Coudrat v HM Revenue & Customs

This is the judgment of the Court.

This is an appeal from the decision of His Honour Judge Ryland, sitting in the Central London County Court on 24 June 2004. The judge dismissed the appellant’s claim for damages for wrongful arrest, false imprisonment and malicious prosecution. The appellant claims that the judge’s decision was wrong and must be overturned. He seeks an order that the appellant’s claim should succeed on liability and should be remitted for the assessment of damages.

The appellant is a French national, born in 1973 and is of good character. On 29^th February 2000, he and another French national, named Luc Sommeyre, were arrested at an hotel in Central London, by officers of HM Customs and Excise, the respondent to the appeal, on suspicion of having committed an offence contrary to Section 72 of the Value Added Tax Act 1994 (VATA). That section creates a number of offences relating to the fraudulent evasion of VAT. Following the arrests, both men’s hotel rooms were searched and documents and cash were seized.

Both men were detained in custody and, later that day, were interviewed under caution. The appellant claimed that he was completely innocent of any wrongdoing. Both men were detained overnight and interviewed for a second time the following day. Again, the appellant claimed complete innocence. Late in the evening of 1^st March 2000, the appellant was charged with an offence under section 72(8) of VATA. Mr Sommeyre was also charged. They were brought before the Magistrates the following day and the appellant was granted conditional bail, but, due to his inability to comply with the conditions, he remained in custody until 7^th March. He was then released but required to surrender his passport and to remain in this country. On 25^th May 2000, the respondent discontinued the case against the appellant but continued the prosecution of Mr Sommeyre. The appellant returned to France that day. Later, Mr Sommeyre breached the terms of his bail; he has failed to return to this country and has not been tried.

In January 2003, the appellant commenced proceedings for damages for wrongful arrest, false imprisonment and malicious prosecution. He alleged that there was no evidence on which the arresting officer could have formed the reasonable suspicion that he was guilty of the evasion of VAT. Also he alleged that there was no evidence sufficient to justify the commencement of proceedings against him for an offence contrary to Section 72(8) and that there was no evidence to undermine the explanations of his conduct that he had given in interview. It was alleged that, in prosecuting him, the respondent had been motivated by malice, in that the officers responsible for the prosecution did not believe him to be guilty of the offence, but charged him in order to keep him in this country and to put pressure on him to give evidence against Mr Sommeyre.

By its defence, the respondent averred that, at the time of the arrest, the arresting officer had had reasonable grounds to suspect that the appellant and Mr Sommeyre were both guilty of a VAT fraud in connection with a company called Tecniconsult Ltd. Further, the respondent’s officers honestly and reasonably believed that there was sufficient evidence against the appellant to justify the commencement of a prosecution. It was averred that, on 22^nd May 2000, standing counsel to the respondent had advised that there was insufficient evidence against the appellant to warrant continuing the prosecution against him. The appellant was informed that the case was to be dropped. The allegation that the respondent’s officers had acted as they did in order to put pressure on the appellant to give evidence against Mr Sommeyre was expressly denied. The evidence that had been available to the respondent at the time of the arrest and the decision to charge the appellant was set out in detail in the defence. We will return to that later in this judgment.

For some time prior to the appellant’s arrest, the respondent had been concerned about a VAT fraud being widely perpetrated by dealers in mobile phones. The respondent called this type of fraud a ‘missing trader’ fraud. It was perpetrated in the following way. An English company (Company A) would obtain VAT registration. Typically, Company A would have no assets and would operate from an accommodation address. It would buy substantial quantities of mobile phones from a supplier somewhere in the EU. No VAT would be chargeable on the purchase transaction between companies registered in different EU countries. Company A would then sell the mobile phones to a purchaser in the UK. VAT at 17.5% would be chargeable on that transaction. The selling price before the addition of VAT would be very competitive and might even be less than the prior purchase price. An invoice would be issued quoting Company A’s VAT registration number. Company B would pay the selling price inclusive of VAT to Company A, which would then be under a legal obligation to account for the VAT to Customs and Excise. However, it would not do so; it would continue trading for only a short time and would disappear before Customs caught up with it. Company A was the ‘missing trader’. Meanwhile Company B would reclaim from Customs and Excise the VAT it had paid to Company A, as it was entitled to do. The effect was that Company A pocketed the VAT it had received from Company B at the expense of Customs and Excise and, of course, the public purse. In effect, the VAT became Company A’s ‘profit margin’, enabling it to sell at a competitive price or even at a loss. It was possible for this fraud to be operated by one dishonest company, Company A, using Company B as an innocent dupe. However, at the trial, Customs officers told the judge that they had come across cases in which both Company A, Company B and also the original supplier of the mobile phones were all involved in a series of sham transactions. If Company B was involved in the fraud, the consignment of phones that it had received might be sent abroad and reimported for a second or even third time, using the same fraud to obtain another 17.5% of the selling price. This was described as a carousel fraud, as the goods went round and round.

The respondent became suspicious that a company called Tecniconsult Ltd (Tecniconsult) was a missing trader dealing in mobile phones. On 29^th February, 2000, a large and valuable consignment of mobile phones was discovered at freight forwarders at Heathrow, standing to the order of Tecniconsult. It was destined for a company called Evolink Ltd (Evolink).

Inquiries showed that the sole director of Tecniconsult was Luc Sommeyre. He had signed the application to register the company for VAT. The application appeared to be misleading in that it claimed that the company’s main business activity was to act as ‘engineering and industrial consultants’ whereas, in fact, its business activity appeared to be the large scale importation of mobile phones. Further, when applying to register for VAT, the company had estimated its annual turnover at between £160,000 and £180,000 per annum, whereas the size of the single transaction with Evolink suggested that the annual turnover was likely to be much larger than that. Yet further, Tecniconsult’s first VAT return, completed in February 2000, in respect of the months September to December 1999, had declared a liability of only £56, suggesting minimal trading. Even that had not been paid. Tecniconsult’s registered office was an accommodation address. Further, Mr Sommeyre was resident abroad and his address in the UK was also an accommodation address. By 29^th February, 2000, the respondent’s officers believed that Tecniconsult Ltd was a fraudulent company, set up to perpetrate VAT fraud through mobile phone dealing.

At the trial of this action, it was for the respondent to prove the lawfulness of the appellant’s arrest. The respondent had to prove that the arresting officer honestly suspected, on objectively reasonable grounds, that the appellant was guilty of VAT fraud. The appellant accepted that there was evidence to suggest that Tecniconsult was involved in VAT fraud. He also accepted that, as the person who had signed the application to register the company for VAT, Mr Sommeyre inevitably came under suspicion. However, the appellant’s case was that he was not involved in the running of Tecniconsult and knew nothing of its VAT dealings. He was an independent selling agent, acting on behalf of Tecniconsult, in selling consignments of mobile phones to companies in the UK. He knew nothing of any fraud and, he claimed, there was no reason to suspect that he did.

On wrongful arrest, the respondent’s case was that its officers had received information from representatives of Evolink that their contact with Tecniconsult had been with a Frenchman named Didier. It was he who had negotiated the contract for the mobile phones then in transit. Evolink’s representatives understood that another Frenchman was also involved and they were due to meet both Frenchmen in London that evening. In reliance on this information, the respondent’s officers suspected that both Frenchmen were involved in the running of Tecniconsult. At that time, they suspected that ‘Didier’ (whom they believed to be the appellant) was the person principally in charge because it was he who had negotiated the sale of the mobile phones to Evolink. However, their case was that they suspected that both men were involved in the company’s business and were therefore both involved in VAT fraud. They contended that it was reasonable for them to do so.

The adequacy of the information collectively available to the respondent’s officers was put in issue, as was the state of mind of Miss Sharon Crowson, the officer who had carried out the arrest. The appellant contended that she personally did not have sufficient knowledge honestly to have formed a suspicion, based on reasonable grounds, that the appellant was guilty of VAT fraud. It was suggested that she was merely acting on the instructions of others who had carried out the investigations. She agreed that she had not been personally involved in the investigations but she said that she understood the nature of missing trader fraud and had been briefed about the evidence relating to Tecniconsult. In the morning of the day of the arrest, she had received information from another officer (she could not remember who) to the effect that the two Frenchmen who were ‘fronting’ or were ‘behind’ Tecniconsult were at the hotel and were to be arrested. The judge found that Miss Crowson’s evidence was truthful and held that she had reasonable grounds to arrest the appellant based on the information she had been given, including that which she had received that morning from, so the judge found, a customs officer named Mr David Rillie. The judge also held that Miss Crowson’s information was ‘sufficient to provide her with reasonable suspicion’. He held that the respondent had discharged its burden of justifying the appellant’s arrest. That conclusion is in issue in this appeal.

The appellant also contended that the authorisation of his detention following arrest had been unlawful. This issue had not been specifically pleaded but it was accepted that the burden was on the respondent to justify the detention until the time when the appellant was brought before the Magistrates. The custody record at the premises where the appellant was detained set out the information which the arresting officer gave to the custody officer at the time the detention was authorised. The judge held that this showed that the custody officer had been given adequate information to justify the appellant’s continued detention. However, the custody record also revealed that the custody officer had made a number of obvious errors in completing the record. For example, he had recorded that the appellant was not a foreign national, when he plainly was. The judge held that those errors did not affect the lawfulness of the appellant’s detention. The claim for false imprisonment failed.

In relation to the appellant’s claim for malicious prosecution, the appellant bore the burden of proof in respect of all four elements of the tort. He had to prove that a prosecution had been commenced against him, that it had been determined in his favour, that the respondent had not had reasonable and probable cause to institute the proceedings and that the respondent had been motivated by malice. It was common ground that a prosecution had been commenced; the appellant had been charged on 1^st March 2000 and brought before the Magistrates the following day. It was also common ground that the proceedings had been determined in his favour. The respondent had asked for the proceedings to be discontinued on 25^th May. What remained in issue was, first, whether the respondent, by its officers, had had reasonable and probable cause to commence and pursue the proceedings and whether the respondent’s officers had been actuated by malice. Both of these matters were contentious. It was common ground that, in order to win, the appellant had to succeed on both issues. It would not avail him if he were to succeed in showing that, on an objective view, the evidence had been insufficient to justify laying the charge and pursuing the prosecution but were to fail to show that the respondent’s officers had been actuated by malice.

The respondent called evidence to explain why its officers had decided to charge the appellant. The two officers involved in the investigation were Mr Rillie and Mr Patrick Dunn. Mr Dunn was the senior of the two. Their evidence was that, by the evening of 1^st March, they had discovered further information over and above that which had been available at the time of arrest. The officers had discovered that Tecniconsult was buying its mobile phones from a company named Alliance International SA (Alliance), which was registered in Luxembourg but trading from Geneva. The purchases from Alliance were free of VAT. Tecniconsult was then selling on to UK customers at prices which included VAT. However Tecniconsult was remitting virtually the whole of its receipts to Alliance’s account in Geneva. Its own bank account was kept almost bare and there were certainly no funds from which a substantial VAT liability could be met. Tecniconsult had incurred a VAT liability of nearly £500,000 in the few weeks since the beginning of 2000. If trading had continued in a similar pattern, the company would have incurred a much larger liability which it appeared that it would be unable to pay. Documents seized from the hotel showed that Tecniconsult was selling mobile phones at a lower price than that that which it had apparently purchased them. Thus, it appeared to be trading at a loss. Its only apparent ‘profit margin’ was the VAT which, the respondents believed, it intended to keep for itself. In short, this evidence confirmed the respondent’s suspicions that Tecniconsult was a fraudulent company.

However, this evidence did not shed any direct light on the role of the appellant or upon his state of knowledge in relation to Tecniconsult’s fraudulent evasion of VAT.

The respondent’s case was that, notwithstanding the lack of direct evidence, the two officers honestly and reasonably believed that the appellant was knowingly involved in VAT fraud. Both Mr Dunn and Mr Rillie asserted that they believed that the appellant was guilty of VAT fraud. Mr Dunn said that he also believed that there was enough evidence against the appellant to warrant charging him. He said that he had based that opinion upon answers that the appellant had given during the interviews, some of which had turned out to be untrue. He had also relied on the interview answers given by Mr Sommeyre, which in some important respects were inconsistent with those given by the appellant.

In interviews, the appellant had answered all the officers’ questions and had asserted throughout that he was an independent commercial agent, acting for Mr Sommeyre and Tecniconsult. He had begun working for Tecniconsult in early January 2000, which would have been about seven weeks before his arrest. He said that he contacted potential customers of whom he was already aware, having been a dealer in the mobile phone market for a considerable time. He offered mobile phones for sale at prices fixed by Mr Sommeyre. These prices were exclusive of VAT. If a deal was struck, Mr Sommeyre was responsible for all further formalities including invoicing and the inclusion of VAT. He, the appellant, was entitled to receive a commission from Tecniconsult of 15 French Francs (about £1.5) per mobile phone sold. However, he had not yet received any commission payments from Tecniconsult. He said that he was not involved in the purchase of the mobile phones. He did not know where they were being purchased from and he did not know at what prices they had been bought. He said that he knew of the existence of Alliance but had had no dealings with them. Further, the appellant said that he had nothing to do with the running of Tecniconsult, the operation of its bank accounts or its registration for VAT. However, he admitted that he had seen VAT documents relating to Tecniconsult. The appellant was asked about his knowledge of and dealings with a Frenchman named Mr Le Guezennec. The appellant said that he knew this man to be a lawyer; he said that he had met him once but had had no business dealings with him. He claimed that he, Mr Le Guezennec and Mr Sommeyre had had lunch together on one occasion but had talked only about women and wine. The respondent’s officers had found a document, apparently a business plan for Tecniconsult, which appeared to have been written by the appellant, Mr Sommeyre and Mr Le Guezennec. On this document, the appellant was described as Tecniconsult’s commercial adviser. The appellant was also asked about the large sum of cash found in his briefcase at the time of his arrest. He said that he believed that Mr Sommeyre had withdrawn the money from Tecniconsult’s account that morning. Mr Sommeyre had given the appellant about £5 to 5.5k as business expenses and had asked him to look after the rest.

In interview, Mr Sommeyre had given some answers that were incriminating and some that conflicted with those given by the appellant. He admitted that Tecniconsult was owned by the two men who ran Alliance and he agreed that Alliance supplied the mobile phones to Tecniconsult. He agreed that he was responsible for Tecniconsult’s VAT affairs. When asked how he intended to pay Tecniconsult’s VAT liability, he acknowledged that there was not enough in its bank account but claimed that he had intended to hold back sufficient funds from future transactions to pay the VAT liability. He said that the appellant had received commission payments for the sales he had arranged for Tecniconsult. He refused to answer a number of questions, in particular about whether Tecniconsult was selling mobile phones at a loss. In respect of the appellant, he said that it was the appellant, not he, who fixed the prices at which Tecniconsult sold to its customers in the UK. Also, he claimed that the appellant was the company secretary of Tecniconsult and, in that capacity, had completed the application for VAT registration; he, Mr Sommeyre, had only signed it.

Mr Dunn told the judge that although he thought that there was enough evidence to justify charging both men, he was uncertain about it so he had taken advice from an in-house lawyer, Mr Kelly. Mr Kelly had advised that there was sufficient evidence to charge both men but that the evidence against the appellant was weaker than that against Mr Sommeyre. Mr Kelly advised that the position be kept under review. Mr Kelly was not called to give evidence; by the time of the trial, he had retired from his employment with the respondent and was unwell and unfit to attend court. Unfortunately, Mr Kelly’s case file could not be found.

Mr Rillie told the judge that he had thought that there was not enough evidence to justify charging the appellant. He had taken a different view from Mr Dunn who thought there was sufficient evidence. Mr Rillie’s position was that he believed that the appellant was guilty but felt that there was a shortage of admissible evidence.

The judge’s findings in respect of whether the respondent’s officers had reasonable and probable cause to initiate the prosecution were not entirely clear. He recited the evidence which he appeared to think should be taken into account when deciding whether there was enough to justify charging the appellant. He noted that there were a number of inconsistencies between what the appellant and Mr Sommeyre had said in interview. He did not mention that evidence of things said by Mr Sommeyre could not be used against the appellant. He noted that the appellant had claimed that he did not know that Alliance was the source of the mobile phones and that that had later turned out to be untrue. He noted that Tecniconsult had no funds to pay its VAT liability because virtually all its receipts were being remitted to Alliance’s account in Switzerland. He noted that the appellant’s claim not to have discussed business with Mr Le Guezennec appeared to be untrue. He also said that Tecniconsult had been ‘persistently selling mobile phones at a very low price’. He noted the existence of a commission statement which had been found in the claimant’s possession, the contents of which he said had tallied with a letter written to Tecniconsult’s bank. Although the judge did not say so, this commission statement showed that the appellant had started doing business for Tecniconsult some weeks before early January, as he had claimed in interview.

The judge accepted Mr Dunn’s account that he believed that the appellant was guilty and had been telling lies in interview. He also accepted Mr Dunn’s account of how he had taken legal advice from Mr Kelly and the nature of the advice given. He then said that he accepted that ‘Mr Dunn honestly believed that the claimant had a case to answer and that such case would be further strengthened by further enquiries’. A little later he said that he did not accept ‘that there was no reasonable and probable cause for Mr Dunn to charge the claimant’. That appeared to be his conclusion on reasonable and probable cause. However a little later, when apparently dealing with the issue of malice, the judge said:

“I consider that both Mr Rillie and Mr Dunn, who both had almost an equal part in the investigation prior to the charging of the claimant, each possessed a reasonably based and honest belief in the guilt of the claimant. I consider that Mr Rillie had a better grasp of the legal requirements than Mr Dunn and he realised that there was insufficient evidence upon which to charge the claimant…”

The apparent inconsistency between these findings gave rise to adverse comment at the hearing of the appeal, to which we will return in due course.

The appellant also alleged that, even if there had been sufficient evidence against the appellant to justify charging him, the prosecution had been continued after a time when the respondent’s officers knew that there was insufficient evidence against him. Mr Dunn told the judge that, in accordance with the advice he had received from Mr Kelly, to keep the case under review, he had submitted the case papers to Miss Tracy Ayling, standing counsel for the respondent, for advice as to the prospects of securing a conviction. At a conference held on 12^th May, Miss Ayling had expressed the opinion that there was insufficient evidence to continue the case against the appellant. Mr Dunn said that he disagreed with that view and had sought to persuade Miss Ayling that the evidence was sufficient. Miss Ayling promised to give the matter further consideration and to advise in writing. On 22^nd May, she wrote:

“I have spoken to the officer in the case, and remain of the view that there is insufficient evidence against the defendant Coudrat and there is not a realistic prospect of conviction.

It is quite clear that although Coudrat was the broker for the deals and received commission for them, this involvement has no special features. For example, the commission received is no greater than that normally received by brokers in the industry. There is no connection between Coudrat and the bank account. He is not a signatory neither is he a director of the company. Whilst he does not need to be, in the absence of any admissions, there is no evidence that Coudrat had any knowledge that VAT would not be paid in the future, nor that he knew that the earlier VAT return had been false.

In the circumstances, and given the burden of proof, I am of the view that there is insufficient evidence to continue a prosecution against Mr Coudrat.”

On receipt of that advice, the appellant’s solicitors were notified of the respondent’s intention to discontinue the proceedings. That was done on 25^th May. The judge accepted Mr Dunn’s account of what had happened in respect of counsel’s advice but did not make any express finding as to the appellant’s contention that there had been no reasonable and probable cause to continue the prosecution beyond the 12^th May.

As we indicated earlier, the appellant’s case on malice was that the respondent’s officers had had an ulterior motive in charging the appellant. It was said that they did not believe in the appellant’s guilt but charged him in order to keep him in England and to put pressure on him to give evidence against Mr Sommeyre. It was alleged that Miss Crowson and Mr Rillie had made offers that the charge would be dropped if the appellant would give evidence against Mr Sommeyre. Miss Crowson and Mr Rillie denied that they had said any such thing and the judge accepted that they had not. The judge also said that he did not accept ‘that Mr Dunn or the other officers acted in a malicious manner, either in the technical sense of that word or in its ordinary meaning’. It was at that stage that he said, as quoted above, that both Mr Dunn and Mr Rillie had had a reasonably based and honest belief in the appellant’s guilt but that Mr Rillie, who had had a better grasp of the legal requirements, had realised that there was insufficient evidence to charge the appellant. The judge added that, in reaching his conclusion, which differed from Mr Rillie’s, Mr Dunn had not acted maliciously. Finally, he said that the appellant had not satisfied him that the prosecution was malicious. He dismissed the appellant’s claim.

Ground 1 alleged that the judge’s finding that the information which Mr Rillie had provided to Miss Crowson on 29^th February amounted to reasonable grounds for arresting the appellant was wrong in law or against the weight of the evidence. It was accepted that there was evidence to bring suspicion on Tecniconsult but it was contended that there was no reasonable ground to believe that the appellant was one of the controlling minds of Tecniconsult or personally a party to the VAT fraud.

Ground 2 challenged the sufficiency of the evidence underlying the judge’s finding that the respondent had justified the appellant’s continued detention on 29^th February and 1^st March.

Grounds 3, 4 and 5 challenged the basis of the judge’s findings in respect of reasonable and probable cause to prosecute. It was said that the judge erred in law and that his findings were against the weight of the evidence. Ground 3 relied on Mr Rillie’s admission that he had never believed that there was sufficient evidence to charge the appellant. It was said that the respondent had failed to check the truth of Mr Sommeyre’s allegation that the appellant had been the secretary of Tecniconsult and had completed the VAT registration form. Ground 4 related to the effect of Miss Ayling’s oral opinion given in conference on 12^th May and Ground 5 alleged that the judge should not have allowed Mr Dunn to claim that he had relied on the advice of a solicitor (Mr Kelly) when deciding whether to charge the appellant.

Ground 6 alleged that the judge erred in law in basing his finding as to the absence of malice upon Mr Dunn’s ‘sincere but wholly irrational belief’ in the appellant’s guilt, based, as it was said to be, on ‘a complete misapprehension of the elements of the offence with which the appellant was charged’. There was no challenge to the judge’s finding that the respondent’s officers had not offered to drop the prosecution if the appellant would give evidence against Mr Sommeyre.

Mr Lyon QC for the appellant (who did not appear below) sought to extend the ambit of the appeal in several respects. In relation to both the allegation of wrongful arrest and malicious prosecution, he submitted not only that there had been insufficient evidence to found the judge’s conclusions but also that the judge’s approach had been fundamentally wrong. He submitted that the judge had not analysed what conduct the offences of which the appellant was suspected entailed; there had been no adequate consideration of whether the evidence available was capable of proving what the prosecution would have to prove in order to obtain a conviction.

It is apparent that, when considering the respondent’s grounds for arresting the appellant, the judge did not regard it as necessary to consider exactly which offence the appellant was suspected of. He considered whether there were grounds to suspect the appellant of ‘VAT fraud’. In our view, he was right to do so; that broad brush approach was entirely appropriate at that stage. It will often not be feasible for a police officer or customs officer to consider exactly which criminal offence appears to have been committed. Here, all that was necessary was that the respondent should have had reasonable grounds to suspect the appellant of knowing involvement in Tecniconsult’s evasion of VAT. It was accepted that the respondent had ample grounds to suspect that Tecniconsult was involved in VAT fraud. The appellant’s contention, on the appeal, was that there was insufficient evidence from which the respondent’s officers could have suspected the appellant of being knowingly involved in the fraud as opposed to being an innocent participant, the dupe of Mr Sommeyre. It is true that the judge did not explicitly deal with the question of whether there were grounds to suspect the appellant of being knowingly involved. It appears that, at the trial, the appellant’s arguments focussed more on Miss Crowson’s personal state of mind than on the existence of grounds to suspect that the appellant knew what was going on. The judge accepted Miss Crowson’s evidence that she had been able to form her own view and had not just been acting on the instructions of her superiors.

Although the judge did not expressly find that there was a reasonable basis for the respondent’s officers to suspect that the appellant was knowingly involved in the fraud, it is implicit that he did so find. At paragraph 11 of his judgment, he set out the evidence available to the respondent. It is not disputed that the customs officers reasonably believed that Tecniconsult was a completely fraudulent company. So far as the appellant’s knowledge was concerned, they had been told by the people at Evolink that ‘Didier’ (the appellant) was selling mobile phones for Tecniconsult. Miss Crowson said that she understood that the appellant was ‘their front man’ or was ‘behind it’. Mr Lyon submitted that this kind of information was insufficient to found suspicion of the appellant’s knowing involvement. He sought to rely on the case of O’Hara v Chief Constable of the Royal Ulster Constabulary [1996] A.C. 286 and in particular passages from the speech of Lord Steyn at page 289H to 290Cand page 291H to 294B. However, Lord Steyn was saying there that it would not be sufficient to justify the arrest if the arresting officer’s state of mind depended upon his knowledge that other officers suspected the suspect but that he himself was not privy to the information upon which their suspicion was based. There is no doubt that that is right but that was not the position here. Miss Crowson knew that the other officers suspected the appellant because he had been selling mobile phones for Tecniconsult. In our view, given that the appellant was (correctly as it turned out) believed to be selling for Tecniconsult, it was entirely reasonable for the respondent’s officers to suspect that he knew what was going on. Of course, it might later turn out that he did not know what Tecniconsult was up to, but, at the time of the arrest, it was entirely reasonable to suspect him.

Mr Lyon also sought to take a point, which appears not to have been raised before, that the judge erred because, at one stage, he appeared to have based his decision on Miss Crowson’s evidence that she had suspected that the appellant ‘might have been a knowing participant in the attempted or actual evasion of VAT by Tecniconsult’. Mr Lyon’s point was that it was not sufficient that Miss Crowson should suspect that the appellant might be knowingly involved. She had to suspect that he was knowingly involved. Of course, Mr Lyon is right in that section 24(5) of the Police and Criminal Evidence Act 1984 (PACE) provides that, where an arrestable offence has been committed, any person may arrest, without a warrant, anyone whom he has reasonable grounds for suspect to be guilty of it. Mr Lyon submitted that there was a real and important difference between suspecting that someone might be guilty of an offence and suspecting that they were guilty of it. We accept that there might conceivably be cases in which there would be a real difference. However, in the context of this case, we consider that Mr Lyon’s point amounts to the splitting of hairs. It appears that Miss Crowson did use the word ‘might’ on one occasion. Later in her evidence, she made it clear that she arrested the appellant on suspicion that he was part of the VAT fraud. In any event, it is our view that there was ample evidence on which Miss Crowson (and the other officers) could reasonably suspect that the appellant was guilty of knowing involvement in a VAT fraud. In our view, there is no substance in this complaint.

Turning to the question of false imprisonment, from 4.15pm on 29^th February, the appellant had been detained on the authority of Mr David Lee-Sang, the custody officer. The judge concluded that the appellant’s detention had been lawful because the account of the arrest and the reasons for suspecting the appellant that had been given to Mr Lee-Sang by Miss Crowson had caused him to have a reasonable suspicion that the appellant had been involved in ‘a potential VAT fraud’. The judge based that conclusion on the evidence of Miss Crowson that she had told the custody officer about the reasons for the arrest and on the words written by the custody officer on the custody record, immediately before authorising the detention. These were:

“Account of arrest:

Officer Crowson, informs in presence of DP as follows, a company called Tecniconsult Ltd, the director of that company is Luke Sommeyre that company is registered for VAT, at a known accommodation address in London, on 13/10/1999, when they registered the annual turnover was estimated as £180,000, given a trading style as industrial sales or dealing in, on 26/1/00, Tecniconsult sold one & a half million mobile phones to a company called Evolink, .…(continued on later page) …. & today F436,000 worth of mobile phones have been obtained at Heathrow; to-date, TECNICONSULT Ltd have submitted ONE VAT return on the 4-2-00 which showed sales of F320,000, owing VAT of F56,00; there is an alleged discrepancy; DP (detained person) was arrested to day in the company of MR SOMMEYRE; Evolink Ltd have been dealing with a man named DIDIER; we believe DP is involved with the fraud. It is being alleged that DP is the DIDIER concerned with this fraud.”

Mr Lyon contended that, in determining the lawfulness of the continued detention, the judge had not applied his mind to the right statutory questions and that, as a result, his finding was flawed. It is clear that the judge did not specifically advert to the statutory provision governing the powers of a custody officer to authorise detention and indeed he may not even have been referred to it. Section 37 of PACE provides that where a person is arrested for an offence without warrant, the custody officer for the place where he is detained shall determine whether he has before him sufficient evidence to charge that person with the offence for which he was arrested and may detain him at the police station for such period as is necessary to enable him to do so. If the custody officer determines that he does not have such evidence before him, the person arrested shall be released unless the custody officer has reasonable grounds for believing that his detention without charge is necessary to secure or preserve evidence in relation to an offence for which he is under arrest or to obtain such evidence by questioning him. If the officer has reasonable grounds for such belief, he may authorise the detention of the person arrested. Mr Lyon submitted that the judge had not made any determination as to whether, at the moment of authorisation, there was sufficient evidence to charge the appellant or whether the custody officer had had reasonable grounds to detain the appellant for the purpose of securing evidence or obtaining evidence by interview. He sought to rely on a passage from Zander on PACE 1984, 4^th Edition, pages 123-124, the effect of which was that research showed that in many police stations, section 37 was more honoured in the breach than the observance. He also submitted that Mr Lee-Sang had no suspicion one way or the other about the appellant’s guilt. He had simply filled in the custody form without applying his mind to the question of whether there were reasonable grounds for believing that it was necessary to detain the appellant so as to secure evidence against him or to obtain it by questioning him. Mr Lyon contended that it was clear that the custody officer had not applied his mind to the task in hand because otherwise he would not have made mistakes in completing the record. Finally on this point, he submitted that the respondent had not called Mr Lee-Sang and it was not open to the judge to conclude that he had applied his mind properly and reached the conclusion that there were reasonable grounds to detain the appellant without charge.

It is clear that the judge did not apply his mind directly to the relevant statutory provision. To that extent, his finding in respect of the lawfulness of the continued detention can be criticised. However, so far as the first limb of the statutory test is concerned, it must have been clear to everyone that there was not sufficient evidence to charge the appellant at that time. In our judgment, it does not avail the appellant to criticise the judge for failing specifically to deal with a point that was not in issue. In respect of the second limb of the test, the judge did not make the appropriate finding. He made a ‘shorthand’ finding that Mr Lee-Sang had a reasonable suspicion that the appellant had been involved in a potential VAT fraud. However, the evidence to found the necessary finding was before the judge and he had made it plain that he accepted the evidence of Miss Crowson as truthful. She had told Mr Lee-Sang about the background to the arrest and he had recorded an adequate account. The custody officer would know that the customs officers wanted to interview the appellant for the purpose of finding further evidence against him if they could. In our view it is clear from the judge’s shorthand finding that, if his attention had been drawn to section 37, his finding would still have been that the detention was lawful. The judge was clearly of the view that the mistakes made by Mr Lee-Sang were irrelevant to the question of the lawfulness of the detention. He made that judgment without hearing from Mr Lee-Sang himself. Mr Lyon submitted that the respondent ought to have called Mr Lee-Sang and that the judge should not have drawn an inference in its favour without so doing. If there had been any real suggestion that the respondent had deliberately avoided calling Mr Lee-Sang, we would see some force in that submission. However, the pleadings were completely silent as to any allegation about the lawfulness of the detention by the custody officer. The respondent was faced, apparently unexpectedly, with the need to prove the lawfulness of the custody officer’s decision. No arrangements had been made to call Mr Lee-Sang. Perhaps the respondent should have foreseen this need but there is no hint of avoidance tactics. In our view, not only was the judge entitled to draw the inferences he did but we ourselves would have taken the same view. We would not find the research quoted by Professor Zander of assistance in determining what happened in any particular case. In our view, there was every reason to conclude that the appellant’s continued detention was lawful.

We turn now to the question of malicious prosecution and deal first with the judge’s finding as to reasonable and probable cause. It is not suggested that the judge applied the wrong test. He said that the test to be applied when considering whether or not the respondent had reasonable and probable cause to prosecute was whether or not there was ‘a case fit to be tried’. Later he used the expression ‘a case to answer’. No criticism is made of that. The appellant’s complaints were that two of the judge’s findings were mutually inconsistent and also that his finding, favourable to the respondent, was not soundly based in the evidence. In particular, he had not apparently realised that some of the evidence upon which Mr Dunn had based his decision to charge would have been inadmissible at trial.

We should say immediately that we recognise the force of Mr Lyon’s submission that the judge’s findings on ‘reasonable and probable cause’ and ‘malice’ were confused and inconsistent. The judge set out various items of evidence which he apparently thought that the respondent’s officers had been entitled to take into account when deciding to charge the appellant. We will return to them in due course. The judge found that, at the time of the charge, Mr Dunn had honestly believed that the appellant had a case to answer and that the case would be strengthened by further enquiries. The judge then discussed what had happened at the conference with Miss Ayling of counsel and counsel’s later written advice. Then he said: ‘I do not accept that there was no reasonable and probable cause for Mr Dunn to charge the (appellant)’. Shorn of the double negative, it seems that the judge was saying that not only did Mr Dunn honestly believe that there was enough evidence to justify charging the appellant but that that belief was founded upon reasonable grounds. It appears that the judge was saying that his own judgment about the state of the evidence at the time the charge was laid was that there was enough to justify the charge. He did not identify or analyse the evidence upon which he based that conclusion. The lack of any analysis might well, in itself, have been sufficient to ground a submission from the appellant that the judge’s finding could not stand. However, the judge’s finding is open to further attack because, a few lines later on, he said:

“I consider that both Mr Rillie and Mr Dunn, who both had almost an equal part in the investigation prior to the charging of (the appellant), each possessed a reasonably based and honest belief in the guilt of (the appellant). I consider that Mr Rillie had a better grasp of the legal requirements than Mr Dunn and he realised that there was insufficient evidence upon which to charge (the appellant) as was in fact borne out by the advice of Miss Ayling subsequently.”

It appears from that second passage that the judge was saying that, objectively considered, there was not enough evidence against the appellant to justify charging him and that, of the two officers, only Mr Rillie realised that. It thus appears that on one occasion the judge said that there was enough evidence to justify laying a charge and then, a few lines later, he has said that there was not. In our view, this confusion and inconsistency is such that the judge’s finding on reasonable and probable cause cannot stand. We have had to consider the state of the evidence for ourselves and to decide whether, objectively considered, there was sufficient evidence against the appellant to justify charging him.

We direct ourselves first that an officer is entitled to decide to lay a charge if he is satisfied that there is a case fit to be tried. He does not have to believe in the probability of conviction: see Glinski v McIver [1962] AC 726 HL at 766G to 767A. The probability of obtaining a conviction is the test that was properly applied by Miss Ayling at the stage when she was asked to advise, when the investigation was complete. The fact that Miss Ayling concluded that there was insufficient evidence to warrant continuance of the prosecution does not necessarily mean that there was insufficient evidence to warrant laying a charge.

When considering whether to charge a suspect, consideration must be given to the elements of the offence with which it is intended to charge him. There must be prima facie admissible evidence of each element of the offence. Although anything plainly inadmissible should be left out of account, we do not think that, at the stage of charging, it is necessary or appropriate to consider the possibility that evidence might be excluded at the trial after full legal argument or in the exercise of the judge’s discretion. Nor is it necessary to test the full strength of the defence. An officer cannot be expected to investigate the truth of every assertion made by the suspect in interview.

Our consideration of the adequacy of the evidence as at 1^st March must start with the definition of the offence charged. This was an offence under section 72(8) of VATA which provides:

“Where a person’s conduct during any specified period must have involved the commission by him of one or more offences under the preceding provisions of this section, then, whether or not the particulars of that offence or those offences are known, he shall, by virtue of this subsection, be guilty of an offence…”

This provision appears to be designed to cater for circumstances where the precise details of the suspect’s criminal actions and the times at which he performed those actions are not known but his actions during a specified period of time are such that he must have committed one or more offence under section 72. Section 72 (1) which is the offence most likely to have been committed by the appellant, if any, provides:

“If any person is knowingly concerned in, or in the taking of steps with a view to, the fraudulent evasion of VAT by him or any other person he shall be liable to…”

and the maximum penalties on summary conviction and after conviction on indictment are set out. Thus, in order for there to be a prima facie case against the appellant, there had to be evidence that, at some time during the period specified in the charge, the appellant had knowingly taken steps with a view to the fraudulent evasion of VAT by Tecniconsult. By virtue of section 72(8), it would not matter if the respondent was not able to identify what steps the appellant had taken on which particular occasions so long as what he had done must have amounted to at least one offence of taking steps with a view to fraudulent evasion of VAT. Put in simple terms, there had to be prima facie evidence that the appellant had done some act or acts with the intention of enabling or assisting Tecniconsult to evade its VAT liabilities on consignments of mobile phones.

As we have said earlier, it is not disputed that there was an abundance of evidence to show that Tecniconsult intended to perpetrate a large VAT fraud by evading its liability at the end of the current period. There was also clear and undisputed evidence that the appellant was selling mobile phones for Tecniconsult. If, when doing so, he knew that the company (the sole director of which was Mr Sommeyre) intended to evade its VAT liability, he would be selling the phones (taking steps) with a view to the fraudulent evasion of VAT and would be guilty of an offence under section 72(8) even though the dates on which he had sold the phones could not be established. So the only element of the offence about which the evidence was doubtful was whether, when selling the phones, the appellant knew that Tecniconsult intended to evade its VAT.

Mr Lyon sought to persuade the court that the evidence of knowledge had to be cogent. He pointed to the fact that Miss Ayling was later to advise that there was insufficient evidence of guilty knowledge to give reasonable prospects of obtaining a conviction. If there were insufficient evidence in May, when all enquiries were complete, there could not have been sufficient on 1^st March. He submitted that the evidence of guilty knowledge had to be such that the appellant must have known what Tecniconsult was going to do. In the light of the burden and standard of proof that lies on the Crown before there can be a conviction, we accept that, at the end of the day, to convict there would have had to be evidence that made the jury sure that the appellant knew about the intended fraud at the time he was selling for Tecniconsult. However, it does not follow that, in order to justify a charge, there had to be evidence of that strength available to the prosecutor at that time. To justify the charge, there had to be prima facie evidence of guilty knowledge, that is evidence which, unless successfully refuted or explained, could lead a reasonable jury to be satisfied of the appellant’s guilty knowledge. The respondent was entitled to rely on circumstantial evidence. It is very often the case that there is no direct evidence of guilty knowledge in fraud cases and the prosecutor relies on the drawing of inferences from circumstantial evidence.

With those observations in mind, we turn to consider whether there was in fact sufficient evidence of the appellant’s guilty knowledge to justify the laying of a charge on 1^st March. Mr Kent QC for the respondent helpfully took us through the documents to show what evidence of knowledge was available to the respondent at the material time.

Mr Kent submitted that, if it could be shown that the appellant was involved in the purchase of mobile phones from Alliance as well as the sale of them to UK customers, that would suggest that he knew of the intention to evade VAT because he would know that Tecniconsult was, in fact, selling the phones for less than it was paying. Among the documents seized were documents showing a series of ‘back to back’ transactions of purchase and sale where the sale price to the UK customer was less than the purchase price from Alliance. (We mention for the sake of completeness that the judge was wrong to say that Tecniconsult was selling at very low prices. There was no evidence that they were selling below the market rates; indeed there was no evidence that there was a market rate.) The fact that Tecniconsult was selling for less than it paid would mean that it could only make a profit if it stole the VAT. There was no direct evidence that the appellant knew of the prices at which Tecniconsult bought from Alliance. He certainly knew the sale prices. The appellant told the customs officers in interview that he had had no dealings with Alliance; he knew of their existence but that was all. He also said that he did not know that Tecniconsult was buying phones from Alliance. The officers believed that the appellant was lying about his knowledge of and lack of contact with Alliance. It seems to us that that was a reasonable belief. Also the officers were entitled to believe that, if the appellant was lying in an attempt to distance himself from Alliance, this would suggest that he knew the selling prices and must therefore have known how Tecniconsult’s profit was being made. The appellant said that he was an experienced dealer in mobile phones and the respondent was entitled to assume that he would be aware of the prevalence of VAT fraud by the ‘missing trader’ method. Although at the day of charge there was no direct and admissible evidence to show that the appellant was lying about his relationship with Alliance, evidence to that effect was obtained shortly afterwards. The respondent obtained a letter written by the appellant in September 1999 to a UK company called Great Oak in which he said he was an independent agent working for Alliance and asking whether Great Oak had any mobile phones for sale as Alliance wished to buy. Within a short time, Alliance bought a consignment of mobile phones from Great Oak. Alliance’s signatory on the letter was a man named S Guiberti and the purchase order was faxed from a machine in the name of Bocor Ltd. Mr Rillie told the judge at trial that Alliance and Bocor were controlled by the same people and this use of a common fax machine appears to be evidence in support of this. A Mr Alkahdi, the managing director of a UK company called Allied TC plc, told the respondent that he had first met the appellant in London in December 1999 in the company of Sebastian Guiberti who was said to be of Bocor SA of Geneva. The purpose of the visit was to offer to sell mobile phones to Allied. It appears that the appellant had had close dealings with both Alliance and its associated company Bocor and that the respondent’s officers had been right to believe that he had lied in interview.

There was further evidence of a connection between the appellant and Alliance in the evidence Mr Portsmouth of the forwarding agents Kuehne and Nagel Ltd, who said that he had dealt with Alliance from late 1999. In January 2000 he was advised by Alliance that they would be shipping mobile phones to their customer Tecniconsult. Shortly afterwards he began dealing with the appellant who said that he was a broker acting for both Alliance and Tecniconsult, although he did not work for either of them. The appellant would telephone Mr Portsmouth to check that the consignments had arrived, would make arrangements for them to be inspected and would direct queries from his UK customers to Mr Portsmouth. The goods would be released to Tecniconsult on receipt of a fax from Alliance’s bank. Tecniconsult would then provide him with their own fax authorising Kuehne and Nagel to release the phones to their customers. Mr Portsmouth said that he always dealt with the appellant. This amounts to further evidence suggesting that the appellant was well aware that Tecniconsult bought its phones from Alliance. It is not clear exactly when this evidence reached the customs officers. They were in touch with Kuehne and Nagel on 28^th February, although Mr Portsmouth’s written statement was not provided until some time after 1^st March. It seems likely that Mr Portsmouth was one of the witnesses from whom Mr Dunn believed that he would obtain further information to strengthen the case.

Among the documents seized at the time of the arrest was a letter written by the appellant (in French) to Mr Sommeyre in which he referred to receiving goods from ‘les petit (sic) suisses’. Although Alliance was registered in Luxembourg, in fact it traded from Geneva in Switzerland. It seems to us to be entirely reasonable to infer that ‘les petit suisses’ were in fact Alliance. This is some evidence that the appellant knew that Tecniconsult’s phones were coming from Alliance. It is hard to think why the appellant would wish to deny that he knew that if he believed that the purchases from Alliance and the onward sales were bona fide transactions.

We mentioned earlier that the respondent’s officers had seized a document which appeared to be a business plan for Tecniconsult. It was written in French and appeared to be the work of Mr Guezennec, Mr Sommeyre and the appellant. It was dated 14^th February 2000. The document contained no suggestion that Tecniconsult was involved in fraud. Its significance was that it tended to show that the appellant was more involved with Tecniconsult than he had claimed to be. At the foot of the document he was described as the company’s commercial adviser. That was at odds with his claim that he was a completely independent selling agent. Moreover, the document cast real doubt on the appellant’s claim that he had met Mr Le Guezennec only once, for lunch with Mr Sommeyre, and that the discussion had not touched upon business matters. It would be reasonable for the customs officers to conclude that the appellant had been lying in interview in order to distance himself from Tecniconsult and Mr Sommeyre. Why would he do that if he believed that the business was bona fide and lawful?

It appears to us, from what we have recited above, that there was circumstantial evidence to show that the appellant knew that Tecniconsult was involved in VAT fraud. We consider that that evidence was sufficient to justify charging him with an offence under section 72(8) of VATA. We accept that the evidence of guilty knowledge was not strong and that it might well have been refuted or explained at trial. But that need not be taken into consideration at the moment of charging. We can see the wisdom of Miss Ayling’s advice based, as it appears to us to have been, on the absence of direct evidence of knowing involvement. That does not mean that there was insufficient evidence, including circumstantial evidence, to lay the charge. We consider that the officers were entitled to take into account evidence which they believed would become available but which had not yet been crystallised into the form of a statement. We consider that, although it appeared that Mr Dunn had taken into account evidence which would have been clearly inadmissible in reaching his conclusion that there was enough evidence to charge the appellant, he could reasonably and justifiably have reached the same conclusion even if that evidence had been left out of account. It does not surprise us that Mr Rillie took a different view from that of Mr Dunn on the adequacy of the evidence. Standing alone, the evidence of guilty knowledge is clearly not substantial. However, when viewed against the background that there was strong evidence that Tecniconsult was a company set up for the sole purpose of VAT fraud, that the appellant was experienced in the mobile phone trade and had been selling very large quantities of phones in a short time, we consider that such evidence as there was of guilty knowledge was particularly telling. We conclude that the respondent’s officers had reasonable and probable cause to charge the appellant on 1^st March.

We turn to the question of malice. The appellant’s original case on malice had failed entirely. That left the appellant with only his secondary argument, that malice should be inferred from Mr Dunn’s decision to charge the appellant on the basis of inadequate evidence. The judge dealt with this issue extremely briefly by saying that he found that the respondent’s officers had not acted maliciously either in the ‘technical sense’ or in the ordinary sense of that word.

The appellant did not challenge the judge’s finding that Mr Dunn was a completely honest witness. Mr Dunn honestly believed that the appellant was guilty of VAT fraud and also honestly believed that he had enough evidence to justify charging him. The appellant’s case was that Mr Dunn’s honest belief was irrational based, as it was, on his misunderstanding of the law of evidence. Mr Rillie who did understand the law of evidence did not think there was enough evidence to justify laying a charge. Mr Lyon submitted that, because Mr Dunn’s belief in the sufficiency of the evidence was irrational, the judge should have inferred that he was motivated by malice.

We accept, without hesitation, that there will be some cases in which it is open to a judge to infer malice in an officer who lays a charge where there is clear lack of evidence against a suspect. But this comes nowhere near being such a case. The appellant’s first obstacle is the judge’s finding that Mr Dunn honestly believed in the appellant’s guilt and in the adequacy of the evidence against him. Even if the judge or this court had concluded that there was in fact insufficient evidence to justify laying the charge, it would be difficult to see how malice could be inferred in the light of the judge’s findings. Mr Dunn’s understanding of the laws of evidence may have been defective but he was far from irrational. The fact that Mr Rillie took a different view does not mean that Mr Dunn was wrong. But, as it turns out, we have concluded that there was sufficient evidence to justify a charge. The appellant’s challenge to the judge’s findings on malice is hopeless. For the sake of completeness, we make it plain that, even if we had concluded that there had not been sufficient evidence to justify a charge as at 1^st March, we would still have rejected the appellant’s contention on malice. The judge was quite satisfied that Mr Dunn was motivated by a proper desire to pursue the ends of justice. Even if Mr Dunn had been mistaken in assessing the evidence as adequate, this would not mean that he had been motivated by malice.

Finally, we deal with Mr Dunn’s decision not to withdraw the prosecution on the basis of Miss Ayling’s oral advice on 12^th May but to wait until he received confirmation of it in writing. It was contended that that decision was unreasonable and showed that Mr Dunn was motivated by malice. In our view, it does not. Mr Dunn strongly believed that the appellant was guilty of VAT fraud. That was not an irrational belief. He was reluctant to accept Miss Ayling’s view that there was insufficient evidence to make a conviction probable. He sought to persuade her to his view. There was nothing unreasonable in that. Provided that his motivation was to pursue the interests of justice and the continuation of the proceedings was not therefore actuated by malice, Mr Dunn’s actions were lawful. Although the judge did not expressly deal with this issue, we are satisfied that Mr Dunn’s decision to postpone discontinuance was lawful.

For the reasons that we have given this appeal is dismissed.