“Missing trader intra-community (or MTIC) fraud typically involves the following: 1 A person registered for VAT (a “Defaulter”) imports taxable goods into the United Kingdom from a supplier in another EU member state (an “EU trader”). The Defaulter does not pay VAT to the vendor because such imports are zero-rated. 2 The Defaulter then sells the goods (at a small profit) to another person registered for VAT in the United Kingdom (a “Buffer”), charging VAT on the consideration for such sale. However, payment for the said goods is (either in whole or in substantial part) not made to the Defaulter but to a third party. 3 The goods may then be re-sold one or more times to other persons registered for VAT in the United Kingdom, with VAT being charged on the consideration for each such sale. 4 Ultimately, the goods are sold and exported by a person registered for VAT in the United Kingdom (a “Broker”) to a purchaser in another EU member state. No VAT is charged in respect of such sale because it is zero-rated for the purposes of VAT. 5 The Broker claims repayment from the Claimants of the input tax charged on its acquisition of the goods. 6 The Defaulter fails to account to the Claimants for the output tax charged on its sale of the goods. 7 17.5% of the price for which the Defaulter sells the goods is thereby extracted from the Claimants. 8 The business-transaction chains commonly involve back-to-back transactions in quick succession at small mark-ups (save for the export transaction, in which the exporter usually charges a significantly greater mark up). 9 The taxable goods traded are usually computer components or (as in all cases relevant to the present claim) mobile phones. 10 Participants are often companies with high turnovers but little capital.” 1 A person registered for VAT (a “Defaulter”) imports taxable goods into the United Kingdom from a supplier in another EU member state (an “EU trader”). The Defaulter does not pay VAT to the vendor because such imports are zero-rated. 2 The Defaulter then sells the goods (at a small profit) to another person registered for VAT in the United Kingdom (a “Buffer”), charging VAT on the consideration for such sale. However, payment for the said goods is (either in whole or in substantial part) not made to the Defaulter but to a third party. 3 The goods may then be re-sold one or more times to other persons registered for VAT in the United Kingdom, with VAT being charged on the consideration for each such sale. 4 Ultimately, the goods are sold and exported by a person registered for VAT in the United Kingdom (a “Broker”) to a purchaser in another EU member state. No VAT is charged in respect of such sale because it is zero-rated for the purposes of VAT. 5 The Broker claims repayment from the Claimants of the input tax charged on its acquisition of the goods. 10 Participants are often companies with high turnovers but little capital.”
“..The overriding objective is that the court should deal with cases justly. That includes, so far as practicable, ensuring that each case is dealt with not only expeditiously but also fairly. Amendments in general ought to be allowed so that the real dispute between the parties can be adjudicated upon provided that any prejudice to the other party or parties caused by the amendment can be compensated for in costs, and the public interest in the efficient administration of justice is not significantly harmed. .. ”
“(2) In this section a new claim means any claim by way of set-off or counter-claim, and any claim involving either— (a) the addition or substitution of a new cause of action; or (b) the addition or substitution of a new party; and “third party proceedings” means any proceedings brought in the course of any action by any party to the action against a person not previously a party to the action, other than proceedings brought by joining any such person as defendant to any claim already made in the original action by the party bringing the proceedings. (3) Except as provided by section 33 of this Act or by rules of court, neither the High Court nor any county court shall allow a new claim within subsection (1)(b) above, other than an original set-off or counterclaim, to be made in the course of any action after the expiry of any time limit under this Act which would affect a new action to enforce that claim. For the purposes of this subsection, a claim is an original set-off or an original counterclaim if it is a claim made by way of set-off or (as the case may be) by way of counterclaim by a party who has not previously made any claim in the action. (4) Rules of court may provide for allowing a new claim to which subsection (3) above applies to be made as there mentioned, but only if the conditions specified in subsection (5) below are satisfied, and subject to any further restrictions the rules may impose. (5) The conditions referred to in subsection (4) above are the following— (a) in the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action; and (b) in the case of a claim involving a new party, if the addition or substitution of the new party is necessary for the determination of the original action.” (a) the addition or substitution of a new cause of action; or (a) in the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action; and (b) in the case of a claim involving a new party, if the addition or substitution of the new party is necessary for the determination of the original action.”
“The court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings.”
“simply a factual situation the existence of which entitles one party to obtain from the court a remedy against another person … [as distinct from] a form of action ... used as a convenient and succinct description of a particular category of factual situation”.”
“..It makes plain that a claim and a cause of action are not the same thing. It follows, as Mr Croally argued, that an originally pleaded ‘factual situation’ may disclose more than one cause of action, although one of them may not be individually categorised as such or the subject of a claim for a separate remedy. However, as Mr Browne-Wilkinson submitted, it does not follow that a claim so categorising it and/or seeking a remedy for it made for the first time by amendment is the addition of a new cause of action so as to render it a new claim. That the draftsmen of section 35 and Ord 20 r 5 had the distinction in mind is underlined by their respective provision for new claims by reference to substituted new causes of action, as well as additional new causes of action. The remedy claimed – ‘any claim’ – may or may not be the same; what makes the claim ‘a new claim’ is the newness of the substituted cause of action. Thus, a claim for damages is a new claim, even if the same amount as originally claimed, if the claimant seeks, by amendment, to justify it on a different factual basis from that originally pleaded. But it is not, even if made for the first time, if it does not involve the addition or substitution of an allegation of new facts constituting such a new cause of action.”
“"Cause of action" has been held from the earliest time to mean every fact which is material to be proved to entitle the plaintiff to succeed, - every fact which the defendant would have a right to traverse.”
“..I do not think that Diplock LJ was intending a different definition from that of Brett J. However it is formulated, only those facts which are material to be proved are to be taken into account. The pleading of unnecessary allegations or the addition of further instances or better particulars does not amount to a distinct cause of action. The selection of the material facts to define the cause of action must be made at the highest level of abstraction. ..”
“As I see it, the exercise which is required is the comparison of the pleading in its state before the proposed amendment and the pleading in its amended state. I do not think that it assists to look at the endorsement on the writ (see Steamship Mutual at p 97 per May LJ). What must be examined is the pleading of the essential facts which need to be proved. To define the cause of action the non-essential facts must be left out of account as mere instances or particulars of essential facts. That is what I understand Millett LJ to have meant by stating that the selection of material facts must be made at the highest level of abstraction. Thus, to take the example provided by the facts in Letang v Cooper[1965] 1 QB 232 ,[1964] 2 All ER 929 discussed by Millett LJ at p 405 of the former report, the facts material to be proved to constitute the cause of action for trespass to the person did not include whether the trespass was intentional or unintentional.”
“[131] While it is good sense not to be pernickety about pleadings, the basic requirement that material facts should be pleaded is there for a good reason—so that the other side can respond to the pleaded case by way of admission or denial of facts, thereby defining the issues for decision for the benefit of the parties and the court. Proper pleading of the material facts is essential for the orderly progress of the case and for its sound determination. The definition of the issues has an impact on such important matters as disclosure of relevant documents and the relevant oral evidence to be adduced at trial. In my view, the fact that the nature of the grievance may be obvious to the respondent or that the respondent can ask for further information to be supplied by the claimant are not normally valid excuses for a claimant's failure to formulate and serve a properly pleaded case setting out the material facts in support of the cause of action. If the pleading has to be amended, it is reasonable that the party, who has not complied with well-known pleading requirements, should suffer the consequences with regard to such matters as limitation.”
“The policy of section 35 of the 1980 Act was that, if factual issues were in any event going to be litigated between the parties, the parties should be able to rely upon any cause of action which substantially arose from those facts.”
“It is common ground that there are two types of actionable conspiracy, conspiracy to injure by lawful means and conspiracy to injure by unlawful means. The first is sometimes described simply as a conspiracy to injure and the second as a conspiracy to use unlawful means: see eg Clerk & Lindsell on Torts, 17th Edn, para 23-76. In our view they are both conspiracies to injure and their ingredients are the same, with one crucial difference. In both cases there must be conspiracy to injure the claimant, but in the first case (in which the means employed would otherwise be lawful) the predominant purpose of the conspiracy must be to injure the claimant whereas in the second case, although the defendant must intend to injure the claimant, injury to the claimant need not be his predominant purpose. We shall treat them as different torts, although, as it seems to us, they are better regarded as species of the same tort. It matters not. For present purposes we would define them as follows: 1. A conspiracy to injure by lawful means is actionable where the claimant proves that he has suffered loss or damage as a result of action taken pursuant to a combination or agreement between the defendant and another person or persons to injure him, where the predominant purpose of the defendant is to injure the claimant. 2. A conspiracy to injure by unlawful means is actionable where the claimant proves that he has suffered loss or damage as a result of unlawful action taken pursuant to a combination or agreement between the defendant and another person or persons to injure him by unlawful means, whether or not it is the predominant purpose of the defendant to do so. We shall call them a “lawful means conspiracy” and an “unlawful means conspiracy” respectively.”
“A further feature of the tort of conspiracy, which is also found in criminal conspiracies, is that, as the judge pointed out at page 124, it is not necessary to show that there is anything in the nature of an express agreement, whether formal or informal. It is sufficient if two or more persons combine with a common intention, or, in other words, that they deliberately combine, albeit tacitly, to achieve a common end. Although civil and criminal conspiracies have important differences, we agree with the judge that the following passage from the judgment of the Court of Appeal Criminal Division delivered by O'Connor LJ in R v Siracusa (1990) 90 Cr App Rep 340, [1989] Crim LR 712 at page 349 is of assistance in this context: “Secondly, the origins of all conspiracies are concealed and it is usually quite impossible to establish when or where the initial agreement was made or when or where other conspirators were recruited. The very existence of the agreement can only be inferred from overt acts. Participation in a conspiracy is infinitely variable: it can be active or passive. If the majority shareholder and director of a company consents to the company being used for drug smuggling carried out in the company's name by a fellow director and minority shareholder, he is guilty of conspiracy. Consent, that is agreement or adherence to the agreement, can be inferred if it is proved that he knew what was going on and the intention to participate in the furtherance of the criminal purpose is also established by his failure to stop the unlawful activity.”
“Although my conclusion on the issue of unlawful means makes it unnecessary to decide the point, I would support Arden LJ's view at 127 that it is a defence to an action for conspiracy to injure by unlawful means if the Defendant not only acted to protect his own interests, but did so in the belief that he had a lawful right to act as he did. Just as the tort of conspiracy to induce breach of contract is not committed if the Defendant believes that the outcome sought by him will not involve a breach of contract (Mainstream v Young), so a Defendant should not be liable for conspiracy to injure by unlawful means if he believes that he has a lawful right to do what he is doing. This is consistent with Lord Hoffmann's comment in the OBG case[2008] 1 AC 1 para 56, when considering the tort of causing injury by unlawful means, that the common law in this area is designed only to enforce basic standards of civilised behaviour.”
“3. Conspiracy to cheat the Public Revenue 3.1 Between July 2000 and November 2001 Mr Uddin together with Benno Mischke and other persons unknown agreed to set up transactions within the United Kingdom and in other EU member states whereby goods were traded between companies in such a way that repayments of VAT would be claimed from and paid by the Commissioners on the basis that genuine transactions were in fact occurring and that VAT was properly being accounted for by the companies concerned in the transactions. 3.2 This system of transactions set up by Mr Uddin involved the “zero rated” purchase of mobile telephone from EU traders (generally from a company under the control of Mr Mischke, the apparent circulation of the telephones through companies under his control (including Cellcom), the sale by Cellcom to exporters and the sale of the telephones back (at a “zero rated” price) to the original EU suppliers. The telephones would then be “re-circulated” through the same companies in subsequent transactions. The companies importing the telephones would produce invoices purporting to charge VAT to their customers but would not account for the tax shown on those invoices to the Commissioners. The exporters would receive on each re- circulation a repayment of VAT from the Commissioners which would itself be passed through the chain (via Cellcom) and be diverted to accounts under the control of Mr Uddin and his associates. 3.3 Between July 2000 and November 2001 repayments were made to exporting companies purchasing from Cellcom amounting to not less than£112,717,000 . During the same period the companies in the chain controlled by Mr Uddin and his associates accounted to the Commissioners for VAT in the sum of approximately£2,717m . The sum paid out by the Revenue which has not been accounted for is not less than£110m . By reason of the matters aforesaid the Commissioners and the Public Revenue have suffered loss and damage. …”
“repayments of VAT would be claimed from and paid by the Commissioners on the basis that genuine transactions were in fact occurring and that VAT was properly being accounted for by the companies concerned in the transactions”
“The business carried on by Cellcom had no legitimate economic purpose. Its sole purpose was to defraud HMCE. The transactions in which it was involved were not conducted with a view to genuine trading in mobile phones but for the purposes of a obtaining payment from exporters (who had received tax credits in circumstances where such credits should not have been paid) and b the retention of corresponding output tax charged by the missing traders.”
“The agreement was unlawful in that it involved (a) the commission of the offence of cheating the Public Revenue; (b) the commission of offences under s.72 VATA; … (e) fraud.” a obtaining payment from exporters (who had received tax credits in circumstances where such credits should not have been paid) and b the retention of corresponding output tax charged by the missing traders.” (a) the commission of the offence of cheating the Public Revenue; (b) the commission of offences under s.72 VATA; (e) fraud.”
“The transactions were set up by Mr Uddin and his associates arranging i) for goods to be despatched to London by the EU traders ii) for those goods to be held by freight forwarders in the first instance in the name of the missing trader iii) thereafter for the goods to be held in the name of the primary buffers (Sisley and Silverwell) iv) for the goods to be thereafter held in the name of Cellcom v) for the goods to be thereafter held in the names of the exporting brokers vi) for the goods to be thereafter to be sold back to the EU traders and delivered back to them vii) for VAT invoices to be prepared purporting to evidence these transactions viii) for the exporting brokers to make repayment claims in the sums charged as VAT in the invoices addressed by Cellcom to them ix) for the missing traders not to account for VAT shown on the invoices issued by them to the primary buffers”
“The transactions involved the apparent ‘buying’ and ‘selling’ of telephones. The circulation of the telephones was ‘apparent’ and the sales transactions were contrived in that the telephones were not delivered to the parties purporting to buy them but retained by the freight forwarders until such time as they were despatched back to the original consignors in the EU. In the case of the missing traders the goods were not paid for by them. Sums were remitted as third party payments through the accounts of the primary buffers, Sisley and Silverwell.”
“The companies in question who formed the transaction chain were under the control of Mr Uddin and/or Mr Golechha or were acting under their direction or in combination with them – see drafted amended Particulars of Claim. Mr Uddin and Mr Golechha were organisers of the conspiracy.”
“3. Conspiracy to cheat the Public Revenue 3.1 Between January 2001 and November 2001 Mr Uddin, the Second and Fourth Defendants conspired together with (a) the EU traders, (b) the Defaulters, (c) the other Buffers, (d) the Brokers and (e) Mr Benno Mischke, alternatively with one or more of them, with the object or purpose of inflicting harm on the Claimants as an end in itself or as a means to another end, to injure the Claimants by unlawful means (and which the conspirators knew to be unlawful), namely: 3.1.1 contravention by the Defaulters of their obligation to account for VAT on their sale of the goods under section 25 of the 1994 Act and/or paragraph 5 of Schedule 11 to the said Act and/or regulation 40 of theValue Added Tax Regulations 1995 ; and/or 3.1.2 the commission by the Defaulters and/or the Brokers of the common law offence of cheating the revenue; and/or 3.1.3 the commission by the conspirators of offences under section 72 of the 1994 Act.”
“If any person acquires possession or deals with any goods, or accepts the supply of any services, having reason to believe that VAT on the supply of the goods or services, on the acquisition of the goods from another member State or on the importation of the goods from a place outside the member States has been or will be evaded. ..”
“In pursuance of the said conspiracy”
“an action cannot be taken pursuant to a conspiracy if it does not fall within the class of matters that it was conspired would be done”
“The basic purpose of pleadings is to enable the opposing party to know what case is being made in sufficient detail to enable that party properly to prepare to answer it. To my mind it seems that in recent years there has been a tendency to forget this basic purpose and to seek particularisation even when it is not really required. This is not only costly in itself, but is calculated to lead to delay and to interlocutory battles in which the parties and the Court pore over endless pages of pleadings to see whether or not some particular point has or has not been raised or answered, when in truth each party knows perfectly well what case is made by the other and is able properly to prepare to deal with it. Pleadings are not a game to be played at the expense of the litigants, nor an end in themselves, but a means to the end, and that end is to give each party a fair hearing. Each case must of course be looked at in the light of its own subject matter and circumstances. Thus general statements to the effect that global or composite claims are embarrassing and justify striking out, to be found for example in Hudson 11th Ed. paragraph 8–204 are not automatically applicable to every case. With regard to the particular pleadings in question, I remain unpersuaded that either McAlpines or PDP were put to any sort of material unfair disadvantage by the way the matter had been set out by the Plaintiffs.”
“The need for extensive pleadings including particulars should be reduced by the requirement that witness statements are now exchanged. In the majority of proceedings identification of the documents upon which a party relies, together with copies of that party's witness statements, will make the detail of the nature of the case the other side has to meet obvious. This reduces the need for particulars in order to avoid being taken by surprise. This does not mean that pleadings are now superfluous. Pleadings are still required to mark out the parameters of the case that is being advanced by each party. In particular they are still critical to identify the issues and the extent of the dispute between the parties. What is important is that the pleadings should make clear the general nature of the case of the pleader. This is true both under the old rules and the new rules. The Practice Direction toCPR 16 , paragraph 9.3 requires, in defamation proceedings, the facts on which a defendant relies to be given. No more than a concise statement of those facts is required. As well as their expense, excessive particulars can achieve directly the opposite result from that which is intended. They can obscure the issues rather than providing clarification. In addition, after disclosure and the exchange of witness statements pleadings frequently become of only historic interest. Although in this case it would be wrong to interfere with the decision of Eady J, the case is overburdened with particulars and simpler and shorter statements of case would have been sufficient. Unless there is some obvious purpose to be served by fighting over the precise terms of a pleading, contests over their terms are to be discouraged.”
“..would not constitute genuine commercial trading but would be carried out with the fraudulent intention that repayments of input tax should be made by the Commissioners but no corresponding payments of output tax would be made by the parties involved in the transactions. ..”
“This system of transactions set up by Mr Uddin and Mr Golechha involved: i) the “zero rated” sale of mobile telephones by EU traders (generally from a company under the control of Mr Mischke) to companies in the United Kingdom (“the missing traders”); ii) the apparent circulation of the telephones through a transaction chain comprising companies including Cellcom which were either under the control of Mr Uddin and/or Mr Golechha or who were acting under their direction or in combination with them; iii) the sale by Cellcom to exporting brokers (or on occasions intermediate buffer companies); iv) the onward sale of the telephones by the exporting brokers back (at a “zero rated” price) to the original or other EU suppliers; v) on occasions the telephones would then be “re- circulated” through the same companies in subsequent transactions.”
“The agreements between Mr Uddin, Mr Golechha, Cellcom and others constituted I) a combination or combinations to injure the Commissioners and the Public Revenue by unlawful means: II) a combination wilfully to injure the Commissioners and the Public Revenue done other than in the furtherance of any legitimate interests of the parties thereto.”
“(c) by arranging that the missing traders would not pay the debt to the Crown that arose by reason of the issue by them of tax invoices showing a supply of goods with VAT chargeable; (d) fraud and cheating”
“(i) Mr Uddin, Mr Golechha, Cellcom Limited and all those in control of the companies involved in the establishment of the transaction chains described above intended that the Revenue should suffer loss and damage by their diverting monies from the Revenue or depriving the Revenue of monies to which it was entitled; (ii) the parties to the transaction chains thereby combined together wilfully to injure the Commissioners and the Public Revenue by acts done other than in the furtherance of any legitimate interests; iii loss and damage to the Revenue resulted from the aforesaid combination.” iii loss and damage to the Revenue resulted from the aforesaid combination.”
“... the payment of the said sums to the trustees of the Bibi Settlement constituted transactions falling withinsection 423 of the Insolvency Act 1986 and were entered into by Mr Uddin and Cellcom for the purposes of putting assets beyond the reach of the Commissioners (being persons who might at some time make a claim against them or otherwise prejudicing the interests of those persons in relation to such a claim). ”
“The discretion is wide enough to enable the court, if justice so requires, to make no order against the other party to the transaction or the person to whom the preference was given. In particular, if a foreign element is involved the court will need to be satisfied that, in respect of the relief sought against him, the defendant is sufficiently connected with England for it to be just and proper to make the order against him despite the foreign element. … Thus in considering whether there is a sufficient connection with this country the court will look at all the circumstances, including the residence and place of business of the defendant, his connection with the insolvent, the nature and purpose of the transaction being impugned, the nature and locality of the property involved, the circumstances in which the defendant became involved in the transaction or received a benefit from it or acquired the property in question, whether the defendant acted in good faith, and whether under any relevant foreign law the defendant acquired an unimpeachable title free from any claims even if the insolvent had been adjudged bankrupt or wound up locally. The importance to be attached to these factors will vary from case to case. By taking into account and weighing these and any other relevant circumstances, the court will ensure that it does not seek to exercise oppressively or unreasonably the very wide jurisdiction conferred by the sections.”
“Secondly, this criterion would leave outside the scope of the legislation a transaction by a debtor with an overseas company wholly controlled by him. Siphoning money abroad in this way is a typical case to which the new legislation must have been intended to apply.”
“Thirdly, and connected with the second point, it seems to me that the proposed new claims are pleaded very sparsely. This is connected with the second point, because, if the amendments were allowed, the sparseness of the pleading would render the onerousness of the task of the defendants all the greater. However, quite apart from this, particularly where complex new heads of damages are sought to be raised by a claimant very late, I think that he is under a duty to plead the case particularly fully, or at least to explain the nature of his case pretty fully in supporting evidence. In the present case, for instance, the valuation ascribed to the various properties in 1991, the likely investment and development values of the properties, and the likely costs and profits of projected development, are included in the baldest of terms, and appear to be based purely on Mr Hicks's assessment, and not that of an independent chartered surveyor. There is therefore no explanation as to how the figures are arrived at. Robson Rhodes' solicitors wrote to Mr Hicks's solicitors as long ago as March 2001 to ask how Mr Hicks had arrived at his valuations and assessment of his loss of opportunity, as well as asking for details of the guarantees and personal liabilities, whether those liabilities still existed, what steps had been taken to enforce them, and how the defendants' actions were said to have caused the loss. In a further letter of 11 April, the solicitors to Robson Rhodes wrote repeating their request for particulars, and also pointing out that the valuations ascribed to some of the six properties in the proposed amended Counterclaim were different from those contained in a statement of affairs prepared by Mr Hicks in March 1992, and seeking an explanation. While answers were provided to a very limited degree by Mr Hicks's solicitors on 25 April, it appears to me that the sort of details and particulars which the defendants, and indeed the court, would expect to see before it could fairly decide that the amendment should be permitted despite the potential prejudice to the defendants, simply remain unprovided.”