Raja v Van Hoogstraten & Ors, Court of Appeal - Chancery Division, November 29, 2018, [2018] EWHC 3261 (Ch)

Resolution Date:November 29, 2018
Issuing Organization:Chancery Division
Actores:Raja v Van Hoogstraten & Ors
 
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Case No: HC-2017-000419

Neutral Citation Number: [2018] EWHC 3261 (Ch)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

CHANCERY DIVISION

Royal Courts of Justice

Rolls Building, Fetter Lane, London, EC4A 1NL

Date: 29/11/2018

Before:

MR JUSTICE MORGAN

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Between:

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Mr Beeby (instructed by Sabeers Stone Greene LLP) for the Claimant

The Second Defendant in person (on his own behalf and on behalf of the Third to Seventh Defendants)

Hearing date: 19 November 2018

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JudgmentMR JUSTICE MORGAN:

The application by the Second to Seventh Defendants

  1. By an application notice issued on 2 August 2018, the Second Defendant applied for various orders. The application notice appeared to have been issued on behalf of the Second Defendant alone. However, the Second Defendant has told me that he had intended to issue the application on behalf of the Second to Seventh Defendants and that he appeared at the hearing of that application on 19 November 2018 on behalf of himself and the Third to Seventh Defendants. I will proceed on that basis.

  2. By their application, the Second to Seventh Defendants applied for three orders. Taking the orders sought in a logical order, the first order was that ``this case'' be transferred to a judge other than myself. In the circumstances of this application, I understood the reference to ``this case'' to be a reference to, at least, the present application of the Second to Seventh Defendants. The Second Defendant supported the application with a witness statement which made various comments about my own position and suggesting that I was ``conflicted''.

  3. When this application was called on, I asked the Second Defendant which of the orders he sought should be considered first as it seemed to me that I needed to decide in the first instance whether I would hear the application or transfer it to another judge. At that point, the Second Defendant stated that he no longer pursued the application for a transfer to another judge and that matter was not further considered. I should add that when I pre-read the papers, I could see no basis on which I ought to transfer this application to another judge and indeed I considered that it was my duty to hear the application rather than pass it to another judge. In that regard I had in mind what was said in Triodos Bank NV v Dobbs (Application for Stay of Appeal) [2006] CP Rep 1 at [7] and Otkritie International Investment Management Ltd v Urumov [2015] CP Rep 6 at [27] in relation to the duty of judge who is wrongly asked to recuse himself.

  4. The second order sought by the application is an order ``amending'' paragraph 7 of an earlier order of 26 February 2018. The third order sought by the application is an order setting aside earlier orders of 11 May 2018, 25 June 2018 and 20 July 2018.

  5. In order to present this application, the Second Defendant had prepared a bundle of communications between the Second to Seventh Defendants and their solicitors, Janes Solicitors (``Janes''). When the Second Defendant asked me to receive this bundle, in view of the fact that he was acting in person and on behalf of others who did not have legal representation, I asked whether he had considered the suitability of a waiver of legal professional privilege in these documents. He confirmed that he did wish to waive that privilege and indeed he wished to rely heavily on these documents for the purposes of the application. At a later stage in the hearing, the Second Defendant wished to show me a document which I considered ran the risk of incriminating him and the Third to Seventh Defendants in relation to a possible contempt of court and I again asked him to consider the suitability of the court and the Claimant seeing that document. The Second Defendant again confirmed that he wished the court to see the document; at the hearing, the Claimant had been provided with all of the privileged documents.

  6. As will be seen, the privileged communications between the Second to Seventh Defendants and their solicitors do not help the case of the Second to Seventh Defendants and, indeed, reveal matters harmful to the submissions made on their behalf.

    The earlier judgment

  7. On 26 February 2018, I gave an earlier judgment in this case. That judgment was given orally but it has since been transcribed and I have been provided with a transcript. The judgment has a neutral citation number: [2018] EWHC 609 (Ch). I have also been provided with a transcript of the discussion between the court and counsel for the parties following judgment. I will assume that anyone reading the present judgment has access to my earlier judgment which has been made available on bailii.

  8. My earlier judgment related to a preliminary issue as to whether the First Defendant, Mr van Hoogstraten had any beneficial interest in two properties, one in Hove and one in Brighton. Mr van Hoogstraten had been barred from defending the proceedings but the Second to Seventh Defendants who are his children did defend the proceedings and were represented by solicitors, Janes, and by Mr Mark Warwick QC. The Claimant, Mrs Raja, was represented by Mr Peter Irvin of counsel.

  9. Although he was not himself permitted to defend the proceedings, Mr van Hoogstraten gave evidence at the trial of the preliminary issue in support of the case put forward by the Second to Seventh Defendants, who are his children. He was not separately represented but was present in court throughout all or most of the trial although I understand that he was not in court when I gave judgment on 26 February 2018.

  10. At the trial of the preliminary issue, the case of the Second to Seventh Defendants, supported by the evidence of Mr van Hoogstraten, was that he held the title to both of the relevant properties on trust for the Second to Seventh Defendants. In my earlier judgment, I determined the preliminary issue in favour of the Second to Seventh Defendants. Following judgment, I heard submissions as to the costs of the claim and I gave a ruling, with reasons, as to costs. I ordered the Claimant to pay one-third of the costs of the Second to Seventh Defendants. I was not provided with a transcript of the ruling which I gave as to costs.

  11. Following my ruling on costs, I raised two matters with counsel for the Second to Seventh Defendants. The first matter is not now relevant but the second related to evidence which I had heard at the trial as to the tax treatment of the income produced by the two properties which, in accordance with my judgment, was trust income. In my judgment, I had referred to this topic at [37], [38] and [53], in these terms:

    ``37 It emerged at a late stage in the trial that since around 2006 the income from 12 The Drive and 208 Preston Road has been treated as the income of a limited company Hamilton Property Holdings Limited. The 6 children are the shareholders in this company. As the income is treated as the income of the company and not the income of a trustee, corporation tax is potentially payable on the income, save that the losses of the company in other respects have reduced the relevant income to nil, or nearly nil, so that minimal tax is paid. Of course, if the net income had been treated as trust income, as the children assert in this court it should have been, a much higher rate of tax would have been payable.

    38 Mr van Hoogstraten did not tell me about these arrangements in his evidence. The second defendant suggested that HMRC had agreed to this method of accounting and taxation. He did not produce any document to record any such agreement. I understood from his evidence that he himself had not seen any such document. I am very sceptical as to whether this evidence is true as to the position of HMRC. However, as the matter emerged late in the trial and was not fully explored, I am cautious as to whether I should find there has been a blatant attempt to cheat HMRC, although I can say that the position looks very suspicious indeed.

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    53 As to the tax treatment of the tax income, this point only arose at a late stage. Prima facie the trustee has not paid the tax which he ought to have paid. The second defendant told me that this underpayment of tax was with the agreement of HMRC on an interim basis. I have already explained that I am very sceptical about the truth of that statement, but I am not able to make a firm finding one way or the other. However, even if I had held that Mr van Hoogstraten was a trustee and that he was not paying the correct tax, that would still not persuade me to hold that the trusts were not genuine. In those circumstances, the right finding would be that the trusts were genuine, but that Mr van Hoogstraten, assisted by his children, were cheating HMRC.''

  12. The transcript of the discussion following judgment contains the following exchanges:

    ``MR JUSTICE MORGAN: ... The next matter is the tax treatment of the trust income. I have not made a finding about whether the Inland Revenue have been misled. I have expressed scepticism about the answers I have been given. It seems to me that the Inland Revenue should be made aware of the findings in this case, and it will be for them to decide what action to take by way of recovery of tax, penalties, any other criminal sanction they may wish to visit upon a cheating taxpayer, if that is what I am dealing with.

    There are two things that can be done. One is for the defendants to obtain a transcript of my judgment and send it to the Inland Revenue, together with any mitigating circumstances or explanatory circumstances they wish. The other is for me to obtain a transcript of the judgment and send it to the Inland Revenue and invite them to investigate. I am happy to hear which of those two options might be more appropriate. Mr Warwick, can you help on that?

    MR WARWICK: My Lord, I have instructions. We...

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