Revenue and Customs v Crossman, Court of Appeal - Chancery Division, July 06, 2007, [2007] EWHC 1585 (Ch),[2008] 1 All ER 483

Issuing Organization:Chancery Division
Actores:Revenue and Customs v Crossman
Resolution Date:July 06, 2007

Neutral Citation Number: [2007] EWHC 1585 (Ch)

Case No: 449 of 2006



Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 06/07/2007

Before :


- - - - - - - - - - - - - - - - - - - - -

Between :

- - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - -

Mr Tony Beswetherick (instructed by Clarke Willmott) for the Petitioner

Mr Sharif A. Shivji (instructed by Daniel Berman & Co) for the Respondent

Hearing date: 17 May 2007

- - - - - - - - - - - - - - - - - - - - -



1. This is a petition by the Commissioners of Her Majesty's Revenue and Customs (``HMRC'') for a bankruptcy order against Richard Alan Crossman (described as ``junior'' in the proceedings). The issues raised in answer to the petition caused Deputy Registrar Schaffer to decide on 18 January 2007 that it should be adjourned to a judge.

2. The proceedings have a protracted history and I hope it will not be unfair to observe that at times there appears to have been some confusion in the minds of HMRC and their solicitors as to the basis on which Mr Crossman's indebtedness arose. Having said that, there is no dispute that he did become indebted to HMRC in the sum asserted and that he has failed to discharge that debt. Nevertheless Mr Shivji, for Mr Crossman, has submitted that for one or more of three reasons the court should exercise its discretion under section 266(3) of the Insolvency Act 1986 to dismiss the petition. The first is a public law ground. The second goes to HMRC's conduct in relation to the matter. The third is that for the court to make a bankruptcy order would be for it to act in vain since it would achieve nothing but wasted costs.


3. On 5 September 2003, on a prosecution brought by HMRC, Mr Crossman pleaded guilty to, and was convicted of, fraudulent evasion of Value Added Tax (``VAT'') and excise duty on kerosene fuel. He was sentenced to 42 months in prison. On 27 February 2004 a confiscation order was made against him under section 71 of the Criminal Justice Act 1988. The court found that the value of his proceeds of crime amounted to £488,090 (in respect of both the VAT and excise duty fraud) and fixed the amount of the confiscation order at £55,965.46. That sum was fixed by reference to what Mr Crossman's assets were estimated to realise at the time the order was made. He was ordered to pay it within 18 months and, in default, he would face a two-year term of custody in addition to the term he was already serving.

4. HMRC wrote to Mr Crossman in prison on 6 April 2004. The letter was headed ``Confiscation Order £55,965.46'' It said that ``although the Court has given you 18 months in which to satisfy the Order, this however, does not mean that enforcement action cannot commence until that date.'' It continued, so far as material:

``At the time of the Confiscation Hearing the following were considered by the Court to comprise your realisable assets:

1. Property at 13 Portobello Terrace, Birtley DH3 2JS

2. Business Unit 10-12 Westline Industrial Estate, Birtley

Although the above were specifically listed as your assets, if you are able to satisfy your Confiscation Order in full using other means, then this would be a viable option.

Once the Magistrates' Court is in receipt of payment in full satisfaction of your Confiscation Order, our interest in this matter will cease.

Accordingly this Office will now need to know your proposals for payment of your Order.''

5. By an uncertain date in mid-2005, which Mr Shivji said was probably July, Mr Crossman had paid the £55,965.46 ordered by the confiscation order.

6. In April 2005 HMRC served a statutory demand on Mr Crossman for payment of £343,450 said to be due to HMRC in respect of unpaid fuel excise duty and penalties. Particulars were given of the periods and amounts by reference to which the calculation was made. In May 2005 Mr Crossman issued an application in the Newcastle upon Tyne County Court to have that demand set aside on the ground that he did not understand its basis, referring to the fact that HMRC had previously demanded VAT arrears from him in the same sum. He wanted to know what sum was claimed and whether for VAT or excise duty.

7. That request provoked a witness statement of 29 July 2005 from Debra Smith, a paralegal with Clarke Willmott, HMRC's solicitors. She explained that the debt was exclusively in relation to unpaid kerosene excise duty, a United Kingdom revenue duty chargeable under section 6 of the Hyrdrocarbon Oil Duties Act 1979 on imported and home produced hydrocarbon oil. She said the duty claimed was calculated following an assessment made on Mr Crossman by an HMRC officer. She also said that HMRC were separately pursuing him for £71,784.97 unpaid VAT due under the Value Added Tax Act 1994.

8. In August 2005 Deputy District Judge Silver dismissed with costs Mr Crossman's application to set the statutory demand aside. I have no note of the arguments then deployed or of any judgment then delivered. Suffice it to say that HMRC does not suggest that any of the points that Mr Crossman now takes in defence of the petition should have been taken before the judge in August 2005 and cannot be taken now.

9. After some apparent delay, HMRC presented a bankruptcy petition against Mr Crossman in the High Court on 17 January 2006. That is the petition now before me. It is not surprising that it is based on the unpaid sum of £343,450 claimed by the statutory demand. What is surprising is that it asserts that the entirety of the £343,450 was in respect of unpaid VAT and penalties, of which full particulars are said to have been given in the statutory demand. Of course they had not: the demand had described the debt as being in respect of excise duty and penalties, and Ms Smith had confirmed that in July 2005. Despite this, James Garside, another paralegal with Clarke Willmott, appears to have had no qualms about making a witness statement asserting that the statements in the petition were made from his own knowledge of dealing with the matter and from information provided to him by the petitioner. One wonders to what extent he had first read the file. His witness statement is anyway formally hopeless. It is described as verifying the bankruptcy petition, and was presumably made in purported compliance with Rule 6.12 of the Insolvency Rules 1986. In fact, it does not attempt to verify the statements in the petition at all, which is perhaps just as well as the most crucial of them is wrong.

10. There was some difficulty in doing so but the petition was eventually served in March 2006, following which Mr Crossman served notice of his grounds of opposition. He said he had satisfied the confiscation order. He asserted that it was his understanding that, as a matter of policy, HMRC do not seek to recover unpaid duty by way of civil proceedings and he referred to two decisions of the Court of Appeal, Criminal Division, decided in 2004 and 2006, to which I shall come. He said he therefore challenged the petition as an ``(i) abuse of process, (ii) breach of Art. 1, Protocol 1 of the ECHR, (iii) wrong in principle.'' He did not take the point that the petition reflected a change of tack and was now asserting that the claimed debt was for unpaid VAT rather than excise duty. I say straight away that he has not pursued the point based on the alleged breach of the European Convention for the Protection of Human Rights and Fundamental Freedoms.

11. Those grounds of opposition raised, or can be read as raising, the point that the claim to bankrupt Mr Crossman on the basis of his unpaid debt of £343,450 reflected (at least in part) a bid to achieve double recovery against him, since he had already paid £55,965.46 in satisfaction of the confiscation order. That payment was not made to HMRC, although it was paid to the Crown of which HMRC are part. Nor was it so paid in satisfaction of any part of the unpaid duty. Despite this, in such circumstances it is the policy of HMRC not to press for the payment of at least that part of their debt equivalent to any amount paid to the Crown in satisfaction of a confiscation order. HMRC have, therefore, accepted that their debt for the purposes of the petition should be calculated by giving credit for the £55,965.46; and so they have agreed to treat their outstanding debt as in the reduced sum of £287,484.54. The first issue raised by Mr Shivji is whether HMRC's policy is even more generous to debtors in the position of Mr Crossman, such that satisfaction of the confiscation order is treated as writing off the entirety of their debt. HMRC dispute that that is or ever has been their policy.

12. The matter of the admitted deficiencies in the petition and verifying witness statement was raised at the hearing. Mr Beswetherwick, for HMRC, sought permission to amend the petition so as to describe the debt as being in respect of excise duty and to produce a witness statement verifying the amended petition. Mr Shivji raised no objection to such permission...

To continue reading