B e f o r e :
LORD JUSTICE KENNEDY
and
MRS JUSTICE HALLETT
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THE QUEEN ON THE APPLICATION OF
PAUL DA COSTA & CO (A FIRM) AND
STEWART COLLINS
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| | THAMES MAGISTRATES COURT AND
H.M. COMMISSIONERS OF CUSTOMS & EXCISE
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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
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Julian Knowles (instructed by Russell Jones & Walker, Gray’s Inn Road for the applicants)
Philip Coppel (instructed by the Customs & Excise)
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HTML VERSION OF JUDGMENT
AS APPROVED BY THE COURT
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Lord Justice Kennedy :
- This is an application for judicial review which relates to the issue of two search warrants by the first defendant, and to the action then taken by the second defendant purportedly pursuant to the search warrants. Before I can consider the submissions it is therefore necessary to look with some care at:-
(1) The information placed before the Deputy District Judge on 12th July 2001 at Thames Magistrates Court which persuaded him to issue the warrants.
(2) The form of the warrants.
(3) The actions taken by the second defendant on 18th July 2001 of which complaint is now made.
Before the Deputy District Judge
- The application for search warrants was made by Alistair Bruce Dougal, an officer of Customs and Excise, who was concerned with enquiries into the Value Added Tax affairs of Paul Da Costa and Co., a firm of Chartered Accountants, and PDC Management Limited (in liquidation). The firm of accountants (Da Costa) has been registered for VAT since 1973, and by 2000 its main office was at High Beech Road, Loughton, Essex. It also had a branch office at Bridge Street, Coggeshall, Essex. The firm had been the subject of periodic VAT inspections and nothing untoward had emerged until August 2000 when the inspecting officer became concerned by tax reclaimed as input tax by Da Costa to a total of £194,538. The claims were made against 18 invoices in the name of PDC Management Limited, which appeared to be associated with Da Costa, and which shared the same premises. There were two distinct categories of invoice:-
(1) Eleven invoices which described the services supplied as “re-charge of salaries”. They were dated between 30th December 1997 and 30th September 1998 and bore total VAT of £54,009.
(2) The remaining seven invoices were for “management services”. They were dated between 31st August 1997 and 28th February 1999 and bore the balance of the VAT reclaimed, £140,529.
The visiting officer of Customs and Excise checked the output tax declarations made by PDC on its VAT returns, and they did not correspond. It also emerged that PDC had apparently gone in to liquidation with effect from 25th August 1998, before the date of some of the alleged supplies. Further enquiries revealed that the directors of PDC were three partners of Da Costa - Collins, Grant and Fletcher (who apparently ceased to be a partner in June 1998). PDC was registered for VAT from 19th August 1997, and during its short life submitted nine monthly tax returns, the earlier ones being signed by Fletcher and the later ones by Grant, both of whom also signed returns submitted by the firm. The PDC output tax figures for the period between December 1997 and June 1998 corresponded to the first seven “re-charge of salaries” invoices posted in the records of Da Costa. But no output tax declarations were made in respect of management charges invoices, and very little tax was paid by PDC to Customs and Excise. The liquidation was a result of a petition by Customs and Excise, and at that time PDC had a known debt to the Customs and Excise of £41,151. The records of PDC obtained from the Official Receiver’s offices show no reference to the management services invoices, and there is no evidence of any payment being made by Da Costa for anything other than re-charge of salaries invoices, although the total net value of the management services invoices purportedly raised by PDC up to the date of its liquidation was £437,764.
- By a letter to the Customs and Excise dated 4th September 2000, only a few days after the VAT inspection, Da Costa identified two “errors” in relation to input tax claims against PDC invoices dated 30th November 1998 and 28th February 1999. It is said that “the charge should not have been made in the first instance” and that the input tax totalling £5,760 should be repaid to the Customs and Excise. That deals with two of the three invoices dated after the liquidation of PDC.
- As Mr Dougal said at the beginning of his information, the fraud suspected as a result of the Customs and Excise enquiries was that Da Costa had made false claims to VAT input tax against invoices in the name of PDC, purporting to be for management services when no such services had been provided, and no money had been exchanged. Furthermore it was suspected that PDC was set up to allow Da Costa to reclaim VAT input tax on its staff and sub-contractor costs without, for the most part, any corresponding payment of VAT liabilities by PDC. Whether in the end those suspicions are shown to have been well founded is not a matter we have to decide. We are at this case concerned only with the material presented to the Deputy District Judge.
- Mr Dougal stated that as a result of his enquiries he had reasonable grounds to suspect that a fraud offence of a serious nature under Section 72 of the VAT Act 1994 had been committed and that evidence of the commission of such an offence was to be found at the two offices of Da Costa, that evidence including certain types of evidence which he specified. He therefore applied under paragraph 10(3) of Schedule 11 to the 1994 Act for warrants to search those premises, and confirmed that the powers conferred by a warrant would not be exercisable “by more than 10 officers” for the main office, or by more than four officers for the branch office.
- In a statement which he has prepared for this court the Deputy District Judge states that the application to him was supported by the detailed information of Mr Dougal (which is summarised above) and that the officer “duly entered the witness box in the ordinary manner”. There is nothing in the statement of the Deputy District Judge or elsewhere to indicate that whilst in the witness box Mr Dougal made any significant addition to his written information. The Deputy District Judge indicates in his statement his recognition of the draconian power he was being asked to exercise, and explains how he sought to exercise it when he decided to grant the two warrants which were sought.
The Warrants
- The warrants are in very similar terms, so I look first at that relating to the main office. It begins by stating that in accordance with paragraph 10(3) of Schedule 11 the District Judge is satisfied “that there are reasonable grounds for suspecting that a fraud offence which appears to be of a serious nature, being an offence under any provision of Section 72(1) to (8) of the Value Added Tax Act 1994, has been committed, or is currently being committed on (the premises of the main office) or that evidence of the commission of such an offence is to be found there.” The warrant goes on to authorise the officers of Customs and Excise to enter the premises and “search them for evidence relating to the commission of this offence including:-
(a) Any documentation and correspondence relating to the VAT registered businesses suspected of being involved in VAT fraud offences.
(b) Any records relating to Bank Building Society or any other financial institutions accounts controlled or operated by Paul Da Costa and Co. any of the individual partners of Paul Da Costa and Co, PDC Management Limited and/or any other business believed to be controlled by any of the individual partners of Paul Da Costa and Co.
(c) Any computer equipment, computer discs and any of the specified information held on any form of computer storage medium
(d) Any other items or information which reasonably appears to the officers to be evidence in relation to suspected VAT fraud offences which appear to be of a serious nature.”
The warrant states that any officer who enters the premises under its authority:-
“may seize and remove any documents, or other things whatsoever found on the premises which he or she has reasonable cause to believe may be required as evidence for the purposes of proceedings in respect of a Value Added Tax fraud offence which appears to him or her to be of a serious nature.”
It also states that the person in charge of the search “shall take with him or her no more than nine other persons.”
- In the warrant for the branch office that figure is three, and the address is different. Otherwise the warrants are identical.
Before us Mr Knowles for the Claimant does not go so far as to say that the warrants should not have been issued. His submissions relate entirely to the wording of the warrants and to the actions taken in reliance on them.
The searches and these proceedings
- On 18th July 2001 officers of Customs and Excise arrested Stewart Collins at his home and carried out a search and seizure operation at that address for which there was no warrant. Since the commencement of these proceedings the Customs and Excise have admitted that that operation was illegal, and for the moment I need say no more about it.
- On the same day Richard Grant was arrested, and the main office premises of Da Costa were then searched under the authority of the first warrant. Fourteen officers were involved, but no more than ten officers were on the premises at any one time. Still on the same day Customs officers searched the branch office of Da Costa under the authority of the second warrant. Here np more than three officers attended the premises.
- During the two office searches a number of documents were seized and retained by the Customs and Excise. An image was taken of each of the two hard disks on the firm’s computer server and possession was also taken of some computers themselves. Members of staff and sub-contractors were invited to complete pre-prepared questionnaires, and most of them agreed to do so.
- About three weeks later, on 9th August 2001, the Claimants began these proceedings for judicial review. In the amended claim form six points are made. One relates to the search of Mr Collins’ home, and only one of the other points relates to the form and content of the warrants, but in his submissions to us Mr Knowles took what I can best describe as a supplementary introductory point, to which I know turn.
Criticisms of the Warrants
- Paragraph 10(3) of Schedule 11 to the 1994 Act begins:-
“If a Justice of the Peace … is satisfied on information on oath that there is reasonable ground for suspecting that a fraud offence which appears to be of a serious nature is being, has been or is about to be committed on any premises or that evidence of the commission of such an offence is to be found there, he may issue a warrant …”
- Mr Knowles first submission is that the warrants were unlawful because the District Judge failed to indicate on the face of each warrant which of the statutory access conditions were satisfied. The inference which we are invited to draw is that the Deputy District Judge failed properly to consider the statutory access conditions, and the question of whether or not the applicant for the warrant had demonstrated to the requisite standard that they were fulfilled.
- I confess that I find this submission both unrealistic and unattractive. On the face of the information there were clearly reasonable grounds for suspecting that a fraud offence of a serious nature:-
(1) Had been committed and maybe was still being committed at the premises it was sought to search, and
(2) That evidence of the commission of such an offence was to be found there -
and I see no reason why the Deputy District Judge should have been obliged to rely on one access condition rather than the other. In my judgment the use of the word “or” in paragraph 20(3) does not have that disjunctive effect.
- The more substantial point which Mr Knowles makes in relation to the warrants is that they were too widely drawn, and so failed to comply with Section 15(6)(b) of the Police and Criminal Evidence Act 1984, which applies to searches of the type with which we are concerned. That sub-section requires a warrant to “identify, so far as is practicable, the articles or persons to be sought”. Mr Knowles submits that in order to comply with that obligation it was necessary for the evidence sought to be specifically described, or defined by reference to generic categories of document relevant to the offence under investigation. It should have been clearly limited to the offence giving rise to the application for the warrant, and expressly limited in time in a way which was related to the period covered by the alleged offences. Our attention was invited to R v. Central Criminal Court ex parte AJD Holdings Limited 24th February 1992 unreported, R v. Southampton Crown Court ex parte J & P (1993) CLR 962, and two decisions under the Bankers Books Evidence Act 1879, and it was said that the limitations for which Mr Knowles contended were required by Article 8 of the European Convention on Human Rights - respect for private and family life.
- By reference to the wording of the warrant Mr Knowles points out that paragraph (d) refers to offences in the plural, whereas the introductory words refer to “this offence” in the singular. Criticism is also levelled at paragraph (a) which does not name the businesses or say who must be suspicious, and it is not, so it is said, limited to the offence for which the warrant was granted. Mr Knowles is particularly critical of the lack of any time frame which, he submits, could have led under paragraph (b) to inspection of partners bank accounts relating to when they were children. As to paragraph (c) it is said that the power invoked should have been that provided by paragraph 11 of Schedule 11, and the formulation in paragraph (c) is unnecessarily wide.
- In my judgment the complaints in relation to the width of the warrants are misconceived. Of necessity the warrant does not set out in detail why the Deputy District Judge was satisfied that there were reasonable grounds for suspecting that a fraud offence of a serious nature (which in an indictment might be charged as more than one offence) had been committed. That detail was in the information, but it was with that in mind that he authorised Mr Dougal and other officers to enter the specified premises and search them “for evidence relating to the commission of this offence” including the items set out in the four lettered paragraphs of which complaint is made. They are all introduced and governed by the words which I have emphasised, so, for example, to any officer who was properly briefed, there would be no doubt as to the identity of the VAT registered businesses suspected of being involved in VAT fraud offences, and not all documentation and correspondence relating to those businesses could be searched, only that capable of constituting evidence relating to the commission of the suspected offence. The same limitation applied to all four lettered paragraphs, and because of the limited life of PDC Management Limited it also provided a relatively short time frame which did not need to be otherwise specified.
The criticisms of the searches
- Mr Knowles next complaint is that the search was rendered unlawful by the seizure of a large quantity of material which fell outside the terms of the warrant. He points out that the enquiry did not extend to the relationship between Da Costa and its clients, as was made clear in the briefing given to search officers, but, it is said, “thousands of clients’ files were seized”. This was really a complaint in relation to computer imaging, as is clear from Mr Knowles’ skeleton argument. For the purposes of this judgment I accept that the images incorporated a vast number of documents relating to the firm’s clients, and held by it subject to a duty of confidence, but I was not impressed by Mr Knowles’ submission that the searching officers could simply have asked a partner or someone in authority at the firm to print off relevant files.
- Mr Coppel, for the Customs and Excise, accepts that an image was taken of each of the two hard disks on the firm’s computer server. He goes on to point out that a computer hard disk is a single storage entity which falls within the definition of a “document” in Section 96(1) of the 1994 Act because it is something “in which information of any kind is recorded”. Thus a hard disk may be seized and removed pursuant to the power to seize and remove documents to be found in paragraph 10(3)(b) of Schedule 11 provided that it contains material which the searching officer at the time of the search has reasonable cause to believe might be required as evidence in relation to the suspected offence or offences, and it is not even suggested that that requirement was not satisfied in this case. The officer is not required to extract from the hard disk just the information he believes may be required, nor is it practicable for him to do so. Imaging was much less intrusive than seizing the hard disks. It was apparently agreed to by a partner, who I accept did not have authority to waive professional privilege on behalf of clients. If the result was that the Customs and Excise obtained amongst other things information in relation to clients of the accountancy practice that is no more objectionable than if they had for good reason taken possession of a leather bound ledger much of which contained information of a similar kind. For the reasons given by Mr Coppel I accept that no complaint can be sustained in relation to the imaging procedure which was adopted. Although Mr Knowles complains in paragraph 53 of his skeleton argument that other items were seized which fell outside the terms of the warrant, that complaint was not pursued in oral argument, probably because, as explained by Mr Coppel in paragraphs 26 to 30 of his skeleton argument, each item of material complained of was clearly material which the authorised officer at the time of the search did have reasonable cause to believe might be required in evidence in relation to the suspected offence. Accordingly I need say nothing about the seizure of those other items.
- I pass therefore to Mr Knowles next criticism of the searching procedure, and this relates to the use of questionnaires. The search, it is said, was rendered unlawful because of the interrogation by Customs of the firm’s members of staff using pre-prepared questionnaires, and the non disclosure of this fact to the Deputy District Judge who granted the warrant. As Mr Knowles points out, Section 16(8) of the Police and Criminal Evidence Act makes it clear that “a search under a warrant may only be a search to the extent required for the purpose for which the warrant was issued”. It cannot be for a collateral purpose. Mr Dougal states that although the questionnaires were drafted when the warrants were obtained no firm decision had been taken at that time as to whether or not they would be used. When it was decided to use them care was taken to ensure that those to whom they were given were not put under any pressure. Mr Knowles accepts that if questionnaires had not been used the searching officers could have obtained the names of everyone present and later interviewed all of them, so from their point of view it can be argued that the completion of a questionnaire was the preferable alternative. Nevertheless it seems clear to me that at some stage prior to 18th July 2001 it was decided by the Customs and Excise to use the opportunity created by the issue of the search warrants to distribute questionnaires, and to my mind that is something that should not have been done without the prior approval of the Deputy District Judge who granted the warrants. In an extreme case a judge might be persuaded that the application for a search warrant was only an excuse to enable the Customs and Excise to reach witnesses they might not otherwise be able to trace, and in such a case that the application for a warrant would be refused. Clearly that is not this case, and in my judgment the omission in the present case to inform the Deputy District Judge does not call for any intervention at this stage by this Court, but in addition to the statutory obligation imposed by section 16(8) there is an onerous obligation upon those who apply for warrants to ensure that any judge who considers the application is kept fully and properly informed.
- Mr Knowles final complaint relates to the number of officers in attendance having regard to the wording of the warrants. Mr Coppel submits that there was compliance with the wording of these warrants if no more than the specified number of officers was inside the premises at any one time. I disagree. These warrants were so worded as to limit the number of persons which the authorised officer could take with him, but they could have been worded in such a way as to facilitate the “revolving door” system which was in fact operated, and the contravention does not seem to me to be significant.
Conclusion
- So far as Mr Collins is concerned I would make the declaration sought, namely that the search of his home was unlawful and in breach of his rights under Article 8 of the European Convention, and I would remit his case to the single judge for damages to be assessed.
- Judicial review being a discretionary remedy I would not otherwise, for the reasons I have given, grant any form of relief. Although Mr Knowles referred to Article 8 he made it plain that he had no free-standing point to take in relation to it.
- It is no criticism of the Deputy District Judge who dealt with this case to say that in my judgment applications for search warrants should normally be considered by experienced District Judges, and not by deputies. As Mr Knowles pointed out, when they are made under the Police and Criminal Evidence Act they have to be considered by a Circuit Judge.
Mrs Justice Hallett : I agree.
Order: Declaration sought so far as Mr.Collins is concerned, that search of his home was unlawful and in breach of his rights under article 8 of the European Convention; the case remited to single judge for damages to be assessed; no order on application for judicial review and save for matter already dealt with that application dismissed; first claimant to pay the second defendant’s costs of the claim expect and in so far as they relate to the search of the second claimant’s home on 18th July 2001 by the officer of the second defendant; second defendant will pay the second claimant’s costs up to September 2001 so far as they relate to the search of the second claimant’s home on 18th July 2001 and costs include litigation costs of these proceedings incurred by that claimant.
(Order not part of approved judgment)
