Takkar v R. [2011] EWCA Crim 646

[2011] EWCA Crim 646Case No 201002734 D4
IN THE COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM THE CROWN COURT AT GUILDFORD
His Honour Judge Stewart
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 18/03/2011
Before
LORD JUSTICE STANLEY BURNTONMR JUSTICE EADYMR JUSTICE FOSKETT
Between
Harjit Singh TakkarAppellantThe QueenRespondent
Adrian Eissa (instructed by the Registrar of Criminal Appeals) for AppellantAndrew Marshall (instructed by CPS) for RespondentHearing Hearing date: 10 March 2011
Judgment

Introduction

[1]The Appellant, Harjit Singh Takkar, appeals with leave of the single judge against the confiscation order imposed on him on 8th April 2010 by His Honour Judge Stewart in the Crown Court at Guildford in the sum of £5,320,420, with a default term of imprisonment of 10 years to be served consecutively to the term of 7 years’ imprisonment imposed on the substantive offences of which he was convicted. The order was made following his conviction on 27 September 2007 before the same judge on counts 1, 2 and 3 of the indictment. Count 1 charged conspiracy to cheat, between 1 November 2003 and 31 August 2004. Count 2 charged the substantive offence of cheating, committed during the same period. Count 3 charged fraudulent trading, during the same period.

The facts

[2]This case principally concerned the type of VAT fraud commonly referred to as a Missing Trader Intra Community (MTIC) fraud. The classical form of a MTIC fraud takes place where goods, usually of high value, are imported from the European Community into this country, without the addition of VAT because they are zero rated. They are then sold on to a United Kingdom company. The importer of the goods charges VAT on this sale but fails to account for it to Customs and diverts it. The goods then become the subject of a series of onward sales in the United Kingdom, which may generate small VAT liabilities on the mark-up which are duly paid. At the end of this chain, the goods are exported and VAT reclaimed from Customs. In many cases, the goods that are the subject of the apparent importations do not exist, and if they do exist are never imported, but documents purporting to evidence their sale and purchase are produced. Whether the goods do or do not exist is irrelevant to the fraud (which involves the re-export or apparent re-export of the goods). We shall assume that in the present case they did exist.[3]The original importer of the goods who fails to account for the VAT is called "the missing trader" because frequently, but not in this case, the company used for this role disappears from sight. The companies through whom and to whom the goods are sold on in the United Kingdom are called "buffer companies" and it is normally either the first or second buffer company that pays the VAT to the organiser of the fraud.[4]The appellant controlled a company in Southall called High Profile Limited, which had a legitimate business as a hairdressing and beauty salon. It was registered for VAT. Between November 2003 and February 2004 he caused it to enter into transactions in relatively low value goods, such as razor blades, which resulted in VAT being payable by the company to Customs. None of that VAT was ever paid. During this period, the appellant was acting alone. The VAT ultimately lost during this period was a relatively small amount, £117,098.[5]In May 2004 the appellant became involved in a MTIC conspiracy. High Profile Ltd was in the position of the “missing trader” in this fraud. Between 24May and 3August 2004, it was involved in 76 separate importations of mobile telephones and similar electronic products, all of which came from one of two French companies. The approximate turnover of this business, excluding VAT, was £26 million. The total amount of VAT that was not accounted for and therefore lost to the Revenue was in the region of £5 million.[6]The goods were always sold on the same day to the first buffer company known as AVAH Trading. AVAH would then sell the goods to the second buffer company, EBST Limited or Trades United. That would normally be on the same day as well. The goods were then rapidly sold on through a chain of further companies and eventually exported. None of the telephones was ever sold within the United Kingdom.[7]The appellant's company did not pay the VAT due to Customs. The VAT due to it on its resales of the goods was diverted to a number of overseas companies as a result of a secret payment instruction given by the appellant to AVAH. Thus Hi Profile never received the bulk of the VAT.[8]The prosecution initially asserted that the benefit figure should include not only the VAT evaded but also the value of the goods on which the VAT was charged. However, without resiling from that position, it was conceded for the purposes of the confiscation hearing that that the benefit could be limited to the VAT figure. Relying on section 75(2)(c) of the Proceeds of Crime Act it was submitted that the appellant had a criminal lifestyle. It was conceded that the Count 1 offence (which was related to the MITC fraud) was committed over a period of less than 6 months and could not therefore alone provide the basis for finding a criminal lifestyle. However, Counts 2 and 3 related to the entire 10 month period covered by the indictment and this was supported by the evidence. Consequently, as a result of the convictions on those counts the appellant fell foul of section 75(2)(c) and had a criminal lifestyle.[9]Amongst properties identified by the prosecution was 25 Ferndale Road, Hounslow, which was held jointly by the appellant and his wife. The property was purchased on 15th January 2003 for £210,000 with a mortgage of £167,780 (and thus also with a deposit of £42,220) A further property at 5 Blenheim House, Bath Road was held jointly by the appellant, his wife, and both his parents. The property was re-mortgaged on 13th January 2003.[10]The prosecution did not accept that the appellant did not have free property available to him sufficient to pay an order in the full sum of his benefit. He had caused large sums of money to be sent abroad, none of which had been recovered or accounted for, and it was therefore asserted that he had hidden assets. The appellant had not given evidence and his section 17 response was virtually silent on the subject of available assets.[11]The defence conceded that the effect of section 76(5) of POCA, as confirmed in R v Dimsey and Allen, was that the unpaid VAT was a pecuniary advantage obtained as a result of the appellant’s conduct and as such constituted benefit. The figure for the VAT evaded on Count 2 was agreed as being £117,098, and the figure for the VAT evaded on Count 1 was agreed as being £5,058,179. However, it was submitted that the pecuniary advantage was merely notional and represented the VAT that should have been paid and not the cash in the appellant’s pocket. Hi-Profile was paid an amount equivalent to its profit plus VAT on each deal by Trades United or EBST. This figure of £54,457.38 was the actual amount of money obtained by the appellant within the meaning of POCA. Most of the VAT evaded was paid to foreign companies in relation to which the appellant had no known association.[12]In respect of “criminal lifestyle” it was submitted that by far the most important part of the prosecution case was the Count 1 MTIC fraud. The earlier Count 2 transactions gave rise to a limited benefit and were nothing to do with the MTIC fraud. The earlier transactions took place between November 2003 and February 2004 and therefore a shorter period than the 6 months required for the assumptions to be engaged. Count 3 was essentially a makeweight which added nothing to the case. It was further submitted that it would be oppressive and disproportionate for the assumptions to apply. The appellant was a man of previous good character with none of the trappings of an expensive or criminal lifestyle. The particular benefit from the offences was not in the form of actual cash but was a pecuniary advantage.[13]In respect of 25 Ferndale Avenue it was submitted that the deposit of £45,427 (including legal fees) was raised from the remortgage of 5 Blenheim Place. To the section 17 statement was appended a document setting out the cash flow figures which was signed by J. Saujani, the conveyancing solicitor. It stated, “The difference came from your parents, on the re-mortgage of their Property known as 5 Blenheim Place”. The judge refused to take this document into account.[14]In respect of available assets it was submitted that it would be unfair, disproportionate and oppressive to make an order in the full sum of the benefit. It was unreasonable to expect the appellant to prove a negative – that he had no hidden assets. The appellant was not the organiser of the conspiracy and the benefit figure was merely notional and did not represent actual cash in the appellant’s possession. It was not necessary for the appellant to give or call evidence and the Judge could take a view on the basis of all the material before him to reach a conclusion that the available amount was less than the benefit. Common sense should be applied as it could not have been Parliament’s intention that a person who had received about £50,000 should be hit with an order for £5 million.[15]The judge ruled that the VAT that was evaded constituted a benefit to the appellant for the purposes of POCA. Although Count 1 on the indictment spanned the period from November 2003 to August 2004, the prosecution put its case on the basis that the appellant was involved only from May to August 2004. There was a substantial overlap between the three counts and the jury had been directed that a conviction on Count 1 would inevitably lead to convictions on Counts 2 and 3. These matters were relevant to the issue as to whether the appellant had a “criminal lifestyle” under the Act. The position adopted by the Crown in limiting the benefit figure to the evaded VAT was realistic and sensible. The defence had no choice but to accept that the VAT evaded constituted benefit. Consequently, the total benefit from particular criminal conduct on Counts 1 and 2 was £5,175,277.[16]On the issue whether the appellant had a “criminal lifestyle”, the focus of the prosecution case was Count 1 and, in one sense, Counts 2 and 3 could be said to have added little by way of additional allegations. However, there was no doubt that the jury accepted the prosecution case in full, had rejected the appellant’s evidence, and was sure of his guilt in respect of the earlier transactions. Whether the appellant had a criminal lifestyle was a straightforward issue of fact. The offences in Counts 2 and 3 were both committed over a period of at least six months as was demonstrated by the facts that led to his conviction on those counts. He had also benefited from that conduct by more than £5,000 and therefore the conclusion had to be that he did have a criminal lifestyle under section 75(2)(c). The assumptions therefore had to be applied unless they were shown to be incorrect or there was a serious risk of injustice.[17]The appellant’s assertions as to the origin of his funds and properties were unsupported by evidence on oath. The contents of his section 17 statement could not be discounted entirely but it could not be as persuasive as sworn evidence.[18]In respect of credits to the appellant’s bank account totalling £111,033, no evidence had been called to provide an explanation for these credits. No serious risk of injustice had been identified and therefore the assumption was made that the sum was benefit resulting from general criminal conduct.[19]In respect of the property at 25 Ferndale Avenue, Hounslow, there was no evidence as to the source of the balance of £42,220. The appellant’s responses asserted that it was derived from the remortgage of 5 Blenheim Place, but none of the underlying documentation had been produced or seen. The source of the sum remained unexplained. There was insufficient material to rebut the assumption in respect of the £42,220. As the appellant’s wife had a half share in the property, the sum of £21,110 would form part of the appellant’s general benefit.[20]The Judge also held that the appellant’s half share in the property at 16 Channel Close formed part of the general benefit. He ruled that a further eight properties did not form part of the appellant’s general benefit.[21]The total benefit figure from both particular and general criminal conduct was held to be £5,320,420.[22]In respect of the available amount, it remained the law that the burden lay with the appellant to satisfy the Court that the realisable amount was less than the benefit. If the appellant failed to place clear and cogent evidence before the Court then the Court must decide that the recoverable amount was equal to the benefit. It was not unfair or oppressive because the extent of the appellant’s assets was within his own knowledge and may be unknown to others. He was not required to prove anything to the criminal standard. The appellant was given every opportunity to provide evidence but, having received advice and being aware of the law and the potential consequences, he made an informed decision not to give or call evidence on oath. The consequence of that decision was that the appellant had failed to show that the available amount was less than the benefit figure. Consequently the available amount was held to be £5,320,420.

The issues on this appeal

[23]On behalf of the Appellant, Mr Eissa submitted:(1) Section 76(5) POCA creates a rebuttable presumption: the court must have regard to the factual position in order to ascertain whether the appellant did in fact obtain benefit as a result of his pecuniary advantage. The appellant should not be taken to have received a benefit if it is in fact entirely notional. There should be a uniformity of approach in confiscation cases, whether based on the concept of obtaining benefit or a pecuniary advantage.(2) It had been unfair, disproportionate and wrong to have treated the Appellant as if he had obtained the VAT evaded in the MTIC conspiracy.(3) The judge had been wrong to find that the Appellant had had a criminal lifestyle for the purposes of POCA.(4) The judge should not have found that the transactions in the earlier period, which had taken place before 20 April 2004, when the Appellant was a director of High Profile Ltd, but on his instructions, resulted in his obtaining a pecuniary advantage.(5) The judge should have accepted the evidence of the solicitor, Mr Saujani, as to the origin of the sum of £45,427 used in the purchase of 25 Ferndale Avenue.(6) It had been unfair to have treated the Appellant as having hidden assets representing the total amount of VAT lost: it was common ground that he had not been the principal conspirator, and that amount must have been shared among others.[24]On behalf of the prosecution, Mr Marshall submitted that the judge had been entitled to make the findings and arrive at the conclusions he did for the reasons he gave. Discussion (1). Pecuniary advantage: the effect of section 76(5)[25]The Appellant’s submissions on the effect of section 76(5) would emasculate that provision. The Act distinguishes between the obtaining of property and the obtaining of a pecuniary advantage, and the subsection requires the Court to treat an offender who obtains a pecuniary advantage to be treated as if he had obtained a sum of money equal to the value of that advantage. It is accepted by the Appellant that he did obtain a pecuniary advantage by reason of the evasion of the VAT liability, and he must be treated, therefore, as having received a sum of money equal in value to that VAT liability. Section 76(5) does not create a rebuttable assumption: it is mandatory. There is nothing in the opinion of the Appellate Committee of the House of Lords in May [2008] UKHL 28 [2008] 1 AC 1028 to justify this Court in construing the Act differently.[26]Moreover, in the circumstances of the present case, there is no unreality or unfairness in the application of section 76(5). The pecuniary advantage was translated into money: in the course of the MITC conspiracy, the VAT was paid by HMRC and remitted abroad. Furthermore, the appellant’s company was entitled to receive from AVAH the VAT on the goods it sold to that company. He diverted the sums of VAT payable to his own company by AVAH from his company by instructing AVAH to remit it abroad. Thus, it is entirely appropriate to treat him as having received a sum of money equivalent to the amount of that VAT. (2). Criminal lifestyle[27]The prosecution’s case was that the Appellant had a criminal lifestyle for the purposes of POCA by reason of the application of section 75(2)(c):
“(1) A defendant has a criminal lifestyle if (and only if) the following condition is satisfied. (2) The condition is that the offence (or any of the offences) concerned satisfies any of these tests— … (c) it is an offence committed over a period of at least six months and the defendant has benefited from the conduct which constitutes the offence.”
[28]The judge rightly held, as the prosecution had conceded, that the issue whether the appellant had a criminal lifestyle in the present case depended on whether he had in fact on the evidence committed an offence over a period of at least 6 months, and that the period stated in the indictment was irrelevant for this purpose. However, he held that counts 2 and 3 covered the entirety of the period from November 2003 to August 2004, and he was sure that the jury had found that the Appellant had been guilty of the offences charged in those counts in the first period of his offending, between November 2003 and May 2004, as well as the later period. We have no doubt that the judge was entitled to come to this conclusion. The Appellant had been under a duty to account for the VAT payable to High Profile Ltd throughout the period from November 2003 to August 2004. He never did so. On the basis that his failure to account for VAT was dishonest, which is what the jury and the judge found, he committed the offences of cheating and of fraudulent trading over the entire period. This ground of appeal therefore fails. (3). Pecuniary advantage during the earlier period[29]Mr Eissa accepted that once the Appellant became a director of High Profile Ltd, and used it dishonestly, it was appropriate to pierce the corporate veil and treat its transactions as his, and the pecuniary advantages it obtained as his. However, he sought to argue that in the earlier period of trading, when the Appellant was not at least formally a director of the company, it was wrong to treat him and the company as one.[30]Mr Eissa’s difficulty in this connection is that this point was not taken before the judge. It is understandable, as we said during the hearing, that this point was not taken, since it is only since the judgment of this Court in White [2010] EWCA Crim 978 that, where the pecuniary advantage obtained by a defendant is said to be the evasion of a liability, the necessity for the defendant being personally liable for the liability which is dishonestly evaded has been appreciated. Be that as it may, since it is accepted that the earlier transactions were carried out on the Appellant’s instructions, it was for him to raise the issue as to whether his influence over the company at that stage was such as to justify treating him and the company as one. Since the issue was not raised, the evidence was not investigated and the requisite findings of fact were not made. It is now too late for this issue to be raised. (4). The written evidence of Mr Saujani[31]In our judgment, the judge was right to reject this evidence. Mr Saujani could have been called to give evidence; if reluctant, the witness summons issued by the Appellant could have been served on him; and the underlying documents, which must have existed, showing the source of the moneys in question could have been produced. In the absence of that documentation, it would have been wholly wrong to have accepted the statement made by the solicitor. (5). The alleged unfairness of the confiscation order[32]Mr Eissa submitted that it was unfair for the Appellant to have been found to have hidden assets, particularly in as great a sum as implied by the confiscation order made against him. It was unfair, and oppressive, for the judge to have required him to prove a negative, namely that he had no assets other than those disclosed.[33]We disagree. The judge, whose findings and conduct of the confiscation hearing demonstrate conspicuous fairness to the Appellant, went to great lengths to ensure that the Appellant was aware of the consequences of his not giving evidence in the confiscation hearing. He adduced no evidence to displace the statutory presumptions. It was inevitable that the judge would make the order he did.

Conclusion

[34]For the reasons set out above, the appeal will be dismissed.