Panesar (t/a Anami Law), R (On the Application Of) v The Crown Prosecution Service

There are before the court three separate but factually related claims for judicial review. In the first two, Sanjay Panesar, a solicitor practising as Anami Law (CO/12754/2010) and Alexander Windsor and Avtar Singh Hare (CO/12833/2010) challenge the lawfulness of decisions made by HHJ Horton sitting in the Crown Court at Bristol on 2^nd December 2010 to issue a number of search warrants. In the third claim (CO/2018/2011), Avtar Singh Hare and Kulwant Singh Hare challenge the lawfulness of conditions attached to their grant of bail by custody officers at each of two London police stations on 7^th December 2010, and the refusal of the Magistrates’ Court sitting at Barking on 25^th February 2011 to vary those conditions. These claims require permission, with the full hearing to follow if permission is granted. In formal terms, we grant permission in the first two (search warrants) claims and refuse it in the third (bail conditions) claim.

The background, common to all these claims, is that in 2010 Her Majesty’s Revenue and Customs were conducting very extensive investigations into what appeared to them to have been a massive diversion fraud of alcoholic drink, which, it was thought, had resulted in the evasion of very large amounts of excise duty and VAT. It was alleged that consignments of alcohol, originating in the United Kingdom, were shipped to bonded warehouses initially in Belgium, but later in Germany. They were then dispatched back to England with duplicate delivery documents, one to a bonded warehouse in France and the other to a bonded warehouse in England. If the lorry was stopped and examined at Dover, the consignment would be taken to the English bonded warehouse upon one set of the documents. If the lorry was not examined in Dover, the consignment would be directed without payment of duty or VAT to one of a number of cash and carry outlets of a business under the name of Eastenders. One set of alternative documents would be destroyed and, at the French end, the other set would be retained to pretend that the consignment had been delivered to the French bonded warehouse. In England, documents would then be created for buffer companies and a missing company which would help to conceal the eventual evasion of VAT.

On 2^nd December 2010, HMRC, in the person of Douglas McGill laid an Information before HHJ Horton sitting in the Crown Court at Bristol making applications under section 8(1) of the Police and Criminal Evidence Act 1984 for 31 search warrants of premises of 11 businesses and 18 individuals including the claimants in these proceedings. A separate Information was also laid under schedule 1 of the 1984 Act relating to special procedure material at Griffin’s Wood House, Copped Hall Estate, Epping, which are premises owned by Avtar Hare in which Sanjay Panesar has his solicitors offices.

Annex B to the first Information gave an outline of the diversion fraud to the effect we have briefly described. Annex C gave an account of investigations in 2008 and 2009 by Belgian and French authorities into movements of consignments of beer, wine and spirits owned by a UK company. The investigation mainly concerned a Belgian bonded warehouse (Demetrans) from which most of the consignments were redispatched to a French bonded warehouse (IEFW). There appeared to be no economic rationale capable of supporting the movement of these goods. On 16^th October 2008, French police officers had stopped a UK registered lorry carrying a load of beer in which they found delivery documents showing Demetrans as consignor and IEFW as consignee; and a duplicate set of delivery documents for the same goods showing Demetrans as consignor and Rangefield, a UK bonded warehouse, as consignee. From this the Belgian authorities suspected that a fraudulent system was in operation at Demetrans. An audit of Demetrans in December 2009 revealed large sums of money provided by Eastenders Cash and Carry and a related UK business and controlling connections of a number of individuals, including Mr Windsor, were alleged to exist. An analysis of all delivery and despatch documents showed that 925 consignments were sent to IEFW and 148 to Rangefield. “It is thus believed that 925 consignments were diverted to home use in the UK.” 38 other consignments on paper dispatched to a bonded warehouse in Spain were also suspected to have been diverted to the UK.

Annex D to the Information gave an account of the subsequent HMRC investigations in 2010 and an overview of the roles of parties to the alleged fraud. This Annex is punctuated with assertions introduced by the words “it is believed that …”. Subsequent Annexes E-AB give an account of the alleged involvement of various businesses and individuals. These are extensive and include, for example, references to observations and interceptions of lorries (Annexes H and K); details of what are said to be transactions with and payments to buffer companies (Annexes I and J); details of missing companies – Transylvania Services Ltd (Annex M) and Signature Drinks Ltd (Annex N); details of Eastenders Cash and Carry plc (Annex U) including the finding at their Barking branch in June 2010 of what appeared to be duplicate delivery documents to IEFW for the same goods received at Barking.

Mr Swift QC, for HMRC, submits in summary that the evidential material before HHJ Horton showed:

Section 8 of the 1984 Act gives power to a Justice of the Peace (or in this case a Crown Court Judge) to issue a warrant authorising a constable (or in this case an officer of HMRC) to enter and search specified premises. The judge has to be satisfied that there are reasonable grounds for believing that an indictable offence has been committed; that there is material on the premises that is likely to be of substantial value to the investigation of the offence; that the material is likely to be relevant evidence (as defined in section 8(4)); that it does not consist of or include items subject to legal privilege (as defined in section 10), excluded material or special procedure material; and that certain conditions are fulfilled which make it appropriate to authorise an unannounced right of entry. A constable or officer applying for a warrant and the warrant itself have to identify, so far as practicable, the article to be sought (section 15(2) and (6)). For the purposes of the Claimants’ main ground of appeal, schedule 1 has relevantly equivalent provisions for special procedure material.

The first two claims for judicial review contend that the judge ought not to have issued the search warrants because on the material before him there were no reasonable grounds for believing that an indictable offence had been committed. In the curious circumstances of this case, as we shall explain, we consider that this contention succeeds, and it will not be necessary to consider other grounds of challenge to which we shall nevertheless briefly refer. The curious circumstances are that two other courts have already considered and determined in substance the same question as arises in these claims in overlapping proceedings.

In addition to applying for search warrants, the CPS applied on 6^th December 2010 to HHJ Hawkins QC at the Central Criminal Court and obtained restraint and receivership orders affecting five alleged offenders, including three of the claimants in the present proceedings, and Eastenders Cash and Carry plc. As the CACD observed in giving judgment in the appeal against the grant of these orders to which we shall refer, it is regrettable that the search warrants were applied for in one Crown Court and the restraint and receivership orders applied for in a different Crown Court when they all related to the same alleged criminality and relied on the same, or substantially the same evidence. The respondents to these orders appealed to the Court of Appeal Criminal Division against their grant. The CACD determined the appeals on 8^th February 2011 and the judgment of the court at Windsor and others v Crown Prosecution Service [2011] EWCA Crim 143 may be referred to for greater detail than this judgment need contain. The appellants included Alexander Windsor, Kulwant Hare and Avtar Hare.

Section 41(1) of the Proceeds of Crime Act 2002 provides that the Crown Court may make a restraint order if any condition set out in section 40 is satisfied. The first condition in section 40(2) is that a criminal investigation has been started in England with regard to an offence, and there is reasonable cause to believe that the alleged offender has benefited from his criminal conduct. Although this is expressed in terms of benefit from criminal conduct, a necessary component is reasonable cause to believe that there has been criminal conduct. Thus, although section 40(2) of the 2002 Act is not identical with section 8(1)(a) of the 1984 Act, there is substantial overlap – reasonable cause to believe that there has been criminal conduct in the 2002 Act, and reasonable grounds for believing that an indictable offence has been committed in the 1984 Act. In paragraph 62 of its judgment, the CACD observed that the test of “reasonable cause to believe” applied to both the application for a search warrant and the application for restraint orders. The court was told that the material before HHJ Horton in Bristol was not the same as that put before HHJ Hawkins QC at the Central Criminal Court who, it was said, was provided with a reduced version. The court said that it was difficult to see why the material before the two courts should not be the same or why the two applications were not made to the same judge. In fact it appears to us that the material before the two courts was substantially the same and, as will appear, that the material subsequently put before Mackay J (see below) in the restraint orders case was substantially the same as that put before HHJ Horton in the search warrants applications. The CACD concentrated on a statement of Alan Brown who stated that he made his witness statement from information supplied by Mr McGill, the HMRC officer who had laid the Informations before HHJ Horton.

Although, as we have said, the test in section 40(2) of the 2002 Act refers to the alleged offender benefiting from his criminal conduct, the CACD in fact concentrated on whether there was reasonable cause to believe that there had been criminal conduct. The court referred to the incident on 16^th October 2008 when French authorities intercepted a UK registered lorry with duplicate delivery documents and to the nature of the fraud which the Belgian authorities had “suspected”. It did not seem to the court that this, without more, provided a judge with the kind of material on which to make a finding of reasonable cause. The court referred also to the belief that 925 consignments which on paper had been consigned from Demetrans to IEFW had been diverted to the UK. Fresh evidence relied on by the appellants, taken at face value, severely undermined the proposition that 925 consignments had been diverted. Further material advanced by Mr Brown was not sufficient to fill the evidential gaps. It may have been suspected that Demetrans may have been involved, but that was not enough. A broad and unsupported statement about the later HMRC investigation was also not sufficient for the judge to find reasonable cause. The court referred to other parts of Mr Brown’s statement, but concluded that the failure in the first part of the statement to show that there was reasonable cause to believe that 925 consignments were diverted was fatal. This was accordingly a finding that the necessary element of criminal conduct had not been sufficiently established.

The court then turned to consider the effect of the restraint and receivership orders on the Eastenders companies and minority shareholders, and in paragraph 109 of the judgment concluded that there was insufficient material before HHJ Hawkins for him to decide that there was reasonable cause to believe that the companies were just a front, sham or device for a diversion fraud committed by the alleged offenders. The evidence suggested that the vast bulk of the companies’ business was legitimate.

The court then considered whether it had power to suspend the effect of a final order discharging the restraint and receivership orders to permit the respondent to make a speedy fresh application to a judge sitting in the Crown Court. They concluded that the wide powers of the court enabled them to do this. Accordingly there was a further hearing of the Crown’s application before Mackay J at the Central Criminal Court at which the Crown had the opportunity to improve on its evidence. Mackay J gave judgment on 22^nd February 2011.

The judge noted that the allegations behind the HMRC investigation were that all the respondents were involved in conspiracy to cheat and defraud HMRC of excise duty and VAT and to launder the proceeds of that fraud. No charges had yet been brought. He referred to the three day CACD hearing and the judgment of that court that the evidence before HHJ Hawkins had been insufficient, but that the court had given the Crown the opportunity to fill the gap and to repair its failure to show reasonable cause.

Having considered the relevant statutory provisions and some authorities, Mackay J related the evidence about the three bonded warehouses and evidence to the effect that Mr Windsor was regarded as the boss of Demetrans and in a position to control its activities. He referred to the fact that the Belgian investigation was set in train by the incident of 16^th October 2008, and to the two Belgian reports which the subsequent investigation engendered. The judge quoted from these reports. He said that what the reports related was the basis of the current application to the effect that all the 925 consignments supposedly delivered by Demetrans to IEFW were fraudulent. The judge noted that the Belgian investigation seemed to have been largely a paper exercise and that the findings were as to what was “suspected”. The judge then referred to an interview on 12^th January 2010 by Belgian investigators of a M. Podhajecki, the manager of Demetrans throughout the period when the fraud was said to have operated. Having considered this, the judge then said that the evidence that he had summarised so far, if it stood alone, could well be viewed as giving some cause to believe that Eastenders and the respondents were involved in a diversion fraud between the relevant dates.

Leading counsel for the Crown confirmed to the judge that his case was based on the alleged fraud by which 925 deliveries purportedly to IEFW were all diverted and sold through Eastenders. It was the cornerstone of his case and the justification for the allegation that the alleged benefit was of the order of £23m. The prosecution in the CACD and before Mackay J had been unable to refute evidence on behalf of the respondents that 90 to 95% of Eastenders sources were legitimate.

The respondents had put in considerable evidence which the judge considered. A Mr Duckney of Bosworth Beverages Ltd gave evidence that the load intercepted on 16^th October 2008 was his. He gave an explanation for the two sets of delivery documents, of which the judge said that the evidence could well be regarded with a degree of suspicion and cynicism. Mr Gluck was operations manager of IEFW. There was no evidence that IEFW had ever been investigated by French authorities and suggestions that it no longer existed were countered. Mr Gluck produced three exhibits running to 700 plus pages of computer print out. The judge said of these that, if they were genuine, they seemed to be a complete answer to the prosecution’s case on the Demetrans fraud. The prosecution contended forensically that the documents were a complete fabrication. There was specific evidential criticism of the documents. The judge considered these matters and said that Mr Duckney’s and Mr Gluck’s evidence was, as things stood, destructive of the prosecution case. He could certainly make no finding of fact in a hearing such as he was conducting that the evidence was bogus. The evidence was important to the extent that, absent other evidence of sufficient strength to support the prosecution case, he would have grave difficulty in finding reasonable cause.

The judge then referred to other evidence derived from investigations in England by HMRC in 2010. He referred, for instance, to evidence of observations of the behaviour of lorries between 27^th and 30^th September 2010, whose movements were said to be indicative of criminal conduct. The CACD had described the evidence about one of these lorries as an important piece of evidence, but of a single occurrence. Leading counsel for the Crown conceded that this was not part of the fraud which he was setting out to demonstrate. It did, however, he submitted, cast light backwards to confirm what was going on at an earlier stage.

The judge then considered evidence of observations carried out between 21^st July and 8^th September 2010, which the prosecution said must be diverted consignments from an unknown bonded warehouse, not Demetrans. There was also a desk top analysis of 600 of the delivery documents seized by the Belgian authorities from Demetrans. There was also intrusive surveillance and physical searches of 32 Fowler Road, office premises rented by Signature Trading Ltd. This produced cheques and documents said to relate to the laundering of large sums of money by a variety of companies on behalf of Eastenders. There was an analysis of the alleged money laundering of which the CACD had said that the evidence demonstrated that there were a number of suspicious very high value transactions. Mackay J agreed. But the prosecution agreed that they could not establish a reasonable cause to believe that there had been diversion fraud by showing that Eastenders were laundering large sums of money. They had to show that there was reasonable cause to believe that the source of the suspicious transactions was the fraud relied on. This was not shown on the evidence before the judge.

The judge concluded that on a fair view of the totality of the evidence in the case he was unable to conclude that it had been demonstrated that there was reasonable cause to believe that the three respondents had committed the fraud for which they were being investigated. The new material, which had not been before the CACD, had, if anything, moved the balance in favour of the respondents’ position. Accordingly the quashing of the original restraint orders ordered by the CACD should take effect.

Accordingly, both the CACD and Mackay J upon additional evidential material have decided that the evidence in support of the applications for restraint and receivership orders was not sufficient to establish reasonable cause to believe that there had been criminal conduct. Mr Alun Jones QC, on behalf of the present claimants, submits that an equivalent conclusion must follow to the effect that there was insufficient material before HHJ Horton for him properly to conclude that there were reasonable grounds for believing that an indictable offence had been committed for the purposes of section 8 of the 1984 Act. The relevant issues were in substance the same in each of the applications and, contrary to what the CACD was told, the evidence before HHJ Horton was not more extensive than that relied on in the restraint and receivership applications.

As to the evidence, Mr Sturman QC showed us with reference in particular to the witness statements of Joanne Coopey and Alan Brown which were before HHJ Hawkins and the CACD that they cover substantially the same ground as that contained in the Information of Douglas McGill and its Annexes in support of the application for search warrants before HHJ Horton. We invited Mr Swift QC to address us if he wished to gainsay this contention and he did not rise to the challenge. Mr Sturman showed us that the CACD explicitly referred to some of this material and an equivalent exercise would show that Mackay J referred to evidence which in substance appears in the Annexes to the search warrants information.

In these circumstances, Mr Jones submits that HMRC and this court are bound by the decisions of the CACD and Mackay J to conclude that there was not before HHJ Horton evidential material giving reasonable grounds for believing that an indictable offence had been committed.

Mr Swift QC submits otherwise. He did not suggest that the evidential material before HHJ Horton was more extensive than that before the CACD or Mackay J. But he did submit that, in the absence of a reasoned judgment from HHJ Horton, the issue for this court on judicial review proceedings is whether on the evidence before him the judge could properly have come to the conclusion that there were reasonable grounds for believing that an indictable offence had been committed. He submits that there was such evidence and that the claimants’ submissions over-concentrate on one part of the evidence only, that in Annex C to the Information which contains the material concerning the Belgian investigations in 2008 and 2009. This was the material which the Court of Appeal concentrated on, and this was the material to which the prosecution confined their case before Mackay J. The numerous other Annexes, however, contain a great deal of additional material deriving from the HMRC investigations in 2010, and the material taken as a whole should be seen as providing reasonable grounds for believing that a number of indictable offences had been committed. Mr Swift says that, for the restraint order applications, the CPS needed to rely on the Belgian material because they had to show reasonable cause to suspect that particular persons had benefited from criminal conduct. The applications for search warrants did not have to be specific as to those for whom there were reasonable grounds for believing that they had committed one or more indictable offences.

Mr Swift submits that the CACD decision concentrated on the material from 2008 and 2009 derived from the Belgian investigation and that before Mackay J the prosecution specifically confined the case to the 925 consignments between July 2008 and December 2009. He points to internal pages 15D, 21F and 29G of Mackay J’s judgment where the judge recorded that it was this part of the fraud upon which the prosecution’s case was based. In so far as later material was looked at, it was in inferential support of the case based on the 925 consignments. Mr Swift submits that the other extensive 2010 material shows that there was diversion of taxable goods out of bond which was routed to Eastenders with duplicate documentation; and that there was a range of buffer companies apparently doing business with Eastenders who were themselves apparently doing trade with one or more missing companies. This was evidence from the current HMRC investigation having all the signs of diversion fraud. There was ample information for the judge to have reasonable grounds for believing that an indictable offence had been committed.

Mr Swift submits that both the Court of Appeal and Mackay J tied their conclusions to the material derived from the Belgian investigations in 2008 and 2009. It is clear that in not drawing a different inference with reference to the later material, Mackay J took into account the explanations and evidence put before him by the respondents. He was concentrating only on the alleged criminality of the respondents before him, whereas the application for search warrants concerned the totality of the operation of a large number of individuals and companies. The search warrant applications must stand or fall on the whole information which was before the judge, much of which has not been considered by the other courts. The only issue is whether HHJ Horton reached a permissible conclusion.

In our judgment, the following analysis applies and is determinative of this claim. First, the issue which the Court of Appeal and Mackay J had to address embraced the same issue in substance as that which concerns this court. Second, the issue which the Court of Appeal and Mackay J in fact determined was whether there was reasonable cause to believe that there had been criminal conduct, which is in substance the same issue as whether there were reasonable grounds for believing that an indictable offence had been committed. Third, the evidential material before the Court of Appeal and Mackay J was in substance the same as, and as extensive as that which supported the Information applying for search warrants. Parenthetically, the Court of Appeal suspended the effect of its decision specifically to enable the prosecution to make a better case before another judge and, if they had not put all available material before Mackay J, they should have done so and had the opportunity to do so. Fourth, although it is correct that prosecuting counsel before Mackay J appears to have confined his main case to the evidence surrounding the 925 consignments, that was no doubt a forensic decision based on his perception of the strength of the case. The other material was before the court and available to be relied on.

On questions of legal principle, this case falls on the borderlines between a number of possible principles – res judicata, issue estoppel, abuse of process and perhaps the principle that a party, having the opportunity to do so, is obliged to bring their whole case before the court and not just parts of it, leaving other parts for later promulgation. It may perhaps be said that none of these (except perhaps abuse of process) quite fits the curious facts and circumstances of this case. It may perhaps literally be correct that the Court of Appeal and Mackay J did not decide the identical issue which arises in the present case so that there was no straight issue estoppel; and this court is not, perhaps, in terms bound by the decision of the Court of Appeal nor strongly inclined to follow Mackay J, being a court of coordinate jurisdiction.

Reference may helpfully be made to Johnson v Gore Wood and Co [2002] 2 AC1, where Lord Bingham of Cornhill said at page 31:

“But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the latter proceeding involves what the court regards as unjust harassment of a party. It is, however wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not.”

This illustrates that what is commonly referred to as Henderson v Henderson abuse of process does not arise directly in this case. It was not an abuse for HMRC to apply for both restraint orders and search warrants, although they have been criticised for essentially administrative reasons for making the applications in separate courts. It would not, we think, have been an abuse if the application for restraint orders had proceeded on entirely different evidence from the application for search warrants. These are not, after all, civil proceedings, and in any event the issues were not exactly the same. In fact, however, the evidence relied on in each set of proceedings was essentially the same, and each of the courts in the restraint order proceedings decided the matters before them by determining in substance the same issue which arose in the search warrant applications. It would, however, in our judgment, be wrong for this court in the circumstances of this case not to follow the decisions of the Court of Appeal and Mackay J whether we are literally bound by the Court of Appeal decision or not. Not to do so would amount to this court deciding on the same material that those decisions were wrong. We do not consider that it is open to us to do this, and it could possibly be said that it is an abuse for HMRC to invite us to do so. Our view is not affected by the fact that counsel for the prosecution before Mackay J chose for forensic reasons to concentrate on parts of the evidence only. The whole of the evidence was before the court, and it was open to counsel to rely directly on all of it. Moreover, Mackay J did in fact consider explicitly some of the 2010 material and no doubt had an eye to all of it.

In our judgment, therefore, where the CACD and Mackay J both decided essentially the same issue in the restraint order proceedings as arises in these search order proceedings, where the evidence before them could have been and in fact was the same in each sets of proceedings to the point that procedurally the two matters should have been brought in the same court before the same judge, it is not open to this court to decide the common issue differently. It follows that we are bound to decide that HHJ Horton could not properly have reached the conclusion that he did and should not have issued the search warrants, which this court will quash.

It is therefore unnecessary for this court to reach conclusions on the other grounds for judicial review. It is also, we think, inappropriate to decide the other grounds when, as will be seen, in the light of our decision on the main ground, the other grounds would need to be determined on the unreal hypothetical assumption that we had concluded that there were on the evidence reasonable grounds for believing that an indictable offence had been committed.

We simply record that the other grounds of appeal were that the search warrants should be quashed because they were drafted too widely in that:

The second but related matter before the court concerns the grant of bail subject to conditions by custody officers at police stations in London to Avtar Hare and Kulwant Hare after they had been arrested in connection with this HMRC fraud investigation on 7^th December 2010; and the refusal of Barking Magistrates on 25^th February 2011 to vary the bail conditions so as to withdraw them. It is said that to grant unconditional bail under section 34 of the 1984 Act was the only lawful course available to the custody officers.

Section 34 of the 1984 Act provides that a person shall not be kept in police detention except in accordance with Part IV of the Act in which sections 34 and 37 appear. Section 34(2) provides that if at any time a custody officer becomes aware that the grounds for the detention of a person in police custody have ceased to apply and he is not aware of any other ground on which the continued detention of the person could be justified, it shall be the custody officer’s duty, subject to an immaterial exception, to order his immediate release from custody. Section 34(5) provides that a person so released shall be released without bail unless it appears to the custody officer that there is need for further investigation of any matter in connection with which he was detained at any time during the period of his detention.

Section 37(1) of the 1984 Act provides that, where a person is arrested for an offence without a warrant or under a warrant not endorsed for bail, the custody officer at the police station has to determine whether he has before him sufficient evidence to charge the person with the offence for which he was arrested. He may detain the person at the police station for such period as is necessary to enable him to so. Section 37(10) provides that the duty imposed by subsection (1) shall be carried out as soon as practicable after the arrested person arrives at the police station or after his arrest at the police station. Section 37(2) provides that, if the custody officer determines that he does not have such sufficient evidence before him, the person arrested shall be released with or without bail, unless the custody officer has reasonable grounds for believing that his detention without being charged is necessary to secure or preserve evidence relating to an offence for which he is under arrest or to obtain such evidence by questioning him.

So habitually when a person arrested on suspicion of having committed an offence is brought to a police station, the custody office has to determine if he has enough evidence to charge him. If he does not, he may be detained for questioning at the end of which there may or may not be sufficient evidence to charge him. The custody officer, you would think, then has to reconsider the matter and either charge him or release him under section 37(2). But the present claim for judicial review contends that this is wrong. It is said that the initial determination under section 37(1) that there is insufficient evidence to charge exhausts the custody officer’s powers under that subsection, and that, if subsequent questioning does not elicit sufficient evidence to charge, the custody officer has to proceed under section 34.

The two claimants were each arrested on 7^th December 2010 on suspicion of culpable involvement in offences which were the subject of the ongoing HMRC investigation into the alleged diversion fraud. They were each taken to police stations and it is evident that there was no intention to provide the custody officers with sufficient evidence to enable them then to be charged. They were, we are told, detained for questioning, but the obvious expectation was that they would be released and a prepared document was produced seeking the grant of bail subject to conditions under section 37(2) of the 1984 Act. They were accordingly released on bail subject to conditions which they maintain were unduly onerous in the light of an investigation which would probably last months, if not years. It is, however, as we say, first said that the grant of conditional bail was unlawful because the custody officers, having exhausted section 37(1) without granting bail, were obliged to proceed under section 34. The custody officer in the case of one of the claimants has subsequently written to say that, at the conclusion of interview, HMRC were not in a position to proceed further and sought to bail Mr Hare whilst they progressed matters.

The same, or at least a closely related, question arose in the case before this court of R (Torres) v Commissioner of Police of the Metropolis [2007] EWHC 3212 (Admin). In that case, the claimant had been arrested, taken to a police station, detained and interviewed and he was then bailed to return two months later, subject to conditions. He was not charged with any offence. It was contended in judicial review proceedings that the custody officer had no power to attach conditions to the grant of bail. He ought to have been bailed under section 34 of the 1984 Act and there was no power to attach conditions to the grant of bail under section 34(5). By the time the case reached the Divisional Court the matter had become wholly academic. The court nevertheless considered the matter and determined that the custody officer was entitled to proceed to grant bail under section 37. Maurice Kay LJ said in paragraph 19 that the difficulty with defence counsel’s attempt at a schematic and temporal separation of sections 34 and 37 was that, although section 37 applies when a suspect returns to a police station to answer his bail, it also applies to every single occasion when a person under actual or deemed arrest is produced to a custody officer including the occasion when he is first arrested. There was nothing in the language of section 37 which would render it inapplicable to the time when the custody officer in that case made his bail decision. Burton J agreed that the circumstances of section 37(1)(a) applied.

Mr Bowers, on behalf of the claimants, submits that section 37 is subordinate to section 34. Section 37 may apply on some, but not all, occasions to which section 34 applies. He submits that a consideration of the sufficiency of the evidence to charge may open the door to section 37(2), but the door cannot stay ajar throughout the entire period of detention. He submits that a section 37(1) decision can be taken once only. If the decision is to detain for questioning, at the conclusion of the questioning there can be no return to section 37(1) to reconsider the question. Without a second decision not to charge under section 37(1), section 37(2) cannot operate to generate conditional bail. If this were not so, there would be no practical function for section 34(2).

We find this submission entirely unpersuasive. It is contrary to the decision in Torres, which decides that section 37 applies to every single occasion when a person under arrest is produced to a custody officer. It would also be contrary to commonsense, because it would mean, as Mr Bowers accepted, that a custody officer has power to grant conditional bail if the arrested person is not detained for questioning, but not if he is. There is no sense in this. It is not necessary to decide when section 34 might apply, but we note that it is expressed in terms which appear to cover the different situation where the custody officer becomes aware that the suspicion on which the person was arrested ceases to apply. That would make proportionate sense of the different bail consequences of the two sections.

For these reasons, the main ground for the claim fails. The second ground of claim, described by Mr Bowers as a fall back, is that there was an unlawful fettering of discretion. The functions of section 37 are to be performed independently by the custody officer – see section 36(5) of the 1984 Act. In this case, the pre-preparation of the briefing note requesting bail with conditions under section 37(2) was, it is said, a blatant attempt to impose the decision and view of the investigating officers on the custody officers. We find this equally unpersuasive. It is open to a prosecutor to suggest a course which might be adopted, and open to a prosecutor who is not in a position to advance evidence sufficient to charge to suggest conditions on which bail might be granted. We are entirely unpersuaded that the custody officers in this case did not take independent decisions.

For equivalent reasons, the challenge to the referral of the Barking Magistrates’ Court to vary the bail conditions also fails.

For these reasons, the search warrants claims succeed and the warrants are quashed. The bail claim has no merit and we refuse permission to bring it.