QB-2020-004171 - [2025] EWHC 2773 (KB)

Having started the analysis with the conclusion that HMRC was not a prosecutor, there is an artificiality in considering the next stage of reasonable and probable cause.The case that there was no reasonable ground on the part of HMRC for the prosecution is wholly or in part based on a case that HMRC deliberately withheld the above-mentioned emails so as to conceal a fundamental part of the defence of C1 and C2. There are several fallacies in this case. The suggestion that every aspect of the facts including full disclosure should have taken place at the charging stage is incorrect and ignores the law as summarised by Lambert J in Rudell as set out above. The fact that HMRC may not have produced all of its disclosure to the CPS by the time of the decision to charge does not indicate that documents had been withheld deliberately or by accident. This was a case there was prima facie evidence of each element of the offences in respect of which it was intended to charge C1 and C2.

The Claimants submitted that there must be positive evidence that the CPS would have prosecuted if they had such documents as were missing at the charge stage: see the Claimants’ skeleton argument at [53]. This overstates the burden on the prosecutor, and fails to give adequate weight to the incidence of the burden of proof in a malicious prosecution case.

In any event, even if the submission were a good one, it is answered in this case by the willingness of the CPS to continue the prosecution even when all of these documents were available to them. Even on the Claimants’ case, the material had been disclosed to C1 and C2 by January 2017. It follows from this that there is no reason to conclude that these documents made or may have made the difference between the decision to prosecute and a decision not to prosecute. There is no objective material to support the contention that this material would have demonstrated to the CPS that “there was no credible evidence of knowing or fraudulent evasion.”

As the Judge in the Crown Court was satisfied at the start of the trial, the CPS checked its disclosure by prosecuting counsel personally reviewing all of the material. Despite the matter having been reviewed including the documents said to have been missing at the charging stage, the CPS continued with the prosecution.

A point in respect of reasonable and probable cause is whether the material has satisfied independent and reasonably experienced counsel. That has occurred in this case. The prosecutions proceeded to trial on two occasions and involved two different highly experienced counsel instructed by the CPS.

In responding to the costs application in the criminal proceedings, the prosecution confirmed that “The case was reviewed by a reviewing lawyer, passed onto a grade 4 counsel of a number of years experience to prosecute the initial trial and then grade 3 counsel to prosecute... this full some way short of an exceptional case, one in which it can be said that “no reasonable CPS reviewing lawyer” would have made the same decision to prosecute and/or continue to prosecute”.

The CPS, with the assistance of Counsel throughout the prosecution process, remained of the view that the Full Code Test was met throughout the prosecution and the two trials both before and after disclosure of the material listed in paragraph 97 of the RRAmPoC. As noted above, it was not necessary to prove that the Full Code Test was met at all because this went beyond the reasonable and probable cause test. However, the belief that it had been met is evidence to the effect that the lower reasonable and probable cause test had been met.

The Claimants were not prosecuted for the failure of LFCP to pay beer excise duty. They were prosecuted for the failure to pay other taxes, namely PAYE, National Insurance, VAT, Student Loans Company deductions and income tax liabilities relating to C1 and C2. The amount was considerable comprising about £727,203 over a period of three years from December 2011 to December 2014. During the period of 2013 and 2014, there were ongoing confiscation proceedings. Neither C1 nor C2 provided any meaningful response or explanation at interview for the non-payment of these taxes. In applying the reasonable and probable cause, that must be by reference to the subject of the prosecution and not to any issue relating to the non-payment of Beer Duty.

In considering the matter objectively and not simply subjectively, other objective indicators as to why a prosecution was objectively justified are as follows:

The failure to pay over years the taxes identified above other than the Beer Duty amounted to over £727,000. There were considerations about the public interest in a prosecution in respect of such a large amount of tax arising out of a business with such a large turnover over a period of years. As noted in the factual summary above, this was a brewery which had employed many tens of staff, had brewed 100 barrels a week, had an annual turnover of about £2 million equating to VAT in the region of £800,000 in two years of operation. The relevant businesses, LFCP and LFB had either failed to submit returns or submitted nil returns leading to nil payments or payments for negligible sums. Following various assessments or negligible payments, payments were made in respect of the period between January 2012 and October 2014 of about £25,000, being a tiny fraction of the sum which would have been payable if proper returns had been completed.

There is evidence from C1 in which it would have been expected that there would have been an explanation as to the circumstances in which there was virtually non-payment of VAT and other taxes. The evidence instead is about how enormously successful the business was such that at the time of seizure, the business was worth several millions of pounds. Its media features are referred to, and then followed by the loss of clients, staff and business said to the impact of seizure. In a witness statement dated 28 September 2023, C1 related how wealthy his parents were and how they were willing to support the business. Despite this, the evidence adduced by the Claimants fails to address how they allowed these vast debts to accumulate, how they never sorted out the alleged accountancy and business management systems and why they did not even on the arrests sort out the arrears by making unconditional payments. Despite voluminous evidence, these core issues raised in the evidence remain without satisfactory responses from the Claimants. This has fed the belief of HMRC that the businesses were at the material time fraudulently evading tax.

There was correspondence in January 2017 relating to a proposed adjournment of the trial to enable unpaid tax to be paid from the proceeds of the sale of the business. The company which owned the business had been placed into administration on 9 March 2016 but LFB Trading Limited was set up by C1's father in order to prevent the business collapsing. The father had entered into negotiations to sell that company and an exchange of contracts was imminent in which the proposed purchase price was around £4 million with initial consideration of about £1.4 million. The father was willing to undertake in writing to pay from the net proceeds of sale a sum to discharge the tax liabilities.

This led to a response dated 6 August 2017 from Mr Temkin, specialist fraud prosecutor, to the following effect:

“Having considered the public interest factors yet again I am in no doubt that it remains in the public interest to carry on with the current prosecution. It is the Crown's contention - supported by current evidence - that your client evaded his fiscal obligations over a prolonged period and not only robbed the public exchequer of a great deal of vital tax revenue (nearly three quarters of a million pounds). But even cheated members of staff in relation to PAYE & NI monies which were deducted from their salaries but not accounted for to the tax authorities thereby jeopardising their rights to pension and other benefits. Moreover, your client also cheated former students out of their loan repayments thereby leaving them with the burden of discharging those loans themselves while incurring interest on the unpaid amounts. There cannot be any doubt that it is in the public interest to prosecute such behaviour.

The belated offer made on behalf of your client to pay the taxes which he has thus far singularly failed to pay is noted and he is, and should be, encouraged to pay the entirety of the taxes while they remain outstanding because he remains liable to pay them. This he should do as a matter of urgency. It is noted that the offer that has been made is in any event not an unconditional offer of immediate payment but is conditional on the sale of your client’s father's business which may or may not be completed and may or may not produce sufficient net sale proceeds to discharge your client’s fiscal obligations. However, the real point is that your client has chosen to evade his tax obligations in a way that has been deliberate, long running and very costly both to the state and to the individuals employed by his business there cannot be any doubt that it is in the public interest to prosecute those who commit such anti-social actions.”

The above showed not only that there was objectively a reasonable and probable cause, but also that the subjective intention was satisfied, namely a belief by the prosecutor CPS in the guilt of C1 and C2. There is no reason to believe that HMRC, although not a prosecutor, did not associate itself with that approach, namely a subjective view that HMRC had been cheated and that the public interest was to bring and to pursue the prosecution.

This suffices to deal with the issue of reasonable and probable cause. It is not necessary to consider separately the issue of the strength or otherwise of the case as regards the Beer Duty since the fraudulent evasion was not about Beer Duty. Even in respect of Beer Duty, the case of the Claimants that there was an oral agreement to brew as an unregistered entity is not straightforward because of the absence of written evidence of permission. If permission had been granted orally, it would be expected to be followed by C1 and C2 expeditiously progressing any registration application and paying any taxes arising from the brewing of beer at the Premises. In fact, the delay was one of years as is apparent from the summary of the facts set out above.

Such documents as there are indicate a position contrary to such a case. In a record of a visit of 17 October 2012, it was written by Mr Ansah on behalf of HMRC that C1 had said that he was told that he could continue whilst he waited for approval, but Mr Ansah said that he could not rely on verbal permission. He needed to get authorisation in writing. He told C1 that he needed to stop brewing for the next few days whilst expert advice was sought. Mr Ansah asked C1 if he was selling stock and the response was that he was. C1 said that there were about 7,500 bottles in 10 pallets and 80 - 100 beer kegs. Mr Ansah mentioned that although LFCP was registered for VAT, only nil returns had thus far been submitted. C1 said that he would need to prepare profit and loss accounts. He said that his accountant was no good but that he would contact a new accountant when he had prepared his accounts.

In a letter dated 14 March 2022 from Mr Eddison-Cook of HMRC, it was stated that C1 failed to employ an accountant for two years (prior to the 6 August 2014 visit) during which he did not return tax returns. His former accountant of whom he was so critical said that he had put in place a system to allow returns to be made by C1 and his company, but that had not been used. No return was received until 4 September 2015, from which the Crown case was that there was an inference that there was no intention to discharge any of the tax liabilities and that the actions were dishonest.

Mr Ansah said that technically C1 was operating illegally. He asked C1 to send an e-mail stating why he felt justified in operating even although he did not have approval. The interview ended because C1 appeared to be in distress. Subsequently, Mr Ansah concluded internally that C1 should be allowed to continue production of beer because the long delay in dealing with the trader's brewery registration application was not their fault.

There is also a note of an interview dated 7 December 2012 by Mr Ansah and Ms Ahmed of C1. Mr Ansah went through a list of information required including current bank details, his accountant details, the end of financial year, the VAT number, current turnover, how much was being paid for the current trading premises, how many years on the lease, summary of suppliers used and what was purchased from them, purchase invoices to support this, payment details, types of beer produced and the alcohol content and other information besides. Mr Ansah asked for complete records regarding beer that had been produced. He informed C1 that he would issue an assessment for the Beer Duty outstanding prior to the company being officially registered as a brewery. C1 stated that the business was doing well and would generate profit that year.

In the record of the 6 August 2014 visit, C1 said that the Beer Duty had not been paid. When asked how much that was, he said that he was unsure but that it might be about £200,000. He said he was unsure because the computerised brewing management system was corrupted and it was producing inaccurate and changing records. He said that he had been trying to correct the computer system without success for some time. C1 was advised about the possibility that the goods on the premises may be forfeited. C1 said that that would be unfair because he had been trying to approve obtain approval and the advice which he had received from HMRC had been wrong.

In an e-mail dated 23 August 2014, C1 stated that there had been issues with the software and that he had discovered a serious error in the way in which the brewery management system had calculated the duty return. He said that although it could be fixed, there were about 4000 transactions to check and it was expected that this could be done “pretty much immediately”, although it may take “at least all next week to do it.”

The conduct in respect of the Beer Duty raised very serious issues of concern about the conduct of the Claimants. Even if there had been any oral assurance, it did not explain the conduct of the businesses over years without compliant applications, proper accounts and management systems and payment of Beer Duty. To blame HMRC for the years that passed without attending to the requests of HMRC was inadequate. To blame the accountant and the management systems might explain a very short period of time, but did not begin to explain the passage of approaching two years.

The position was much worse for the Claimants because the case against them was not about Beer Duty. It was about the VAT and other taxes. In the circumstances set out above, both the subjective and the objective tests are satisfied. The CPS and HMRC respectively believed that there had been large scale tax evasion, and that the public interest required the prosecution. Having regard to the amount at stake, to the period over which it accumulated and to the repeated attempts of HMRC to address the position which went unheeded, the objective test was satisfied. There was a plethora of reasons supporting the decision to bring and continue the prosecution. So strong is the case that there is no real prospect of the Claimants establishing that there no RPC nor is there any other compelling reason not to grant summary judgment and/or there is no reason not to strike out the case in malicious prosecution.