Larkfield Ltd & Ors v Revenue & Customs Prosecution Office & Ors

This is an appeal by Larkfield Limited (“Larkfield”) from an order dated 22 July 2009 of His Honour Judge Mackie QC, sitting as a Deputy Judge of the High Court, by which he declared that Flat 85, Dundee Wharf, 100 Colt Street, London, E14 (“the Flat”) is the realisable property of Raymond George May within the meaning of section 74(1) of the Criminal Justice Act 1988 (“the CJA”) and dismissed Larkfield’s claim to beneficial ownership of the Flat.

Larkfield is registered at HM Land Registry as the proprietor of the Flat, having acquired it from Mr and Mrs Gilkes on 5 August 1999 at a stated consideration of £248,000. Larkfield was incorporated in the Bahamas on 30 March 1999, and had two Liberian corporate directors. It has two issued shares. The shareholders have executed declarations of trust, under which the shares are held for a trust called the Magle Settlement, which was established in the Isle of Man in November 1996. Peter Gleeson claims that he was the sole provider of the funds of the Magle Settlement, and that he, his issue, and any spouse for the time being of himself or his issue are the sole beneficiaries of the Magle Settlement and so the ultimate beneficial owners of the shares in Larkfield. The Respondent, the Revenue and Customs Prosecution Office (“the Prosecutor”), claims that Mr May is the beneficial owner of the Flat.

On 5 September 2000 Mr May was arrested and charged with conspiracy to cheat the Revenue in a VAT “carousel” fraud. He pleaded guilty on 24 September 2001. On 2 August 2002 His Honour Judge Samuels Q.C. made a confiscation order in the sum of £3,246,277. Included in that figure was the value attributed to the Flat on the basis that, subject to any successful claim by Mr Gleeson to the Flat, the Flat should be included within Mr May’s realisable assets for the purposes of the CJA.

In due course the Prosecutor applied for the appointment under the CJA of an enforcement receiver over Mr May’s assets, including the Flat. On 2 September 2008 Larkfield gave notice of its claim that it is the absolute beneficial owner of the Flat and that Mr May has no interest in the Flat. Pursuant to an order of Judge Mackie dated 26 June 2008 the Prosecutor filed Particulars of Claim in the Queen’s Bench Division claiming a declaration that the Flat is part of the realisable property of Mr May, or alternatively a declaration as to the extent of Larkfield’s interest. The Prosecutor’s case was that the Flat is beneficially owned by Mr May, and the registration of title in Larkfield’s name and the use of trust and company structures were designed to conceal Mr May’s interest. Larkfield denied those allegations in its Defence. The Judge, after a trial with written and oral evidence, held in favour of the Prosecutor.

The confiscation provisions of the Proceeds of Crime Act 2002 (“POCA”) have replaced those of the CJA (dealing with non-drug offences) and the Drug Trafficking Act 1994 in respect of offences committed on or after 24 July 2002. Nothing in this appeal turns on that change. The following provisions in Part VI of the CJA are relevant.

Section 71 empowered the Crown Court and the magistrates’ court to make a confiscation order against an offender if satisfied that the offender had benefited from the relevant offence. Section 71(6) provided that the amount required to be paid by such an order could not exceed the lesser of the benefit so obtained or the amount that might be realised at the time the order was made.

Section 74 contained the following provisions, relevant to this appeal, as to “realisable property”:

“(1)

In this Part of this Act, "realisable property" means, subject to subsection (2) below— ”

(a)

any property held by the defendant; and

(b)

any property held by a person to whom the defendant has directly or indirectly made a gift caught by this Part of this Act.”

“(3)

For the purposes of this Part of this Act the amount that might be realised at the time a confiscation order is made is— ”

(a)

the total of the values at that time of all the realisable property held by the defendant, less

(b)

where there are obligations having priority at that time, the total amounts payable in pursuance of such obligations, together with the total of the values at that time of all gifts caught by this Part of this Act.”

“(4)

Subject to the following provisions of this section, for the purposes of this Part of this Act the value of property (other than cash) in relation to any person holding the property—

(a)

where any other person holds an interest in the property, is—

(i)

the market value of the first-mentioned person's beneficial interest in the property, less

(ii)

the amount required to discharge any incumbrance (other than a charging order) on that interest; and

(b)

in any other case, is its market value.”

“(10)

A gift (including a gift made before the commencement of this Part of this Act) is caught by this Part of this Act if—

(a)

it was made by the defendant at any time after the commission of the offence or, if more than one, the earliest of the offences to which the proceedings for the time being relate; and

(b)

the court considers it appropriate in all the circumstances to take the gift into account.”

Section 80 contained the following provisions as to realisation of property:

“(1)

Where—

(a)

a confiscation order is made;

(b)

the order is not subject to appeal; and

(c)

the proceedings in which it was made have not been concluded,

the High Court may, on an application by the prosecutor, exercise the powers conferred by subsections (2) to (6) below.

(2)  The court may appoint a receiver in respect of realisable property.

(3)  The court may empower a receiver appointed under subsection (2) above, under section 77 above or in pursuance of a charging order—

(a)

to enforce any charge imposed under section 78 above on realisable property or on interest or dividends payable in respect of such property; and

(b)

in relation to any realisable property other than property for the time being subject to a charge under section 78 above, to take possession of the property subject to such conditions or exceptions as may be specified by the court.

(4)

The court may order any person having possession of realisable property to give possession of it to any such receiver.

(5)  The court may empower any such receiver to realise any realisable property in such manner as the court may direct.

(6)  The court may order any person holding an interest in realisable property to make such payment to the receiver in respect of any beneficial interest held by the defendant or, as the case may be, the recipient of a gift caught by this Part of this Act as the court may direct and the court may, on the payment being made, by order transfer, grant or extinguish any interest in the property.

(7)

...

(8)  The court shall not in respect of any property exercise the powers conferred by subsection (3)(a), (5) or (6) above unless a reasonable opportunity has been given for persons holding any interest in the property to make representations to the court.”

Section 82 provided so far as relevant as follows:

“(1)

This section applies to the powers conferred on the High Court by sections 77 to 81 above … or on a receiver appointed under this Part of this Act or in pursuance of a charging order.

(2)

Subject to the following provisions of this section, the powers shall be exercised with a view to making available for satisfying the confiscation order or, as the case may be, any confiscation order that may be made in the defendant's case the value for the time being of realisable property held by any person by the realisation of such property.

(3)

In the case of realisable property held by a person to whom the defendant has directly or indirectly made a gift caught by this Part of this Act the powers shall be exercised with a view to realising no more than the value for the time being of the gift.

(4)

The powers shall be exercised with a view to allowing any person other than the defendant or the recipient of any such gift to retain or recover the value of any property held by him.

    (5)  …

(6)

In exercising those powers, no account shall be taken of any obligations of the defendant or of the recipient of any such gift which conflict with the obligation to satisfy the confiscation order.”

Section 102 contained provisions as to interpretation, of which the following are relevant:

“(1)

In this Part of this Act—

...

“interest", in relation to property, includes right;

“property" includes money and all other property, real or personal, heritable or moveable, including things in action and other intangible or incorporeal property.”

“(7)

Property is held by any person if he holds any interest in it.”

“(10)

Property is transferred by one person to another if the first person transfers or grants to the other any interest in the property.”

It is sufficient, for the purpose of this appeal, to summarise the substance of the case of the Prosecutor in its Particulars of Claim and the case of Larkfield in its Defence as follows.

In the Particulars of Claim the Prosecutor summarised its case as being that the Flat is owned beneficially by Mr May, and Mr May has used trust and company structures for the purpose of concealing his interest in that and other property. The Prosecutor alleged that the Magle Settlement was created to hold funds provided by Mr May or Mr Gleeson, and that Mr May, either alone or together with Mr Gleeson, was the true settlor of the funds provided to the Magle Settlement. The Prosecutor further alleged that Larkfield was incorporated to hold property belonging to Mr May; Mr May negotiated the purchase of the Flat from Mr and Mrs Gilkes; and Mr May intended that the purchase price should be paid out of funds held by Valeo Limited (“Valeo”) on his behalf or due to him. Valeo is a Bahamian company, which, the Prosecutor alleged, held assets which had been contributed by Mr May, among others, to a settlement called the “Mark Hubbard No 2 Settlement” (“MH2”). The Particulars of Claim noted that on about 4 August 1999, the day before the transfer of the Flat to Larkfield, Valeo offered Northquay Limited (“Northquay”) and Southquay Limited (“Southquay”), who were the directors of Larkfield, an interest free loan repayable on demand in the sum of £258,324.53 for the purchase of the Flat. The Particulars of Claim alleged various facts and matters after the transfer to Larkfield in support of the Prosecutor’s claim that Mr May was the beneficial owner of the Flat, including “probe” evidence, which was principally transcripts of “bugged” conversations involving Mr May. It was alleged that the registration of title to the Flat in Larkfield’s name was a device to conceal Mr May’s ownership.

In its Defence Larkfield denied that Mr May paid or provided any part of the purchase price of the Flat or that he settled any money in trust for such purpose or that any money settled by him in any trust was used for that purpose. Larkfield denied that the Magle Settlement was created to hold funds provided by Mr May. Larkfield alleged that the Magle Settlement was created to hold funds provided by Mr Gleeson; Mr Gleeson had an established relationship with Valeo, which at the time of the purchase of the Flat held certain of his shares, which could not easily be accessed at short notice; he asked Valeo to lend Larkfield the necessary money for the purchase of the property, on the basis that it would be repaid in due course, as in the event it was, following sales of Mr Gleeson’s shares; since the date of the transfer Larkfield has held the property absolutely and without any trust of any kind.

It is to be noted that the Prosecutor could not rely, and has never relied, on the tainted gift provisions of the CJA. That is because Larkfield acquired the Flat before Mr May became involved in the carousel fraud. There were four stages to the fraud. The second phase ran from July to November 1999. Mr May was not involved until the third phase, which ran from February to July 2000. The only question in issue, therefore, was whether the Flat was held by Mr May within section 74 of the CJA, that is to say he had an interest in it as provided in section 102(7) of the CJA.

Early in his comprehensive and detailed judgment the Judge referred to the argument of Mr Aidan Casey, counsel for Larkfield, that there was no sustainable case for concluding that Larkfield holds the Flat on a constructive or resulting trust for Mr May, absent any pleaded case by the Prosecutor or any legal or factual basis for saying that any trust was a sham or for piercing the corporate veil of any company. He then referred in paragraph [17] of the judgment to the submission of Mr John McGuinness QC, for the Prosecutor, that, while the submissions of Mr Casey as to the ordinary legal principles as to shams and piercing the corporate veil were not challenged, “they are irrelevant given the nature of the statutory power which has led to the confiscation”. He said that Mr McGuinness relied on “the confirmation by the Court of Appeal that the court may pierce the corporate veil and treat the assets of a company as those of the Defendant in cases under the Act”. The Judge also referred to Mr McGuinness’ submission that “directly applicable to the enforcement of a confiscation order are cases addressing the earlier stage of the restraint and receivership under statutes with identical wording such as the Drug Trafficking Act 1994” and Mr McGuinness’ reliance on the following statement in paragraph [17] of the judgment of Ouseley J in Re D [2006] EWHC Admin 254:

“In my judgment the real question which a judge faced with an application for a restraint or receivership order is whether the order of the extent sought and now obtained is appropriate or necessary in view of the two legislative objectives out in section 31(2) and (4) of the 1994 Act. The question whether the effect of such an order is to pierce the corporate veil or whether some particular test related to that concept requires to be satisfied is not, in my judgment, the ultimate object of the inquiry which the court has to carry out. The object of the Act is to enable proceeds of crime to be ascertained, protected and realised. The first question therefore is whether there are corporate assets which should be treated as the defendant’s assets and the second question is whether, if that is the case, a restraint and receivership order of the extent sought is necessary. The position, in my judgment, is the same where there is an intermingling of the assets of a criminal, who is seeking to evade the effect of the confiscation order, with the assets of innocent business partners in a company. If it is established that some or all of the assets of the company are to be treated as assets of the defendant, the question of how their intermingling with the assets of someone who is innocent of wrongdoing is to be dealt with, is a matter for resolution by deciding whether an order should be made and if so on what terms, rather than a matter which has to be resolved by simply asking whether the corporate veil should be pierced.”

The Judge then referred to Mr Casey’s response that there is a distinction to be drawn between assets which are the subject of a confiscation order but not themselves the proceeds of crime (which is the case here so far as concerns the Flat) and the courts’ approach to assets which are the actual proceeds - for which he relied on the sentence of Ouseley J quoted above: “the object of the Act is to enable proceeds of crime to be ascertained, protected and realised.”

The Judge gave his conclusion on that dispute in paragraph [18] of his judgment as follows:

“18.

In my judgment the approach of the Prosecutor is correct. Once assets have been identified as relevant realisable property they may be recovered, subject to the protection afforded by sections 80(8) and 82(4). They may be recovered from any trust or company irrespective of any legal obstacles or protections for the direct or indirect benefit of the Defendant which would otherwise arise under company or trust law. The sentence of Ouseley J relied upon by Mr Casey is, it seems to me shorthand, as indeed is the title of Part VI of the Act itself “Confiscation of the proceeds of an offence”. As soon as one looks at the detailed provisions it is clear that the statute and the case law guidance do not contain the limitation contended for by Mr Casey. If the position were otherwise, as I put it to Mr Casey, a master criminal, before embarking on a serious financial crime would be able to protect his assets, other than those directly obtained from the crime he was about the commit, by placing them all in trust. It cannot have been the intention of Parliament to make that possible leaving the victims with only the potential weapon of the law of insolvency to rely upon. In my judgment the purpose and the language of the Act is clear. So while the propositions so ably put forward by Mr Casey, standing on their own, have considerable force and indeed are not disputed by the Prosecutor they are, as it were, trumped by the Act.”

That paragraph in the judgment was followed by the heading: “Facts agreed or not seriously in dispute”. For the purposes of this appeal, it is necessary only to refer to the following factual matters mentioned by the Judge in that part of his judgment.

Mr Gleeson and Mr May and their families have been close friends for more than 30 years. They have worked closely together in business matters and in their personal financial affairs. Mr Gleeson has been very successful in his business dealings. They also had business dealings and personal relations with Mr Richard Hubbard, another very successful businessman. Mr Hubbard, his father, and his brother Mark had for some years made investments using trusts in the Isle of Man advised by Mr Francis Howard, a chartered accountant and tax advisor, who was at the time a director of and shareholder in Coda Corporate Services Limited (“Coda”), an Isle of Man company dealing with corporate and trust administration and support. In time Mr Richard Hubbard and Mr Gleeson became close friends.

MH2 was set up by a trust deed dated 7 April 1995. Despite its name, it was established with money that was effectively Richard Hubbard’s with a view to benefiting mainly Richard and his family. There was evidence that one of the assets of MH2 was Valeo, and that as at 20 June 1996 Valeo held shares and cash for Mr May. Mr Hubbard and Mr Gleeson also transferred money to Valeo. By a revocable declaration on 10 March 1999 the MH2 trustees effectively restricted the class of beneficiaries to Richard Hubbard and his family.

The Judge described the evidence as to the establishment of the Magle Settlement. It is common ground that Mr May was not named in the beneficiary class when the trust deed was executed. By a deed dated 20 November 1996 the beneficiaries were restricted to Mr Gleeson, his issue, and his and their spouses. Having mentioned the incorporation of Larkfield, the Judge said that on 4 August 1999 a meeting of the directors of Valeo, comprising Mr Michael Doyle and Mr Howard as representatives of Northquay and Southquay, resolved to make a loan to Larkfield of £258,324.52 interest free and repayable on demand for the purchase of the Flat; on 20 August 1999, in their capacity as representing the directors of Larkfield, again Northquay and Southquay, they resolved to buy the Flat; the money used by Larkfield to buy the Flat came from a Valeo bank account, and went from Valeo to Abchurch Corporate Services, a Coda vehicle. The Judge said there was no documentary evidence of Mr Gleeson or Mr May providing money to Valeo to buy the Flat, and there was no evidence of Larkfield ever repaying the loan.

In the next part of his judgment, the Judge referred to evidence directly relating to the purchase of the Flat by Larkfield and its use after purchase. The Judge said that he attached great importance to the witness statement of Mrs Emma Gilkes in the criminal proceedings, and set out in paragraph [30] of his judgment the following passage in that statement:

“My husband and myself are the former owners of 85 Dundee Wharf, 100 Three Colt Street, London E14. In April 1999 we instructed a number of agents to place this property on the market. In early June 1999 we were introduced to a man using the name of Ray May and a second man who used the name Peter. This introduction was via a man we knew at Dundee Wharf . I believe this man may have lived at Flat 94 Dundee Wharf.

Mr May told us that he was buying for an Isle of Man company for entertaining clients. Mr May told us that he was able to ‘move fast’ and that the cash was available. The price was agreed at £248,000 plus £7,000 for fixtures and fittings at a meeting at the property. They indicated that they were on their way to celebrate one or the other’s birthday.

I would describe Ray May as being tall, medium build, fair haired, with an East London/Essex accent. Peter was considerable shorter than Ray may, solidly build.

This was the first and only meeting with Ray May and Peter.

My husband spoke to Ray May a number of times. I believe that the number used was 07930 866084”.

The Judge said that the telephone number given to Mrs Gilkes was the mobile phone number of Mr May.

The Judge referred to other evidence connecting both Mr May and Mr Gleeson to the Flat after its purchase, including bills, utilities and other services in the Flat. He referred to a witness statement and an affidavit by Mr Gleeson both made on 5 October 2000, following Mr May’s arrest in September 2000, claiming that he (Mr Gleeson) was the beneficial owner of the Flat and that it had been purchased “solely with funds provided by myself”. Mr Gleeson accepted that he had not repaid the loan and referred to the wording as “incorrect terminology”.

In the next part of his judgment the Judge summarised the evidence that had been given by the witnesses, including, among others, Mr May, Mr Gleeson, Mark Hubbard, Paul Quayle (since 2008, one of the current trustees of the Magle Settlement), and Mr Howard.

The Judge stated his conclusions in paragraphs [51] to [61] of his judgment. He said that it was quite clear that Mr May conducted the negotiation with Mr and Mrs Gilkes and told them that he was seeking to buy the Flat through an Isle of Man company. The Judge considered that there were more items than not in the probe evidence consistent with Mr May explicitly claiming the Flat as his. The Judge said that, in view of Mr May’s admitted untruths and the obvious implausibility of some of what he had said, he was unwilling to accept what Mr May said unless there was other material to support it. On the points at issue the Judge did not believe him. He stated that the implications pointed to Mr May as being the real owner, and that Mr Gleeson’s account was difficult to accept given the pointers to Mr May, Mr Gleeson’s deceit in the use of a false name, Steven Lee, in the running of the Flat, his false claim in his affidavit of October 2000 and the circumstances in which it was made. The Judge said that most of his reservations about Mr May’s evidence applied equally to Mr Gleeson: the implausibility of some of his replies, when drawn to his attention in cross-examination, “was particularly striking when coming from someone of wide experience and high intellect”. The Judge said that there was no direct supporting evidence that either Mr Gleeson or Mr May paid for the Flat, and, without that necessary support, he must and did reject Larkfield’s claims about that aspect of the case. He said he bore in mind that the “big picture presented by the documents is incomplete.” He did not doubt that Mr Gleeson somehow made investments in or through Valeo, but whether those were his investments or, just as Mr Gleeson had invested in Mr May’s name some years earlier, Mr May’s was not clear. He considered that “[i]t is very likely that Mr May invested also, directly or in Mr Gleeson’s name.” The Judge considered that the evidence of Mr Howard, who was very close to the Hubbards and Mr Gleeson, was undermined by a lack of objectivity and by selectivity in his memory. The Judge concluded that it was likely that Mr May, like Mr Gleeson, “had substantial funds with Valeo or elsewhere within Coda”.

In paragraph [59] the Judge said that Mr Gleeson was “ostensibly” the beneficial owner, in effect, of the Magle Settlement, which “appears to have ended up simply as a vehicle used for the purchase of the flat via Larkfield with money borrowed from Valeo.”

The Judge observed in paragraph [60] of his judgment that neither Mr May nor Mr Gleeson nor Mr Hubbard had provided any records, and that the picture was “to an extent confused and opaque as a result of the ways in which Mr Gleeson, Mr May and others have arranged their affairs.” He considered that, nevertheless, that was “no reason not to form common sense conclusions based on the totality of the evidence about both the Isle of Man and the London sides of the transactions”. He found that “on balance ... Mr May had significant assets within Valeo, possibly mixed up with the assets of Mr Gleeson and that these were drawn on to enable Mr May to buy the flat, the purchase of which he negotiated with Mr & Mrs Gilkes.” His conclusion, was briefly stated in paragraph [61] of his judgment, as follows:

“I therefore conclude that the Prosecutor has shown on balance that the flat is the realisable property of Mr May. Larkfield’s claim therefore fails.”

The sole ground of appeal for which permission to appeal was granted to Larkfield is that the Judge was wrong to hold that the Flat was the realisable property of Mr May and that the Judge erred in his analysis of the law as to the identification of realisable property. The essence of the appeal is that the Judge failed to apply the general law as to property and trusts, separate corporate identity and the doctrine of “sham” in reaching his conclusion that the Flat was the realisable property of Mr May for the purposes of the CJA, and that Judge was wrong in treating the CJA as making it unnecessary to apply that general law.

The first question concerns the proper approach to resolving whether the Flat is the realisable property of Mr May for the purposes of Part VI of the CJA.

The principles to be applied have not, in the event, been disputed on this appeal. First, in resolving that question it is irrelevant that Judge Samuels, sitting in the Blackfriars Crown Court, in a written judgment handed down on 2 August 2002 decided that the Flat should be included in Mr May’s realisable assets: Re Norris [2001] UKHL 34, [2001] 1 WLR 1388 at para. [25]. The resolution of a dispute with a third party as to the beneficial ownership of property alleged to be “realisable property” is for the determination of the High Court in civil proceedings. Secondly, the dispute is to be resolved in accordance with ordinary principles of property law, save to the extent that the CJA provides otherwise: ibid paras. [25] and [27]. Re D, in which Ouseley J was considering the ambit of the discretionary grant of a restraint order, where the proceeds of crime had been transferred to a company, is not authority to the contrary. The CJA provides otherwise, for example, in relation to property held by a person to whom the convicted person has directly or indirectly made a gift after the commission of the offence and the court considers it appropriate in all the circumstances to take the gift into account. In such a case, the property is treated as the convicted person’s property and realisable for the purposes of the confiscation order irrespective of any principle of property law to the contrary: CJA ss. 74(1)(b) and (10), 80(6) and 82(3) and (4). It has never been the Prosecutor’s case that the Flat was purchased by Larkfield with money given by way of gift from Mr May. Thirdly, since Larkfield is the registered owner of the Flat, the starting point, as a matter of ordinary principle, is a presumption that it is the beneficial owner of the Flat: Norris para [25]; Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432, esp at paras [4] (Lord Hope) and [56] (Baroness Hale).

There is some doubt whether the Judge appreciated, and applied, the second of those principles in view of what he said in paragraph [18] of his judgment cited above. On one view, what he said in that paragraph was directed only to the stage of realising the value of property after the Court has determined in favour of the prosecutor any ownership dispute with a third party. On the other hand, his express rejection of the submissions of counsel for Larkfield as to the proper approach, his statement that the propositions of Larkfield’s counsel were “trumped” by the CJA, and indeed the way in which the Judge himself reached his conclusion that the Flat is the realisable property of Mr May, give rise to doubt about what he meant in paragraph [18].

Paragraph [18] of the Judge’s judgment was approved in R v Modjiri [2010] EWCA Crim 829, which was handed down in the Criminal Division of the Court of Appeal (Stanley Burnton LJ, Davis J and HH Judge Roberts QC) on the day we heard the appeal in the present case. That case concerned the operation of POCA, but the point in issue is equally of relevance to the confiscation provisions of the CJA. The short point in that case was whether, where the convicted person is one of a number of registered owners of land, each of whom has a beneficial tenancy in common in the land, and the land cannot be sold, mortgaged or leased without the consent of all the proprietors, the convicted person’s beneficial interest has any value for the purposes of a confiscation order if all the co-owners do not agree to any sale. Allowing the prosecutor’s appeal from the Crown Court Judge, the Court of Appeal held that the convicted person’s beneficial interest has a value because the property could be ordered to be sold pursuant to an application to the Court by the convicted person under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 (which was not drawn to the attention of the Crown Court judge). Having reached that conclusion, Stanley Burnton LJ, giving the judgment of the Court, quoted paragraph [18] of the judgment of Judge Mackie in the present case, and simply said “We agree”, without any further comment or elaboration. We do not understand that citation by Stanley Burnton LJ of Judge Mackie’s judgment to be any confirmation that, when identifying realisable property for the purposes of a confiscation order, anything other than conventional property principles are to be applied save where statute clearly provides otherwise. The Court of Appeal in Modjiri applied standard property and trust law principles in reaching its conclusion, and was plainly correct in its analysis of the application of those principles to the facts of that case. We understand the citation by Stanley Burnton LJ to be intended merely as an endorsement in general terms of the approach taken by the Court of Appeal in that case, namely that a convicted person’s property should not be excluded from a confiscation order merely because it lies within a trust and its value can only be realised with the consent of others, or, in default of such consent, by order of the Court.

The trial before Judge Mackie was plainly a difficult one to conduct. He found the evidence of some of the principal witnesses unreliable, the documentary evidence was incomplete in important respects, and the arrangements of the affairs of Mr May, Mr Gleeson and others was, as he said in paragraph [60] of his judgment, confused and opaque. Sympathising as I do with the difficulties confronted by the Judge, his conclusion that the Flat was the realisable property of Mr May was, in my judgment, unsustainable on the evidence before him and his conclusions, and absence of conclusions, on the facts. It is sufficient to refer to the following few points, which can be stated very briefly.

There was no finding by the Judge that Mr May was directly or indirectly the beneficial owner of the shares in Larkfield, whether under the Magle Trust or otherwise. Mr McGuinness expressly confirmed in his oral submissions to us that it was no part of the Prosecutor’s appeal that the Judge should have found that Mr May had any such interest in Larkfield.

The evidence shows, and it is common ground, that the money for the purchase of the Flat by Larkfield came from a Valeo bank account. Although the Judge found that Mr May “had substantial funds with Valeo or elsewhere within Coda” (para. [57]), there is no express finding by the Judge that the money transferred by Valeo for the purchase of the Flat was held on trust by Valeo for Mr May as distinct from being part of the assets of Valeo itself.

Furthermore, the evidence was that the money transferred by Valeo for the purchase of the Flat was advanced by way of loan. The making of the loan was recorded in the minutes of the respective meetings of the directors of Valeo and Larkfield on 4 August 1999. Mr McGuinness submitted that, reading the judgment as a whole, it is to be inferred that the Judge found that the loan was a sham pursuant to a dishonest scheme to conceal Mr May’s ownership of his assets in general, and the Flat in particular. That submission is, in my judgment, plainly unsustainable. There was no finding by the Judge that those minutes of the meetings of the directors of Valeo and Larkfield were false and that the loan was a sham. On the contrary, the Judge expressly acknowledged that a loan was intended when he said, in paragraph [59] of his judgment, that: “Magle appears to have ended up simply as a vehicle for the purchase of the flat via Larkfield with money borrowed from Valeo”. Further, as I have said earlier, in the section of his judgment dealing with “Facts agreed or not seriously in dispute”, the Judge referred in paragraph [28] to the resolution of the directors of Valeo on 4 August 1999 to make the loan, without any suggestion that the minutes were false or the resolution did not take place or the loan was not made as such. Nor could the Judge have so found. Although the loan was expressly mentioned as an aspect of the transaction in paragraph 16 of the Prosecutor’s Particulars of Claim, the Prosecutor did not allege that the loan was a sham. Indeed, there is no express allegation of dishonesty anywhere in the Particulars of Claim. Further, Mr Howard was recorded in the minutes of the meetings of the directors as being present by telephone, representing Southquay, one of the two directors of Valeo and of Larkfield. He gave oral evidence at the trial, but it was never put to him in cross-examination that the minutes were false and there was no loan in fact.

It follows that it is possible that Mr May has an interest in any money recovered from Larkfield in respect of that loan, but such rights will be as between himself and Valeo, and have nothing to do with securing any beneficial interest of Mr May in the Flat itself.

I would, therefore, allow this appeal.

Mr McGuinness submitted that, in the event of the appeal being allowed, the case should be remitted so that the Judge can set out more clearly precisely what are his findings in respect of Mr May’s interest in the various companies and trusts. That course is not, in my judgment, an appropriate one since, in view of the Prosecutor’s Particulars of Claim, the evidence adduced at the trial and the cross-examination of Mr Howard, it would not be open to the Judge now to find that the loan to Larkfield of the money to purchase the Flat was a sham and Mr May has a beneficial interest in the Flat itself.

I agree

I also agree.