HM Revenue & Customs v Munir

These are committal proceedings brought by the Commissioners of Her Majesty's Revenue & Customs against Amran Munir, Ali Sami Farooq and Saif Chaudhry. Mr. Munir and Mr. Farooq were, at the material times, the directors of Parkwell Investments Limited ("Parkwell"). Mr. Chaudhry was the Company Secretary.

On 18^th March 2014 Hildyard J appointed Mr. Wilson as provisional liquidator of Parkwell, HMRC having presented a petition for a claimed sum in excess of £7.7 million for unpaid VAT. In the usual way the order appointing the provisional liquidator spelt out that Mr. Wilson had been appointed by the court as an officer of the court and that it was a contempt of court for any person to prevent or impede him in carrying out his duties. The order warned that if they did so they may be held to be in contempt of court and liable to be imprisoned, fined or have their assets seized. The order also contained a warning that anyone who did anything which helped or permitted a breach of the terms of the order would likewise be liable to be held in contempt of court. The express object of the order appointing the provisional liquidator was to enable him to take possession of and to collect in and protect the assets of Parkwell, including any third party moneys held in the possession of or under the control of Parkwell. Such orders are only made if the court is satisfied on the hearing of the application for the appointment for a provisional liquidator (a) that a liquidation is likely in the ordinary course of events, and (b) that a provisional liquidator needs to be appointed (if necessary without notice) in order to protect the assets of the company. That is the whole point of the order.

At 10.40 am on 19^th March 2004 (the following day) the provisional liquidator, accompanied by an independent solicitor and a process server on behalf of HMRC attended at Parkwell's premises. The process server served the various documents on Mr. Munir personally and in the presence of Mr. Chaudhry, including the order for the appointment of the provisional liquidator. At some point thereafter Mr. Chaudhry left the room in order to call Mr. Kinsella, Parkwell's tax adviser. I proceed on the footing that it was in his absence that the independent solicitor, explained the meaning and impact of the order appointing the provisional liquidator to Mr. Munir. Mr. Munir inquired of the provisional liquidator how Parkwell could carry on its business, and Mr. Wilson explained that that was a matter for his decision. These proceedings were concluded by about 11 am.

It is common ground that at 11.07 a payment of US$ 293,000 was made out of Parkwell's bank account with NatWest to a company based in Dubai called 'Echo Calls'. This was done on the instructions of Mr. Farooq. In these proceedings this has been referred to as the 'first payment'.

Shortly after 11 am Mr. Kinsella, the tax adviser, arrived at Parkwell's premises. He explained to Mr. Munir and to Mr. Chaudhry that the only option was to co-operate with the provisional liquidator, and that in effect Parkwell would be shut down for a week. At 14.53 a further payment of US$23,322 was made to Echo Calls. This again was made on Mr. Farooq's instruction. This is referred to in these proceedings as the 'second payment'.

The following day, on 20^th March 2004, at 13.02 a further payment of US$308,303 (being the balance standing to Parkwell's credit with the Pakistan Telecommunication Company Limited) was also transferred to Echo Calls. This had the effect of clearing out the cash assets of Parkwell. This transaction was undertaken upon the instructions of Mr. Chaudhry. This is referred to as the 'third payment'.

In these proceedings HMRC contend that the first payment, the second payment and the third payment were each payments made in contempt of court.

The evidence filed on behalf of Mr. Munir, Mr. Farooq and Mr. Chaudhry did not acknowledge this to be the case. But, at the door of the court, and after having received advice from Leading and Junior counsel and their solicitors the three respondents decided to make admissions. They signed a document in these terms:

In considering sentence I have had in mind the following principles:

Amran Munir, will you stand? Ali Sami Farooq, will you stand? Saif Chaudhry, will you stand? Applying the principles I have outlined to the facts of the case leads me to these conclusions. First, a custodial sentence is essential. Where people in a position of trust use that privileged position to deprive others of sizeable sums of money a custodial sentence is all but inevitable in criminal cases; and the same is true in the realm of civil contempt. Secondly, where officers of a company seek to thwart a liquidator in the performance of his office a clear message must be sent to the commercial community that such conduct has very serious consequences. In this aspect of the case it does not matter that you were paying a supplier. You were usurping the function of the liquidator by disposing of money that did not belong to you for the benefit for a favoured creditor. You were doing so in part with an eye on benefit for yourselves in case you could forestall full liquidation and recover control of the company. Thirdly, because you were not lining your own pockets directly the case is not as bad as it otherwise would have been. Had you taken the money for yourselves the criminal penalty appropriate for misappropriation of such large sums would have far exceeded the two year maximum term that is available to me. My starting point would, in those circumstances, have been the maximum penalty open to me of two years.

As it is, what you have done remains serious because of the sums involved, because of the proportion of the companies' assets which is affected by your conduct, because of the consequences for the liquidation and because, above all, you intentionally thwarted the purpose of a court order.

I propose, in each of your cases, to take as a starting point for the unlawful preference of one creditor over others a sentence of nine months' imprisonment. I have considered whether that is a correct starting point having regard to comparable criminal offences and having regard to the practice of the court in cases of civil contempt. I am satisfied that it is.

It is difficult to find comparable criminal cases, but in the case of R v Kerling [2011] EWCA Civ 182 a postman who, for small personal gain, deprived other people of substantial amounts of post, was sentence according to a starting point of two years' imprisonment. The case indicates that my starting point of nine months is not excessive (and that is its only utility).

Your counsel drew to my attention the case of Thomas v Jakes [2012] EWHC 525 where Mr. Justice Briggs imposed a prison sentence of 12 months for a case involving misappropriation of far larger sums and with a deliberate intent to line pockets. It is not possible to know what lies behind that ultimate sentence of 12 months, and in particular what the starting point was, but I am satisfied that my nine months starting point is, in your case, appropriate.

Amran Munir, you know that you have admitted to wrongful dealing with a sum in excess of US$203,000 by making two payments on 19^th and 20^th March. You acted twice in defiance of a court order. Both payments represent substantial funds both in their own right and as a proportion of the assets of the company. In your favour some powerful points in mitigation were made. First, you are of good character; that is almost inevitably the case in offences and wrongs of this sort, but nonetheless your past record as a citizen entitles you to be viewed in a favourable light. Furthermore, I accept the point that as a man of good character the public humiliation of these events bears heavily upon you. Secondly, in mitigation I take into account that these acts were not premeditated. Your counsel described you as 'acting like a headless chicken'. Had you thought for a moment about what you were doing you probably would not have done it, but you did not think. In my view, premeditation is more appropriate to be viewed as an aggravating factor rather than as one entitling you to some discount. Nonetheless, I do give some weight to the fact that you acted without thinking.

The most significant fact that weighs in your favour is the credit that must be given for the admissions which you have made. Those admissions were made undoubtedly late at the door of the court and, in the eyes of many judges, such admissions do not lead to a substantial discount on the sentence that would otherwise be passed. But I propose to be generous. First, your admission has, as your counsel pointed out, minimised the affront to the rule of law; you have not persisted in asserting that what you did was right. Secondly, I am conscious that you have agreed to bear the costs of this exercise, indemnity costs, in a very sizeable sum. The fact that these proceedings have been unnecessarily detailed and prolonged will go into the amount of costs which you bear, and in those circumstances I need not limit excessively the discount for having taken the course of only admitting things at the very last minute. I therefore propose to cut by 20 per cent the sentence I would otherwise have passed upon you.

Amran Munir, I sentence you to six months' imprisonment. That is as short a time as the gravity of your contempt allows. Of that time you will serve three months in prison. After that time you will be unconditionally released.

Ali Sami Farooq, you have admitted to wrongful dealings with sums of the order of $194,000 on a single day in March. Many of the matters that I have outlined in relation to Mr. Munir apply also to you. You were of good character, and I give that weight for two reasons: your past record as citizen is good; public humiliation will bear hardly upon you. You acted precipitately, without thinking, and you are entitled to some small credit for that. You are entitled to substantial credit for the fact that you, at the end, admitted your wrongdoing. I sentence you, too, to six months in prison. You also will serve three months in prison and at the end of that time will be unconditionally released.

Saif Chaudhry, you were involved in only one payment of a slightly lesser sum of about $186,000. But the one act you did was on 20^th March. It was significant because it effectively cleared all cash out of the company, and also, in your case, the act was to a greater extent premeditated than those instant transfers that were made on 19^th March. In your case also I take into account the same factors as mitigating the sentence I would otherwise pass.

You were of good character and, although you acted with a measure of prior consideration, you still acted in the context, as your counsel put it 'of being caught on the hop without warning'. I give credit for your admission in exactly the same way as that of the others. You, too, will serve six months in prison. That is as short a time as the nature of your contempt allows. You will serve three months in prison. You will then be unconditionally released. You may sit down.

I must now prepare the warrants for committal. I intend also to allow the defendants 30 minutes to make whatever telephone calls they require to be made, and to begin to arrange their affairs. I will sit again at 1:30pm.