APPEAL COURT, HIGH COURT OF JUSTICIARY
Lord Clarke Lord Bonomy Lord Osborne	[2013] HCJAC 21 Appeal No: C799/11   OPINION OF THE COURT   delivered by LORD CLARKE   in   APPEAL UNDER SECTION 74 OF THE CRIMINAL PROCEDURE (SCOTLAND) ACT 1995   by   SHAHID RAMZAN Appellant;   against   HER MAJESTY'S ADVOCATE Respondent:   _______

 

Appellant: Burns, QC;

Respondent: A Mackay, Advocate Depute; Crown Agent

 

24 February 2012

 

[1] At a hearing on 24 February 2012 the appellant appealed against a decision of Lord Uist of 29 November 2011 whereby his Lordship refused to grant commission and diligence in terms of a petition brought by the appellant for recovery of documents. We refused the appeal and undertook to provide written reasons for that decision in due course which we now do.

[2] The appellant is indicted on an indictment which runs to several pages and which contains charges which, in brief, allege that he was with others a participant in so‑called "MTIC" (missing trader intra community) VAT frauds and relating financial irregularities. The nature of such frauds are well described by Lord Emslie in the Opinion of the Court in the appeal by the present appellant, and another, (appeal no. XC355/11 and XC356/11 (unreported)) in the following terms:

"Typically, such frauds involve sequential 'chains' of transactions commencing with the acquisition, in another EU country, of physically small but high‑value commodities such as mobile phones or computer components. Once within the UK, that VAT must by law be collected and accounted for on each onward disposal, and in essence such frauds consist in the 'disappearance' of companies (and their principals) without accounting for VAT received. Such 'disappearance' may inter alia be facilitated by the channelling of relevant invoices and payments through third parties. The sums involved can be very high indeed and the UK Treasury are said to lose billions of pounds every year in this way." (at para 2)

[3] The appellant previously lodged a preliminary issue minute raising the following question:

"The Crown has indicated to the defence that it has complied with its obligations of disclosure under Scots Law. Per contra, the Minuter contends that to properly comply with its duties, it is incumbent on the Crown in Scotland in a case such as the present, to carry out disclosure exercise in terms of that which would be carried out by the Crown in England and Wales in VAT fraud offences of this sort in terms of chap. 32 of the Crown Prosecution Service Disclosure Manual and the MTIC Fraud Protocol relating thereto. As far as the Minuter is aware, the Crown in Scotland has not carried out the disclosure checks which would be done routinely for cases of this sort in England and Wales. In the absence of such checks the Minuter submits that the Crown cannot satisfy the court that all relevant material in the hands of Her Majesty's Revenue and Customs has been disclosed to the defence."

In support of that issue it was contended, on behalf of the appellant:

"That in the absence of the Lord Advocate deploying the same procedure in the present case as would apply in England in such a complex fraud with recognised problems regarding disclosure, the Lord Advocate does not satisfy her disclosure obligations. In such circumstances, Shahid Ramzan's Convention rights under article 6 are violated. In such circumstances the Lord Advocate acts unlawfully if she continues with the prosecution; separatum the court acts unlawfully if it permits the Lord Advocate to continue with the prosecution. A preliminary issue arises"

The appellant sought an order on the Crown to undertake wide‑ranging further investigations which were said to be necessary and, in the alternative the appellant sought dismissal of the whole indictment. In essence the appellant's claim was that without the full disclosure that he desiderated there would be unavailable to him material which might tend to show that he was simply an innocent dupe, who had got caught up in the chain of activity, and that material which the Crown may have in its possession, relating to the activities of others in that chain, might help to establish such a defence. Lord Uist, having heard full submissions on 17 May 2010, held that it could not be said that the Crown had not fulfilled its duty of disclosure in the particular circumstances of the case.

[4] The appellant appealed against that decision. That appeal was refused. The Opinion of the Court was given by Lord Emslie, an extract from which having been cited supra. The grounds for refusing the appeal were three in number. The first of these, as expressed at paragraph 10 of the Opinion of the Court, was as follows:

"First, the Supreme Court's decision in McDonald makes it quite clear, in our view, that for article 6 purposes the Crown's spontaneous duty of disclosure extends only to material which they are, or become, aware while discharging their primary prosecuting function. It does not include the carrying out of potentially extensive and time‑consuming investigations as dictated by the defence, and in this respect it seems to us that the Crown's opposition to the appeals was appropriate and well‑founded. It is simply not open to the defence to produce a 'wish list' of inquiries which they would like to see carried out, and then to insist that the prosecution be delayed and disrupted - perhaps to no useful purpose - while such inquires proceed."

The second reason for refusing the appeal, given by the court, was that the court was not in a position to judge whether, at the time the application was made, the Crown's duty of disclosure had been adequately complied with or not. As it was put , at para 11, "For all we know, there may be no further disclosable material in the hands of the Crown or of the investigating authority. A fortiori it cannot at this stage be said that, by the time of the trial, the duty of the disclosure will not have been fully met." This recognised that the Crown's duty of disclosure is a continuing one.

[5] The third reason for refusing the appeal was that what was said on behalf of the appellant was so vague, and lacking in specification, as to leave the Crown in an impossible situation. In the course of elaborating upon that aspect of matters Lord Emslie said, at para 12, "If the appellants are concerned that the Crown have not sufficiently complied with their duty of disclosure so far, then in our view their proper course would be to prepare and lodge a detailed specification of the documents which they would wish to recover, and thereafter to satisfy the court of the relevance and materiality of what they seek." (It will be noted that the original application to Lord Uist and the appeal thereafter to this court was made not only by the present appellant but by a then co‑accused). As has been seen, the appellant took up that suggestion and lodged a specification of documents. The calls in the specification are in the following terms:

"1. All documents or other records so that excerpts may be taken at the sight of the commissioner for all entries showing or tending to show any links, whether known or suspected, between or among all or any of the following companies (companies (i) to (x) being listed in schedules A, B and C to the indictment; companies (xi) to (xxxii) being companies which are known to the Lord Advocate and HMRC as featuring in the deal chains within the disclosed Crown productions whether in respect of common directors, shareholders, bank account signatories, sources of funding or in respect that any of said companies are controlled or operated by associates of those controlling or operating any of the other of the following companies or otherwise during the period between 1 January 2002 and 31 December 2004:

(i) Eurobridge UK Ltd

(ii) HK International Imports Ltd

(iii) Search 85 Ltd

(iv) Silversafe Ltd

(v) TTX Trading Ltd

(vi) Atec Associates Ltd

(vii) Rascal Management Ltd

(viii) Danum Trading Ltd

(ix) Mobile Heaven Europe Ltd

(x) Leapfrog Solutions Ltd

(xi) France Affaires International

(xii) Profix and Co Limited

(xiii) Negolux International

(xiv) Parisienne du Commerce

(xv) Kingswood Trading

(xvi) Springledown Limited

(xvii) Diginett Limited

(xviii) Inter Communications

(xix) Tiger Trade Limited

(xx) Investagonal

(xxi) Mac

(xxii) AR Coms and Elec Ltd

(xxiii) Online Promotions

(xxiv) Intel Communications Limited

(xxv) Vendini International

(xxvi) Feasacom Ltd

(xxvii) Sim City Phone Limited

(xxviii) DHS Telecom Ltd

(xxix) Worldwide Appliances Ltd.

(xxx) Smart Telecom Ltd

(xxxi) Online Promotions Ltd

(xxxii) Sava Ltd

2. All documents or other records so that excerpts may be taken at the sight of the commissioner for all entries showing or tending to show that France Affaires International and Parisienne du Commerce were involved in MTIC or carousel trading during the period 1 January 2002 and 31 December 2004 and the companies and individuals therein with which and with whom they are known or suspected to have collaborated in order to participate such trading.

3. All documents or other records so that excerpts may be taken at the sight of the commissioner for all entries showing or tending to show any suspected or known participation by Imran Hussein (dob 8.2.78 last known address Flat 3/2 6 Waterside Place, Glasgow G5 0QD), Rafiq Rizuan (dob 17.10.81 last known address 1 Rue des Hevruelles Oranges 9500 Cergy France), Rafiq Mohammed (dob 15.8.48 last known address 1 Rue des Hevruelles Oranges 9500 Cergy France, Zeng Wang and Malik Haider (dob and addresses unknown) in the affairs of any of the companies listed above between 1 January 2002 and 31 December 2004.

4. All documents or other records so that the excerpts may be taken at the sight of the commissioner for all entries showing or tending to show any known or suspected MTIC or carousel trading between 1 January 2002 and 31 December 2004 on by or on behalf of the crown witnesses listed below or any companies with which they were involved; any investigations carried out by or on behalf of the HMRC relating to the VAT affairs of the said witnesses or any companies with which they were involved; any agreements or Memoranda of Understanding reached between HMRC and the said witnesses or associated companies regarding VAT matters including civil settlements ; any discussions or agreements reached between HMRC and the said witnesses regarding the giving of evidence in the present proceedings; any undertakings given by the Lord Advocate, by or on behalf of HMRC, Crown Prosecution Service or United Kingdom Law Officers not to prosecute the said witnesses for any criminal offences; and whether any of the said witnesses were or are recognised by HMRC as informants:

(i) Ian Tuppen of Kingswood Trading Ltd trading as Springletown (CW 165)

(ii) Mark Lawton of Rascal Management Ltd (CW79)

(iii) Pervex Ali of Spectrum Computer Consultants Ltd (CW14)

(iv) Denaught Sharma of Sava Ltd (CW78)

(v) Darren Hill of DSH Ltd (CW60)

(vi) Mohammed Bhatty of TTX Ltd (CW66)

(vii) Parkash Virhia of Mobile Heaven Ltd (CW77)

(viii) George Parkin of Iqbal Public Ltd (CW67)

(ix) Tofiq Malik of Iqbal Public Ltd (CW68)

(x) Gurpeet Sidhu of Diamondforce Ltd (CW70)

(xi) Yusif Ali of TJ Connections Ltd (CW75)

(xii) Haroon Rafiq HK International Imports Ltd (CW62)

(xiii) Paul Turner of Leapfrog Solutions Ltd (CW76)

(xiv) John O'Donnell (CW15)

5. All documents or other records so that excerpts may be taken at the sight of the commissioner for all entries showing or tending to show any participation in known or suspected MTIC or carousel trading by freight forwarding companies Pauls Freight Ltd, Hawks Freight Ltd and Interken Freight Ltd and/or their directors, shareholders or operatives thereof between 1 January 2002 and 31 December 2004; any known or suspected connections and links between directors, shareholders or operatives thereof and those of the companies listed in call 1 above and the extent to which said companies are known to have introduced third parties into MTIC or carousel fraud.

6. Failing which principals, drafts or copies of all or any of them."

[6] In refusing to grant the application for commission and diligence in respect of those calls, Lord Uist agreed with the Crown's submission that the test that had to be met before the court would grant diligence for recovery of documents was authoritively stated by Lord Justice General Rodger in McLeod v HM Advocate (No. 2) 1998 JC 67 at page 80 D - F where his Lordship said:

"...an accused person who asks the court to take the significant step of granting a diligence for the recovery of documents, whether from the Crown or from a third party, does require to explain the basis upon which he asks the court to order the haver to produce the documents. The court does not grant such orders unless it is satisfied that they will serve a proper purpose and that it is in the interests of justice to grant them. This in turn means that the court must be satisfied that an order for the production of the particular documents would be likely to be of material assistance to the proper preparation or presentation of the accused's defence. The accused will need to show how the documents relate to the charge or charges and the proposed defence to them. Such a requirement imposes no great burden on an accused person or his advisers: the averments in the petition may be relatively brief and the court will take account of any relevant information supplied at the hearing."

Lord Uist, in refusing the application, said that he was not satisfied that the appellant, in terms of the application he made had met the "McLeod" test. At paragraph 5 of his report to this Court he said:

"I concluded that the first accused [the appellant] had failed to show that the documents which he sought to recover would be of material assistance to the proper preparation or presentation of his defence by demonstrating how they related to the charge and his proposed defence to them. The sole question for the jury to consider at the trial will be whether the Crown have established the required guilty knowledge on his part. It seemed to me that whether or not other companies or individuals in the supply chain were guilty or not was not a question which the jury would have to consider and was therefore irrelevant to the one question which they would have to consider."

[7] Before this Court, Mr Burns QC, for the appellant submitted that the judge at first instance, had erred in advancing the foregoing reasons for refusing to allow commission and diligence in terms of calls 1, 2, 3 and 5 of the specifications. In relation to call 4, senior counsel submitted that the judge at first instance, had not addressed it separately. Different considerations applied in relation to it and the judge had not given any adequate reason for rejecting the application in respect of that call.

[8] Senior counsel explained that the appellant's defence would be that he had been duped into becoming involved in the MTIC Chain of transaction. The particular involvement of the individuals and bodies referred to in the specification of documents, in the MTI Chain, as revealed in documents, which may be held by the Crown as a result of their investigation into these person's activities, might be of assistance in supporting this line of defence. If it could be shown that the appellant was merely a link in the chain then that would assist his defence that he had no knowledge of the purpose to which the transactions, in which he was involved, would be put or, at least, that he had been in some way duped into his involvement in that chain. As regards call 4 the material sought to be recovered thereunder might assist the appellant on the issue of credibility and reliability of both himself and persons who might have been involved in the chain. The material sought under this call was somewhat similar to previous convictions.

Decision

[9] It is of the nature of an MITC fraud operation that a number of individuals or bodies will be involved. The appellant in charges1, 3, 4 and 5 is charged as "acting along with others." The principal issue for the jury to determine will be whether the appellant knew of the fraudulent purpose to which the transactions in which he was engaged were to be put. The context in which that issue will be set out will, of necessity, require the jury to understand that his involvement was as part of a chain of persons or bodies involved in a fraudulent scheme. The jury will not, however, be concerned with deciding what other persons in this chain had the necessary knowledge to make them guilty of similar offending to that which the appellant is charged.

[10] In R v Matthews [2010] EWCA Crim 3202 the appellant had been convicted of involvement in an MTIC fraud. One of his grounds of appeal was that the trial judge had unfairly restricted or limited him in the conduct of his defence. He had wanted to show how the fraud in which his company was involved had been masterminded, so as to substantiate the defence that he had been unwittingly manipulated into joining in the purchase and sale of the mobile phones involved in the fraud. He wanted to show that there were four suppliers from the European Union and four missing traders and that whilst they used a number of different companies, the same people were behind all these activities. The trial judge had made rulings restricting the appellant's cross‑examination as to the nature of other people's deals and convictions on the basis that what other persons had done, and any pleas or convictions that related to them, were not relevant and were outwith the ambit of matters with which the appellant had been charged and did not assist in determining the state of his knowledge. The Court Of Appeal rejected this criticism of the judge's handling of matters. In giving the judgment of the court Moses LJ at paragraph 21 said:

"It is important to stress that it was never alleged by the prosecution that this appellant was the mastermind. All that was alleged was that his company, Calcon, was a buffer, buying phones from missing traders. In other words, that the company had been interposed in the chain to purchase and sell mobile phones, pay output tax to its supplier, and receive input tax from the person who bought its phones in the normal way, thus enabling the missing trader to receive, and subsequently make off with, the VAT for which it was liable to Her Majesty's Revenue and Customs. All that inevitably required planning and control other than by this appellant. None of this, we repeat, was disputed, and the judge specifically recalled that which is obvious, the existence of ring masters, when he directed the jury."

At paragraph 24 of the judgment his Lordship continued:

"It is further alleged that the judge unfairly prevented the appellant from adducing evidence as to what was described as 'the commonality of control' of the European suppliers. The judge rightly stopped that issue from being further explored...It was quite unnecessary for the appellant to explore that further, in the light of the obvious feature of this type of fraud of the need for ring masters or masterminds - call them what you will. That was never in dispute."

At paragraph 26 Moses LJ then remarked:

"The prosecution in cases such as this is entitled, indeed bound, given their prevalence, to choose who to prosecute. It is no defence to say that others in similar shoes to the appellant had not been prosecuted, and it is of no significance whatever. It would have been quite wrong to allow questioning, or further questioning on that basis, and misleading for the jury."

At paragraph 29 of the judgment the following important point was made:

"The question for the jury was whether the prosecution could prove that the appellant knew that the trade in which he was involved, involved missing traders or fraud upon Her Majesty's Revenue and Customs."

In dismissing the appeal on the grounds advanced on behalf of the appellant, at paragraph 45 of the judgment Moses LJ said:

"It is difficult to see how he could conceivably think that the gains he made, the rewards he found over such a short time, could have been made without realisation that he was participating in some fraud or cheat. These cases should always be focussed on that simple fact. The defence inevitably tried to spin out such cases with applications for discovery in linked cases, arguments about the non‑prosecution of others, or the fact that hapless Customs officials, when visiting, did not advise them earlier or stop them persisting in such trade. None of these features touch upon the essential question and the judges should strive to confine these cases to the essentials. These cases do not warrant long trials, which only deflect a jury from the real question that they have to consider, namely how could a defendant in a position such as this appellant think that he should gain such sudden and dramatic wealth in a trade in which he must have known fraud was rife?"

[11] In the later case of R v Pomfrett (Peter) [2010] 1 WLR 2567 the position was that the Inland Revenue and Customs had investigated a large number of frauds and related money laundering offences under codenames "Operation Vitric" and "Operation Devout". P's prosecution had arisen out of Operation Devout II. The alleged conspiracy concerned a chain or carousel fraud arising out of the import of computer processing units, as a result of which Revenue and Customs were cheated out of some £25 million of VAT. P was convicted of being involved in Operation Devout II. On appeal he contended that his conviction was unsafe, inter alia, because of the prosecution's admitted failure to disclose a large body of material concerning Operation Vitric. P submitted that that material ought to have been disclosed because it established that a third party was the organising mind of both Operation Vitric and Operation Devout II and that the fraud in Operation Devout II had been put into effect to divert funds for a further cycle of fraudulent activity, and that the case against him had therefore proceeded on an artificial basis, as if it was a self‑contained conspiracy. P argued that his defence that he had been the innocent victim of the dishonesty of others could have been advanced much more effectively with the benefit of the additional material. P's appeal against conviction was dismissed. As regards the appellant's complaint about the lack of disclosure, the court held that, whilst, with the additional material, his defence would have been advanced in a different context, it would not have altered the essential nature of the prosecution case against him, or his defence, or the evidence he had given in support of that defence. The central issue would still have been his defence that he was an innocent dupe who was unaware that his company was participating in fraudulent activity. That had been rejected by the jury who had to have found that P had lied about his lack of knowledge of the fraud. It is true that, as Mr Burns pointed out, in an earlier judgment, given by a differently constituted appeal court in England and Wales, namely R v Sandhu [2006] EWCA Crim 606, the court held that the failure by the Crown to make disclosure of certain information about an individual who had "masterminded" an MTIC fraud which, it was said, might have led the jury to conclude that the appellant was an innocent dupe brought into a carousel fraud by a highly skilled criminal gang, rendered the conviction against him unsafe. None of the foregoing English cases is, of course, binding on us and they all dealt with the point discussed on appeal after conviction, as opposed to it arising at the stage of an application for discovery of documents in advance of trial. Nevertheless we consider that the reasoning of the Court of Appeal in Matthews and Pomfrett is highly persuasive and of considerable assistance when considering whether the judge at first instance in the present case, was correct in refusing the application for commission and diligence. We remind ourselves, at this stage, of the test set out by Lord Justice General Rodger in McLeod (No. 2). Before the court should grant commission and diligence it has be satisfied that the recovery of the documents in question will serve a proper purpose and that it is in the interests of justice to grant commission and diligence in relation to them. The court requires, in turn, to be satisfied that production of the particular documents will "be likely to be of material assistance to the proper preparation or presentation of the accused's defence." The accused also has to specify clearly how the documents relate to the charge or charge and the proposed defence to these. Moreover as pointed out by Lord Hamilton (as he then was) in McLeod (No. 2) at page 102 B - C, the disadvantage to the administration of justice, including to accused persons generally, of the generation of large quantities of paper and their painstaking examination by the defence, against a remote possibility that such an exercise may uncover significant information of which the defence does not already have the knowledge or the means of knowledge, are obvious not least in relation to the injustice which would be created by undue delay in the commencement and the conclusion of trial. The judge at first instance in the present case, as he narrates in his report to this Court, at paragraph 3 was advised by Crown that

"call 1 sought a broad enquiry of 32 different companies in the broadest of terms and drew particular attention to the words 'or otherwise' in that call. Gathering the data would require HMRC to investigate the whole records kept by them, which were not kept in one location, and would take three or four officers between six and nine months. Analysing or reviewing the material thereafter would take a similar amount of time. There was a resource consequence for HMRC and a time consequence in relation to when it would be possible to commence the trial."

In the present case all that senior counsel for the appellant could say, in support of the application that the documents sought should be recovered, was that they may assist in his defence that he was a mere innocent dupe caught up in a chain of criminal activity. But we have already said it is a given that there was such a chain and as the Court of Appeal in Matthews made clear it is of the nature of such operations that there will be a mastermind or masterminds involved. It is for the Crown to show that the appellant was not only a participant in the chain of transactions but, that in participating in it he knew that it was designed to achieve fraudulent ends. That others were also involved and that they were, as it might be put, "bigger fish" than he, would neither assist nor hinder his defence. We listened in vain for an explanation as to what the relevance was of the documents sought, relating to the activities of other individuals and bodies in assisting in demonstrating the appellant's lack of knowledge which, it was accepted, is to be his line of defence in this case. In all the circumstances we did not consider that the judge at first instance was wrong in holding that it would be inappropriate to grant commission and diligence in respect of calls 1, 2, 3 and 5.

[12] As regards call 4, which relates to a document which might show the involvement in the chain, of witnesses who are on the Crown list, and companies with which they were associated, those acting for the appellant will be able to seek precognitions from these persons. The Advocate Depute, on behalf of the Crown, also advised the court that there do not exist any agreements or memoranda of understanding as described in this call. We were satisfied that, for these reasons and the more general objection that can be taken as to the terms of the specification, as a whole, which we have set out above, no proper justification for recovery of the documents in terms of this call had been put forward. Had we thought otherwise then, given the terms of the call, it would have been necessary for the matter, as was submitted by the Advocate Depute, to be referred to ministerial level for consideration of a public interest objection being taken.

[13] In the whole circumstance we considered that the judge at first instance applied the correct test in deciding to refuse the application and that his reasons for refusing that application, having regard to its terms, could not be criticised.