Flat — Confiscation order – Realisable property – Respondent prosecutor wishing to include flat as realisable property under confiscation order – Appellant company claiming beneficial ownership – Judge ruling in favour of respondent — Whether judge erring in analysis of law on identification of realisable property — Appeal allowed
The appellant company was incorporated in the Bahamas with two Liberian corporate directors and had two issued shares that were held on behalf of an Isle of Man trust. It was registered at HM Land Registry as the proprietor of a flat that the respondent prosecution office claimed to be part of the realisable property of M, against whom a confiscation order had been made following his conviction of conspiracy to cheat the HM Revenue & Customs in a VAT carousel fraud.
The appellant sought a declaration that it was the beneficial owner of the flat. The respondent claimed that the flat was beneficially owned by M, who had used trust and company structures for the purpose of concealing his interest in that and other property, and that the appellant had been incorporated for the purpose of holding the property for M. It was alleged that the appellant had been registered on the title to the flat in order to conceal M’s ownership. Accordingly, the flat was the realisable property of M within the meaning of section 74(1) of the Criminal Justice Act 1988. The judge held in favour of the respondent.
The appellant was granted permission to appeal on the ground that the judge had erred in his analysis of the law regarding the identification of realisable property. The appellant argued that the judge had failed to apply the general law governing property and trusts, separate corporate identity and the doctrine of “sham” in reaching his conclusion that the flat was the realisable property of M for the purposes of the 1988 Act and was wrong to treat the 1988 Act as making it unnecessary to apply that general law.
Held: The appeal was allowed.
In resolving the question of whether the flat was the realisable property of M for the purposes of Part VI of the 1988 Act, it was irrelevant that the crown court had already decided that the flat should be included in M’s realisable assets. The resolution of a dispute with a third party concerning the beneficial ownership of property alleged to be realisable property was to be determined by the High Court in civil proceedings. The dispute was to be resolved in accordance with ordinary principles of property law, save to the extent that the 1988 Act provided otherwise.
Since the appellant was the registered owner of the flat, the starting point, as a matter of ordinary principle, was a presumption that it was also the beneficial owner; Re Norris [2001] UKHL 34; [2001] 1 WLR 1388, Stack v Dowden [2007] UKHL 17; [2007] 2 AC 432 and R v Modjiri [2010] EWCA Crim 829; [2010] PLSCS 124 considered.
The judge’s decision that the flat was the realisable property of M was unsustainable on the evidence and his conclusions, or absence of conclusions, on the facts. The judge had not found that M was directly or indirectly the beneficial owner of the shares in the appellant. Moreover, the evidence suggested that the purchase moneys for the flat had been advanced by way of loan from another company, and there had been no suggestion that the loan was a sham nor had there been any express allegation of dishonesty.
Furthermore, it was not appropriate to remit the case so that the judge could set out more clearly his findings in respect of M’s interest in the various companies and trusts. It was not open to him to find that the loan to the appellant of the money to purchase the flat was a sham and that M had a beneficial interest in the flat.
Andrew Mitchell QC and Aidan Casey (instructed by Clyde & Co LLP) appeared for the appellant; John McGuinness QC and Rupert Jones (instructed by Revenue & Customs Prosecutions Office) appeared for the respondent.
Eileen O’Grady, barrister