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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Revenue And Customs v Sunico A/S & Ors [2013] EWHC 941 (Ch) (19 April 2013) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2013/941.html Cite as: [2013] EWHC 941 (Ch) |
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CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS |
Claimants |
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- and - |
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(1) SUNICO A/S (2) SUNIL KUMAR HARWANI (3) MANGHARAM HARWANI (4) ABASCUS HOLDING ApS (formerly Sunico Holding ApS) (5) M&B HOLDING A/S (6) PT NAINA EXIM INDO (7) HASHU DHALOMAL SHAHDADPURI |
Defendants |
____________________
Case No: HC10C01636 OF 2010
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 19 April 2013
Before :
MRS JUSTICE PROUDMAN
- - - - - - - - - - - - - - - - - - - - -
Between :
THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS
Claimants
- and -
(1) SUNICO A/S
(2) SUNIL KUMAR HARWANI
(3) MANGHARAM HARWANI
(4) ABASCUS HOLDING ApS (formerly Sunico Holding ApS)
(5) M&B HOLDING A/S
(6) PT NAINA EXIM INDO
(7) HASHU DHALOMAL SHAHDADPURI
Defendants
- - - - - - - - - - - - - - - - - - - - -
David Chivers QC, Peter Shaw and Tiran Nersessian (instructed by Howes Percival) for the claimants
Abbas Lakha QC and Graham Brodie (instructed by Jeffrey Green Russell) for the 1st-5th defendants
The 6th and 7th defendants did not appear and were not represented
Hearing dates: 23/26/27/28/29/30 November 2012 and 03/04/05/06/11/12/13/14/17 December 2012
Judgment
____________________
Crown Copyright ©
Mrs Justice Proudman :
Introduction
The parties
The claim
Disclosure
The witness evidence
- On behalf of HMRC:
- Mr Roderick Stone OBE, who also gave oral evidence. He has been employed by HMRC since 1974 and, as is plain from his witness statement, he has extensive experience of dealing with MTIC fraud, other forms of VAT fraud and associated money laundering. Between 2001 and 2004, he was the MTIC fraud regional co-ordinator for Southern England, where he was responsible for implementing the strategy to combat MTIC fraud, and since October 2004, he has collaborated and advised on the development and delivery of the MTIC fraud strategy at HMRC. Notably, he is the HMRC representative on MTIC fraud related project groups sponsored by the EU Commission Tax Directorate. At the outset of these proceedings, the First to Fifth Defendants applied to have Mr Stone's evidence excluded on two grounds. First, it was said that Mr Stone's evidence was essentially expert or quasi-expert evidence and, as no order for expert evidence had been made, it ought not to be admitted. Secondly, the First to Fifth Defendants objected to parts of Mr Stone's evidence in respect of which HMRC had not given proper disclosure. In summary, I held that although Mr Stone's evidence is what I would describe as multi-purpose common form evidence, in that it deals with MTIC fraud in general rather than specifically in relation to the pleaded issues in the case, I accepted that his experience means that it is sensible to entertain his observations about MTIC fraud insofar as they assist the Court. However, I ordered that certain paragraphs should be excluded on the basis that they contain Mr Stone's opinion of Sunico's trading, and other paragraphs should be excluded because they contain tables constructed on the basis of information which had not been disclosed to the Defendants.
- Mrs Susan Ogburn, who also gave oral evidence. She has been an officer of HMRC since its formation in April 2005. Prior to that, she was an officer of Her Majesty's Commissioners of Customs and Excise ("HMCCE"), which she joined in 1974. She left HMCCE in 1983 but rejoined in 1991. She has headed HMRC's investigation into Sunico, a role which she inherited from a Ms Sarah Lang. It was apparent from Mrs Ogburn's evidence that the 719 transaction chains were constructed by a team at HMRC under the direction of Ms Lang, before Mrs Ogburn became involved in the investigation. In addition to Mrs Ogburn's witness statement, HMRC also sought to rely on an affidavit sworn by Mrs Ogburn dated 17 May 2010 in support of HMRC's application for a world-wide freezing injunction against Sunico. This purports to set out the entirety of HMRC's allegations against Sunico and thus addresses all 719 transaction chains. The First to Fifth Defendants sought to exclude this evidence insofar as it traverses beyond the Sample Chains in relation to which HMRC has not provided disclosure. In my judgment of 27 November 2012, I held that only those parts of Mrs Ogburn's first affidavit which are inextricably linked to an issue related to the Sample Chains and 12 additional example transactions upon which she relied were to be admitted. I should add that I am satisfied HMRC have provided proper disclosure in relation to these 12 examples.
- Mr Peter Sawyer, who was not called for cross-examination. He is an officer of HMRC and part of the special investigation unit within HMRC which worked to construct the transaction chains upon which HMRC's claim is based. In particular, Mr Sawyer was involved in the investigations into Riff Trading Limited ("Riff"), Fresh 'n' Clean Limited ("Fresh n Clean") and ECS84.com Limited ("ECS84"), which are the alleged Defaulters in some of the Sample Chains. In his evidence Mr Sawyer incorporates and corroborates three affidavits from Mr Kirk Butcher, Ms Julie Ward and Mr Gordon Young, all of whom were formerly involved with special investigation work at HMRC in relation to Riff, Fresh n Clean and ECS84.com respectively.
- Ms Heather Rowe, who was not called for cross-examination. She is an officer of HMRC and part of HMRC's special investigation into Fone Rack Cellular Accessories Limited ("Fone Rack"), another alleged Defaulter in some of the Sample Chains. Ms Rowe's statement exhibits and corroborates an affidavit from Mr Stephen Cooper, who also worked on HMRC's special investigation into Fone Rack.
- Mr Michael Jarvis, who was not called for cross-examination. He also is an officer of HMRC, and was previously the investigating officer in respect of Panther Services (UK) Limited ("Panther"), another alleged Defaulter in some of the Sample Chains. He exhibits and confirms the contents of an affidavit he swore in relation to a winding-up petition and application for the appointment of a provisional liquidator in respect of Panther.
- On behalf of the Defendants:
- Mr Alex Marsden, who gave oral evidence. He is a Fellow of the Institute of Chartered Accountants in England and Wales and works in BDO LLP's forensic accounting department. Mr Marsden was instructed by the Defendants to provide a forensic accounting analysis of the Sample Chains as constructed by HMRC and, in particular, to assess whether any monies that Sunico received through the Sample Chains were the sums for which they invoiced, and/or whether Sunico received additional payments, either directly from customers or from third parties, in respect of any of the Sample Chains. He was assisted in the preparation of his witness statement by other staff at BDO LLP, who carried out their work under his supervision and control. His report draws on several key sources of information, including: a computerised copy of the Microsoft Navision CF accounting system operated by Sunico ("Navision") for the financial years ending 30 September 2005 and 30 September 2006 (the key years relating to the Sample Chains); a trial balance from Navision as at July 2004, August 2004 and September 2004; Sunico's customer accounts for 16 EU customers; selected bank statements and financial statements; and discussions with various Sunico employees. His evidence is in the odd category of being neither expert evidence nor direct evidence of fact.
- HMRC did not formally object to the admission of Mr Marsden's evidence. Indeed, Mr Chivers accepted before Warren J that, to the extent Mr Marsden performed no more than what was essentially a number crunching exercise of the relevant data, his evidence would assist counsel in expediting the submissions on the evidence. It is, to borrow Mr Lakha's description, a convenient mechanism by which to put the underlying material before the Court. I note however that both before Warren J and before me at trial, HMRC drew attention to the fact that parts of Mr Marsden's statement are in the form of expert evidence, in that they include his opinions and/or conclusions based on the data, making it comparable to the evidence of Mr Stone, to which the Defendants objected for similar reasons. There was a suggestion that, were the Defendants adamant that Mr Stone's evidence should be excluded in its entirety by virtue of being expert evidence, Mr Marsden's should also go out on something of a "tit for tat" basis. In the event, however, HMRC never made such an application and allowed Mr Marsden's evidence to stand. I therefore make the same point that I made in respect of Mr Stone's evidence that, to the extent Mr Marsden's evidence expresses his opinions on the documents, I discount it.
"…it would be most undesirable if the Court were too astute to construe an indication of intention to rely upon a statement as an irrevocable commitment to adduce or put that statement in evidence…a trial is…a dynamic process [which may] throw up unanticipated surprises."
The documentary evidence
The Hawk Documentation
"There was no dispute by the end of the trial that Willcom, Handycom, MSCoten and the freight forwarders who handled and stored the mobile phones, Hawk Precision Logistics Ltd ["Hawk"] and Paul's Freight Services Limited ["Paul's", a company also incidentally used by Sunico], were all involved in the fraud."
"Mr Anderson opened to the jury that the absence of MSCoten documents at the freight forwarders was further evidence of the bogus nature of that company."
"These investigations showed that Hawk through the managing director, Nicky Hooper, and an employee Diana Ayton, were in close contact with another EU supplier, that the freight forwarders were heavily involved in missing trader fraud involving EU companies located outside the UK and that steps were being taken by Hawk to mislead C&E."
"Customs reiterate that no witnesses from Paul's or Hawk would be put forward by the Crown as witnesses of truth. The Crown now takes the view that at least some of the employees of [the freight forwarders] must have been aware of the operation and indeed have played a part in what is termed "Missing Trader Inter Community Carousel" fraud."
"With all respect to Mr Anderson we have doubts about this. If the freight forwarders were as involved as was thought the removal of MSCoten documents used to fool the appellant would not be surprising….In any event two days later another intercept showed that Hawk were involved in the creation of false documents."
"[1] Hawk and Paul's were freight forwarders of choice for MTIC fraud and had been suspected of being complicit in MTIC fraud since early 2001. MTIC fraud to the value of £758,000,000 had passed through the hands of the freight forwarders, between September 2001 and September 2003. Since 2001, freight forwarders Hawk and Paul's have developed close links with major EU suppliers and involved themselves in the orchestration of carousel fraud...
[3] The freight forwarders acted as introducers of third parties into carousel frauds...
[5] Hawk and Paul's were prepared to destroy paperwork and mislead [HMRC]."
"On 1 September, Brian Turner [the senior investigative officer in Operation Venison] went to Germany and was acquainted with the substance of intercepts which revealed current participation by Hawk in fraud. That clearly went to the reliability of the Hawk witnesses. And when combined with intelligence from 2001, it made it at least very likely that Hawk had been participating in fraud in 2001. However, information about who was controlling the fraud in 2003 would not necessarily assist the Defendants in relation to fraudulent activity in 2001. Later, a transcript for 16th October made clear that Hawk were falsifying paperwork.
Two things are clear. First, whatever the situation before, the Hawk witnesses could no longer be relied on. Secondly, there was a duty of disclosure in relation to the intercept material [which revealed Hawk's participation]."
"While there was muddle and incompetence, I do not accept that these fully account for what happened in late 2003. At least after 1st September 2003, those responsible for this prosecution must have taken a decision at least to postpone informing Counsel about the intercepts, despite the fact that all concerned recognised that the Hawk witnesses could not be relied on. Why? The only conclusion that makes sense is that it was hoped that the Defence would not dispute the Hawk documents and would not otherwise ask awkward questions. There was the additional difficulty that Operation Topping [the operation by which HMRC obtained the intercept information about Hawk from Germany] would be jeopardised. I have been given no real explanation for the failure to raise the matter with Counsel on 30th September and on other occasions. If prosecuting counsel were to be kept in the dark, there must have been a preparedness to keep the defence, the judge and ultimately the jury in the dark.
And what they would be kept in the dark about was not only the status and reliability of the Hawk documents. If Hawk were active conspirators, that could affect the question of who was orchestrating the fraud."
"While we consider that it was right that Customs should disclose that there were doubts about the reliability of Hawk's documents we do not consider it reasonable to serve such a large quantity of documents at the last minute when they were available much earlier and when there were only three relevant exhibits in this appeal, which were all instructions to Hawk for the release to [sic] goods to the next purchaser."
Outline issues in the case
- First, were the Defendants parties to an unlawful means conspiracy (the "Conspiracy Issue")?
- Secondly, if the Court finds that the Defendants were parties to such a conspiracy, can HMRC prove that it has suffered loss in any of the Sample Chains? Mr Lakha added that a necessary part of this second issue must be to determine whether the Sample Chains have been accurately reconstructed by HMRC. This depends on the cogency of the evidence upon which the claim is based.
- First, I provide a general overview of the common features of MTIC fraud as described in the authorities and in the evidence, and an overview of the elements and authorities on the tort of unlawful means conspiracy.
- Secondly, I identify and discuss the parties' submissions on the Conspiracy Issue. In light of the decision by the Defendants not to call the Harwanis, this issue involves consideration of the arguments and authority on the drawing of adverse inferences.
- Thirdly, I discuss the 26 Sample Chains by reference to the documentary evidence and the parties' submissions as to the accuracy and reliability of those chains, and I address the issues of causation and loss.
- Finally, I consider the position of Mangharam and the Fourth, Fifth, Sixth and Seventh Defendants.
1. General Principles
MTIC fraud
- A VAT registered trader in one EU member state sells taxable goods to a VAT registered trader in another member state (such as the UK). The overall effect is that the importer does not suffer VAT on its import.
- The UK importer, known in MTIC parlance as a "missing trader", "hijacked trader" or "Defaulter", sells the goods to another UK trader, known as a "Buffer". When the Defaulter sells to the Buffer, it charges VAT on the supply. As the Defaulter only incurs output VAT on its supply, but has no input VAT on its own purchase from the EU supplier, it is liable to account to HMRC for the full VAT element on its sale.
- The Defaulter then fails to file a return or account for the VAT to HMRC. Sometimes it will simply go missing, meaning HMRC is unable to pursue a claim for the VAT it is owed. Alternatively, the Defaulter will direct the Buffer to pay some or all of the purchase price to a third party or third parties ("Third Party Recipients"), thereby rendering the Defaulter unable to discharge its VAT liability. Such third party payments are central to the present case.
- The first Buffer trader, or "First-line Buffer" will sell the goods on in the UK to another Buffer (a "Second-line Buffer") and may either receive payment from the Second-line Buffer and make payments up the chain of supply itself, or the First-line Buffer may direct the Second-line Buffer to make third-party payments up the chain.
- There may be a number of sales to Buffers, in order to extend the paper trail and obfuscate the underlying fraud.
- Eventually, a Buffer will sell to an exporter of the goods (the "Broker"). The Buffer may account to HMRC for VAT in the usual way, netting off the input tax on its purchase against the output tax on its sales. The amount of the VAT payable to HMRC by the final Buffer in the chain will represent the VAT on the Buffer's profit or commission.
- The Broker will then sell the goods to a purchaser in another EU member state. It will suffer no effective output tax on the export, but it will have an input tax credit in respect of its purchase from the final Buffer.
- The Broker will then submit a (frequently very large) VAT refund claim to HMRC in respect of the input tax from its purchase from the final Buffer.
- Quite often the same goods exported by the Broker will then be re-imported to the UK and the whole sequence will be repeated again. Hence the name "carousel fraud".
- It may be some time before the importer defaults on his obligation to account for the input tax he has charged and been paid. In order to avoid detection the transactions are usually effected, or said to have been effected, extremely quickly, often within the space of one day. More often than not, the transactions involve substantial sums of money passing down the chain.
- Overall, if the fraud depends upon the use of third party payments to put the money beyond the reach of HMRC, the Third Party Recipients (usually overseas companies) will receive virtually the entirety of the purchase price for the goods, including the VAT element, although each party to the fraud creams off a small percentage of the VAT as it passes on the goods.
"17. The simplest form of abuse is what the [HM Customs and Excise Commissioners] call "acquisition fraud". A business in the UK acquires goods from an EU supplier VAT free and sells them on into the United Kingdom market directly or indirectly. When it sells these goods to its UK customers it charges VAT but it fails to account to the CCE for the VAT it collects. Before the CCE catch up with it the trader simply disappears.
18. This kind of abuse is somewhat limited in that the importer who intends to defraud is actually selling the goods into the United Kingdom market. He has to find real customers or his customers do.
19. Much more significant is the second type of abuse which the CCE call "carousel fraud". Again, there is a UK importer buying from a supplier in another EU state. Again, he pays no VAT on his purchase. He then sells to a "customer" in the UK, charging VAT. That "customer" sells on to another "customer", himself charging VAT (output tax) and setting that against the tax he paid to his supplier (input tax). This may go through several traders (whom CCE call "buffers"). The last buffer in the chain does not, however sell on to ultimate UK customers. He sells back into the EU, very often to the original seller. He will have paid input tax on his purchase. This he claims "back" from CCE. None of this would matter if the original importer, who has charged output tax to the first of the buffers, were around to account to the CCE for that tax. But by now he has disappeared.
20. So on each circuit of the "carousel" 17.5% of the value of the goods is extracted from the CCE. The scheme requires high value low physical size goods – a container full of mobile phones or computer chips is just right for this. A pallet-load arrives at Heathrow, the transactions all take place quickly (perhaps in the same day) and the pallet moves out again."
- An EU supplier may sell 1,000 phones to a Defaulter for £99 each (on which no VAT is chargeable), giving a total purchase price of £99,000.
- The Defaulter will then sell the 1,000 phones to a Buffer at £100 each, charging VAT on the price (as the sale is within the UK). This gives a total purchase price of £120,000 (£100,000 for the goods, plus 20% VAT), meaning the Defaulter has made a profit of £1,000.
- The Defaulter then directs the Buffer to pay it just £1,200, being the Defaulter's profit of £1000 plus 20% VAT.
- At the same time, the Defaulter will direct the balance (i.e. £118,800) to be paid to a Third Party Recipient.
- Thus, the Defaulter has procured an overpayment from the Buffer, which has been paid to the Third Party Recipient, substantially equivalent to the Defaulter's VAT liability.
- The Third Party Recipient has therefore received a sum that lawfully ought to have been available to the Defaulter to pay to HMRC in discharge of its VAT liability.
Unlawful means conspiracy
"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."
Unlawful means
"…I derive a general assumption, too obvious to need discussion, that criminal conduct engaged in by conspirators as a means of inflicting harm on the claimant is actionable as the tort of conspiracy, whether or not that conduct, on the part of a single individual would be actionable as some other tort. To hold otherwise would, as has often been pointed out, deprive the tort of conspiracy of any real content…
…In my opinion your Lordships should clarify the law by holding that criminal conduct (at common law or by statute) can constitute unlawful means, provided that it is indeed the means … of intentionally inflicting harm."
"…the same concern does not apply where, as here, the offence exists in its very nature to protect the revenue; where its commission is necessarily, directly and intentionally targeted at and injurious to the revenue; and where its intended result is the wrongful non-payment of VAT by [the Defaulters] of statutorily recoverable VAT or the payment to [the Broker] of a VAT credit not properly due under the [Value Added Tax Act 1994]. Like others of your Lordships, I think that there would be an evident lacuna if the law did not respond to this situation by recognising a civil liability."
Loss and damage
"No statutory remedy to recover VAT or repayment of a VAT credit from [the Defendant] has been identified as available to the commissioners in this respect. [The Defendant] happens to be a company in the chain of suppliers and purchasers involved in the present alleged "carousel" fraud, and it is its overseas status and the fact that it is not a taxable person that takes it outside the statutory scheme.
…Neither the liability for VAT which [VATA] imposes on taxable and some other persons, nor the potential liability to a penalty or criminal offences which it also imposes on certain persons, including some who are not themselves taxable persons under [VATA] seem to me reasons for treating the Act as excluding or precluding the exercise of ordinary civil remedies against non-taxable persons like [the Defendant] against whom [VATA] provides no parallel statutory remedy."
(iii) Combination or agreement for a common purpose
"It may be that the alleged conspirators have never seen each other, and have never corresponded. One may have never heard the name of the other, and yet by the law they may be parties to the same common criminal agreement."
"A further feature of the tort of conspiracy, which is also found in criminal conspiracies, is that…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.
Thus it is not necessary for the conspirators all to join the conspiracy at the same time, but we agree with the judge that the parties to it must be sufficiently aware of the surrounding circumstances and share the same object for it properly to be said that they were acting in concert at the time of the acts complained of."
"If an act is done deliberately and with knowledge of its consequences, I do not think that the actor can sensibly say that he did not 'intend' the consequences or that the act was not 'aimed' at the person who, it is known, will suffer them."
Extent of knowledge
"...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."
"A defendant may procure an infringement by inducement, incitement or persuasion. But, in the present case, [the Defendant does] not procure infringement by offering for sale a machine which may be used for lawful or unlawful copying and they do not procure infringement by advertising the attractions of their machine to any purchaser who may decide to copy unlawfully".
"Selling material for the purpose of infringing a patent to the man who is going to infringe it even though the party who sells it knows that he is going to infringe it and indemnifies him, does not by itself make the person who so sells an infringer. He must be party with the man who so infringes and actually infringe."
"In my judgment there is no simple doctrinaire answer to the conundrum presented by such a case. The answer lies in a painstaking analysis of the extent to which the particular defendant shares a common objective with the primary fraudsters and the extent to which the achievement of that objective was to the particular defendant's knowledge to be achieved by unlawful means intended to injure the claimant. Although neither I nor counsel have found an authority which specifically addresses this particular difficulty, the solution to it which I have described is reflected in the following passages from Nourse LJ's judgment from Kuwait Oil at paragraph 111 [quoted above]."
2. Conspiracy
Adverse Inferences
"(1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action.
(2) If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.
(3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue.
(4) If the reason for the witness's absence or silence satisfies the court then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified."
"Despite the variety of serious allegations made in the pleadings against Mr Crawford, and the matters deposed to by the investigating accountants as calling for explanation, neither Mr Crawford nor any member of his family gave evidence before the Chief Justice. It is well settled that in civil proceedings the court may draw adverse inferences from a defendant's decision not to give or call evidence as to matters within the knowledge of himself or his employees."
"The weight to be attached to a defendant's failure to testify varies with the circumstances of the case. It is plain that in this case the Chief Justice and the Court of Appeal attached a good deal of weight to Mr Crawford's silence, and their Lordships are satisfied that they were right to do so. Mr Crawford was the chairman and chief executive of the Bank, the Building Society and the Merchant Bank. It is an irresistible inference that he was the directing mind behind Regardless, Holdings and the rest of the group. The consolidated proceedings raised many grave issues as to his stewardship of the whole group of companies. His failure to testify was a strong indication that he had no satisfactory answer to what was alleged against him."
"The point is worth making too even in those cases where the defendant elects to call no evidence. True, as Mance LJ made plain in [Miller (t/a Waterloo Plant) v Margaret Cawley [2002] EWCA Civ 1100], the only issue then is whether the claimant has established his claim on the balance of probabilities. But it must be recognised that he may have done so by establishing no more than a weak prima facie case which has then been strengthened to the necessary standard of proof by the adverse inferences to be drawn from the defendant's election. Such adverse inferences can in other words tip the balance of probability in the claimant's favour".
"…the only issue then is whether the claimant has established his claim on the balance of probabilities. But it must be recognised that he may have done so by establishing no more than a weak prima facie case which has then been strengthened to the necessary standard of proof by the adverse inferences to be drawn from the defendant's election. Such adverse inferences can in other words tip the balance of probability in the claimant's favour."
"In our legal system generally, the silence of one party in face of the other party's evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence. Thus, depending on the circumstances, a prima facie case may become a strong or even an overwhelming case. But, if the silent party's failure to give evidence (or to give the necessary evidence) can be credibly explained, even if not entirely justified, the effect of his silence in favour of the other party may be either reduced or nullified."
- First, has HMRC shown a prima facie case to answer that Sunico was party to the unlawful means conspiracy, supported by some evidence?
- Secondly, if I find there is a prima facie case to answer, should I draw adverse inferences against the Defendants from the failure of the Harwanis to give evidence in answer to that prima facie case?
- Thirdly, if I do draw adverse inferences against the Defendants, do those inferences tip the balance in HMRC's favour and demonstrate that Sunico was party to an unlawful means conspiracy on the balance of probabilities?
The three pillars of the claim
- The receipt by Sunico of sums in excess of their invoices.
- Payment was made to Sunico in accordance with payment instructions.
- The profit earned by Sunico was greater than that earned by the others in the transaction chains.
Prima facie case to answer?
No Checks
No adequate record-keeping
Regular Third Party Payment instructions
Trading through numerous Buffers in very large sums in a short space of time; The Buffers not in reality having to do any work in terms of looking for suppliers.
No Credit Control
"there are cases where "coincidence cannot satisfactorily account for the number of chains in which the same exporter and the same importer are involved, particularly if…there are …features of his involvement indicating that his purchase and on-sale are other than what one would expect in the case of a genuine arms-length transaction."
Adverse inferences
3. The Sample Chains
(a) the Transaction Chains involving Riff Trading Limited ("Riff") numbered 11a, 12a, 17a, 34a, 34b, 59a, 74b and 96a;
(b) the Transaction Chains involving ECS84.com Limited ("ECS84") numbered 1a, 6a, 17a, 18a and 21a;
(c) the Transaction Chains involving Panther numbered 9b, 10b and 20 (66a);
(d) the Transaction Chains involving Fone Rack Cellular Trading Limited ("Fone Rack") numbered 2d, 14a, 17d, 29c, 45c and 100c; and
(a) the Transaction Chains involving Fresh 'N' Clean (Wales) Limited ("Fresh N Clean") numbered 15, 29, 47, 63/64].
For ease of reference during these proceedings the Sample Chains were numbered consecutively as 1 to 26.
Deal logs
"The passing of property in the telephones was not the purpose of the transactions. The purpose was the creation of book entries enabling a claim for the repayment of input tax to be made."
Third Party Payment Instructions
The Hawk Documentation
Causation/Loss
"The argument for the plaintiff was that if a victim received more doses or injections after the cut-off point than before it, it is more likely than not that the lethal dose or injection was received after the cut-off date and was therefore tortious.
Mr Irwin, for the plaintiffs, by analogy, likened the doses to a pack of cards. Although most patients received many more than 52 doses –often many, many hundreds- the pack contains only one ace of spades, representing the lethal dose.. If the pack is divided into 25 and 27 piles of cards it is more likely than not that the ace of spades will be in the pile of 27 cards…
…Mr Kent [for the defendant] submitted [on the basis of the facts of that case] that common sense suggests that causation is only established if the preponderance of doses or injections were given after the cut-off date. He suggested that I should arbitrarily decide that a plaintiff should only succeed if that preponderance were substantial, perhaps three-quarters or two-thirds of the doses being administered after the cut-off date.
I reject Mr Kent's argument. In my judgment its fallacy is that it alters the civil standard of proof and the balance of probabilities to a standard of substantially probable, or very probable Although in civil actions where grave allegations of fraud or immorality are made it is rightly said that such an allegation should not be found proved, and the onus of proof discharged except on clear and convincing evidence, the basic standard of proof, the balance of probability, remains."
"The test is one of more probable than not. In those chains in which the quantum of exports was greater than the quantum of domestic sales, as a matter of probability, it may be said that the relevant chain fell into the 'export' rather than the 'domestic sale' category, simply because it is the greater category."
The two conceded chains
4. The position of Mangharam and the Fourth to Seventh Defendants
Mangharam
Sunico Holdings ApS and M&B Holdings A/S
PT Naina and Hashu Shahdadpuri
- There is nothing recorded in writing, no faxes, emails or notes of telephone conversations. Save for letters enclosing commission statements there are very few letters between Sunico and PT Naina or the Seventh Defendant.
- It is alleged that there was a final indebtedness of $9.7m owed by Sunico to PT Naina in respect of commission. However there is not a single letter of demand, let alone any threat of proceedings. There is merely one letter listing the invoices and showing the outstanding amount.
- Sunil told SKAT that all referrals were keyed into a computer database but no copy of that database or any printouts were provided on disclosure by Sunico or anyone else.
- The letters enclosing the commission statements are addressed "Dear Sir" although there was supposed to have been continual telephone conversations and the parties knew each other well. There was a chain of existing relationships between them.
Conclusions