution say this is a lying defence…. “3. The defendants do not dispute there was a conspiracy to cheat. The defendants Adali-Mortty, Timur Mehmet and Babak Cherazi admit they did acts which furthered the conspiracy because they carried out the deals. But they say they did not know of any VAT fraud and acted honestly. They say they are the victims of other people’s dishonestly. They were used or hoodwinked by others who were dishonest, such as Jogia and Mustafa Mehmet. In the case of any defendant where that may be so you will acquit. The prosecution say these are lying defences, each of these defendants was dishonest because he too agreed to help what he knew was a VAT fraud. The central issue in the case, therefore, is whether any of theses defendants had a dishonest state of mind. You will decide that by looking at all the evidence including what they did or did not do or said. 4… in the case of Hamidi he denies being involved in any way whatsoever. If that might be so you will acquit. The prosecution say this is a lying defence…. 49. … The prosecution contend that the only sensible inference from all the evidence is that each defendant who was involved in the day to day operation of Aurum, Lightcare, Globalactive and Beronvine must have been aware that they were participating in an MTIC carousel fraud because such a fraud requires that movements and pricing of goods, and transfers of money are carefully synchronised and that each party has a pre-ordained and agreed role to achieve the dishonest objective. The goods have to be sold to the right people at the right price at the right time….” 13 On the evidence at trial the genesis of the fraud charged in the indictment was obscure, though the suggestion before the jury was that it originated in, or had its epicentre in Dubai. Certain information about this had been provided to the prosecution by Jogia after he entered his plea of guilty. That information was disclosed to the other defendants but very little of it could be deployed in evidence in the absence of Jogia as a witness. … In May 2002 [a man called] Raffi [who traded in Dubai] faxed [to Jogia] various documents, including drafts of letters to be sent to PJ Spencer and to Globalactive…. 14 The documents sent by Raffi to Jogia were in evidence before the jury, and the fax details showed that they had been sent from Masheikh [a Raffi company] in Dubai. This invited an inference, that someone else in Dubai, was behind the fraud… 15 Also in evidence was a letter of introduction written by Jogia to Globalactive on 7 May 2002, in terms corresponding to the draft sent to Jogia. Entries in Globalactive’s cashbook provided evidence of two payments of £667.20 to Emirates on 7 May for travel: and [Peter Pomfrett] said in evidence that Timur Mehmet had visited Dubai that day. 16. On receipt of Jogia’s letter of introduction of 7 May [Peter Pomfrett of Globalactive] wrote a reply on the same day, thanking Jogia for the letter, indicating a willingness to trade with Aurum, and asking for a trade reference and for clarification of Aurum’s trade classification. Globalactive subsequently sent completed purchase orders to Aurum, but there was no evidence that the trading between them went ahead. During the period of trading relied on by the prosecution at trial, sales by Aurum were made to Lightcare and Vendon as second line buffers, and then on to Globalactive and Beronvine as third line buffers, rather than direct from Aurum to Globalactive.”
[4]The features of the trading cycle which the prosecution were able to prove enabled the prosecution to assert the following: i) The purpose of the trading cycle was not to make a profitable trade in CPUs but to evade payment of VAT due to the Revenue; ii) The chain and speed of transactions was designed to frustrate any attempt by HMCE to intervene to freeze the payments made by the third line buffers; iii) The losses made on resale to the buffers represented payment to the buffers for their participation in the paper trail; iv) Coordination of the paperwork was essential to the successful implementation of the fraud and it followed that those who were facilitating the paper trail must have been knowingly involved.[5]As Richards LJ observed, the second line buffer immediately up the line from Beronvine was alleged to be Lightcare Limited whose director and company secretary was the defendant Adali-Mortty. In four purported transactions in July 2002 Lightcare sold to Beronvine Limited CPUs to a value of some £13 million. By this means Beronvine gave assistance to deprive the revenue of £2 million odd. The issue for the jury was whether the appellants Hamidi and Cherazi were knowingly implicated in the fraud.[6]Lightcare had in the two financial years ending April 2001 and April 2002 a trading turnover of £76, 835 and £138, 840. Lightcare was managed by Mr. Adali-Mortty from a rented council flat. During twenty days of trading in June and July 2002 its turnover was purportedly £140 million by way of purchases from Aurum and sales to Globalactive and Beronvine. At trial Mr. Adali-Mortty represented himself as an innocent broker.[7]Beronvine was incorporated in January 2002 and registered for VAT on 1st June 2002. The appellant Hamidi was registered as company secretary on 10th July 2002. The appellant Cherazi was registered as director from March 2002. The four transactions which Beronvine purported to conduct with Lightcare took place between the 2nd and 5th July. Beronvine made a profit of £90, 432.[8]It was the prosecution case that on 11 June 2002 Mr. Hamidi, using the name Khalid, telephoned the HMCE contact centre wanting confirmation in writing that a trader was registered for VAT. The prosecution asserted that such an inquiry was the typical behaviour of fraudsters who were seeking to disarm suspicion. The jury heard similar evidence in relation to the other third line buffer, Globalactive.[9]On 12th November 2003 HMCE recovered from the home of Arash Masoumzadeh (director of the second line buffer Vendon UK Limited) the booking of flights by Mr. Hamidi and Mr. Masoumzadeh to Dubai departing on 30th May 2002 and returning on 3rd June 2002.[10]The prosecution asserted that were it not for the closing down of the operation in July 2002 following a visit by a customs officer to Beronvine and the arrest of Jogia on 22nd July 2002, Beronvine would have taken part in further transactions. It was for that purpose that Hamidi became company secretary and arrangements were being made for new banking facilities.[11]The appellant Hamidi had, claimed the prosecution, been involved on an earlier occasion in a carousel fraud while director of a company called Med Trading Limited. The company was incorporated and Mr Hamidi appointed director in August 1999. It was registered for VAT on 3rd February 2000. It represented its business as an importer of wine products from Morocco and distributor of food stuffs. Its seven quarterly VAT returns submitted up to September 2001 revealed input purchases no higher than £80, 686. Between 6 and 20 November 2001, Med Trading purported to purchase from a company called Longdog Trading Company Limited (“Longdog”) CPUs to a value of £5.2 million on which VAT of £781,000 was charged. The invoices requested payment to the EU suppliers who included some of those involved in the present case. Although Longdog delivered the invoices the suppliers were named as the EU companies. Longdog was found to be a missing trader. Although a Longdog VAT certificate was found among Med Tradings documents, Longdog had not submitted relevant VAT returns and did not account for output tax on transactions with Med Trading. Longdog’s invoice address did not exist and no contact could be made with the company. HMCE recovered documents which indicated that Med Trading had been instructed as to the form of words to be used in purported introductions to prospective buyers, introductions which had in fact been pre-arranged, just as the buffers were instructed in the present case. Mr Hamidi was arrested at Med Trading on 21 November 2001. Present with him was Arash Masoumzadeh. Mr Hamidi told the HMCE officer that Mr Masoumzadeh took no part in the business but was just helping out.[12]When interviewed during the Med Trading enquiry, Mr Hamidi admitted that he was responsible for the Med Trading transactions. He was acting, he said, as a broker between Longdog and purchasers next down the line not withstanding that the invoices suggested otherwise. At the time of Mr Hamidi’s arrest in 2001, Med Trading held £1.55 million frozen by Customs. It was owed to the suppliers. Longdog had instructed him to pay but Mr Hamidi had received no further contact from either Longdog or the creditors. Asked to identify his contact in Longdog Mr Hamidi told the officers that he was a man called “Mike”. He had no other details.[13]No criminal proceedings were brought against Mr Hamidi in respect of the Med Trading transactions and the VAT assessment levied on Med Trading in consequence of the suspected fraud was subsequently set aside by a VAT tribunal. The prosecution contended that the evidence of Mr Hamidi's trading through Med Trading Limited was relevant and admissible in the case against him concerning his involvement with Beronvine. The admission and use of this evidence forms one of the grounds of appeal now advanced on Mr Hamidi's behalf.[14]Mr Cherazi was Beronvine’s sole director during the relevant period of trading. He was one of two people involved in the day to day running of Beronvine. The other was Mr Kokabzedah. Mr Kokabzedah was company secretary until his replacement by Mr Hamidi on 10th July 2002. Beronvine traded from Mr Kokabzadeh's home at 1 Rutland Mews, London NW8. Correspondence recovered from Beronvine included a letter from Lightcare dated 1 July 2002, addressed to Mr Cherazi, confirming their discussion of proposed trading in IT products. When he gave evidence in his own defence, the appellants’ co-accused, Adali-Mortty, told the jury that he was introduced to Mr Cherazi by the appellant Hamidi. He had received a letter of introduction from a “K.Omar” a person he later understood to be Khaled Omar Hamidi, the appellant. He reached that conclusion because following the letter of introduction there were meetings between Adali-Mortty and Hamidi at the former’s flat to discuss the progression of trade. One of those meetings took place on 4th July 2002, the day before the final transaction.[15]Mr Cherazi accepted that he conducted Beronvine’s business with Lightcare. His defence was that he was an innocent broker between the suppliers and the purchasers further down the line.[16]We turn now to the appellants’ grounds of appeal.

Section 35 Criminal Justice and Public Order Act 1994 (Both Appellants)

[17]As Richards LJ observed at paragraph 8 of his judgment, Timur Mehmet failed to attend his trial which proceeded in his absence following appropriate directions from the Judge to the jury. It was apparent that at stages during the trial counsel who remained in attendance were receiving instructions from him. He did not, however, attend to give evidence at his trial.[18]The terms of section 35 (2) Criminal

Justice and Public Order Act 1994 are as follows:

“(2) where this sub section applies, the Court shall, at the conclusion of the evidence for the prosecution, satisfy itself (in the case of proceedings on indictment, in the presence of the jury) that the accused is aware that the stage has been reached at which evidence can be given for the defence and that he can, if he wishes, give evidence and that, if he chooses not to give evidence, or having been sworn, without good cause refuses to answer any question, it will be permissible for the court or jury to draw such inferences as appear proper from his failure to give evidence or his refusal, without good cause, to answer any question.”
Section 35(3) provides:
“(3) Where this sub section applies, the court or jury, in determining whether the accused is guilty of the offence charged, may draw such inferences as appear proper from the failure of the accused to give evidence or his refusal, without good cause, to answer any questions.”
Section 35(3) provides:[19]It is accepted by counsel on behalf of the appellants that since Timur Mehmet absconded before the necessary statutory procedure had been followed, it was not open to the jury to draw any adverse inference from his silence at trial, and the Judge was bound to provide the jury with a direction to this effect (see Gough (2001) EWCA Crim 2545; (2002) 2 Cr. App. R. 8 at page 121). The appellants, on the contrary did attend trial and the section 35(2) procedure was followed. They elected not to give evidence.[20]At the close of the evidence and before speeches Mr Davis, who represented the appellant Cherazi in the court below, submitted that Mr Cherazi was, as regards the election not to give evidence, in the same position as Timur Mehmet. Since the jury would be directed that they should not draw any inference adverse to Mr Mehmet from his absence, the jury should also be directed that they should draw no such inference adverse to Mr Cherazi. The Judge’s attention was drawn to the judgment of the court in Cowan (1996) QB 373 at page 380E, when Lord Taylor CJ said:
“…..we accept that apart from the mandatory exceptions in section 35(1) [where the accused’s guilt is not in issue or it appears that the physical or mental condition of the accused makes it undesirable for him to give evidence], it will be open to a court to decline to draw an adverse inference from silence at trial and for a Judge to direct or advise a jury against drawing such inference if the circumstances of the case justifies such a course. But in our view there would need either to be some evidential basis for doing so or some exceptional factors in the case making that a fair course to take. It must be stressed that the inferences permitted by the section are only such “as appear proper”
. The use of that phrase was no doubt intended to leave a broad discretion to a trial Judge to decide in all the circumstances whether any proper inference is capable of being drawn by the jury. If not he should tell them so; otherwise it is for the jury to decide whether in fact an inference should properly be drawn.”[21]The Court accordingly concluded that contrary to the submission made on behalf of the appellants in Cowan, that the terms of section 35(2) applied to all cases. It would not be only in exceptional cases that the inference would be available to the jury. It would, on the contrary, be in exceptional cases that the ability of the jury to draw an adverse inference would be removed from them by direction.[22]The application made by Mr Davis was not at trial supported by counsel then acting for Mr Hamidi. The Judge rejected Mr Davis’s application and proceeded to give the jury a conventional section 35 direction in the cases of both Hamidi and Cherazi. The Judge explained to the jury why he did not give them such a direction in the case of Timur Mehmet, namely that the conditions of section 35 had not been satisfied and directed them that in his case they should draw no adverse inference. It is now submitted on behalf of Mr Hamidi and Mr Cherazi that this course created an unfairness because Mr Mehmet was placed in a more advantageous position when it was he who, in the words of Mr Davis, “thumbed his nose” at the criminal justice system. By contrast the appellants attended their trial and did not deserve to be disadvantaged by comparison with the absent Mehmet.[23]We are not persuaded that there was any unfairness to the appellants generated by the course taken by the trial Judge. It not infrequently happens that a defendant in a trial is placed in a more advantageous position than his co-accused in consequence of the application of the rules of evidence. Evidence may, for example, be admissible against one accused and not against another. Here, Parliament has laid down the specific circumstances in which the jury are permitted to consider drawing an adverse inference from the accuser’s silence. That those circumstances exist in the case of two accused present but not in the case of a third who is absent does not, in our view, render the direction concerning the two present defendants unfair.[24]If Timur Mehmet was deliberately absent, knowing full well of the advantage he gained from the Judge’s directions to the jury, his manipulation of the legal system to his own advantage was no basis for bestowing a similar advantage on his co-accused. If, on the other hand, Timur Mehmet was unaware of the terms or effect of section 35(2) his position needed protection from its rigours. The appellants did not need such protection since they were present at trial, heard the evidence, received advice from counsel and could make an informed decision whether to give evidence or not. We do not say that there will be no circumstances when, as between defendants, the trial judge would be justified in trying to achieve parity, but, echoing the words of Lord Taylor, there would need to be an evidential basis or exceptional circumstances requiring that course. In our view, neither existed in this trial. The jury understood exactly why they were being given one direction in the case of Mehmet and another in the cases of Hamidi and Cherazi. That may have given Mehmet an advantage he did not deserve but if it did, it was not an advantage which was correspondingly unfair to the appellants. Mehmet’s case concerned the activities of Globalactive, the other third line buffer. His case had no significant overlap with the appellants’ cases but was largely contained within a separate compartment of the evidence. There was no knock-on effect which could have affected the appellants’ cases adversely. More significantly, perhaps, is the fact that neither Mr Mayo QC on behalf of Hamidi, nor Mr Davis, on behalf of Cherazi, has sought to demonstrate any particular area of prejudice or unfairness arising from the development of the evidence in the absence of Mehmet. Had there been, for example, significant issues of fact between Mr Mehmet on the one hand and the appellants on the other, the consideration of which would have been affected by the section 35 direction, there may have been exceptional circumstances which required the Judge to ensure the parity sought. In the absence of such circumstances we do not consider this ground has merit.[25]We turn to the second and third grounds advanced by Mr Mayo QC on behalf of Mr Hamidi which concern the treatment of the evidence of Mr Hamidi’s previous involvement in Med Trading Limited.

The Med Trading evidence (Hamidi)

[26]We have summarised the effect of the Med Trading evidence earlier in this judgment. The evidence was admitted without objection from the defence. The sequence of events was as follows. Sir Derek Spencer QC on behalf of the prosecution provided to the other parties his opening note dated 3rd October 2007. At paragraph 87 he identified the evidence on which the prosecution proposed to rely. At paragraph 87 (vii) he wrote:
“His (Hamidi) involvement with Med Trading Limited in an earlier MTIC fraud, operation Derby, in November 2001. The prosecution contend that the evidence is admissible, a) On the basis that he was an innocent party because it rebuts his defence in Devout 2 that he played no active part in Beronvine’s trading and it made him aware of the mechanics of MTIC fraud and the dangers of dealing in CPUs. b) Alternatively, on the basis that he was a knowing party to this MTIC fraud, it is admissible as bad character evidence under section 101 CJA 2003 because it is relevant to matters in issue between him and the prosecution, that is whether he played any part in Beronvine’s trading and whether he had guilty knowledge; and whether at the time of the Devout fraud he had a propensity to commit MTIC fraud. (A notice under section 101 CJA 2003 was served on the 18th May 2007). A person involved in two companies both of which are concerned in deal chains where MTIC fraud has occurred is more likely to be a knowing party to the fraud. Any suggestion it is bad luck is an affront to common sense”
. Sir Derek Spencer accompanied his note of opening with a skeleton argument supporting the application to adduce the evidence on the grounds contended. Mr Fuller QC, having considered the contents of these documents, did not dispute the admissibility of the evidence. He did however reserve his position upon the question whether the evidence could properly support an inference of propensity, an issue which Mr Fuller intended to address later in the trial. a) On the basis that he was an innocent party because it rebuts his defence in Devout 2 that he played no active part in Beronvine’s trading and it made him aware of the mechanics of MTIC fraud and the dangers of dealing in CPUs. b) Alternatively, on the basis that he was a knowing party to this MTIC fraud, it is admissible as bad character evidence under section 101 CJA 2003 because it is relevant to matters in issue between him and the prosecution, that is whether he played any part in Beronvine’s trading and whether he had guilty knowledge; and whether at the time of the Devout fraud he had a propensity to commit MTIC fraud. (A notice under section 101 CJA 2003 was served on the 18th May 2007). A person involved in two companies both of which are concerned in deal chains where MTIC fraud has occurred is more likely to be a knowing party to the fraud. Any suggestion it is bad luck is an affront to common sense”.[27]It follows that the evidence of Mr Hamidi’s involvement in Med Trading was admitted by agreement. If it was capable of constituting evidence of misconduct or disposition towards misconduct on another occasion (see sections 98 and 112 CJA 2003) then it would require a direction from the trial Judge in his summing up.[28]Although this ground was at first advanced by Mr Mayo as a complaint against the admission of the evidence, he readily conceded that it was admissible as similar fact evidence going to the issue of Mr Hamidi’s state of mind even if it did not amount to evidence of bad character and could not be treated by the jury as evidence of propensity. The reason for this concession was the acknowledgement by Mr Mayo that during interview between Mr Hamidi and the customs officers in 2001 they explained to him how his admitted involvement facilitated a missing trader fraud. Although Mr Mayo argued that the evidence could have been presented by way of formal admission in an “anodyne” form, it seems to us that if the evidence was admissible all relevant parts of it were admissible. Furthermore, Mr Mayo had to accept that the evidence was admitted by agreement.[29]The issues between the prosecution and Mr Hamidi were whether Mr Hamidi(1) took any part in the Beronvine trades which in fact assisted the alleged conspiracy and(2) if so, whether he did so knowingly or as an innocent agent. It seems to this court that Mr Hamidi’s involvement in Med Trading’s transactions was capable of being relevant to both issues but more particularly to issue (2). If Mr Hamidi had been involved knowingly or unknowingly in a fraud in 2001 it was, as Sir Derek Spencer argued, less likely that he would involve himself unknowingly in a similar fraud in 2002.[30]The evidence was presented to the jury in the form of documentation, formal admissions and the evidence of two customs officers. There was virtually no dispute about that evidence. Accordingly, the Judge was required to consider before speeches the use to which the evidence could properly be put by the jury in their deliberations. The trial Judge distributed in writing to counsel the legal directions he proposed to give to the jury, including his directions on the Med Trading evidence. Although other of the Judge’s proposed legal directions were the subject of argument, no attempt was made by counsel on Mr Hamidi’s behalf to persuade the trial Judge to exclude the issue of propensity from the jury’s consideration of his case. Accordingly, the trial Judge directed the jury as follows; “In the case of Mr Hamidi, you heard evidence concerning his dealings with a company called Med Trading in the previous autumn, in November 2001. That is some six months before the matters you are trying. I shall shortly remind you of the evidence about that, he is not charged with any offence concerning that company. You are not trying him for any charge concerning that company. The evidence that you have heard may prove or tend to prove that he was guilty of another MTIC fraud, but it is placed before you not to prove that he was guilty of that offence but that he is guilty of the offence you are trying here now, and it may be relevant in two ways. Firstly, if you are satisfied that he was not engaged in innocent legitimate trade in November 2001, then this is evidence which is what we call, as I referred to earlier about other things, evidence of reprehensible conduct, which may amount to a propensity to commit the type of offence you are trying. That means that this conduct concerning Med Trading, if found proved by you, may indicate a likelihood to commit the offence you are trying on this indictment. The law allows you to hear this evidence as it may or may not resolve an issue which exists in this case between the crown and Mr Hamidi: namely, if you find that Mr Hamidi did some act or acts which in fact assisted this conspiracy, were those innocent acts or were those acts done knowing that he was part of the criminal conspiracy itself? So, you will first of all have to decide if Mr Hamidi did perform some act which assisted this conspiracy, and the essence of it is that it was Mr Hamidi who introduced Lightcare to Beronvine and Mr Hamidi who made that initial enquiry to Customs and Excise in order to assist Beronvine. That is, in essence, what the preliminary statements were and then you have the prosecution case about what happened thereafter. So that is the first thing you have to decide: did he perform some act which did, in fact, assist the conspiracy. If you do not find that proved, then you need go no further because the verdict is not guilty, and the fact that he was engaged in Med Trading, there was no relevance. You understand that? So, that is the first thing you do. But if you decide that he did and… did some act in furtherance of this conspiracy, that assisted this conspiracy, I mean, and you decide that what he did in November 2001 was reprehensible conduct by way of dishonesty involving himself in that previous MTIC fraud, the law says that if you do decide… that he has a propensity to commit the offence of the type you are trying, and you are sure about it, you can take it into account if you think it is right in deciding whether he has committed this offence. Now, the law requires me to warn you, which you probably think is quite proper, not to place undue reliance on the matters of Med Trading, and, in particular, I have to tell you that a propensity to commit this type of offence, if you find that proved, cannot by itself prove he is guilty of the offence you are trying. So that means that you should not conclude that he is guilty of this offence merely because of that propensity because even if you find as a matter of fact that he was guiltily involved in that MTIC trading in November, and that it shows a propensity to act in the way of this indictment, that of its own does not prove he has committed this offence. Do you understand that? It is a factor, so it is for you to decide if the alleged behaviour shows such a propensity and if you find that proved you may take it into account in determining guilt as one of the relevant factors. You take that and you assess its significance in the light of all the other evidence you have heard about. Now, if you had only heard evidence of Mr Hamidi’s part in Beronvine trading with Lightcare in isolation, and you heard nothing else, you may have thought that that was unconvincing of his guilt. That is a matter for you. I am not saying that you would or you would not, but you may have thought it was, but as you have also heard the evidence of what happened at Med Trading, then you are entitled to consider that in deciding whether or not the crown have proved he is guilty of the charge before you in this trial.”[31]We pause at this point in the learned Judge’s directions to observe that he confined the jury’s consideration of propensity to their resolution of the second issue identified. They were not to utilise that evidence when considering whether Mr Hamidi did in fact take any step which advanced the fraud.[32]The Judges directions continued as follows; “Now, there is a second way in which that evidence may be relevant. Even if you conclude that the previous trading with Med Trading was or may be innocent, legitimate trading it can still assist you in deciding if it was in fact Mr Hamidi who telephoned the national centre on the 11th June. You have a record of that at page E703 where a man giving his name as Mr Collins made that enquiry. So, even if Mr Hamidi’s involvement in Med Trading was or might have been innocent, the Crown say it gave him a special knowledge, an interest, in what was required by Customs and Excise when trading with CPUs and they submit that he made that call in order to deal with that issue, and that Med Trading therefore may assist you in that way as to whether or not he made the phone call.” Thus, the Judge was directing the jury that if Mr Hamidi’s part in the Med Trading transactions was or may have been innocent, he had, nevertheless, during the 2001 investigation acquired knowledge which might assist them on the question whether the person making an enquiry on Beronvine’s behalf was a person who had that knowledge and, if so, whether that made it more likely the enquiry was made by the appellant.[33]Mr Mayo submitted that counsel should have made an application to the trial Judge to direct the jury that they could not treat the Med Trading evidence as evidence of propensity. The ground for such a submission lay, said Mr Mayo, in the events which followed the Med Trading investigation. HMCE placed a restraining order upon Med Trading’s bank account in which £1.55 million was residing to its credit. The ground for the restraint was the suspicion that Med Trading was involved in an MTIC fraud. An assessment was imposed upon Med Trading Limited for the unpaid tax. Mr Hamidi appealed to the VAT tribunal. He gave evidence. Applying the civil standard of proof the tribunal concluded as follows:
“Mr Hamidi seemed to us to be reasonably sophisticated in business matters and one might have expected that he would have been suspicious of offers of quick profits without putting up any money, but we find that he accepted everything Mike told him of a business about which Mr Hamidi knew nothing. At the end of the day we consider that the fraudulent Longdog found in the appellant just what it was looking for, an innocent person who was just starting in computer trading and knew nothing of the industry, which enabled it to use the appellant in furthering its MTIC fraud by inserting the appellant in transactions and thereby distancing itself from other persons in the chain.”
[34]Mr Mayo at first submitted that the conclusion of the tribunal involving, as it did, the discharge of a burden of proof on Mr Hamidi, in effect deprived the evidence of the quality of misconduct or disposition to misconduct which might have enabled the Judge to give a propensity direction. However he was bound to concede that the absence of prosecution or conviction does not determine admissibility (see for example O’Dowd (2009) EWCA Crim 905; (2009) 2 Cr. App. R. 16). Furthermore, a previous acquittal on the same evidence is not determinative of the issue of admissibility provided that the evidence is relevant to an important matter in issue in the subsequent trial (see Z (2000) 2 AC 483 and section 101(1)(d) CJA 2003). Mr Mayo agreed that the decision of the VAT tribunal could not create a form of issue estoppel in the subsequent criminal trial since there was not a common issue. As the Judge correctly directed the jury it was not the jury’s responsibility to return a verdict in the Med Trading case but to determine his guilt of the offence charged in the indictment. As we understood Mr Mayo’s final submissions, he was arguing that the Judge should have formed the view that the treatment of the Med Trading evidence proposed by the prosecution would create an unfairness within the meaning of section 101(3) Criminal Justice Act 2003 and section 78 Police and Criminal Evidence Act 1984. Mr Mayo recognised that the requirement of section 101(3) applied only upon an application by the defendant to exclude the evidence. That should not however, in his submission, have prevented the Judge from reaching his own conclusion that the jury should be directed not to treat the evidence as supporting propensity.[35]Quite apart from the issue whether the evidence was capable of proving misconduct, it was submitted that Med Trading represented a single incident from which propensity could not be safely inferred.[36]In our judgment, Mr Mayo’s submissions as to the effect of the tribunal’s decision are mistaken. That the tribunal had been prepared to accept the evidence of Mr Hamidi to the effect that he was an innocent dupe was no bar to the consideration of the same evidence by the jury. The decision of the tribunal was not capable of binding the jury. The jury heard additional evidence of the appellant’s further involvement in Beronvine. Provided they received appropriate legal directions the Judge was not bound to find that any unfairness would arise if the jury reached a contrary view. By the time that the Judge was required to give his directions to the jury, it was apparent that Mr Hamidi had declined to enter the witness box to explain the Med Trading evidence. It was open to the jury to conclude that Mr Hamidi was a knowing participant in an earlier MTIC fraud.[37]Although the appellant’s earlier involvement related to a single enterprise, there was a course of trading which bore the idiosyncratic features of an MTIC fraud as the customs officers explained to Mr Hamidi during his interviews in 2001. The fact that a single enterprise and short period of trading were involved did not in our view render unfair or unsafe the invitation to the jury to consider the evidence. The fact that experienced trial counsel saw no ground to raise the issue of propensity with the Judge reinforces our view that the issue of propensity was properly left to the jury.[38]Finally, as to the treatment of this evidence in summing up, Mr Mayo drew our attention to that passage of the Judge’s directions which suggested that the jury might, but for the Med Trading evidence, regard the case against him as unconvincing. Read in that way, Mr Mayo submitted that the Judge was inviting the jury to treat the evidence as sufficient to bolster a weak case within the meaning of the prohibition upon such a course highlighted by the judgment of the Vice President, Rose LJ, in Hanson and others (2005) EWCA Crim 824 at paragraph 18. We have been troubled by this submission. We recognise that the terms in which the Judge expressed himself were capable of giving that impression to the jury. We have to consider whether the jury may reasonably have so understood him. We observe that the Judge had just directed the jury that they first had to be satisfied of Mr Hamidi’s participation in the Beronvine trading with Lightcare. In other words, his observation was directed to a situation in which the jury were sure of his participation and were now considering the issue of knowledge. Secondly, the jury had just received from the Judge an explicit direction that they should not place undue weight on their finding of propensity if they made it. In these circumstances, we do not consider that the jury could have misunderstood the Judge’s intention, namely to point out that if they found that the appellant had participated knowledgably in an earlier MTIC fraud, that was capable of being important evidence going to the issue of knowledge during his participation in the Beronvine trading. The Judge was not saying and could not reasonably be understood as saying that previous participation in an MTIC fraud was conclusive. The jury had been specifically directed to the contrary.

Application to admit finding of VAT Tribunal (Hamidi)

[39]An application was made to the trial Judge during the evidence of Customs officer Brooks, introducing the documents relating to Med Trading to the jury, and describing the investigation, that the defence should be permitted to adduce from Mr Brooks the conclusion of the VAT tribunal that Mr Hamidi had been the innocent dupe of Longdog. The Judge declined to permit counsel to adduce the evidence but he did permit Mr Fuller to adduce that “Mr Hamidi had not been charged with any criminal offence following his arrest on those matters but that civil proceedings got underway and that eventually the restraint order was discharged and the frozen funds released.” (see transcript summing up Vol VII p.44A) Mr Mayo submits that the conclusion of the tribunal was as much part of the evidential picture as the underlying evidence of Mr Hamidi’s involvement in Med Trading. The Judge declined to admit evidence of the tribunal’s finding on the ground that it was irrelevant. We agree with him. The tribunal’s finding was not part of the evidential picture but the judgment of the tribunal upon the evidence. We recognise that in circumstances such as these trial Judges may permit the earlier decision to be adduced in evidence. We have had to consider whether there is a ground in legal principle for admission of such evidence or that the rules of evidence are relaxed by way of instinctive concession to the defence. The latter would appear to be the basis for admission of the evidence quoted from the summing up above. We are satisfied that the decision of the tribunal was inadmissible on the issue which the jury was required to determine because its decision and its reasoning was irrelevant. It was open to the appellant to meet the evidence as he had before the tribunal by deploying such evidence, explanations and arguments as might be necessary to undermine the prosecution’s assertion of propensity. The admission of the underlying evidence without the finding of the tribunal did not, as we see it, generate any unfairness. The jury received a strong direction to the effect that first they had to be sure of propensity and second that if they were sure they should not afford it undue weight. It was a matter for them to weigh up the evidence for themselves.

Fairness of the Summing Up (Cherazi)

[40]We turn to Mr Cherazi’s second ground of appeal as advanced by Mr Davis. It was asserted that the summing up was so profoundly one sided as to be unfair to the appellant. The summing up was characterised as advocacy to the extent that it affected Mr Cherazi. The defence case was denigrated and dismissed. The cumulative affect of the Judge’s reference to the absence of evidence by way of contradiction or explanation was to remove from the jury an opportunity for fair consideration of the appellant’s case. These were submissions trenchantly expressed. We would have expected to find material commensurate to the assertion.[41]It is of some importance to a consideration of this ground to remind ourselves of the context in which it is advanced. The trial commenced on 1st October 2007 and the jury returned its verdicts on 23rd January 2008. Sir Derek Spencer QC completed his final address to the jury just before the Christmas break on 19th December 2007. By the time the Judge commenced his summing up on 9th January 2008 some three weeks had elapsed.[42]The Judge explained how he was going to structure his summing up by dealing with the alleged conspiracy in stages, summarising the evidence relevant to the stage he was considering whether for prosecution or defence, as he proceeded. The evidence relevant to transactions admittedly conducted by Mr Cherazi was considered by the Judge in its own compartment on the late morning of Friday 11th January and early morning of Monday 14th January. He had of course to place his legal directions about the evidence in their proper context and this he did in a section of his summing up on Wednesday 9th January. The Judge in adopting the course he did was endeavouring to assist the jury’s task in the manner most helpful to them. There was a risk that the placement of the evidence in compartments in this way would cause the jury to lose sight of the defence case in all its clothes. In such a case it is desirable for the Judge to remind both of the salient parts of the defendant’s interview and to summarise the defence case. This the judge did.[43]When the trial Judge gives a direction under section 35 of the 1994 act he will almost invariably point out to the jury that the first effect of the absence of evidence from the defendant is the absence of contradiction or explanation of evidence adduced by the prosecution. Such an observation can only be made with fairness, of course, if the uncontradicted evidence concerns a matter about which the defendant can confidently be expected to have personal knowledge. Such a direction cannot be given in isolation of the evidence itself. Accordingly, there can be no cogent complaint of the Judge’s reminder to the jury of those important aspects of the evidence which may be touched by his direction. The question for us is whether such reminders as the Judge did give so laboured the point that the right to silence was subverted and/or unfairness to Mr Cherazi resulted.[44]We have examined each of the passages in which the Judge dealt with the absence of evidence from Mr Cherazi when directing the jury upon; i) The admissibility and effect of interviews ii) Good character iii) The section 35 inferences iv) The defence case. All of these directions were given on the morning of Wednesday 9th January 2008 in the context of the Judge’s legal directions about the evidence affecting Mr Cherazi’s case. Each of them was, in our view, unexceptional and not remotely unfair to the appellant.[45]On Friday 11th January the Judge reminded the jury that no explanation had been provided by the defendant for correspondence between Mr Adali-Mortty and Beronvine in which a purported business introduction was made and a VAT certificate and certificate of incorporation provided.[46]On Monday 14th January the Judge reminded the jury that they had heard no explanation from the defence why Lightcare had not received payments and why, if Mr Adali-Mortty’s letters of complaint, if sent, had not received a response from Beronvine, nor copies found amongst Beronvine’s papers. Further, the Judge informed the jury that in light of the fact that Mr Cherazi had not given evidence it was the Judge’s responsibility to remind them at least in summary of the salient parts of his interview, copies of the transcript of which were in the jury’s possession. We do not accept that these references to the absence of evidence from Mr Cherazi had the effect of generating any unfair prejudice against Mr Cherazi. On the contrary, it is our view that the Judge’s references to the absence of evidence were entirely appropriate in their context and comparatively few in total. They do not, in our view, come anywhere near supporting the proposition advanced in argument.[47]Mr Davis further complained that the Judge had invited the jury’s attention to the fact that the VAT return for the quarter ended 30th September 2002 revealed only the results of purported trading with Lightcare, namely over a period of four days purchase and sale transactions to a value of approximately £13 million. He argues that the Judge should not have posed for the jury the question whether the cessation of business with Lightcare had anything to do with a visit by customs officer Atkin in early July 2002. In our judgment neither of these criticisms has substance.[48]Finally, Mr Davis observes that when reminding the jury in headline form of eight of the principal points made by Mr Davis on Mr Cherazi’s behalf in his final speech the Judge made comments which in part reflected matters raised by the prosecution and declined to add further explanation of Mr Davis’ argument when invited to do so at the close of his summing up. It is clear to us that the Judges’ intention was to remind the jury of the issues raised by the arguments respectively for the prosecution and defence. It was not to engage in a judgment upon them but to point out to the jury that the judgement upon the issues was for them. In one respect it was submitted by Mr Davis that the Judge had misunderstood the point which he had been attempting to make. He described to us the point that he did intend. It was, in our judgment a matter of peripheral importance. It was an attempt by Mr Davis to deflect the force of the prosecution’s observation that Beronvine’s trading took place in apparent isolation of any other income over a period of four months. Since the jury were in possession of the defence documents upon which Mr Davis was relying they will have had well in mind his argument in response to the prosecution. During the course of the Judge’s summary of the evidence, he had reminded the jury in some detail of the exculpatory account given by Mr Cherazi in interview. If, which we doubt, there is any justification in Mr Davis’ submission that the defence case should have been summarised without reference to the prosecution case to which it was a response, we are satisfied that it could not have had the effect of unbalancing the jury’s consideration of the defence case.[49]Mr Davis was concerned on behalf of the appellant to rebut the prosecution’s refrain that a carousel of this sophistication could not have been successful without the knowing participation of those who were engaged at a managerial level in the transactions. This was undoubtedly the assertion which the prosecution attempted to make good in the evidence. Mr Davis’ response was to attempt to demonstrate by reference to the relevant documents that knowledge was not necessarily the appropriate conclusion in the case of Mr Cherazi. The jury can have been in no doubt what was the main thrust of his arguments. The Judge’s reference to the points at which his arguments might have had greater force if supported by evidence seemed to us to be well within the legitimate exercise of the Judge’s responsibility during summing up.[50]We have no doubts about the safety of these verdicts and the appeals against conviction are dismissed.

Sentence (Cherazi)

[51]We turn finally to the renewal of Mr Cherazi’s application for leave to appeal his sentence of four years imprisonment. Mr Davis was content that we should consider his submissions in writing. He made two main points. The first was that a comparison with sentences which, in the view of the court considering a similar fraud in Attorney General’s References numbers 88 – 91 of 2006 (2007) 2 Cr. App. R. (S) 28 at page 55, were appropriate should lead us to the conclusion that the sentence imposed upon Mr Cherazi was manifestly excessive. We have considered the Court’s judgment in that Reference. One of the accused should, in the opinion of the court, have received a sentence of three years imprisonment following a trial when the accused had occasioned a loss to the revenue of some £1 million (see page 156 and 161). In the present appeal Mr Cherazi was, on the finding of the jury, responsible for loss to the revenue in the region of £2 million. We do not find that of itself the sentence of four years imprisonment was arguably excessive. Secondly, it is argued that the period of time during which the investigation took place and the criminal proceedings were completed required from the sentencing Judge a discount for undue delay. We have read the Judge’s sentencing remarks in which he considered in detail the question whether in the circumstances of the present case any discount should be made from the appropriate sentences. He concluded that such delay as had taken place could not be described as undue or unfair but was an inevitable consequence (save in the case of two defendants who pleaded guilty) of a fully fought indictment. We do not consider that the Judge’s conclusion is reasonably susceptible to criticism.[52]Mr Davis raises the question of disparity between the sentence imposed on Mr Adali-Mortty of six years imprisonment, the sentence of four years imposed on Mr Hamidi and the appellant’s position. We have considered the sentencing Judge’s remarks about the age and personal circumstances of Mr Adali-Mortty. We have considered the Judge’s conclusion as to the respective positions of Mr Cherazi and Mr Hamidi. No cogent argument of unfair disparity is, in our view, available.[53]For these reasons we are in agreement with the single Judge and the renewed application is dismissed.