Matthews, R. v

LORD JUSTICE MOSES: This is an appeal against conviction, by permission of the full court, arising out of a number of complaints as to the unfairness of a retrial at Birmingham Crown Court, sitting at Worcester, in July and August 2008. The trial lasted 6 weeks and, on 22 August 2008, this appellant was convicted by a majority on a single Count of cheating the Public Revenue. He was sentenced to 7 years' imprisonment.

The appellant was arrested on 18 June 2002 in connection with what is commonly known as an MTIC fraud. A fraud, in other words, in which easily transportable items, such as mobile phones, are imported from the European Union; a transaction which does not trigger a liability to pay for VAT, or did not in those days, and in which the mobile phones are bought and sold by a number of different traders in a chain, amongst whom is a trader who does not pay the VAT which it owes by way of output tax and goes missing. The fraud in which this appellant was said to be involved led to the loss of some £54 million of VAT.

The appellant had control over a company known as Calcon Industrial Supplies Limited. Over the space of 3 months he made a profit of £324,000. The loss of VAT, due directly to the transactions in which his company was involved, was estimated to be in the region of £10 million. The company was what is known as a buffer company. In other words, it did not make off with VAT it was liable to account to customs for, but it enabled a missing trader to do so.

Calcon bought from four different missing traders and sold on to other purchasers. Often Calcon paid for the mobile phones, not to the supplier from whom it bought, but to another supplier at the direction of its supplier. The profit for this appellant consisted of a regular amount of £1 per mobile telephone. That apparently was an unfluctuating reward for each mobile phone, the subject matter of the transactions in which Calcon Industrial Supplies Limited were involved.

The nub of the case against him was that he had sole control over Calcon Industrial Supplies Limited. He had never before been involved in this trade; he had previously been conducting a perfectly lawful cleaning business through that company. The prosecution pointed to the complete absence of any dealings with those from whom he was buying and selling telephones. Indeed, there was a complete absence of any commercial dealings at all. The prosecution relied upon the fact that he had, in March 2002, moved from working in the cleaning business that we believe was originated by his parents, to what was properly described as a multi-million pound trade in mobile phones. He had done so, and succeeded in doing so, without any training experience or guidance. He thus made, by dealing with traders who turned out to be missing traders and by making payments at their direction to third party suppliers, very large profits for no credible reason. On the very day he started this trade, he learned of the arrests of others involved in similar trades and, so the prosecution alleged, must have appreciated the use of such trades for the fraud of which he was accused from assurance visits that he received from Customs Officers.

He recruited into this business another young man who had no experience of it, a family relative, a man called Hollins, who was given a list of contacts and asked to telephone to see whether there were phones which Calcon could buy or sell. Significantly, Hollins described the circumstances of his dealings in the business; being left on his own on frequent occasions. The appellant was absent from the office for lengthy periods, on what was said to be a golf course, whilst receiving this sudden influx of large amounts of money.

The focus of this appeal has been on the complaint that this appellant was subjected to an unfair trial on a second occasion, after a jury had disagreed following an unfair first trial presided over by the same judge, HHJ Cavell. Mr Offenbach, on behalf of this appellant, said, and has argued, that the judge should not have tried the second trial since he had exhibited bias in the first. This was hotly disputed by counsel for the respondent, who also had been trial counsel, Miss Preston. Prosecuting counsel submits that the judge behaved with conspicuous fairness, despite provocation by counsel for the defence, who obdurately failed to comply with the judge's rulings.

We indicated at the start of the submissions, and we repeat, that we take the view that this appeal should concentrate on the second trial. If the allegations made in relation to the second trial prove unfounded, it is, in our view, impossible to see how this court could conclude that the verdict in that second trial was unsafe because of unfairness, if any, in the trial earlier, at the conclusion of which the jury disagreed. If, on the other hand, we concluded that the verdict was unsafe in the second trial because of unfairness, or for other reasons, in that second trial, then any reference to the first, save in so far as it clarifies or substantiates grounds advanced in the second, would be irrelevant.

We start with two grounds with which Mr Offenbach started this appeal, namely his contention on behalf of the appellant that the judge wrongly admitted previous convictions of others involved in what was said to be this conspiracy. They formed the subject matter of ground 5 and ground 4 of this appeal. Mr Craig Johnson pleaded guilty to conspiracy of laundering proceeds of profits alleged to be frauds, in which Calcon, this appellant's company, was involved. He had also pleaded guilty to cheating the Revenue in relation to the purchase of mobile phones 2 years before. The prosecution sought to rely upon those convictions as tending to prove, not only that a fraud was committed in respect of Count 5 of the indictment that the appellant faced, but also as tending to prove that this appellant knew that by embarking and persisting in this trade that a fraud or cheat was being committed on Her Majesty's Revenue and Customs.

The link on which they relied between Craig Johnson and this appellant was that this appellant had been in the habit of providing cleaning services to a house occupied by Craig Johnson, where his wife lived. Apparently an employee would visit three or four times a week. There was, further, evidence that at about the time of this appellant's arrest a fax had been sent by a fellow conspirator, Barbara Moran, to a room in Dubai. That fax set out details of deals in which Calcon had been involved. The link with Craig Johnson, so the prosecution contended, was established by the fact that the room to which the fax was sent was a room paid for by Johnson. Thus, it was contended that it established a further connection between, not only MTIC frauds, but the frauds in which this appellant's company was involved.

In our judgment, the evidence was admissible, both to prove the nature of the frauds and also the defendant's knowledge, pursuant to section 101(1)(b), as explanatory evidence within the Criminal Justice Act 2003. We do not think that it was arguable to the contrary, although it was argued before the trial judge and the arguments were repeated before us. The evidence was plainly admissible and it was fair to admit it.

A further ground was advanced in connection with Craig Johnson's plea of guilty to laundering money. The defence sought to rely upon Johnson's basis of plea; he pleaded guilty on a written basis of plea accepted by the Crown, in which he said this:

In our judgment, it would have been quite wrong to allow this basis of plea to be placed before the jury as some evidence of the absence of guilty involvement of Calcon or this appellant. At best, it contains an absence of admission by Johnson in his case that he was involved with the appellant's company, but it is coupled with a refusal to name who his co-conspirators were. It was thus of no benefit, still less of any evidential value, to this appellant.

Mr Offenbach contended that once the Crown had accepted the basis of plea in Johnson's case it was somehow bound to place that basis of plea before the jury as tending to exculpate the appellant, on the basis of unfairness or some species of abuse which would debar the prosecution from refusing to permit what Craig Johnson said about it, to go before the jury in the appellant's case. He relied, for that proposition, on CPS Sussex v Haravinda Singh Mattu [2009] EWCA Crim 1483.

Mattu was a wholly different case. The prosecution sought to prosecute, for laundering, a defendant in respect of whom it had already accepted a plea on the basis that he was merely a conduit for the supply of drugs. In short, the prosecution in that case had earlier accepted that he was merely a conduit for the supply of drugs, and subsequently then sought to change its mind and charge him, in a separate trial, at a different venue, for money laundering. The court regarded that as grossly unfair, inconsistent, and any prosecution, it concluded, would amount to an abuse (see paragraphs 17 to 19). That authority has no relevance to this case where the defendant seeks to deploy a self-protecting basis of plea. There is no basis for saying that the prosecution has behaved inconsistently or unfairly in refusing to allow that basis of plea to go before the jury. If the defence had wanted to call Johnson, it could have done so.

Allied to that ground was a contention by Mr Offenbach that the prosecution was guilty of a late disclosure of Johnson's basis of plea; it only emerged after the defence had learned about it through their instructing solicitor and had requested it. There was, in our judgment, no basis for any complaint whatsoever against the prosecution for not disclosing the basis of plea. It was not relevant, it did not tend to undermine the case against this appellant. Indeed, had it been advanced, it was arguably damaging to this appellant, since it was plain on its face that Johnson, whilst not accepting who his co-conspirators were, would not name those with whom he said he had been dealing.

The other convictions, the admission of which the appellant objected to, were relevant for the same purpose as the convictions of Craig Johnson. For example, a lady called Hawcroft was alleged to have run a company called Aviat. It was denied that she was running the company, although she was a director. Aviat was a freight forwarder in transactions in which this appellant's company was involved. Plainly, Hawcroft's convictions were relevant for the purposes of section 101, and admissible for the purposes of section 101(1)(b) of the 2003 Act.

Similarly, the convictions of Sanders were relevant and admissible. He was a man whose company dealt with this appellant's company in the first five or six deals. There was, as we reiterate, no basis for objecting to the admission of any of those convictions.

Ground 3 contends that the judge unfairly restricted or limited this appellant in the conduct of his defence. The appellant wanted to show how the fraud in which his company was involved had been masterminded, so as to substantiate the defence that he had been unwittingly manipulated into joining in the purchase and sale of the mobile phones. He wanted to show that there were four suppliers from the European Union and four missing traders, and whilst they used a number of different companies, the same people were behind all these trades.

The judge ruled, both in the first and the second trial, in a way that sought to restrict the appellant from persistent cross-examination as to the nature of other people's deals and convictions. The judge said, for example on 30 May 2007 in the first trial, and gave similar rulings in the second, that it was not relevant what other defendants had done, and that their basis of plea and convictions were outside the ambit of the matters with which this appellant had been charged and did not assist in determining the state of his knowledge.

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

The appellant contends that the judge unfairly prevented him from adducing evidence as to the destination of the proceeds of the fraud. It was known that money from this fraud, like from others, had been laundered in Hong Kong. The appellant wished to show who the beneficiaries from what was described as the Hong Kong laundry were.

There was never any dispute that the money, the proceeds of these frauds, had gone to Hong Kong. Nor was there ever any suggestion or dispute but that this appellant did not receive the proceeds of that laundry from Hong Kong. His gain from this fraud was alleged to be the unceasing, repetitive receipt of a £1 turn on each deal when buying and selling these mobile phones. There was some suggestion that money for which he was liable to account later, some £100,000, had not been sought from those with whom he was dealing, but that was never suggested to be the proceeds of money laundering in Hong Kong. It was therefore quite unnecessary for the appellant to probe that issue any further.

It is further alleged that the judge unfairly prevented the appellant from adducing evidence as to what was described as "the commonality of control" of the European suppliers. The judge rightly stopped that issue from being further explored, for example in a ruling on 24 July 2008 in the second trial. It was quite unnecessary for the appellant to explore that further, in the light of the obvious feature of this type of fraud of the need for ring masters or masterminds -- call them what you will. That was never in dispute.

The further matter of which the appellant complains is that he was prevented by the judge from relying on the fact that another company, Aviat, the freight forwarder to which we have already referred, demonstrated in its trade the same features, for example as a first line buffer and payments to third parties, which were alleged to demonstrate guilt in relation to this appellant's company. Yet, so it was contended, Aviat had not been prosecuted, and that showed either that those features of guilt were not well founded or something more sinister.

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

There is no basis for suggesting that this appellant's defence was unfairly confined or limited. This appellant's counsel, Mr Offenbach, repeatedly attempted to probe into other convictions, the basis of those convictions or pleas of guilt, and the judge allowed him considerable leeway. We have gained the clear impression from reading the transcripts, which of course can never give the full picture and flavour of the trial, that defence counsel repeatedly tried to cross-examine on matters about which the judge had ruled were irrelevant. We take the view that the judge's rulings were correct. Indeed, he would have been wrong to have allowed counsel for the defence further leeway. We reject this ground of appeal.

This leads to another ground of complaint advanced by this appellant. The appellant complains that the prosecution refused to admit that their could be innocent traders in chains such as those involved in the instant appeal. The Crown refused to make an admission that traders acting as buffers, like Calcon, buying a selling in a chain, could be innocent in the sense that they did not know that missing traders in the chain would make off with output tax owed to Customs. In support of that submission, Mr Offenbach pointed to cases such as Optigen, Fulcrum Electronics and Bond House Systems v The Commissioners of Customs and Excise ECJ Joined Cases C354/03 and Bond House Systems Limited v The Commissioners of Customs and Excise before what was then the VAT Tribunal in 2003. In cases like Bond House, Customs had advanced their contention that they were not liable to repay input tax, on the basis that, even if individual traders were innocent and did not know of the fraud, the trade in which they were involved was not an economic activity, and thus did not fall within the Sixth Directive.

In our view, the stance of the Crown was correct. There was no possible basis for compelling the Crown to make an admission that there could be innocent traders. Such an admission would not assist the jury. The question for the jury was whether the prosecution could prove that the appellant knew that the trade in which he was involved, involved missing traders or fraud upon Her Majesty's Revenue and Customs. It was irrelevant whether anybody could conceive of a case such as this, where a trader might not know. Why then should the Customs have been compelled to make such a confusing and misleading admission to be laid before the jury? By 2002, when the trades in which this appellant was involved were taking place, vast losses had been suffered in relation to VAT, to the detriment of the country, by the trade in small items such as mobile phones and computer chips. The Customs stance, with which many citizens would have sympathy, would be that anyone who chose to make for himself sudden and dramatic gains by entering into such a trade must have appreciated the fraudulent source of such rewards. The suggestion that it would be unfair not to make an admission to the contrary is unwarranted, unfounded and, in our view, absurd.

A number of the grounds advanced, particularly grounds 7 and 8, criticise the behaviour of the judge. It is contended that he displayed hostility to counsel for the defence and disinterest in his cross-examination. He repeatedly rejected applications advanced by counsel for the defence, whilst accepting prosecution counsel's submissions.

The repeated applications, all, as the judge found and as we endorse, without foundation, were bound to cause any judge displeasure. This judge, rightly, sought to compel counsel for the defence to comply with his rulings and get on with the case. In our view, he was justified in doing so. The response from counsel himself was repeatedly and publicly to blame the judge for rejecting his submissions, and to attempt to indicate to the jury that the judge was unfairly restricting his defence. This was not justified. This court will support and respect counsel for the defence, when undertaking a difficult defence, doing so in a robust and forceful manner; our system of trial depends upon courageous and independent minded advocates. But from time to time both judges and counsel become irritated with each other, that is only human, and it must always be remembered that there sits in the dock an accused, facing possibly a long term of imprisonment, who will find such displays of irritation or anger less easy to understand. They tend to exacerbate any feelings of unfairness the accused feels.

In this case, we have considered all the transcripts with which we have been furnished. Our views of the judge's rulings demonstrate that he was right to reject them and right to seek to curb the defence counsel's wish to widen the ambit of the case beyond that which was relevant. From time to time we fear that counsel, in his laudable wish to strain to the utmost on his client's behalf, overlooked his obligations to prepare and conduct the case in accordance with the overriding objective in the Criminal Procedure Rules 2010. That objective is that cases should be dealt with justly (see paragraph 1.1 and 1.21(a)). We acquit counsel of any deliberate attempt to antagonise the judge so as to gain some advantage, either at the trial or on appeal. The 2010 Criminal Procedure Rules do not permit the Liverpool defence nowadays. But from time to time we have to say that defence counsel gave the appearance of doing so in his discourtesy to the judge.

Equally, the judge must not permit himself to show anger or display sarcasm to counsel, however provoked he may be. From time to time it is clear that the judge was sarcastic and, unfortunately, showed his irritation with counsel. On one occasion he did so without justification. When the prosecution called the official, Mr Stone, it did so to give evidence about the nature of frauds such as the one in which it was alleged the appellant had been involved. Counsel for the defence, perfectly properly, started to set the ground for the cross-examination which he wished to advance, drawing out from the witness certain features in favour of the defence. He started by questioning the suggestion that he was familiar in his experience with the legal process and then asked whether his opinion evidence comes from an expert. The judge intervened, asking whether he was trying to make a point.

In our view, easy though it is to criticise, we have to say the judge intervened too soon. Counsel responded that he was giving evidence as an expert. This, unfortunately, the judge rejected. He said it was not evidence of expert evidence and that counsel for the defence should have objected earlier. When the defence counsel demurred and said he did not have to, the judge said:

This was a rare occasion when, as it seems to us, the judge was in the wrong and counsel was in the right. On other occasions, we take the view that he had every justification for rebuking Mr Offenbach, who has conducted this appeal with conspicuous skill and courtesy but who seems to have been driven in his disappointment as to the adverse rulings from time to time to step over the mark of the normal politeness between counsel and the judge. It was wrong to accuse the judge of hostility, still less of bias against either the defendant or his counsel. If counsel make repeated unjustified applications, then counsel must expect a rebuke.

The rebukes should not have been the subject matter of any grounds of this appeal and we recall that when the single judge, Blake J, first saw this case, he refused permission. We reject any suggestion of unfair hostility or bias against the judge. The accusations should never have been made, either at the time or now. We think that the judge displayed, in the main, great patience.

A further allegation made against the judge is that he was either feigning sleep, or was asleep, or deliberately displayed disinterest by not taking notes during passages in the cross-examination, taking off his glasses or closing his eyes. The prosecution deny that that took place.

We do not intend to say more than that the judge was under no obligation to note parts of the evidence that he regarded as irrelevant or unhelpful, whether in chief or in cross-examination. But, as we are confidant the judge is well aware, he must not display to the jury in dumb show that the evidence is irrelevant or that the jury should disregard it. He must either let the evidence in and let the jury decide as to its relevance, or rule it out. The judge, we accept, may from time to time have displayed disinterest in passages of the evidence, but we are quite satisfied that that did not lead to any unfairness in the conduct of the trial or deflect the jury from its task. We are confidant in that conclusion because of the care in which this judge drafted his summing up. That amply demonstrates that, in the precision that he exercised, he had paid acute attention to this appellant's case.

Ground 11 of the grounds of appeal suggest that the summing up was unfair, in that it was too short. The judge summed up the case up in two and a half hours after a 6 week case. We wish to emphasise that the summing up was a model of how such cases should be summed up. It omitted reference to some of the points the defence wished to make but it clearly laid the issues before the jury and the defence the appellant sought to advance; that he had no knowledge, that he had been set up by others and was angry about it. All the points that were necessary to lay before the jury were sufficiently covered. Any points the defence wished to advance by way of argument did not require repetition by the judge. It was not for the judge, and indeed would have been wrong for him, merely to repeat those arguments which defence counsel sought to advance. There was no lack of balance, there was no unfairness and, in our view, there was no basis for challenging this summing up.

It was suggested that the judge wrongly commented on the failure of the defence to make admissions. It is worth illustrating the strength of this, like many other of defence counsel's arguments, by quoting from what the judge said about the absence of admissions in his summing up:

It is quite wrong for anyone to suggest that that contains any criticism. It does not.

The background to that allegation was the failure of the defence to make some 100 admissions that it had made in the earlier trial, because it said the prosecution had failed to make 9 admissions or so that it had made in the earlier trial. Prosecuting counsel, in our view, was quite entitled not to repeat those admissions. They had been admissions mainly in relation to money laundering in Hong Kong and had led to arguments by way of diversion or deflection from the central focus of the trial. Prosecuting counsel, in our view, was right not to repeat them. Her stance was no justification whatever for the defence not to repeat the admissions. We have already referred to the Criminal Procedure Rules. Counsel, having sanctioned the making of admissions in the first trial, was not justified in refusing to make them in the second trial, unless the evidence or some point that had emerged in the evidence of the first trial demonstrated the lack of wisdom in doing so. Indeed, not to do so was, in our view, a breach of the rules. The trial judge would have been justified in requiring counsel to make those admissions in writing, absent any justification for not doing so. The judge did not take at that approach. Certainly, it led to no criticism within the summing up.

The final ground with which we chose to deal is ground 9. There had been found a document written by a witness, a man called Hollins who had been employed by this appellant, that referred to a chain. The appellant called Hollins. The appellant's counsel was, with full justification, under the impression that Hollins was a man of good character. Unfortunately, he was not. After he started to give evidence, the prosecution discovered that he was a man with previous convictions. Without warning, prosecuting counsel asked the witness whether he was of good character, and when he said he was not she launched into a cross-examination as to some of his previous convictions until he was stopped. That led to submissions in the absence of the jury, in which the judge ruled that the only conviction that should have been and should be put to the witness, and the only conviction relied on, was in fact a caution not a conviction for dishonesty of an offence of theft.

Prosecuting counsel realises now that she should not have adopted that approach. Although she had no advance warning of this witness, once she discovered the convictions she should have asked the jury to go out and then made her application, if necessary, in the absence of the witness. She regrets it now and has very fairly expressed that regret. The point was dealt with with conspicuous fairness by the judge in the summing up, in reality it disappeared. Certainly the approach of counsel, whilst it was wrong, did not lead to any unfairness in the trial, because there was no basis for excluding the witness' caution.

We have considered all the grounds advanced in this case. What is more, we have looked at this case overall. In our judgment, the appellant has no ground of complaint whatever. Defence counsel had a difficult defence to run. Here was a comparatively young man, about 37 at the time, without any experience of such trade, who suddenly saw the opportunity for great wealth. It is difficult to see how he could conceivably think that the gains he made, the rewards he found over such a short time, could have been made without realization that he was participating in some fraud or cheat. These cases should always be focussed on that simple fact. The defence inevitably tried to spin out such cases with applications for discovery in linked cases, arguments about the non-prosecution of others, or the fact that hapless Customs officials, when visiting, did not advise them earlier or stop them persisting in such a trade. None of these features touch upon the essential question and the judges should strive to confine these cases to the essentials. These cases do not warrant long trials, which only deflect a jury from the real question that they have to consider, namely how could a defendant in a position such as this appellant think that he should gain such sudden and dramatic wealth in a trade in which he must have known fraud was rife?

We have not considered in detail further examples of the way in which this case was unnecessarily prolonged, or exchanges in what sadly was an ill tempered trial. But the defendant himself should be assured that we are satisfied that he did have a fair trial, and he had the benefit of a robust counsel who did his utmost to defend him. However, for reasons we have given, this appeal is dismissed.

LORD JUSTICE MOSES: The appellant renews his application for permission to appeal against sentence, now that his conviction appeal has been dismissed. He was sentenced to 7 years' imprisonment and disqualified under section 2 of the Company Directors Disqualification Act 1986 for 6 years.

He was a comparatively young man, 37, at the time of these offences, 41 now, of positive good character and, as we indicated in the appeal, it was sad that he should be tempted in this way to make so great a reward. But he did make substantial monies out of this until he was stopped by his arrest. He was involved in a particularly serious type of fraud.

In excellent submissions, Mr Offenbach contends that the sentence of 7 years was manifestly excessive, mainly on the basis that it was out of line with previous authority, particularly the case of Takkar [2008] EWCA Crim 646, and the case on which it was based, Attorney General's Reference numbers 88 to 91 of 2006 EWCA Crim 225 for Mehan and others. The bracket, he contended, for offences where the loss is greater than £20 million and the fraud is undertaken for periods of more than a year, is between 6 to 8 years. This appellant, so it was contended, was only involved for 3 months and the loss, as the judge recorded, was only £10 million, with a personal gain somewhere between £300,000 and £600,000.

Whatever the suspicions of the judge, we are quite satisfied he did only deal with him on the basis that his company was a buffer. We take the view that the sentence of 7 years was severe, at the top of the bracket for a case such as this with a man of good character, but nonetheless was not manifestly excessive. We do not think it arguable to the contrary.

In those circumstances, the application is refused.