LORD JUSTICE HOLROYDE:
- There is before the court an application for judicial review as part of a decision made by His Honour Judge Carey in the Crown Court at
Maidstone
on 15 August 2017 by which the learned judge refused to permit the claimant, Her Majesty's Revenue and Customs (to whom we shall refer as "HMRC") to retain certain items which had been seized during searches of premises owned or occupied by the interested parties. This is the judgment of the court.
- In very brief summary the circumstances giving rise to the claimant are as follows. HMRC had been investigating suspected offences of conspiracy to cheat the public revenue, fraudulent evasion of income tax and associated money-laundering. The conduct under investigation involved alleged abuse of the regimes for tax credits and what is referred to as the child care element of working tax credit. In short, these are regimes which entitle a person who works for 16 hours per week to receive a working tax credit of £76.34 per week and an additional weekly sum if childcare costs are incurred.
- The interested parties are companies and individuals who control the companies which were providing childcare in the Birmingham area and which purported to employ staff at a minimum wage for 16 hours per week. Individual staff members or purported staff members made claims for working tax credit and childcare credit and for payment of a percentage of childcare costs on the basis that they were employed by the interested parties and/or were paying for childcare at nurseries operated by the interested parties. The relevant persons were living for the most part in the Birmingham area and in some cases in Leicester.
- In the course of their investigation, HMRC successfully applied to the Crown Court at Birmingham for warrants to search the homes and business premises of the interested parties. In total 37 search warrants were issued. They were executed on 11 July 2016. A substantial amount of property was seized. The validity of the search warrants was challenged by the interested parties. No suggestion was made that they had been obtained in bad faith. By letter of 4 October 2016 HMRC conceded that the warrants were defective because the searches were authorised for material defined only by reference to "the companies", with the companies not being identified on the face of the warrants. This concession by HMRC meant that the property seized would fall to be returned to the interested parties unless and until relief was obtained by HMRC pursuant to s.59 of the Criminal Justice and Police Act 2001 authorising them to retain the property under Sch. 1, para.13 to the Police and Criminal Evidence Act 1984.
- On 20 October 2016 HMRC therefore made an application pursuant to s.59(5) of the 2001 Act to retain the seized items. By the time they made that application the interested parties had already issued an application under s.59(2) of the Act seeking orders that the seized property be returned to them. At the hearing of those applications before the learned judge, the property which had been seized was listed on a Scott schedule. It was 66 pages in length. It contained rows covering 739 items. The items had been colour coded to identify different categories of the seized material.
- In his ruling, which he handed down on 15 August 2017, the learned judge concluded that there were reasonable grounds for believing that indictable offences had been committed by and/or in relation to an organised crime group of which the interested parties were members or with which they were closely connected. The judge authorised retention by HMRC of a number of the categories of documents which had been seized. However, he refused HMRC's application in respect of 271 seized items which had been shaded dark green in the Scott schedule and which we will therefore refer to for convenience as "the dark green items". It is that ruling which is challenged by HMRC in this application for judicial review, permission to bring which was granted by McGowan J on 19 February 2018.
- Before saying a little more about the facts and then coming to the submissions made to the judge below and to this court, it is convenient to refer to the statutory framework. Section 59 of the Criminal Justice and Police Act 2001 is part of a group of provisions in that Act headed "Remedies and safeguards". Provision is made as to the return or retention of seized property in ss.53 and following. In particular, s.54 makes provision for the return as soon as reasonably practicable of items seized in exercise of a power of seizure if it appears to the person having possession of them that they are or contain items subject to legal professional privilege. Section 55 provides for a similar requirement to return material if it appears to the person having possession of it that it is or includes excluded material or special procedure material. Section 59 provides for judicial supervision of the process for the return or retention of seized items. It confers on those with a "relevant interest" in seized property the right to apply to the "appropriate judicial authority" for the return of all or part of the seized property. It also confers on the person who is for the time being in possession of the seized property, in other words the relevant investigating agency, a right to make an application to retain unlawfully seized material in certain circumstances. This provision provides in effect a second chance for the investigating authority to be able to retain documents for use as evidence in a criminal investigation in circumstances where they would otherwise have to return the documents and risk relevant evidence in the criminal investigation being lost.
- Section 59 provides as follows in ss.1 to 7:
"59 Application to the appropriate judicial authority
(1) This section applies where anything has been seized in exercise, or purported exercise, of a relevant power of seizure.
(2) Any person with a relevant interest in the seized property may apply to the appropriate judicial authority, on one or more of the grounds mentioned in subsection (3), for the return of the whole or a part of the seized property.
(3) Those grounds are—
(a) that there was no power to make the seizure;
(b) that the seized property is or contains an item subject to legal privilege that is not comprised in property falling within section 54(2);
(c) that the seized property is or contains any excluded material or special procedure material which—
(i) has been seized under a power to which section 55 applies;
(ii) is not comprised in property falling within section 55(2) or (3); and
(iii) is not property the retention of which is authorised by section 56;
(d) that the seized property is or contains something seized under section 50 or 51 which does not fall within section 53(3);and subsections (5) and (6) of section 55 shall apply for the purposes of paragraph (c) as they apply for the purposes of that section.
(4) Subject to subsection (6), the appropriate judicial authority, on an application under subsection (2), shall—
(a) if satisfied as to any of the matters mentioned in subsection (3), order the return of so much of the seized property as is property in relation to which the authority is so satisfied; and
(b) to the extent that that authority is not so satisfied, dismiss the application.
(5) The appropriate judicial authority—
(a) on an application under subsection (2)
(b) on an application made by the person for the time being having possession of anything in consequence of its seizure under a relevant power of seizure, or
(c) on an application made—
(i) by a person with a relevant interest in anything seized under section 50 or 51, and
(ii) on the grounds that the requirements of section 53(2) have not been or are not being complied with, may give such directions as the authority thinks fit as to the examination, retention, separation or return of the whole or any part of the seized property.
(6) On any application under this section, the appropriate judicial authority may authorise the retention of any property which—
(a) has been seized in exercise, or purported exercise, of a relevant power of seizure, and
(b) would otherwise fall to be returned, if that authority is satisfied that the retention of the property is justified on grounds falling within subsection (7).
(7) Those grounds are that (if the property were returned) it would immediately become appropriate—
(a) to issue, on the application of the person who is in possession of the property at the time of the application under this section, a warrant in pursuance of which, or of the exercise of which, it would be lawful to seize the property; or
(b) to make an order under—
(i) paragraph 4 of Schedule 1 to the 1984 Act
(ii) paragraph 4 of Schedule 1 to the Police and Criminal Evidence (Northern Ireland) Order 1989 (S.I. 1989 1341 (N.I. 12))
(iii) section 20BA of the Taxes Management Act 1970 (c. 9), or
(iv) paragraph 5 of Schedule 5 to the Terrorism Act 2000 (c. 11), under which the property would fall to be delivered up or produced to the person mentioned in paragraph (a)."
- The effect of those provisions is that where an investigating agency makes an application under s.59(5), the court has a discretion under s.59(6) to authorise the retention of property which had been unlawfully seized and would otherwise fall to be returned if satisfied that retention is justified on grounds falling within s.59(7). The judicial discretion built into the scheme in s.59(6) provides a safeguard against any abuse on the part of an investigating authority in relation to the drawing up and execution of search warrants. In exercising this discretion courts accordingly subject applications for the retention of unlawfully seized property to rigorous examination of the circumstances surrounding the illegality of the initial seizure.
- The operation of s.59(6) and (7) was considered by King J in giving directions as a judge of the Crown Court in HMRC v Cheema & others, 17 January 2014. In a passage relied upon by the interested parties, and also referred to by the learned judge in his judgment below, King J at paras.20 and 21 of the judgment said this:
"Although I have spoken of an application for a s.59(6) order which involves reliance upon the grounds in subsection (7)(a), as one involving a notional application for a warrant under section 8 in respect of the property concerned, there is a critical difference between an application such as this made after the property has been seized and an actual application for a warrant in advance of seizure. In advance of seizure, any warrant application asserting, as it must, that the criteria for the issue of the warrant set out in s.8(1) of the Act have been satisfied, must necessarily be based on what is believed to be on the premises and what it is believed any such article or class of article is likely to contain. An application made after seizure however is in respect of known articles which must mean that the onus is on the Applicant to show that the subsection 8(1) criteria for the grant of a warrant is satisfied in relation to the known contents or characteristics of each particular article. This must be particularly so in relation to the requirements under 8(1)(c) and (d) that, respectively, there are reasonable grounds for believing that (c) the material is likely to be of substantial value to the investigation of the offence and (d) is likely to be relevant evidence as defined in subsection (4).
21. It must further follow that in order to begin to make out its application for the retention of any particular item seized, the Applicant must first examine its contents which requires relaxation of the Order made against examination."
- It follows that in applying s.59 of the 2001 Act a court must consider whether, if the property were now to be returned, it would immediately become appropriate to issue on the application of the investigating authority either a fresh search warrant under the criteria in s.8 of PACE 1984 or an order for the property to be produced under the special procedure criteria pursuant to para.4 of Sch. 1 to PACE. In effect, a party seeking authority to retain property seized under an invalid warrant must satisfy the court that it would succeed in a notional application for a search warrant. Thus, the investigating authority must satisfy the court that there are reasonable grounds for believing (a) that an indictable offence has been committed; (b) that the property is likely to be of substantial value, whether by itself or together with other material, to the investigation of the offence; (c) that it is likely to be relevant evidence; (d) that it does not consist of or include items subject to legal professional privilege or excluded material, and (e) that in the case of special procedure material it is in the public interest that it should be retained. In the present case the focus is on the criteria in subparagraphs (b) and (c), for which we shall use the convenient shorthand phrase "value and relevance".
- The court considering an application under s.59(5) may itself look at the material in order to decide whether the statutory criterion has been met. However, it may be both practical and convenient to proceed on the basis of a Scott schedule describing the material where both sides have had an opportunity to set out their respective positions item by item.
- We turn now to the facts relating to the making and hearing of the applications under s.59. At a directions hearing on 21 October 2016, the learned judge approved directions which had been agreed between HMRC and the interested parties. The directions had two objectives. First, to provide a mechanism by which the any excluded material or legally privileged material could be isolated and quarantined; secondly, to enable the parties to put before the court a Scott schedule upon which the value and relevance of each item seized could be set out for the purposes of consideration and adjudication by the court. The format of the Scott schedule to be compiled by HMRC's case team provided for each exhibit to be identified with a brief description given by HMRC officers at the time of the initial search and an indication of where the item had been found and seized. Separate columns in the schedule allowed for a fuller description of each item to be given on later examination; HMRC's submissions as to the item being likely to be of substantial value and being likely to be relevant evidence; assertion by the interested parties of any claims for legal professional privilege or excluded material; the results of the review by independent counsel; submissions by the interested parties; and the judge's decision. The directions set out a timetable. It was subsequently extended by consent on a number of occasions.
- So far as the isolating of excluded material was concerned, the solicitors for the interested parties provided on 20 December 2016 a schedule which identified the items which they asserted did include excluded material or in relation to which they could not say whether or not excluded material was included. The judge's directions provided for independent counsel to be appointed at HMRC's expense to examine those items. The directions prohibited HMRC from examining material until independent counsel had reviewed it and identified it as not containing any excluded material. Counsel were instructed for this purpose, and as part of the work which they did they were also instructed to provide descriptions of the material which they were examining. An advice provided by lead independent counsel on 22 February 2017 set out the methodology which had been adopted. The independent counsel, of whom there were several, generated spreadsheets which included descriptions of the items examined and their opinions as to which if any items comprised excluded material. These spreadsheets were supplied to the solicitors for the interested parties on a rolling basis. HMRC proposed, and the interested parties did not demur, that there should be a period of seven days in which to notify any objections. No objections were in fact made at any stage.
- However, the work took longer than had been anticipated. It became apparent to HMRC that they would not be able to complete all of the intended work by the date set for the hearing. HMRC then gave priority to the completion by counsel of the exercise of isolating any excluded material. HMRC's officers did not examine all of the material for the purposes of providing a fuller description on the Scott schedule. Instead, HMRC relied on the descriptions provided by independent counsel as part of their sifting work. This approach was made clear in the later iterations and final iteration of the Scott schedule by shading the relevant entries dark green and by stating in a rubric at the head of the schedule,
"Items examined by independent counsel due to the asserted presence of EM -- these items have not yet been examined by the case team and the descriptions as to content are based upon the reports from independent counsel."
- It is HMRC's case that they were able to formulate submissions as to the value and relevance of the dark green items based partly on HMRC's own initial descriptions and partly on independent counsel's later descriptions and to enter those submissions on to the Scott schedule. It was on 5 May 2017 that the latest version of the schedule sent to solicitors for the interested parties indicated that this approach had been taken.
- An issue has arisen as to the time at which and the manner in which HMRC made clear to those representing the interested parties that HMRC had unilaterally departed from the process which all parties had contemplated when the directions were agreed and approved by the learned judge. Having heard the submissions on both sides, it seems to us that HMRC failed properly to alert the interested parties and the court to this change of approach at an appropriately early stage. Thus, to the extent to which HMRC sought to criticise the interested parties for only raising any objections to this approach at a late stage, such criticism is in our view misplaced. We do not, however, think that anything turns upon this issue in the final analysis and we therefore do not consider it any greater detail.
- In preparation for the hearing HMRC served witness statements by Ms Maydew, the case officer in the investigation. In her statement she described the criminal investigation and she described the creation of the Scott schedule. In her first statement she said that the case team had reviewed 411 hard copy and media items seized which were not identified as containing excluded material. Five items were either damaged or encrypted and could not be examined. In her second statement, Ms Maydew said that the case team had completed the Scott schedule from HMRC's perspective. She explained that she had supervised the composition of the schedule but that it had been a team effort. She said that it was accurate to the best of her knowledge and belief but she made clear that in respect of a number of items the case team had not considered the content of the material because of the time taken by the review by independent counsel to sift out excluded material. Ms Maydew explained that in those cases HMRC had relied on the descriptions of content provided by counsel in order to make submissions as to value and relevance.
- The interested parties relied on the witness statement of the solicitor who has conduct of the case on behalf of almost all of them. He took issue with the Scott schedule served in its later iterations on the basis that in relation to the dark green documents it was not supported by any sufficient description of the document. That, he contended, could only be achieved by examining each document and no such examination had taken place. In response to that evidence HMRC served a statement by Ms McMahon, the case manager of the overall investigation. She explained the significant delays encountered in reviewing the seized items for excluded material and the course which had been adopted in order to enable the schedule to be completed by the time of the hearing on 17 July 2017.
- Neither party sought to adjourn that hearing, which began on its listed date and occupied three days. HMRC made clear that their application stood or fell on the basis of the Scott schedule. Ms Maydew gave oral evidence that to the best of her knowledge and belief the entries to the Scott schedule were accurate. She was cross-examined about a number of items referred to by way of illustrations and we are told and accept that she made concessions, for example, that in one seized item there was a discrete document which arguably did not meet the description of the item as a whole.
- Counsel who have appeared before this court today, and for whose submissions we are grateful, also appeared before the learned judge at the hearing below. For HMRC Mr Bird submitted that the use of descriptions provided by independent counsel was an acceptable way of conducting this exercise. In particular, independent counsel had been instructed to provide descriptions and had done so thoroughly and conscientiously without objection from the interested parties. Mr Bird acknowledged that copies of the hard copy material had not been provided to the interested parties until a very late stage but submitted that copies of electronic material had been returned. The solicitor for the interested parties accepted in an email dated 27 June 2017 that checking of the independent counsel's assessment for each data item would be unnecessary in 99 per cent of cases. Moreover, Mr Bird submitted, the descriptions provided by independent counsel could be checked against the original descriptions in every case, the original material was all available for inspection at the hearing by the interested parties and the interested parties had been supplied with CD ROMs containing images of the hard copy material. Mr Bird relied on the submission that none of the descriptions had been shown to be inaccurate.
- Mr Bowers QC appears now as then for all but two of the interested parties. Of the other two, we understand that one has been out of the jurisdiction for a long period of time. The other has not responded to communications from HMRC. We have felt it proper to proceed in the absence of those two men and we have treated Mr Bowers' submissions as being, in effect, on behalf of all the interested parties and to the benefit of all of them.
- Mr Bowers submitted that the Scott schedule was inadequate and did not assist either the interested parties or the court in assessing whether the statutory criteria were satisfied in relation to each entry. In relation to the dark green items which had been examined only by independent counsel, he submitted that the schedules described which of those documents fell into the categories of excluded material for legally privileged material, but that independent counsel were not tasked with assessing the relevance of the material for any other statutory criterion. He submitted that the interested parties had been unable to have any meaningful input into the accuracy of independent counsel's assessment because the material had not been returned to them, and discs of the scanned material provided at a late stage did not assist for this purpose. In the course of his submissions to the judge Mr Bowers took as an example what was item 3 on the Scott schedule, an exhibit originally referred to as "SAUNDERS0002". He relied upon this as an illustration of what he contended was a flawed approach by HMRC. The original description of the item by an HMRC officer was, "Various files containing staff documentation". The schedule recorded that it had been found on a windowsill of a first floor office at the premises of Salma Daycare, one of the interested parties' premises at 12 Brunswick Street. The item had been examined by independent counsel who said that it only contained non-excluded material described as "Staff registers". HMRC's submissions on the schedule as to value and relevance were in these terms:
"Identification and clarification of individuals employed at Salma Daycare and hours worked. This item was identified at Salma Daycare, a suspect childcare provider and employer. Identification of individuals employed there is central to the tax credits investigation. This material will likely confirm or refute any genuine employment."
- In his detailed written ruling the learned judge addressed the various categories of material listed in the schedule. In relation to the many items shaded light green, for example, he said that he was satisfied "... from the narrative inserted by the HMRC case team that each of these items has been the subject of careful consideration for the specified reasons". Having checked each entry in respect of value and evidence, he was satisfied that HMRC had established all the statutory requirements in relation to each of those items.
- In relation to the 271 items shaded dark green, however, he said this at paragraphs 34 and 35 of his ruling.
"The Dark Green Items (271 in total)
34. For each of these items HMRC seeks to rely on the descriptions given by independent counsel. The process of review for excluded material and LPP led to the preparation of schedules by independent counsel in Excel spreadsheet form. In large measure, though by no means in every case, independent counsel gave general descriptions of the reviewed material. Lead independent counsel, Edward Pleeth, in his note dated 12th July 2017, referred to having prepared a template schedule which was to be adopted by all counsel during the reviewing process which he described thus: 'IC was instructed to review the material, provide a short description and attach a label (EM — excluded material, NEM — No Excluded Material, RR — Redaction Required, LPP — Legal Professional Privilege).' During the course of the hearing Mr Bowers sent the court an example of such a schedule. He referred to it as 'SAUNDERS0002 inter alia' which relates to Scott schedule item 3. It gives no description of any of the non-excluded material in a schedule of 130 NEM items. The Scott schedule describes the material as 'Staff registers'. Even if, which I cannot see, there is a reference to staff registers, this is far too vague and generalised to satisfy the statutory requirements. In contrast, on the same attachment to Mr Bowers' email are a number of other item-related schedules which give a description of each document. So, for example, Welch0011 which relates to SS item 14 sets out an exhaustive, document by document, description of NEM and EM alike. That has enabled HMRC to say in the fuller description column of the SS 'Item also contains non-EM: a) P45 job application forms, staff records, time sheets, records of employment, qualification certificates b) childcare contracts, childcare application forms, childbirth certificates.' I have not made similar checks in respect of all or many of the 271 'dark green' items and nor do I regard it as necessary to do so. I have no doubt that it would show document descriptions in some instances and none in others. Even if I did so, there is a more fundamental objection to the approach taken by HMRC which is that, since it bears the burden of proving the statutory grounds and since it has not itself made any attempt to do so in respect of the 'dark green' items, this aspect of its application fails in limine. That is because I cannot be satisfied that the reference to descriptions given by independent counsel, who are not accountable to the court on this and who have expressly limited the scope of their responsibilities, are reliable or accurate. HMRC did not seek an adjournment of the hearing to complete its own checks as per the light green items and so I must deal with the application on its merits as they appeared at the time of the hearing.
35. For these reasons the application fails in respect of the dark green items."
- We observe that included within the dark green items and therefore rejected by the judge were items 14 to 18, all of which contain an expanded description of the seized items. Item 14 in particular, was described by the judge as setting out a fuller description of the item based on independent counsel's examination and as including non-excluded material comprising "P45, job application forms, staff records, time sheets, contracts of employment, qualification certificates, childcare contracts, childcare application forms, child birth certificates.". This expanded description was not it seems disputed, and on the face of it, such items are likely to be of substantial value to the investigation and to provide relevant evidence as to who worked, and when, and which children genuinely attended childcare. However, the judge made no distinction between these items and SAUNDERS0002, in respect of which a significantly shorter description was given. As we have noted, in the latter case, the description was simply "Staff registers". Even in the case of staff registers, however, it seems to us that on the face of it, such documents are likely to constitute evidence of who attended work and when, which is likely to be both of value to the investigation and relevant evidence. The decision made by the learned judge in the paragraphs of his judgment which we have quoted was embodied in parts of two separate orders, para.4 of an order dated 11 September 2017; para.2 of an order dated 10 November 2017; and para.3 of the latter order in so far as it related to items marked on an annexed copy of the Scott schedule with the letter X. It is not necessary for present purposes to say more about the precise terms of the orders.
- HMRC seek judicial review on five grounds, which are pleaded in the following terms. (1) The judge was wrong in law to reject the descriptions of items labelled "N" which were adduced in evidence by Ms Maydew simply because she had relied upon descriptions of those items provided by independent counsel instructed by HMRC who had not themselves given evidence. (2) The decision to reject those descriptions was Wednesbury unreasonable in that they had been disclosed to the interested parties and their solicitors and had not been contradicted and no reasonable judge could have come to the conclusion on the evidence before him that the descriptions were not reliable or accurate. (3) No reasonable judge could have concluded on the evidence that HMRC had made no attempt to prove the statutory grounds. HMRC had, by making the submissions it did based upon its own description and upon independent counsel's description. (4) In the event, all items were labelled and had original descriptions which had been applied directly by HMRC officers and verified in evidence by Ms Maydew and these descriptions were sufficient to require the judge in the proper discharge of his function as the appropriate judicial authority to adjudicated upon the relevance and value of these items on their merits. The judge was wrong in law to dismiss in limine the application to retain those items and without consideration of the submissions that had been set out and verified in evidence in relation to each item on the Scott schedule. (5) There was procedural unfairness because HMRC submitted that the judge should consider each item in the Scott schedule. The interested parties had not responded to the descriptions and had not challenged the descriptions on the basis that they were unreliable or inaccurate and the judge did not give the applicant the opportunity to present arguments on the reliability and accuracy of the descriptions.
- In considering the submissions made to this court, we start with grounds 3 and 4, which together challenge the approach of the judge as perverse in concluding on the evidence that HMRC had made no attempt to prove the statutory grounds and as wrong in law to dismiss in limine the application to retain these items without consideration of the submissions set out on the Scott schedule. Mr Bird contends that the original descriptions applied by HMRC officers, as verified by Ms Maydew, taken together with the descriptions provided by independent counsel, enabled HMRC to make submissions as to value and relevance and were sufficient to require the judge in the proper discharge of his function to adjudicate upon the value and relevance of these items on their merits. Against that, Mr Bowers contends that HMRC's arguments are unsustainable. He submits that it is obvious, reading the judgment as a whole, that the judge had carefully considered the Scott schedule, having indeed dedicated an entire section of his ruling to its preparation. The judge, contended Mr Bowers, was also well aware of the history of the proceedings and of the unilateral departure by HMRC from the procedure contemplated by all when directions were made. Mr Bowers submits that the judge decided that the process by which the schedule had been compiled in relation to the dark green items, relying as it did on the descriptions given by independent counsel, was unreliable and having reached that conclusion the judge decided that the descriptions in the Scott schedule were incapable of satisfying the statutory criteria.
- Given that HMRC accepted that its application must stand or fall by reference to the Scott schedule, the integrity of the Scott schedule was plainly in issue. Mr Bowers submits that HMRC can have no justifiable complaint that their case fell rather than stood. The failure by HMRC itself to examine any of the dark green items to determine that they satisfied the necessary criteria meant that the process was flawed, and entitled the judge to reach the conclusion he did. Mr Bowers submits that it certainly cannot be said that the decision of the learned judge was one which was not open to him. On the contrary, he contends, it was an entirely predictable decision and an entirely proper one, given the way in which the application had been presented by HMRC.
- In support of his submissions Mr Bowers relied upon the paragraphs which we have quoted from the judgment of King J in Cheema. In our view, the emphasis placed by Mr Bowers on that decision was, with respect, misplaced. When paras.20 and 21 are read together it is immediately apparent that para.21 is concerned with the practicalities in a situation in which property has been seized but the seizing has been unlawful. Having in para.20 equated the procedure in many respects to a notional fresh application for the search warrant, King J drew the important distinction that in circumstances such as the present the seized property is in the possession of the seizing authority. Thus, at para.21 King J simply recognises the common sense necessity for some provision to be made for the investigating authority to examine the material now in its possession so as to be able to make submissions as to whether it should be permitted to retain it. Paragraph 21, accordingly, can fairly be regarded as an observation about the enabling effect of the statutory provisions. It is not one which circumscribes the approach which the investigating authority must take and it is not one which requires the investigating authority itself to examine every single item seized.
- On these issues we accept the submissions of Mr Bird. Reading para.34 of the judge's judgment fairly and in the context of the judgment as a whole, we have concluded that it makes plain that the judge did not make checks in respect of "all or many of the dark green items" and stated clearly that he did not regard it as necessary to do so. He recognised that had he done so, it would no doubt have shown document descriptions in some instances, none in others. Rather than conducting such an exercise, however, he adopted the approach that HMRC could not prove the statutory grounds without having conducted its own examination of each item and that is why he decided that the application failed in limine. It may well be that in reaching that conclusion the learned judge also placed undue weight on the paragraphs which we have quoted from King J's judgment in Cheema. We note in this regard that the learned judge quoted some of King J's words, deliberately emphasising the phrase "the applicant must first examine its contents."
- Whilst it is of course necessary for a prosecuting authority to examine the items in question in order to determine whether the statutory criteria are satisfied, it seems to us that this can be done in different ways, and the method which will need to be adopted to perform this exercise will vary from case to case. In our judgment, it can in an appropriate case be delegated to a reliable third party. Provided that the exercise is conducted in a transparent way and the person conducting the examination is sufficiently skilled and accountable, a team of reviewers, whether directly or indirectly engaged by HMRC, can perform it.
- We have come to that conclusion for a number of reasons. First, no statutory provision has been drawn to our attention which requires that the necessary work be done by an employee of the investigating authority itself. We note in this regard that Rule 47.38 of the Criminal Procedure Rules, which sets out procedural requirements for an application pursuant to s.59, contains nothing which suggests that there is any such requirement. Nor has any case law been cited to us which supports the existence of any such requirement. We have already made our observations on the reliance placed on Cheema. Reference was also made to a decision of Ouseley J, R(Van Der Pijl) v Crown Court at Kingston-upon-Thames [2013] EWHC 3040 (Admin). The passages referred to us did not, however, seem to us to provide support for Mr Bowers' propositions. Secondly, whilst it may well have been the case that all parties and the judge expected that HMRC officers would review all the material after it had been sifted by counsel, we see nothing in the direction given by the judge which required HMRC to proceed in that way. Thirdly, it is not difficult to think of circumstances in which the use of a third party to schedule seized material and to provide a description of it sufficient for the purposes of the s.59 application will be inescapably necessary: for example, if the seized property includes many documents which were in a foreign language not known to any of the investigating agency's officers, or where the seized property is an encrypted computer or includes technical documentation or otherwise requires some specialist knowledge for even an initial exercise of scheduling and describing to be undertaken. Fourthly and more generally, we can see no reason why it should be necessary for HMRC's own officers to do the work even if a team of reviewers can be assembled who are individually and collectively better qualified than the available officers. It is difficult, for example, to see why a recently-retired HMRC officer should be prevented from doing work of a kind with which he was well familiar and in which he was well qualified merely because he would now be doing it as an outside contractor rather than as a direct employee. Lastly, as Mr Bird submits, we find it difficult to reconcile a requirement that the investigating authority must itself do the work, even if it has already been done by independent counsel engaged in sifting out excluded material, with the overriding objective.
- This is not to say, of course, that HMRC or any other investigating authority will always want to use a third party to prepare a Scott schedule of this nature. The use of an outside contractor may carry risks in the circumstances of a particular case. It may make it harder for the authority to establish the statutory requirements to the satisfaction of the court. The position will inevitably vary from case to case.
- In the present case HMRC, having in the circumstances which we have briefly described made the unilateral decision to adopt a different procedure, placed itself into the position whereby it was driven to present the application before the judge on the basis that it stood or fell with the Scott schedule. Mr Bowers, in his submissions to us, put forward a number of arguments to the effect that HMRC had placed themselves in a position where they were indeed unable to satisfy the statutory requirements. In our view, however, those submissions by Mr Bowers went to the sufficiency of description of particular items in the schedule and not to the lawfulness of the approach adopted or the lawfulness of the approach taken by the learned judge.
- In the present case independent counsel were expressly instructed to review the material, to provide a short description of it and to identify whether or not it contained excluded material. There was no evidence to suggest that the descriptions so provided were unreliable or in error. Indeed, as we have noted, the solicitor for the interested parties had accepted that in 99 per cent of cases it would be unnecessary to examine the items individually. All of the items shaded dark green have been examined by independent counsel, primarily to perform their sifting function but also in accordance with their instructions to provide a description of it. We can see no principle of law that would prevent HMRC from relying on the description given by independent counsel, together with the original description given, in the circumstances of this case and in the absence of any suggestion that independent counsel did not conduct their role carefully and conscientiously. The learned judge in his judgment did not identify any errors in the descriptions provided by independent counsel or any features of the descriptions themselves that rendered them unreliable because he regarded it as unnecessary to make checks in respect of each or any of the dark green items. He did not therefore consider the individual descriptions provided. With all respect to the learned judge, that was, in our judgment, an erroneous approach.
- We note in this regard that on a number of occasions HMRC were not satisfied by the description initially provided by independent counsel. In those instances, the matter was sent back to independent counsel for a fuller description to be provided, especially of the non-excluded material contents of the items. We have referred already to the rubric at the head of the final version of the Scott schedule. At one point in the submissions it seemed that Mr Bowers on behalf of the interested parties was challenging that rubric as being inaccurate or misleading in suggesting that the schedule had been completed by reference to the descriptions given in the reports of the independent counsel. In this regard Mr Bowers took us to a number of documents which had been placed before the learned judge, which were supporting schedules compiled by independent counsel in relation to one of the items on the schedule. It transpired, however, that the documents concerned had been prepared in April 2017 and were later replaced by an expanded set of schedules containing fuller descriptions in June 2017. This, accordingly, was not a point which in our judgment assisted the interested parties. It may well be for that reason that it does not appear to have been the subject of any cross-examination of Ms Maydew.
- HMRC also challenges the reasons given by the learned judge for concluding that he could not be satisfied that the descriptions given by independent counsel were reliable or accurate. Mr Bird contends that the judge erred in law when he rejected such descriptions, notwithstanding the evidence of Ms Maydew, simply because she had relied upon descriptions of independent counsel when HMRC officers had not themselves given evidence. Mr Bowers submits that in light of the directions made by the court as to the approach to the Scott schedule, which required HMRC to examine the material following independent counsel's assessment and analysis, and in light of the evidence about the process adopted and the failure by HMRC to comply with the judge's directions, the learned judge reached a conclusion that was entirely open to him in the circumstances. Mr Bowers contends that the judge had jurisdiction to refuse the application. He was entitled not to find the necessary statutory criteria satisfied on the evidence he had heard. Once he was not satisfied of the statutory criteria, he was bound to refuse the application and he made no error of law in doing so.
- We understand, of course, why Mr Bowers places emphasis on the unilateral departure by HMRC from the approach which had been contemplated by all concerned and on the non-compliance with the directions. It cannot, however, be said that non-compliance with the directions disbarred HMRC from making their application to the court. It may well be said against them that they weakened their own position, but that is a different matter.
- We have again concluded that the arguments advanced by Mr Bird in relation to this ground are correct. Taking SAUNDERS0002 as an example, since it was relied upon by the interested parties before the judge, there was no evidence that the descriptions applied by independent counsel were anything other than reliable and accurate. Independent counsel's description was supported by the original HMRC description. Ms Maydew gave evidence that the item would be likely to be of value to the investigation and relevant evidence because staff registers would identify and clarify who worked at Salma Daycare and what hours they worked, and so would be likely to confirm or refute the genuine employment of particular persons. However, none of this was considered by the learned judge. Instead, as the judge made clear, he dismissed the application in limine because HMRC had not itself examined the items. His conclusion that he could not be satisfied that the descriptions given by independent counsel were reliable or accurate was reached, as he explained, on the express basis that independent counsel were not accountable to the court and had expressly limited the scope of their responsibilities.
- Again, with great respect to the judge, we have some difficulty in understanding those reasons. Whilst it is true that independent counsel did not give evidence and were not "accountable to the court" in that sense, they were practising members of the Bar and owed duties to the court. Moreover, their involvement in the case was in accordance with directions given by the court and they had professional duties and responsibilities accordingly. The fact that the items were examined by independent counsel rather than HMRC officers had no bearing whatever on the reliability or accuracy of the descriptions they provided. Nor did it have any bearing on whether or not the test in s.59(7) was satisfied.
- In considering the submissions in this case we have borne very much in mind that the matter was considered at length over a period of days by a most experienced judge who was plainly fully familiar with all the facts of the case. We hesitate to differ from his decision. There is, however, no doubt in our judgment that he did not consider the dark green items on their merits. Had he done so, HMRC may or may not have been able to satisfy him that the statutory criteria were met in relation to any given item; but they had no chance to do so, because the judge adopted the approach summarised in the phrase that the application failed in limine. For those reasons we conclude that the third and fourth grounds for judicial review are made out. The judge, with respect to him, was wrong to refuse the application to retain the dark green items on the blanket basis that he did, and wrong not to consider the individual dark green entries in the schedule. HMRC were entitled to have the judge consider the items in the schedule on their merits.
- It follows that the challenged part of the decision must be quashed and the case remitted to the Crown Court so that a judge may consider the dark green items in the Scott schedule afresh and reach a decision as to whether the statutory requirements have been made out in respect of all or any of them. We are aware that the learned judge has recently retired and it will, therefore, be necessary for a different judge to make that decision. In the light of these conclusions we take the view that it is unnecessary to address the remaining grounds.
(Submissions were made as to the form of the order and as to costs)
(Short break)
LORD JUSTICE HOLROYDE: We are against you on costs, Mr Bird, primarily for two reasons: first, that as we indicated in our judgment, there was a failure by HMRC promptly to alert the court and the interested parties to the change of approach and it was that change of approach which resulted in the matter coming before the court in the way it did, and secondly, we also see some force in the submission made by Mr Bowers that given the nature of these proceedings, the interested parties bear their own costs below, even though it might be said that they were successful below and of course bear their own costs in this court. We conclude that the fair order as to costs is that there be no order.
We make an order in the following terms, and Mr Bird, we would ask you to be kind enough to draw this up: first, an order quashing para.4 of the judge's order of 11 September 2017; second, an order quashing para.2 of the judge's order of 10 November 2017 and para.3 thereof in so far as the additional directions relate to items marked "X"; third, we direct that the application be remitted to the Crown Court at Maidstone to be listed before a judge nominated by the resident judge of that court for a directions hearing with a view to the crown court considering on their merits the items marked "N" and "X" in the schedule to the judge's orders, and we make, as I have indicated, no order as to costs.
Is there anything else, gentlemen?
MR BOWERS: No.
MR BIRD: No, thank you.
LORD JUSTICE HOLROYDE: Thank you very much indeed.
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