Dimsey & Anor, R v [1999] EWCA Crim 1917 (7 July 1999)

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DERMOT JEREMY DIMSEY RORGER BRIAN ALLEN, R v. [1999] EWCA Crim 1917 (7th July, 1999)

On 21 March 1997, before HH Judge Addison in the Crown Court at Guildford, Dermot Jeremy Dimsey was convicted (by a majority of 10 to 2) upon what was count 3 of an amended indictment of the offence of conspiracy to cheat the public revenue. On 30 April 1997 he was sentenced to 18 months imprisonment. He had served his sentence before his appeal was listed for argument in this court. There were two co-accused, Chipping and Da Costa. On 23 January 1997 Chipping pleaded guilty to 8 counts of the common law offence of cheating the public revenue. On 21 March 1997 he was convicted upon two further counts of cheating the public revenue, and also (along with Dimsey) of the conspiracy. On 30 April 1997 he was sentenced to 8 concurrent terms of 12 months imprisonment in respect of the charges to which he had pleaded guilty, and also to 3 concurrent terms in respect of the offences of which he had been found guilty by the jury, so that his total sentence was one of 3 years imprisonment. He has not applied for leave to appeal. Da Costa was also on 21 March 1997 found guilty of the conspiracy, and on 30 April 1997 was sentenced to 12 months imprisonment. He has abandoned his application for leave to appeal against conviction.

On 19 February 1998, before HH Judge Hordern in the Crown Court at Knightsbridge, Brian Roger Allen was convicted upon 13 substantive counts of cheating the public revenue of income tax and corporation tax by concealing or failing to disclose profits made by offshore companies which were managed and controlled by him in the United Kingdom. On 20 February 1998 he was sentenced to 13 concurrent terms of 7 years imprisonment. A confiscation order was made against him pursuant to s.71 of the Criminal Justice Act 1988 in the sum of £3,137,165, with a consecutive term of 7 years imprisonment in default.

In 1987 Mr. Adam, consultant to Racal Avionics, was approached in South Africa about the possible supply of avionic equipment from Germany to a company in South Africa, Hurbarn Electronics Ltd. Such supply was contrary to sanctions then in force against South Africa. The South Africans wished to deal with an intermediary rather than direct with the manufacturer. Mr. Adam contacted Chipping. He asked Chipping whether he was interested in being involved in such supply and Chipping confirmed that he was. Mr. Adam subsequently introduced Chipping to Mr. Chalklin of Astronautics GmbH of Munich, who were to supply the equipment. Mr. Adam arranged two meetings in London between Mr. Chalklin and Chipping. Mr. Adam then dropped out of the picture and Chipping took over as the middleman. There were at least three further meetings between Mr. Chalkin and Chipping. Mr. Chalkin dealt mostly with Chipping, but also communicated with Dimsey in Jersey by telephone and fax.

Between 1985 and 1993 Dimsey by arrangement received bank statements on Chipping’s personal and savings accounts held at the Royal Trust Bank (Jersey) Ltd., which he passed to Chipping from time to time either personally in Jersey or by post on Chipping’s instructions. Dimsey formed two companies, Thomlyn Supplies Ltd. (“Thomlyn”) and later Glenville Supplies Ltd. (“Glenville”), to deal with the contracts which Chipping had obtained. The relevant contracts were signed in Jersey by Dimsey on behalf of the companies. Dimsey applied on behalf of Thomlyn and Glenville for credit cards for Chipping’s use principally for personal expenditure; Dimsey arranged for payment of the credit card liabilities by the companies.

Mr. Adam received commission from Thomlyn for his introductory services. At Chipping’s suggestion, Mr. Adam flew to Jersey late in 1988 or early in 1989 to collect an advance payment of £25,000. He was introduced to Dimsey by Chipping at Dimsey’s office. There was discussion between Chipping and Dimsey about business matters. Then Mr. Adam, accompanied by Dimsey and Chipping, went to the bank where Dimsey had arranged for £15,000 to be available in cash for Mr. Adam. Later, when Chipping informed Mr. Adam that the contracts had been completed, Mr. Adam again visited Jersey. His further commission was paid into an account in Jersey administered by Dimsey. During his dealings with Chipping, Mr. Adam contacted Chipping about six times on his home telephone number; he would contact Chipping to resolve problems. On one occasion he spoke to Dimsey about a delay in the establishment of a letter of credit. Mr. Adam thought that Dimsey was Chipping’s accountant. He thought that Thomlyn and Glenville were effectively one and the same.

Mr. Barnes of Hurbarn Electronics regarded Chipping as the middleman for the placing of the order and for the shipping, operating through Thomlyn and Glenville. Mr. Barnes dealt with Chipping at Thomlyn by fax and telephoned him at his home. He spoke to Dimsey, who appeared to deal with Thomlyn’s finance, about a letter of credit. He dealt with Chipping about increased prices, the letter of credit and his commission. He dealt only with Chipping about the condition of the goods. It was Chipping who refused to change the shippers. He sent details of the export licence to Chipping and Dimsey sent a fax to him requesting that Chipping should not be mentioned in that connection. In cross-examination on behalf of Dimsey, he said he thought that Chipping worked full-time for Thomlyn and/or Glenville and that there was no difference between those companies.

There were six contracts for supplies by Astronautics GmbH to Thomlyn, four of which were channelled by the suppliers through a Swiss intermediary, Parago. There were eight contracts for supplies to Glenville, none involving Parago. A freight company operated by Allen usually dealt with the transport. The profits made by Thomlyn were £664,057, in respect of which £220,000 in corporation tax was allegedly due. The profits made by Glenville were £582,000, in respect of which £175,000 in corporation tax was allegedly due.

Some of the equipment for the Glenville contracts was obtained by Chipping from Omni Aviation Ltd. (“Omni”). Mr. Brian Alexander of Omni dealt only with Chipping over the actual supply of items to Thomlyn and Glenville. Mr. Alexander visited Jersey and was introduced by Chipping to Dimsey, who paid Omni’s bill. Chipping required Omni to use Allen for transport. Mr. Alexander received about £30,000 in commission from Thomlyn and Glenville, which was paid into a bank account at the Royal Trust Bank in Jersey.

The supply of other equipment was obtained by Chipping from a company called Sperry in the United States, but Sperry would not deal directly with Glenville. The Mann Group sold $742,400 worth of equipment to Glenville between February 1990 and April 1992, having purchased it from Sperry. The Mann Group received commission of $61,000.

A third company, Lantau Investments Ltd. (“Lantau”) was acquired by Dimsey. It was not a trading company. It was the prosecution case that Chipping used this company to receive some of the profits of the contracts, which were used by Lantau to acquire a flat in the United Kingdom for Chipping’s daughter. It was the prosecution case that Dimsey administered Lantau for Chipping and that although nominee directors and shareholders were appointed for Lantau, the company was managed and controlled by Chipping from his home and office in England.

On the 7th March 1990 $194,066 was in fact paid from a bank account in Thomlyn’s name at the Algemeine Bank in Switzerland into a bank account in Lantau’s name. In September 1990 a flat at Milford was bought by Lantau for £50,000. Da Costa acted as solicitor for Lantau. Chipping viewed the flat and gave the impression that he was buying it for his daughter. Chipping’s daughter occupied the flat. In March 1993 Chipping told Mr. Hibbert, his financial adviser, that his daughter lived in a flat owned by a Jersey trust which he had set up in Jersey and that the total assets of the trust were valued at £200,000. Subsequently Chipping asked Mr. Hibbert to delete the reference to the Jersey trust from his records. In March 1993 there was a total balance of £154,631 in the Lantau bank account. In interview Chipping said that he had received £200,000 as a reward for services which he had undertaken on behalf of Thomlyn and Glenville and that this sum was held on trust in Jersey.

Chipping was a 50:50 partner with Mr. Brian Alexander in a joint venture company called Chaltech Aviation Ltd. Chipping’s shares were issued to Lantau. In due course Lantau purchased Mr. Alexander’s shares. The sum of £50,000 held in a bank account in the name of Chaltech on account of commission paid to Chipping was subsequently paid into a Lantau bank account.

Chipping held four accounts at the Royal Trust Bank in Jersey in which a total of £40,000 had been invested. He received interest of over £6000 between 1985 and 1991. These accounts were administered by Dimsey for Chipping. An unexplained payment of £21,920 in relation to which Chipping pleaded guilty was paid into one of these accounts.

The Inland Revenue started an investigation into Chipping’s tax affairs after information was received from Germany about Astronautics GmbH. Miss Christine Barclay, an Inland Revenue officer, interviewed Chipping and three directors of the Mann Group on the 21st September 1993. Chipping said that he had never heard of Thomlyn and had nothing to do with Glenville.

As part of her inquiries Miss Barclay had already interviewed Mr. Adam. It was Mr. Adam’s evidence that he was interviewed by the Inland Revenue in May 1993 after Dimsey had told him what to say. Dimsey told him not to mention Chipping’s name, but to say that Dimsey was in charge of Thomlyn. He told Mr. Adam to suggest that he had met Mr. Adam in London. Mr. Adam thought that implausible, and it was agreed at his suggestion that he would say that he had met Dimsey through an American contact. Mr. Adam gave this account to the Inland Revenue. Dimsey telephoned Mr. Adam after his meeting with the Inland Revenue. Dimsey appeared relieved on being told that Chipping’s name had not been mentioned.

In cross-examination on behalf of Dimsey, Mr. Adam made certain concessions. He accepted that he had been confused about whether Chipping had been a director of Thomlyn. He agreed that when he met the Inland Revenue there was a danger that he might be forced to speculate about the roles of individuals in the transaction. He agreed that it was a possibility, although it had not occurred to him, that the mood of his meeting with Dimsey was that Dimsey told him not to volunteer Chipping’s name or speculate about his full role, because if he speculated he might make mistakes. He agreed that “If you’re not asked about Chipping, don’t mention him” was virtually what Dimsey said. He accepted that Dimsey told him he could inform the Inland Revenue that he (Dimsey) was his contact in Jersey and was in control in Jersey. He accepted that what Dimsey told him reflected his understanding of the true position.

In re-examination Mr. Adam said that Dimsey had told him that he (Dimsey) was running Thomlyn. He found it difficult to say whether Dimsey had put it on the basis “If you’re not asked about Chipping, don’t mention him”. The suggestion that he (Mr. Adam) had met Dimsey in London was made because Dimsey did not want Chipping’s name to come up in connection with the inquiry and Thomlyn.

Chipping and Da Costa were involved in drafting letters to the Inland Revenue. Dimsey was sent draft letters by them and his comments sought. He responded. Dimsey was also asked to provide information about the corporate history and structure of the offshore companies. The letters submitted to the Inland Revenue by Da Costa on Chipping’s behalf were misleading in that they suggested that the South African business started when Dimsey telephoned Chipping. The letters stated that Chipping’s role was as consultant with Thomlyn and Glenville. The letters made no mention of three of the Royal Trust (Jersey) bank accounts, the credit cards or Lantau.

On the 1st October 1993 Chipping wrote to Dimsey requesting copies of the Royal Trust Bank statements in relation to one of the four bank accounts. Dimsey confirmed on the 5th October 1993 that an account had been opened at the Royal Trust Bank in Jersey on the 11th October 1985. Copy bank statements were sent by Dimsey to Chipping on the 18th October 1985. On the 16th October 1993 Chipping sent Dimsey some notes which were to be passed to Da Costa with a view to responding to the Inland Revenue. In his notes Chipping stated that Thomlyn had been formed in order to further discussions with a customer in relation to a business opportunity. Dimsey checked the notes and made some alterations, to make it appear that Thomlyn had been incorporated to transact certain types of aviation business. The text was designed to minimise Chipping’s role in Thomlyn and Glenville.

On the 15th November 1993 Chipping and Da Costa visited Dimsey’s offices in Jersey and examined files. Da Costa then prepared a draft disclosure letter on the 18th November 1993 which he sent to Chipping and Dimsey for approval. The letter included reference to one of the four Royal Trust Bank accounts. The deposit account, the dollar account and the current account into which £21,920 had been paid were not mentioned. The letter stated that Chipping had received only two BMW cars and £3000 from Thomlyn and Glenville. It suggested that Chipping had first become involved when Dimsey had telephoned him to say that he had a client, Thomlyn, and wondered if he could help in respect of a transaction which Thomlyn was undertaking.

On the 29th November 1993 Chipping faxed to Da Costa amendments to the draft disclosure letter. A copy was faxed to Dimsey on the 1st December. Dimsey sent to Da Costa notes made by Chipping, with his own comments and amendments. Dimsey commented: “I need to clarify with Brian who negotiated the deal with Parago, as I would not wish Parago to provide details to the Inland Revenue of the initial transaction being negotiated with Brian”. The prosecution contended that the second reference to “Brian” was to Chipping, but Chipping accepted in cross-examination on behalf of Dimsey that the reference was to Brian Allen.

Da Costa produced a second draft of a letter to be sent to the Inland Revenue dated the 2nd December 1993. This letter contained the reference to one of the bank accounts at the Royal Trust Bank in Jersey. On the 3rd December Chipping sent a fax to Da Costa from Dimsey’s offices, signed by Dimsey, which included the following passage: “In my conversations with Dermot today we both feel that the reference to the Royal Trust Bank account is still a touchy matter to discuss. Is there anything else we can say or alternatively can we dispense with the paragraph?”

In a letter dated the 10th December 1993 written on Chipping’s behalf by Da Costa to Miss Barclay, Chipping told the Inland Revenue that the South African business started when Dimsey phoned Chipping, which was untrue. The letter omitted to disclose the existence of any of the Royal Trust Bank accounts, of Lantau and/or £200,000 held in a Jersey trust, or of the use by Chipping of credit cards in the names of Thomlyn and Glenville. Da Costa denied in cross-examination on behalf of Dimsey that a copy of this letter was sent to Dimsey.

Dimsey continued to be consulted by Chipping and Da Costa on the content of correspondence with the Inland Revenue in respect of Chipping’s financial affairs. It was the prosecution case that this enabled him to monitor and vet replies with a view to covering up the extent of Chipping’s financial affairs and the extent of Chipping’s tax liabilities arising from his involvement with Thomlyn and Glenville. On the 24th May 1994 Miss Barclay wrote to Chipping asking for a certificate of complete disclosure. On the 8th July 1994 Da Costa replied that Chipping had nothing further to add and that everything had been previously disclosed.

Chipping’s case was that he was only a consultant to the offshore companies. He did not know what profits they made. He denied receiving £200,000 and the existence of a trust fund, although he had made admissions when interviewed by the Inland Revenue. The letters written to the Revenue were designed to put off having to make full disclosure. Da Costa’s case was essentially that he was acting on Chipping’s instructions and had no personal knowledge of the matters. He realised that some matters were not being disclosed to the Revenue, but that did not in the circumstances amount to deception.

Dimsey was not interviewed. He did not give evidence at the trial. The case argued on his behalf was that it was legitimate for him to manage and control companies registered in Jersey. Chipping was merely a consultant to Thomlyn and Glenville. Even if Chipping controlled and managed Lantau, that company did not make profits. He had reason to think that Max Braendli, who lived in Switzerland, was the owner. Thomlyn had a Swiss bank account. He had reason to think that Chipping wanted to hide his activities from his previous employers at Mann Avionics. The sole purpose of any false or misleading documents was to avoid the sanctions against South Africa, not to cheat the Revenue. He had no reason to concern himself with the tax affairs of Chipping, who had a solicitor acting for him.

Allen is a man of 50, a successful businessman involved in a series of different activities. It was the prosecution case that his income and assets were held by offshore companies. The properties in which he and his family lived were bought and sold in the name of offshore companies. Offshore companies were used to pay for personal expenditure, including holidays, school fees and ordinary household expenses.

There were 13 offshore companies, incorporated at various dates between 1978 and 1992 in Jersey or Liberia. Five of the companies were used as vehicles by Allen for controlling and managing his portfolio of properties, which had a total value of £2,083,325. The companies were administered by Dimsey through DFM in Jersey. They had bank accounts in Jersey, administered by Dimsey for Allen in accordance with Allen’s instructions. Dimsey and his office undertook administrative work relating to the offshore companies and Allen’s personal assets. It was the prosecution case that Allen himself managed and controlled the companies in the United Kingdom. That aspect of the prosecution case is not challenged for the purposes of this appeal.

Amongst the papers recovered from DFM in Jersey was a schedule of assets purporting to show Allen’s assets in July 1993. It listed the bank balances of the offshore companies and the Rock settlement as assets of Allen. The net balance was approximately £750,000. Numerous draft letters were recovered showing that Allen was giving instructions to Dimsey to send letters on behalf of the offshore companies.

When Allen’s home address, Warleys, was searched in February 1995, there were found numerous detailed cash statements and lists in respect of the offshore companies, cheque books in respect of the companies where blank cheques had been signed by the authorised signatories, and bank statements of the companies annotated by Allen. There was evidence that Allen paid the directors’ fees of certain of the offshore companies.

Counts 1 to 7 concerned profits made by the offshore companies. Count 1 concerned Meldrette Investments Ltd., which made the most substantial profits, over £5 million, on which over £2 million in corporation tax was alleged to be due. Counts 2 to 7 concerned Colander Investments Ltd., Peche d’Or Investments Ltd., Tanin Holdings Ltd., Berkshire Investments Ltd., Escorin Investments Ltd. and Iles Investments Ltd.

Counts 8 to 10, 12 and 13 related to failures to declare personal income and benefits received by Allen from the offshore companies. Counts 8 and 9 alleged incomplete returns. Counts 10, 12 and 13 related to an absence of returns. It is sufficient to summarise the kinds of income and benefits received. Meldrette provided £80,000 in premium bonds to the Allen family. Warleys, the house in which the Allen family lived, was held in the name of Peche d’Or. Allen and members of his family had credit cards in the names of Meldrette and Peche d’Or, which were used to pay household and personal bills and for holidays and education. School fees for four of Allen’s children were paid by Peche d’Or.

Count 11 concerned a schedule of assets provided by Allen to the Inland Revenue during a Hansard investigation into his affairs. The schedule did not list certain shares in the offshore companies, bank accounts of those companies and properties of those companies. Those assets purported to belong to two discretionary trusts, the Rock Settlement and the Burberry Settlement, set up in Gibraltar and Jersey in 1979 and 1988 respectively. The only named beneficiaries were the Red Cross and Oxfam. There was power to appoint additional beneficiaries, but the power had not been exercised. The issue placed before the jury at the trial was whether the two trust deeds were genuine or a sham. The shares of the various companies were held by individuals or others described as nominees of the trustees of the two settlements.

It was submitted to us on behalf of both appellants that the offence of cheating the Revenue in principle cannot be made out where the alleged actus reus consists only in an omission, unless the omission is in breach of a duty imposed by the law on the defendant. Mr Newman QC for Allen went so far as to contend that this was a general principle of the criminal law: there can be no crime by omission unless there is a duty to act. He would no doubt accept that that position might be altered by statute; but cheat is a common law crime.

It is convenient first to summarise the statutory provisions relevant to this argument’s application in these appeals. S.6(1) of the Income and Corporation Taxes Act 1988 (“ICTA”) provides: “Corporation tax shall be charged on profits of companies”. S.10(1) of the Taxes Management Act 1970 (“TMA”) requires a company which is chargeable to corporation tax but which has not made a return to give notice to the tax inspector that it is so chargeable. S.10(2) and (3) provide for monetary penalties where no notice is given. S.108(1) of TMA provides in part:

It is submitted that the only duty to notify the Revenue of the relevant company’s liability to corporation tax was owed under s.108 by the “proper officer”: and neither Mr Allen nor Mr Chipping filled that role; and so, it is said, neither appellant (in Dimsey’s case, through the conspiracy route) can be fixed with any criminal liability, however much they knew, and however much they set out to conceal.

In our judgment this argument has no merits. It is obvious that any failure by the proper officer to perform his s.108 duty cannot relieve the company of its liability to corporation tax under s.6(1) of ICTA. If an individual, having total de facto control of a company, so arranges its affairs that the company (a) makes profits but (b) does not declare them to the Revenue, he is obviously cheating the Revenue. A fortiori if the company is actually established to operate in this way.

Here, the case made by the Crown was that the appellant Allen and Dimsey’s co-defendant Chipping themselves intended to cheat the Revenue, in each case by deliberately declining to notify the Revenue of company profits which they knew or believed (a) would be taxable and (b) would not be disclosed by anyone else - proper officer or otherwise. This was (as the jury in each case must have accepted) a deliberate course of conduct designed and intended to defraud the Revenue of tax due. The fact that s.108 of TMA imposes an express duty on the company secretary to make the relevant disclosure is neither here nor there. The secretary’s statutory duty does not render the conduct here in question either less deliberate, or less dishonest. It is nothing but a red herring. So is the more general proposition that no omission can amount to a cheat unless it is in breach of duty. The offence of cheat is perfectly simple: it is constituted by any form of fraudulent conduct having the purpose and effect of depriving the Revenue of money due to it. In any event it is simply artificial, on the facts which we have recounted, to suggest that these were cases of mere omission. These were deliberate plots, involving overt acts in the way of correspondence and so forth, to bring about a state of affairs in which the Revenue was to be defrauded.

In his first ground of appeal the appellant Dimsey submits that the judge misdirected the jury as to the correct test for determining whether Thomlyn, Glenville and Lantau were resident in the United Kingdom. It is contended that the jury may have reached its conclusion that these three companies were resident in the United Kingdom in the erroneous belief that it was sufficient for the prosecution to prove that because Mr Chipping was closely involved in the day to day profit making activities of Thomlyn and Glenville within the United Kingdom, those companies were resident in the United Kingdom. Alternatively, they may have concluded that, as owner of the share capital of the company, Chipping controlled the company in the United Kingdom.

There was no dispute between the Crown and the appellant as to the true test of residence. A company is resident where the central management and control of its business abides. For nearly a century the test enunciated by Lord Loreburn has been applied. In De Beers Consolidated Miles Ltd v Howe, Surveyor of Taxes (1906) 5 TC 198 he said:-

The paradigm of central management and control of the business of the company is the exercise of such management and control by directors of a company sitting as a board. Residence will be where the board habitually meets and decides matters of fundamental policy. The test of corporate residence must, therefore, be distinguished from questions as to:-

(a) the control of the company itself. Shareholders control the company, directors exercise central management and control over the business of the company. In the case of a limited liability company owned by shareholders they will collectively have the power to ensure that the affairs of the company are conducted in accordance with their wishes, exercising that power through general meetings of the company but they do not exercise central management and control of the business of the company.

“The test of whether a company is resident in the UK is whether its real business is carried on here. The real business of the company is carried on where the central management and control are exercised. Management and control are two different words having slightly different meanings. Management for these purposes means the day-to-day running of the business of the company. Control refers to the making of policy decisions and exercising the final say in business matters. The word central means overall or top-level. The prosecution case is that although these companies were registered in Jersey, their business was really conducted by Mr Chipping and he conducted it in this country. The defence case is that the companies were not only registered in Jersey but their real business was conducted by Mr Dimsey in Jersey and that Chipping was only a consultant. If that is correct, then they were not subject to UK corporation tax. You must look at the circumstances concerning each of these companies and decide whether the prosecution have made you sure that they were centrally managed and controlled in the UK rather than in Jersey or elsewhere. The test is where they were in fact centrally managed and controlled, not where they should have been managed or where they appear to have been managed.

So what matters should you look at when applying this test? These are some suggestions. Firstly, what did the business of the company in fact consist of? Secondly, what role was played by each individual in the running of that business? Thirdly, where did the people running the business carry it on? Where did they hold their meetings and make their decisions? Where were the contracts discussed? Where were telephone calls made from and where was correspondence sent? Fourthly, where was the administrative work of the company conducted? Where were the records kept? Fifthly, where were the company bank accounts held, and in particular, from where instructions were sent to those banks? You may think that for the most part Mr Chipping carried on his activities in England although he did go to Jersey from time to time. Mr Dimsey, on the other hand, was mainly in Jersey. You may think that possibly the simplest way of formulating a test in the circumstances of this case is are you sure that Chipping was in reality managing and controlling these companies or may it have been Dimsey or some other person or persons?” [13G-15C]

This passage is criticised because, it is said, it was likely to lead the jury to believe that it was sufficient to prove that Mr Chipping was concerned with the day to day running of the business. The combination of the distinction the judge made between management and control (at 13H) and the questions at 14F to 15A were likely to divert the jury from the central issue, namely where the high policy in relation to the business of the company was determined. It led them to focus, erroneously, on the many activities which Mr Chipping undertook in the United Kingdom.

We agree that it was undesirable for the judge to split the concept of management and control. The test is composite; it is designed to identify where decisions of fundamental policy are made as opposed to the place where the day to day profit earning activities are undertaken. Further, we agree that the series of questions the judge asked, taken on their own, directed as they were to the daily activities of the business, could theoretically be misleading.

However, it is vital that the directions are considered as a whole. It is not permissible to criticise sections of the summing up without regard to their overall effect in the context of the facts of the case. The factual issues in the case centred on the question whether it was Mr Dimsey who managed and controlled the companies, with Mr Chipping merely acting as a consultant who undertook work in England on behalf of the companies. The jury were presented with a simple choice. There was no subtle distinction between the function of Mr Dimsey and the function of Mr Chipping. So long as the prosecution could satisfy the jury so that it was sure that Mr Chipping was not a consultant but in fact not only undertook the day to day running of the business but made all the decisions whilst Mr Dimsey carried out the functions of administration in Jersey, no sophisticated or difficult questions of central management and control arose.

“You may think that for the most part Mr Chipping carried on his activities in England although he did go to Jersey from time to time. Mr Dimsey, on the other hand, was mainly in Jersey. You may think that possibly the simplest way of formulating a test in the circumstances of this case is are you sure that Chipping was in reality managing and controlling these companies or may it have been Dimsey or some other person or persons?” [15B-C]

“Members of the jury, I shall remind you shortly of the evidence of the people who were involved in the details of how the contracts were carried out. The prosecution case is that Mr Chipping was really the linchpin of the whole business, that he had both the technical expertise and the business and financial knowledge to negotiate and carry out these contracts. They say that effectively he simply used Thomlyn and Glenville to do his business for him, that those companies were just convenient facades or fronts set up for the purpose. The defence case is that those companies were or at least may have been genuine trading companies controlled at least in Jersey and that Mr Chipping was merely a consultant.” [50D-G]

Between pages 50 and 70 the judge summarised the evidence as to the activities of the companies in relation to the contracts to which he referred at page 48. It emerged that Mr Dimsey signed the contracts, arranged for Mr Adams’ commission to be collected from the bank, chased late payments and dealt with invoices. In the light of the issue left to the jury it is not possible in our judgment to entertain the idea that the jury may have thought that merely because the day to day profit earning activity had been undertaken by Mr Chipping as a consultant in England the companies were resident there. We reject that criticism of the summing up.

Further criticism is advanced to the effect that the judge confused control of the companies with control of the business. It is true that from time to time in his summing up he referred to central management and control of the companies as opposed to central management and control of the business of the companies. It is contended on behalf of the appellant that the jury may have been mislead into concluding that the companies were resident in the United Kingdom because Mr Chipping was the beneficial owner of the shares in the companies. Again we reject that criticism. The question of control by shareholders of a company was never argued before the jury. It was never mentioned by the judge. Accordingly, we do not think that it would have even occurred to the jury to conclude that because Mr Chipping was the beneficial owner of shares in the company those companies were resident in the United Kingdom. We refer, again, to the way in which the judge dealt with the essential factual argument before the jury. Read in the light of that factual issue we do not think there was any misdirection in the respect here contended for. We reject the first ground of appeal.

We understand the Revenue to accept that s.739(2) of ICTA, which we shall shortly set out, applied on the facts in both appeals, so that the income of the offshore companies was in each case deemed respectively to be the income of Chipping and Allen. But it is contended for the appellants that, in consequence, the income in question is thereby deemed also not to be the income of the companies. If that is right, then none of the companies was liable to any corporation tax in respect of such income: it was not their income. It is said that that has the following results.

(1) There was no evidence on which Dimsey could properly have been found guilty of the conspiracy with which he was charged. The evidence showed (as the jury must have found) that he conspired to pretend that Chipping did not have the central management and control of the business of the three companies in question, in order to give the false impression that the companies were not resident in the UK. But the only point in doing so would be to avoid corporation tax chargeable against the companies. Since the companies were not liable to corporation tax, there was no actual or potential loss to the Revenue which could possibly flow from the conspiracy in which Dimsey took part. But it is a constituent element of the common law offence of cheating the Revenue that there should exist such an actual or potential loss. In its absence there could be no cheat, and therefore no conspiracy to cheat: there can be no criminal conspiracy unless it is shown that the alleged conspirators agreed to bring about a state of affairs which would itself amount to a crime.

(2) There was no evidence on which Allen could properly have been found guilty of the “corporation tax counts” in the indictment laid against him (counts 1 - 7). The Crown’s case was that he had dishonestly concealed the fact that he had the central management and control of the businesses of the companies in question in his case, again in order to give the false impression that the companies were not resident in the UK. But, as in the Dimsey appeal, the only point in doing so would be to avoid corporation tax chargeable against the companies. Since the companies were not liable to corporation tax, Allen’s alleged (and proved) dishonesty could not have led to any actual or potential loss to the Revenue, so that, for want of an essential element in the offence, he could not be guilty of cheat.

(3) Nor could Allen have properly be found guilty on the “income tax counts” (counts 8 - 10, 12 - 13): the money from which the benefits in question were derived was, by operation of s.739, his own, and he is plainly not liable to income tax on benefits which he has paid for himself.

“(1)... the following provisions of this section shall have effect for the purpose of preventing the avoiding by individuals ordinarily resident in the United Kingdom of liability to income tax by means of transfer of assets by virtue or in consequence of which, either alone or in conjunction with associated operations, income becomes payable to persons resident or domiciled out of the United Kingdom.

(2) Where by virtue or in consequence of any such transfer, either alone or in conjunction with associated operations, such an individual has, within the meaning of this section, power to enjoy, whether forthwith or in the future, any income of a person resident or domiciled out of the United Kingdom which, if it were income of that individual received by him in the United Kingdom, would be chargeable to income tax by deduction or otherwise, that income shall, whether it would or would not have been chargeable to income tax apart from the provisions of this section, be deemed to be income of that individual for all the purposes of the Income Tax Acts.”

“(2) An individual shall, for the purposes of s.739, be deemed to have power to enjoy the income of a person resident or domiciled outside the United Kingdom if - [five sets of circumstances are then set out, at least one of which - (d) - shows that the “power to enjoy” may be contingent on events outside the control of the individual having the power, who may possibly never receive the income in question or any benefit derived from it].

“(1) Income tax at the basic rate or the lower rate shall not be charged by virtue of s.739 in respect of any income to the extent that it has borne tax at that rate by deduction or otherwise but, subject to that, income tax so chargeable shall be charged under Case VI of Schedule D.

“Except as otherwise provided by the Tax Acts, the amount of any income shall for purposes of corporation tax be computed in accordance with income tax principles, all questions as to the amounts which are or are not to be taken into account as income, or in computing income, or charged to tax as a person’s income, or as to the time when any such amount is to be treated as arising, being determined in accordance with income tax law and practice as if accounting periods were years of assessment.”

As we have foreshadowed, the sole question for determination on this part of the case is whether s.739(2) has effect to deem the income of the relevant person resident outside the United Kingdom not to be his income, as well as deeming it to be the income of the individual or individuals having “power to enjoy” it. Mr Venables (whose argument was adopted by Mr Newman QC for Allen) submitted that the section should not be read as empowering the Revenue to tax the same income twice.

In our judgment this point is concluded in the Revenue’s favour on the true construction of the Act. The deeming provision in s.739(2) has effect “for all the purposes of the Income Tax Acts”. It cannot, therefore, have effect for any other purpose. The “Income Tax Acts” are defined by s.831(1)(b), which we have set out. This definition and that of the “Corporation Tax Acts” are, plainly, mutually exclusive. In our judgment it follows that the deeming provision contained in s.739(2) has no impact whatsoever on the actual or potential liability to corporation tax of a company which for the purposes of s.739(2) constitutes a person “resident... out of the United Kingdom”.

Mr Venables sought to refute this conclusion by reference to s.9(1) of ICTA. He submitted, as is plainly the case, that this subsection incorporates “income tax principles” into the provisions relating to corporation tax, so that income tax principles have to be applied for the ascertainment of a company’s chargeable income for the purposes of corporation tax. Upon this he sought to build the further proposition that by virtue of the application of income tax principles, the effect of s.739(2) is that the relevant offshore company is taken to have a nil income. But this is a non sequitur . The fact that income tax principles fall, by virtue of s.9(1), to be applied in the ascertainment of a company’s liability to corporation tax cannot have the consequence that the scope of the deeming provision in s.739(2) is wider than the subsection states, that is (reading in the s.831(1)(b) definition) “for all the purposes of [the enactments relating to income tax, including any provisions of the Corporation Tax Acts which relate to income tax]”. In short (as was submitted by Mr Brennan, junior counsel for the Crown) the deeming provision does not affect corporation tax.

Mr Venables also submitted that a deeming provision such as that contained in s.739(2) must be taken to its logical conclusion, and its logical conclusion here entails that the income in question, once deemed to be that of the transferor, must therefore also be deemed to be not that of the transferee. He cited Marshall v Kerr 67 TC 56. But the entailment is false. There is nothing self-contradictory in the proposition that the income belongs to the transferee but is in addition deemed by s.739(2) to belong to the transferor. If that is an objectionable conclusion, it is so on grounds that a liability to taxation on the same income is generally objectionable; but that is an objection of policy, not logic (and as such it is one that we shall deal with directly). As regards Marshall v Kerr , we would accept Mr Brennan’s submission that the extinction of liability to corporation tax in the case of a s.739(2) transferee offshore company lies outside the purposes of the statutory fiction, and is not demanded by it. It seems to us that this conclusion is in line with what was said by Nourse J, as he then was, in IRC v Metrolands Ltd [1981] 1 WLR 637, 646, cited with approval in the Court of Appeal by Peter Gibson LJ in Marshall v Kerr 67 TC 56, 76-79:

“When considering the extent to which a deeming provision should be applied, the court is entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be resorted to. It will not always be clear what those purposes are. If the application of the provision would lead to an unjust, anomalous or absurd result then, unless its application would clearly be within the purposes of the fiction, it should not be applied. If, on the other hand, its application would not lead to any such result then, unless that would clearly be outside the purposes of the fiction, it should be applied.”

Certain prudential considerations militate also in favour of this conclusion. As we have pointed out in parenthesis in referring to s.742(2), the category of persons having the “power to enjoy” is so widely drawn as to include individuals who may never receive the income in question or any benefit derived from it. It is possible that a case might arise in which the Revenue would thus be unable to collect income tax under s.739(2) and, if Mr Venables is right, neither would any corporation tax be due from the offshore company. Moreover Mr Venables’ argument seems to us to entail the conclusion (as Mr Brennan submitted) that the statutory scheme might be manipulated so as to achieve the avoidance of corporation tax on the part of the offshore company: as for example by ensuring that liability was fixed upon an impecunious individual transferor.

We acknowledge that this position gives rise, in theory at least, to the possibility of double taxation: for income tax against the individual tax-avoider who has transferred assets offshore, and for income tax or corporation tax against the person resident or domiciled out of the United Kingdom to whom assets have been transferred. But this is far from being the systematic result of our approach to s.739(2). It is important to notice that in such a situation the transferee’s liability to tax is not, of course, created by s.739 and would only arise in the case of an offshore company if its central management and control is in the United Kingdom. Such a company is treated as resident outside the United Kingdom for the purposes of s.739: see s.742(8). However it remains resident in the United Kingdom for the purpose of the charge to corporation tax. If the transferee company is not centrally managed and controlled in the United Kingdom, no liability to corporation tax could arise. Where the transferee is a natural person, his residence/domicile outside the United Kingdom will generally immunise him from any liability to income tax.

In reply Mr Venables cited Vestey v IRC [1979] 3 WLR 915. In that case the Revenue claimed that the predecessor of s.739 (s.412(2) of the Income Tax Act 1952) operated so as to deem the relevant income to be the income of a large number of trust beneficiaries, some of whom on the facts received relatively modest amounts from the discretionary trusts in question, and had certainly not been involved in the transfer of assets, done for the avoidance of tax, which had given rise to the section’s application; yet, said the Revenue, they all had “power to enjoy” given the breadth of that expression’s scope (by virtue of what is now s.742(2)). And the Revenue asserted a right to tax any or some or all of them on the whole amount, which was very large, or any part of it. Lord Wilberforce said at 925-6:

A proposition, that whether a subject is to be taxed or not, or, if he is, the amount of his liability, is to be decided (even though within a limit) by an administrative body, represents a radical departure from constitutional principle. It may be that the revenue could persuade Parliament to enact such a proposition in such terms that the courts would have to give effect to it: but, unless it has done so, the courts, acting on constitutional principles, not only should not, but cannot, validate it.

They say that the income tax legislation gives them a general administrative discretion as to the execution of the Acts, and they refer to particular instances of which one is section 115 (2) of the Act of 1970 (power to decide period of assessment). The judge described the comparison of such limited discretions with that now contended for as "laughable." Less genially, I agree. More generally, they say that section 412 imposes a liability upon each and every beneficiary for tax in respect of the whole income of the foreign transferees: that there is no duty upon the commissioners to collect the whole of this from any one beneficiary, that they are entitled, so long as they do not exceed the total, to collect from selected beneficiaries an amount decided upon by themselves.

My Lords, I must reject this proposition. When Parliament imposes a tax, it is the duty of the commissioners to assess and levy it upon and from those who are liable by law. Of course they may, indeed should, act with administrative commonsense. To expend a large amount of taxpayer's money in collecting, or attempting to collect, small sums would be an exercise in futility: and no one is going to complain if they bring humanity to bear in hard cases. I accept also that they cannot, in the absence of clear power, tax any given income more than once. But all of this falls far short of saying that so long as they do not exceed a maximum they can decide that beneficiary A is to bear so much tax and no more, or that beneficiary B is to bear no tax.

This would be taxation by self-asserted administrative discretion and not by law. As the judge well said [1979] Ch. 177, 197: "One should be taxed by law, and not be untaxed by concession." The fact in the present case is that Parliament has laid down no basis on which tax can be apportioned where there are numerous discretionary beneficiaries.”

In our judgment the Revenue’s contentions as to s. 739 in this case bear no resemblance whatever to their stance excoriated by the House of Lords in Vestey. There is a theoretical liability to double taxation. We were told that the practice is not to exact tax twice. We wholly accept that the subject is not to be taxed by discretion. Were a situation to arise in which, contrary to their plain statement to this court, the Revenue sought in a s.739 case to exact tax both from the transferor (or other person with “power to enjoy”) and the offshore transferee, the High Court might be invited to prohibit it as an abuse of power. (S.744(1), which we have set out, shows that the Revenue may not take into account more than once any amount of income in charging tax under s.739, that is, against persons having “power to enjoy”.)

Counts 8, 9, 10, 12 and 13 alleged that the appellant had omitted to declare benefits in kind and the provision of living accommodation between 1989 and 1995. The appellant contends that as a shadow director he was not liable to tax in respect of such benefits. If the appellant is correct, his convictions for cheating the Revenue by failing to declare the benefits to which those counts refer were unsafe. The resolution of the issue is a question of pure statutory construction. Accordingly we now turn to the relevant statutory provisions.

Case II: any emoluments, in respect of duties performed in the United Kingdom, for any year of assessment in which the person holding the office or employment is not resident (or, if resident, not ordinarily resident) in the United Kingdom, subject however to section 192 if the emoluments are foreign emoluments (within the meaning of that section);

“(1) Subject to the provisions of this section where living accommodation is provided for a person in any period by reason of his employment, ... he is to be treated for the purposes of Schedule E as being in receipt of emoluments of an amount equal to the value to him of the accommodation for the period, less so much as is properly attributable to that provision of any sum made good by him to those at whose cost the accommodation is provided.

Thus, the provisions only have application to a person who is an employee with emoluments of £8,500 (originally £5,000 in 1976, raised to £8,500 in 1978, and never raised since) or to a shadow director who is an employee but has emoluments of less than £8,500. They have no application to a shadow director in the position of the appellant who was not employed and had no emoluments at all.

The appellant, it is contended, had no such emoluments. The requirement is necessary in order to impose a territorial limitation. Absent such a limitation the section imposes a charge on benefits provided to a foreign employee by a foreign employer. The only way a territorial limitation can be imposed under s.154 is to construe s.168 (2) as referring to actual emoluments coming within s.19 and one or more of the Cases thereunder. If a shadow director is only in receipt of benefits which are deemed to be emoluments under s.154, no territorial restriction exists. In support of that contention Mr Kessler relies upon a decision of the distinguished Special Commissioner Dr Avery Jones who concluded in the context of what is now s.145 that the purpose of the definition in s.168(2) was to provide the very territorial limitation which would otherwise be absent (see Re Taxpayer F1 SC 3099/93 and 3100/93).

However, those emoluments would only fall to be assessed if they fell within one or more of the Cases under Schedule E. Those Cases themselves impose a territorial limitation. If the deemed emoluments are outwith those three Cases they will not fall to be assessed under Schedule E, and accordingly the shadow director would not be within the definition of employment in s.168(2). The territorial limitation is imposed by the requirement in s.168(2) that the deemed emoluments fall to be assessed under Schedule E. The appellant’s argument fails to give adequate weight to the wording of the requirement, which implies that there could be emoluments which did not fall to be assessed under Schedule E, for example emoluments which do not fall within one of the three Cases. Although the appellant was in receipt of emoluments chargeable to income tax under Schedule E, he would not be in employment for the purposes of Chapter II unless those emoluments fell to be assessed under Schedule E. The appellant’s benefits were received in the United Kingdom. They did fall to be assessed under Schedule E. We reject the first argument.

The appellant’s second argument challenges the Revenue’s concept of a deemed office holder. It is plain that a shadow director does not in reality hold an office; there is no appointment and there can be no vacation of such a post (see per Lord Wilberforce in Edwards v. Clinch 56 TC 367 at 410). There is, so it is contended, no reference in the statutory provisions to a deemed office. In our judgment no such reference was required. Chapter II of Part V applies to employment as a director (see s.167(1)(a)). Employment means an office or employment (see s.168(2)). Director has the extended definition given in s.168(8) which includes those who manage the affairs of a company who are not directors, and shadow directors. In our judgment since the word “employment” in s.167(1)(a) means an office as well as employment properly so called and since the word “director” includes those who are not directors, the application of the definition in s.168(2) and of the extended definition in s.168(8), to s.167(1)(a) has the effect of deeming those who fall within the extended definition of director to hold an office. The submission of the appellant fails to give full effect to the meaning of “employment” and “director” in s.167(1)(a) as defined in s.168(2) and (8). By virtue of those two definitions a person who falls within the extended definition of director holds an office as director.

Such a construction has the merit of giving content to s.168(9). If the appellant is correct then the purpose of the extended definition of director is only to catch shadow directors who are employees with emoluments of less than £8,500. If the extended definition is so restricted it is difficult to see how anybody, whose directions or instructions were given in a professional capacity, would be caught under ss.(8) and thus require exclusion under ss.(9). So much is accepted by Mr Kessler, but he says that such a conclusion should not deflect us from acceptance of his submissions since it is clear that the exclusion in s.168(9) derived from s.94 of the Companies Act 1928 and subsequent consolidations. We prefer a construction which gives content to ss.(9) and does not rely upon an accident of repetition.

It is true, as the appellant contends in his third argument, that ss.167 and 168, being within Chapter II of Part V, have no application to s.19 which refers under paragraph 1 to “any office or other employment”. But in our judgment the effect of s.154 is to deem the cash equivalent of the benefit to which s.154 applies to be “emoluments of the employment and accordingly chargeable to income tax under Schedule E”. The statutory fiction under s.154 must be carried through to s.19 and there is no warrant for imposing any further requirement, such as that the emoluments should derive from an actual office, before the cash equivalent of the benefit is subject to charge under Schedule E.

The counts in the indictment cover both benefits to which s.154 applies and benefits consisting of the provision of living accommodation under s.145(1). Since the counts cover both, it is strictly unnecessary further to analyse the provisions of s.145 since the convictions would be safe even if the provision of living accommodation to the appellant did not fall within s.145(1). But for the sake of completeness we should add that, in our judgment, the provision of living accommodation to this appellant as shadow director does fall within s.145. By virtue of s.145(8)(b), the definition of employment in s.168(2) and the extended meaning of director in s.168(8) are carried through to the meaning of employment in s.145. S.145 applies where a person is provided with living accommodation by reason of the fact that he holds an office. For the reasons we have already given the combined operation of s.168(2) and (8) have the effect that the holder of an office includes one who falls within the extended definition of director. For those reasons, therefore, we conclude that the appellant was in receipt of living accommodation chargeable to tax under s.145(1) because he was a shadow director.

As we have said the allegation here was that Allen provided a false schedule of assets during the course of a “Hansard” investigation. Allen was alleged to have omitted from the schedule his “beneficial interest in shares issued by offshore companies, his beneficial interest in properties held in the names of offshore companies, and his beneficial interest in bank accounts held in the United Kingdom and in Jersey in the names of offshore companies.” His case was that all these items were properly omitted, because the shares were in truth the property of one or other of two discretionary trusts, the Rock Settlement and the Burberry Settlement, as was shown by the relevant trust deeds; and the property and bank accounts were beneficially owned by the offshore companies.

“But here the question is, was Mr Allen the beneficial owner the true owner of the shares, the properties and the bank balances in question? If he was then clearly the schedule of assets which he provided to the Revenue in answer to their enquiries was entirely wrong. If he appreciated that he should have declared [them] to the Revenue, then he was cheating the Revenue by failing to do so...

That is entirely right [viz that the assets belonged to the trusts] unless you are satisfied that the various very lengthy trust deeds you have seen are a sham, that is to say, documents which purport to show a legal situation which is other than the real one intending to give the appearance of creating legal rights different from the actual legal rights, if these trust deeds are a sham then it is open to you to find that the defendant was the beneficial owner of the various assets, knew that he was, and was cheating the Revenue in not disclosing the various [assets] in the schedule of assets which he was required to give them.”

“So you have to decide about those trusts... they are in virtually identical terms, one set up in Gibraltar, knowing [sic: “bearing” is meant] the date the 26th February 1979 the other one set up in Jersey bearing the date the 8th February 1988 it is said to you that the various [meaning the trust deeds] are perfectly standard discretion trusts. Yes and no. No doubt they are in a from very frequently used but you have seen that the only named beneficiaries are the Red Cross and Oxfam. You have seen that the trustees of each trust have the power to appoint additional beneficiaries... So far as we are aware no deeds [sc. appointment of further beneficiaries] have ever been executed... you may think it extremely unusual for a person who is really wanting to put money into a trust not to specify at least the classes of people whom it is intended to benefit.

Which grandfather will set up a trust in favour of... any child reaching the age of 21 of his daughter... so that the trustee can choose... which child they benefit[. T]hey have a class of people and you may think that that is a good deal more usual than an open trust in which the trustee can benefit any person in the world that he wishes except a resident of Jersey. That is the way that formally these trusts are set up. But you may think that the real test is this; consider the trusts assets, it is said that [materials in the documents before the court] show the trust assets... Again, yes and no if those documents are accurate. You will notice that... the shares in Colander are $500 US$ bearer shares, and that... the shares in Peche D’Or are $500 US$ shares. They are shares... perhaps likely nowadays to be very very much out of fashion the reason being that they are like cash... bearer shares are owned by the person who has them in his hand... It is usual for bearer shares to be held in a bank... to the order of a particular person. We don’t know w[h]ere they are. We do not know to whose order they are held. But... if you were to conclude... that in practice Mr Allen used any monies or assets belonging to any of the various companies as if they were his own then... that would be an indication that the various trusts do not set out the true position.

An owner of things is the person generally who has the say so about what happens to them. You are entitled to say whether you keep your motor car or you sell it for instance. Take one absolutely particular example and if you concluded that Mr Allen actually did whatever he liked with any of the assets or monies of any of these companies that would be powerful evidence that these documents, lengthy as they are, are... simply pieces of paper.” (86H-89A: the transcript is corrupt)

This passage is criticised by Mr Newman, first, on the footing that the judge has categorised as unusual - and therefore impliedly suspicious - aspects of the trust deeds which are in fact perfectly normal and unexceptionable, or which, at least, cannot throw light on the question whether they were “sham” documents. Thus, the power to nominate a wide (even unlimited) class of beneficiaries is nothing unusual, and the fact that the assets included bearer shares is simply neutral: it cannot cast light on the issue as to “sham”. Moreover it is argued that since the trustees were entitled to prefer any beneficiary over any other, the fact that a particular individual, Allen, enjoys all the use of the trust property as if it were his own is entirely consistent with the existence of a trust.

We take the view, and apprehend that the Crown was inclined to accept, that those features relating to the width of the discretionary trusts and the existence of bearer shares among the assets were not indicative of anything sinister at all in the documents; and so far as the judge suggested otherwise, he should not have done so. But this criticism of the summing-up has to be viewed in context. The plain fact is that if the jury found that Allen was the beneficial owner of the assets in question, they must inevitably have convicted him on count 11. They were fairly and squarely directed to that effect. And there was, in fact, overwhelming evidence that the assets were Allen’s to dispose of as he would, that he treated them as such, and that there was no question of the trustees possessing any real power or discretion in the matter. The evidence in question is summarised at pp. 17-19 of the Crown’s skeleton, and since it is not disputed by Mr Newman we need not set it out.

Mr Newman advanced a further argument, conspicuous for its imaginative quality. He submitted that if he was wrong upon the issue of “sham”, then the corporation tax counts and the income tax counts against Allen - that is, the rest of the indictment - were fatally infected: it would mean that all the assets of the companies belonged to Allen, so that there would be nothing on which to charge corporation tax; and Allen could not be liable to income tax on benefits in kind, since they would, in effect, be gifts to himself. He referred to ICTA s.8(2): “A company... shall not otherwise be chargeable to corporation tax on profits accruing to it in a fiduciary or representative capacity...” But, as Mr Rook submitted, the fact that Allen owned the companies did not imply that they generated no profits. A company’s profits are not earned “in a representative capacity” on behalf of its shareholders; nothing could be more elementary. Allen, as beneficial owner of the companies, was entitled to a distribution of profits, which is what he got.

LORD JUSTICE LAWS: Mr Venables, I rather think we need a three judge Court to deal with that. As you see, Judge Crane is with me but Moses J is in the middle of a murder trial on circuit. With his consent we have handed the judgment down as a two judge Court. Unless the Associate corrects me, I think applications for leave and a certificate need to be a three judge court. (Pause). The Associate thinks that is right as well. Does anyone at the Bar have any greater knowledge of the procedural question? I think that is right.

LORD JUSTICE LAWS: If you think it is helpful to say anything now Mr Venables, I certainly will not stop you. I do not believe we are competent to deal with the matter as a court of two. We will certainly receive any such application in writing and then decide whether to deal with it on paper or at a further hearing. I should mention that I recall having correspondence - I fear some little time ago now - from some counsel asking the Court to agree to give directions for a hearing as to sentence if the appeal was dismissed. It was you, Mr Newman. So there must be a further hearing, assuming any sentence appeal is pursued for that purpose anyway. On the assumption that we would then convene as a court of three, we could deal with your applications, then if we thought it necessary to have a hearing. The trouble is, that time goes by. For reasons beyond our control it has already been a long time since the hearing of this case, now near the end of the summer term.

MR VENABLES: The only point is a 739 point, we do not wish to pursue anything else. That is a very difficult area of the law, that has been considered by their Lordships' House on many occasions. That is the one section, the Tax Exemption Act, must litigate and there are many ranging problems. Their Lordships certainly showed an appetite to want to consider it. It is an important...

MR VENABLES: There is this much wider aspect. From time to time, the House of Lords come down very strongly against it. It is very interesting to know that your Lordships' judgment might be dealt with by judicial review and that could indeed be (inaudible) that is underdeveloped so far as the authorities. There is also the problems of self-assessment. Of course, the question of judicial review is expensive, unlike General Commissioners' Magistrates for a smaller tax payer, going to the Queen's...

LORD JUSTICE LAWS: It is cheaper than most forms of High Court litigation but it is expensive by comparison with other things. Mr Venables I think, as you have made those observations which are very helpful, because they give a matter the focus, the Court would be assisted if you were able to provide us not only with a draft question for their Lordships' House, but also, as briefly as you may, with some written submissions along the sort of lines you have just been outlining.

LORD JUSTICE LAWS: I think so, I would wish to reserve the Court's discretion, whether to deal with these applications relating to their Lordships' House without a hearing. If we need a hearing, then it can happen at the same time as the sentence appeal. If we have written submissions in plenty of time, we can then decide one way or the other.

MR NEWMAN: They clearly do go wider as your Lordship will see from question number 1. They do not relate to all the points taken on appeal. Point 1 relates to an admission to an act that constitutes an offence and points 2 and 3 relate to sections 145 and 154. And then point 4, relates...

LORD JUSTICE LAWS: That would be of great assistance to us. Speaking for myself, I have not discussed this with Judge Crane, it may be unorthodox, I do not know. If the Crown have any submissions that they would be willing and prepared to make, out of assistance to the Court, as to why the certificate should not be granted, that would be of assistance also.

MR NEWMAN: The only other matter is this. We do seek directions this morning - your Lordship may recollect what happened was a joint letter written by Mr Rook and myself was sent - your Lordship replied to it saying you would. We reckon the confiscation point which is outstanding is probably half a day's argument. It raises a very important general point.

MR NEWMAN: The relevant section of the Criminal Justice Act allows the Court or requires the Court to make a confiscation order in respect of a person who benefits from an offence. The question which arises is the respect in which Mr Alan Benny, in the sentence that, notwithstanding his finding of guilt, he is still in every way liable to pay the tax. Therefore it raises also a double taxation point in a different way.

So far as directions are concerned, we for our part, would welcome the production of further skeleton arguments on this particular point, because my learned friend's point, he has raised his point, he has flagged it, he has not really developed it. I think in response to him developing the point we could certainly make some submissions which would shorten we would hope the time actually taken up in court.

MR NEWMAN: In which case, my Lord, may I respectfully suggest I would have curtailed time, had it been able to hear beforehand. Can I suggest that skeleton arguments from both sides will be lodged by the beginning of September. I mean we can make it earlier if there is any prospect of the Court actually hearing the matter, if there is not...

MR NEWMAN: My Lord, I believe he was an applicant in relation to sentence, although I have to say that from such correspondence as I have had with my learned friends and indeed from what my learned friend said to your Lordship in court, for what it is worth the prosecution accept the confiscation point is a real point to be argued. They do not accept we are right, but it is an important point to be argued. The confiscation order is part of the sentencing. I would ask for your Lordships to grant leave to appeal against sentence.

LORD JUSTICE LAWS: I am not - speaking for myself - provisionally prepared to give you leave in relation to that, but I would not seek you to prevent renewing it at the hearing. Then the appeal against sentence on the confiscation order point will be adjourned, as will be the application in relation to the prison term. The Crown is to attend the restored hearing by counsel for the assistance of the Court. The appellant should submit a skeleton argument to the Criminal Appeal Office and to the Crown by 1st September, relating to the confiscation order point. Skeleton argument in reply from the Crown by the 15th September. The case will be listed as soon as it may be heard in the new term by the same constitution of this Court that heard the appeals against conviction.

LORD JUSTICE LAWS: You may be right about that, Mr Newman. I say with a time estimate of half a day. But if counsel on either side have any further thoughts as regards the time estimate when they are preparing the skeleton they should notify the Criminal Appeal Office. Thank you. Is there anything else?

MR FISHER: My Lord, yes, there is one matter. Mr Alan is a legally aided defendant, but Mr Dimsey is a privately funded appellant, and that brings the Crown to the section 18(2) of the Prosecution of Offences Act, an application for costs. My Lord, it can be conveniently found in Archbold, at page 743. My Lord finds

LORD JUSTICE LAWS: I think you are entitled to complain about that, Mr Venables. At the moment, whatever his assets are, in a simple sense, he has not got access to the majority of them because of a freezing order on your instructions. Do you know, you say anything as to the likely duration of that order, has it just been made, is there a trial forthcoming or...?

LORD JUSTICE LAWS: Mr Fisher, we are not inclined to make an order today. We are not criticising you personally, but we cannot at present understand why Mr Venables was not notified of the application some time ago rather than just this morning. It would be quite wrong for us to attempt to investigate the ins and outs of this freezing order when Mr Venables has barely any instructions about it and there are certainly no documents. It may be that, at the end of the day, to be candid, the application may not be worth very much, one does not know what the position is. We consider that if you decide to pursue this application, you must give proper notice and seek a further hearing. If you do that, it may be it ought to come on at the same time as Mr Alan's sentence appeal. Certainly that would be convenient for the court for obvious reasons. We are not encouraging you one way or the other. Mr Venables, I did not invite further submissions from you, you are content with what I have said to Mr Fisher, are you?

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	England and Wales Court of Appeal (Criminal Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Criminal Division) Decisions >> Dimsey & Anor, R v [1999] EWCA Crim 1917 (7 July 1999) URL: http://www.bailii.org/ew/cases/EWCA/Crim/1999/1917.html Cite as: [1999] BTC 335, [2000] QB 744, [1999] EWCA Crim 1917, [2000] 1 Cr App R 203, [1999] STC 846, [2000] 3 WLR 273, [2000] 1 Cr App Rep 203

England and Wales Court of Appeal (Criminal Division) Decisions

DERMOT JEREMY DIMSEY RORGER BRIAN ALLEN, R v. [1999] EWCA Crim 1917 (7th July, 1999)