Richard Ian Hughes v HMRC & Anor

Mr Richard Hughes (“the Claimant”) is a businessman and financier. In December 2015 he was charged with offences of conspiracy to cheat and of cheating the Revenue. The charges were dismissed by HHJ Simon Drew QC (Footnote: ¹) in May 2017 because they were defective. It is clear from contemporaneous documents that shortly before then it had begun to be appreciated that the prosecution was in a mess. One clear and obvious line of inquiry had not been pursued and disclosure was in a pitiful state. The Claimant applied for costs within the criminal proceedings and in a “Prosecution Statement of Position” filed in December 2017 it was conceded by the Crown that there had been improper conduct of the prosecution. In March 2018 the Claimant was informed that the Crown did not intend to recommence any prosecution by applying to a High Court judge for consent for preferring a Voluntary Bill of Indictment.

The Claimant instituted these proceedings against HMRC and CPS on 8 December 2021. The pleaded claims against both Defendants are in the torts of malicious prosecution and misfeasance in public office. The Claimant’s preliminary schedule of loss claims vast sums. Most of the losses claimed were suffered by two companies that he regarded as his, Zeus Capital Limited (“ZCL”) and Zeus Renewables Limited (“ZRL”). However, the precise ownership position requires careful examination. The companies’ rights and causes of action were assigned to the Claimant in the summer of 2019.

Thereafter, the litigation proceeded slowly. On 18 October 2023 both Defendants filed applications asking the Court to strike out the claims under CPR Part 24 and CPR r. 3.4(2) on various bases. In short, the Defendants say that the Claimant has no real prospect of making out a number of the essential ingredients of these torts, and that the assignments are unenforceable as being contrary to public policy. This is my judgment on those applications.

A vast amount of evidence has been placed before the Court. I have not read each and every page in the voluminous exhibit bundles but I am fully abreast of the material. It is right to point out that both Defendants have waived privilege and that I have been in a position to examine a mass of internal documentation which frankly recognises the Crown’s shortcomings. Even so, I must bear in mind that the evidential picture might be fuller at trial and that Mr Rupert Bowers KC would have the opportunity to cross-examine witnesses (and, in the event that material witnesses were not called without proper explanation, the Court would be able to draw adverse inferences, if so advised).

The principles governing these applications are extremely familiar. In my view, the summary judgment applications should be my focus because if the Defendants cannot succeed on those, the strike-out applications would inevitably fail. There is a good summary of the relevant principles in the White Book at paras 24.3.2 – 24.3.4. Given what I have just said about the evidential picture being incomplete, I set out the following passage from Cockerill J’s judgment in King v Stiefel [2021] EWHC 1045 (Comm):

“21.

The authorities therefore make clear that in the context of summary judgement the court is by no means barred from evaluating the evidence, and concluding that on the evidence there is no real (as opposed to fanciful) prospect of success. It will of course be cautious in doing so. It will bear in mind the clarity of the evidence available and the potential for other evidence to be available at trial which is likely to bear on the issues. It will avoid conducting a mini-trial. But there will be cases where the court will be entitled to draw a line and say - even bearing well in mind all of those points - it would be contrary to principle for a case to proceed to trial.”

Broadly speaking, the issues arising in this application will be addressed in the following order:

Given the large amount of material placed before the Court, it is neither possible nor desirable to refer to everything drawn to my attention by the parties.

The criminal offences for which the Claimant was prosecuted related to his involvement in the establishment of investment products in his role as a partner of Zeus Partners LLP (“ZPL”), a financial services firm regulated by what is now the Financial Conduct Authority. In November 2007 ZPL and HSBC Private Bank (UK) Limited (“HSBC”) entered into an agreement which provided amongst other things for HSBC to assist ZPL with developing, and thereafter establishing and promoting, ZP Investment Products using what the Claimant describes as the HSBC framework. As para 9 of the Amended Particulars of Claim explains:

“The ZP Investment Products ultimately comprised investments in 52 UK Limited companies. The investments comprised an investment by each high-net-worth individual, both through their own funds and in significant part through “limited recourse” loans. It was intended that, in the event that an investment failed, a claim could be made for share loss relief pursuant to sections 131 and 132 of the Income Tax Act 2007. Each of the investments suffered a fall over time in the value of its shares.”

Further detail is provided in the witness statement of Ms Nishat Choudhury, a solicitor employed by HMRC. In all, there were five iterations of these investments or schemes: SA Film, Equicap, Games, Triton and Pharma. Over 400 high-net worth-individuals invested through the schemes in 52 UK limited companies. Ms Choudhury points out that 51 out of the 52 companies failed within 12 months of the investment having been made.

The “architecture” of the schemes was somewhat complex but Ms Choudhury has been able to provide the following simplified description:

“The Schemes: - the Schemes provided a vehicle through which high net-worth individuals (the ‘Investors’) could invest in companies (the “InvCos”), formed by ZP using their own personal funds and ‘limited recourse loans’ (the “Loans”), by a newly incorporated finance company (the “FinCo”). Alliance & Leicester Corporate Financing (the “Lender”) provided the financing for the FinCos for the initial schemes. The Schemes were designed so that: -

(i)

The Lender would provide a Loan to the FinCo under a facility that any funds provided were at all times held within blocked accounts with the Lender. The FinCo would then provide the majority of the investment (82-88%) through the Loans to the Investors repayable after a period of 12 months. The Loans were limited in recourse to the value of the shares in the InvCos. The Investors had no other obligation to repay;

(ii)

The Lender provided the bank accounts for the FinCo and InvCos. The Loans were transferred direct from the FinCo to the InvCos on behalf of the Investors. The sums provided for the Loans were placed in secure blocked accounts and could not be expended without agreement of the Lender; and

(iii)

The Investor would provide the remaining 12% to 18% of the funds themselves, which were used to pay fees to those responsible for administering and selling the Schemes. As such, the remaining element of the ‘investment’ in the Schemes, were the Loans, which the Investor had no obligation to repay and which could not, and were not, in any event accessible by or used by the InvCos (before the Schemes failed); and

(iv)

When the Schemes failed, the Investors would make a claim for share loss relief pursuant to sections 131 and 132 of the Income Tax Act in relation to their investment (as augmented by the Loans).” (see para 8 of her witness statement)

Given that virtually all the schemes failed (and in HMRC’s view, were always going to fail), the loans were never used (and, because they were never actually used, could be redeployed on a basis that has been described as “circular”), the individual investors were able to claim share loss relief (because the shares in the failed investment vehicles had no value), and the share relief claimed by these individuals, which included the loan element, well exceeded the sums actually invested.

HMRC’s viewpoint was (and still is) that, given that these schemes were not genuine commercial investment opportunities but rather were designed to obtain a tax advantage, there was a requirement to register them with HMRC. Further, the Targeted Anti-Avoidance Rule was introduced by the Finance Act 2007 so as to deny relief on capital losses accruing to any person as a result of, or in connection with, any arrangements where the main or one of the main purposes of the arrangement was to secure a tax advantage.

These basic facts provided the foundation for the criminal charges which were ultimately brought against the Claimant.

It is important to understand the extent to which the Claimant disputes HMRC’s narrative in these proceedings. In my view, the Claimant’s essential argument is that HMRC failed to undertake fundamental lines of inquiry which would, or at least might, have placed a rather different light on a state of affairs which might appear, at least superficially, to be incriminating. Putting the Claimant’s case at its highest, it is said that individuals within HSBC well knew exactly how the schemes would be implemented in practice and that it was reasonable for the Claimant to rely on their advice. It is also said that when Mr David Milne QC advised on the tax implications of the schemes in January 2008 he was aware that their architecture included these limited recourse loans.

I will need to examine the relevance of HSBC’s involvement in due course. To be fair to Mr Milne KC, who is still in active practice at the bar, I do not read his Instructions, drafted by HSBC, as specifying exactly how these particular limited recourse loans would work. He was also informed in terms that these were genuine commercial transactions.

To be fair to the Claimant, he would doubtless say, if given free rein, that these were genuine commercial transactions, but were high risk. The fact that so many of them failed is nothing to the point: hindsight gives a distorted perspective. He would doubtless say a number of other things too. But whether he has raised an effective challenge to the sufficiency of the evidence in the context of the CPS’s charging decision and its subsequent maintaining of this prosecution is a matter which I will have to examine.

What follows in this section of my judgment is a factual narrative which largely reflects the material Mr Bowers wished me to consider. In that sense, this narrative may be envisaged as the Claimant’s best case on the facts. Mr Jonathan Kinnear KC and Mr Alan Payne KC presented a somewhat different narrative which I will be summarising later.

In or about November 2010 HMRC commenced a criminal investigation into the ZP Investment Products (“Operation Lunar”). In October 2012 the Claimant was made a suspect. He attended an interview under caution with HMRC officers in January 2014. In a prepared statement he said:

“… every aspect of the transactions under investigation had been advised upon by credible professional advisers … any proper and fair evaluation, of the contention by HMRC of suspected criminal activity, should be considered against the background of, and be informed by the fact of, the involvement of the many independent professional individuals and organisations.”

Although the Claimant highlighted the involvement of a number of individuals and organisations, his principal target was HSBC. His pleading states that HSBC responded to a production order in February 2014 by providing 22 ring binders of material. It is asserted that the centrality of HSBC’s role was obvious. The Claimant says that the real reasons for not pursuing lines of enquiry relating to HSBC were that the bank was viewed as a “political hot potato” and, as the prosecutor was later to say in disciplinary proceedings brought against him, there was:

“… a big debate as to whether we should take a reasonable line of enquiry. HMRC were very reluctant to get involved with HSBC as in their opinion it would distract the jury from the fraud and would enable [the Claimant] to blame [HSBC].”

On any view, the investigation was proceeding slowly. The Specialist Fraud Division of the CPS became involved in 2014. In November 2014 the CPS was sent a lengthy report on Operation Lunar which had been prepared by Mr Paul Millington of the HMRC. Counsel was instructed by the CPS in early 2015.

Another suspect in Operation Lunar, Mr Richard Anderson, brought judicial review proceedings challenging the failure of the CPS to make a charging decision within a reasonable time. Mr Curt Wise, a Unit Head within the Specialist Fraud Division of the CPS, provided a witness statement in connection with the judicial review in early August 2015. In it he made the following points:

Further, Mr Wise told the Court:

“… in my opinion I would not be acting in accordance with the Code for Crown Prosecutors if I were to make a charging decision on the Claimant in this investigation at the present time or within the very narrow window of time that the Claimant has suggested. The reason for that is that the investigation has not concluded. I regard it as vital that all the charging decisions in this investigation are made at the same time and with the great deal of care that the Court would expect. …

Not only would making a decision before the investigation had concluded not be in accordance with the Code … it would also create very real logistical difficulties …”

Despite all the work that needed to be done, Mr Wise envisaged that a charging decision could be made by 30^th November 2015.

Collins J did not make an order in the judicial review proceedings because an undertaking was given to him by the DPP that a charging decision would be made by 30 November 2015. It was for that reason that permission to proceed with the judicial review was not granted.

Although it is correct to say that no undertaking was given in relation to the Claimant, the CPS had made it clear to the Court that all charging decisions should be made at the same time. It follows that both HMRC and the CPS believed that this was the deadline to which they were working. There is force in Mr Bowers’ submission that this belief was the reason why a premature charging decision was made in December.

There were conferences with counsel on 23 November and 9 December 2015, and he also provided a written advice. Nine co-defendants were charged in late November 2015 and the Claimant was charged under the written charge and requisition procedure on 10 December 2015. The charges laid against the Claimant were:

On 9 December 2016 Mr Lewis wrote to the Claimant’s solicitors in the criminal proceedings assuring them that the decision to charge him was “made following detailed consideration of the evidence having applied the Code”. That detailed consideration had been given “by myself, counsel and HMRC”.

The Claimant’s pleaded case is that at the time of charge: (a) there had been no investigation into the role played by HSBC, (b) no disclosure schedules had been produced, nor were any near completion, (c) there was no signed, or accurate, overarching statement from Mr Millington, and (d) HMRC had not even started to review the unused digital material. The Claimant adds (and I take this slightly out of chronological sequence) that it was not until 3 March 2017 that Mr Lewis asked HMRC to consider investigating Mr Bowman of HSBC “with a view to prosecuting him as it is clear to counsel and I that he is very much involved in these kinds of arrangements”. It is unfortunate to say the least that Mr Bowman’s name had been wrongly redacted in the documents disclosed to the Claimant in the criminal proceedings.

During the course of 2016, schedules of some of the unused material were produced. The Claimant is highly critical of their quality, and I will be returning to that topic in the context of the misfeasance claim.

On 2 March 2017 Ms Naheed Hussain, Deputy Head of the Specialist Fraud Division, wrote to the Claimant’s solicitors assuring them that she had read “all the prosecution material that I considered to be relevant” and was satisfied that the Full Code Test remained fulfilled.

On 19 April 2017 Ms Caroline Dorman took over Mr Lewis’ role. She attended a three-day dismissal hearing at Birmingham Crown Court before HHJ Drew QC. Ms Dorman, concerned as she was about defence criticisms of the “shoddy” way in which the CPS had managed the case, took the opportunity to make appropriate inquiry. She soon discovered that that the case was in a complete mess. In her view, CPS records relating to disclosure were inadequate (in particular, the CPS did not have any records of what material had been disclosed to which defendant for tranche 1 disclosure), the x-drive for the case was in a state of disarray, and:

“As the week progressed, issue after issue arose. The sheer scale of work outstanding and remedial work required and that needed to be immediately actioned was phenomenal.”

In terms of the work to be done, this included, but was not limited to, redoing the whole of the initial disclosure exercise, owing to the errors that she had identified, and carrying out virtually all the digital disclosure exercise, in the face of a direction to complete Part 1 by the end of May 2017.

Ms Dorman’s immediate recommendation to one of her line managers, Ms Elizabeth Bailey, was that greater resources should urgently be allocated to the case. On 25 April it was recommended that new counsel be instructed.

On 15 May 2017 HHJ Drew QC handed down his reserved ruling dismissing the charges on the basis that they disclosed no offence known to law. Making a claim for capital loss relief was, he said, prima facie lawful: it is only unlawful in certain circumstances and those had not been specified.

Mr Bowers submitted that the CPS, and HMRC as joint prosecutor, are estopped from denying that they did not have reasonable and probable cause to bring and maintain these proceedings in the light of this judicial ruling. In my view, that submission is unrealistic. Mr Bowers placed reliance on a Scottish case in support of his argument. I consider that the straightforward answer to the submission is that (1) the charge was defective because it missed out a few words, and (2) on the premise that the charge could not be amended (which I doubt, but I assume in the Claimant’s favour that it could not be), there is no real prospect of proving malice in this connection. At its highest, any incompetence in connection with the formulation of the charge was just that.

On 2 August 2017 Ms Elizabeth Bailey, CPS Unit Head based in Manchester, sent a report to the Head of the Specialist Fraud Division. She was highly critical of the CPS. The following extracts from Ms Bailey’s report are sufficient to paint the picture:

“I can find no evidence that either the reviewing lawyer [James Lewis] or counsel had read the evidence sufficiently to satisfy the evidential limb of the test.

…

Add to that:

•

Succumbing to pressure to charge when clearly not ready to do so;

•

…

•

Instructing counsel whose instinct about the case was sound but he did not have the time needed to read and consider the evidence and prepare charges that accurately reflected the evidence. Because the reviewing lawyer had not read the evidence, he had no idea as to the work required and therefore both leading and junior counsel’s tasks and hours were understated and inadequate.

•

Failing to “front load” the case in relation to our disclosure duties prior to charge. In his note book, JL records at a conference on 3 March 2015 that he advised HMRC that the disclosure exercise could not be completed prior to charge, if it were to be completed first, it would delay charge by another 12 months. Instead, HMRC should continue to schedule material. Post charge, we seemly [sic] took a “keys to the warehouse” approach. Had we reviewed the unused material properly [critical words redacted]. We should also have realised that there were reasonable lines of inquiry in relation to HSBC that were necessary …”

Following the dismissal of the charges, the Claimant applied for costs under section 19 of the Prosecution of Offences Act 1985. To be successful he had to show that he had incurred costs “as a result of an unnecessary or improper act or omission by, or on behalf of, another party to the proceedings”. The Claimant made a large number of disclosure requests within the costs application. On 12 December 2017 a “Prosecution Statement of Position” was filed in response to the costs application. The author of the document made it clear that the position statement was on behalf of the Crown. No attempt was made to differentiate between the roles of the CPS and HMRC respectively.

The position statement made the following concessions:

Item (6) above amounted to tacit admissions that the Full Code test could not be met as matters stood in December 2017, and that it could not properly have been met in December 2015 and at all material times thereafter.

In February 2018 Ms Janine Smith, Chief Crown Prosecutor in CPS East Midlands, concluded a special investigation report into Operation Lunar. In her view, Mr Lewis had failed in his duty properly to review all the material, and he also relied too heavily on counsel’s advice. Mr Lewis did not follow relevant guidance on the “front-loading” of disclosure and should have ensured that HMRC complied with their disclosure obligations under the CPIA. The guidance stated:

“… in any serious or complex case the CPS prosecutor will not normally authorise charging notwithstanding the strength of the evidence unless the disclosure exercise is sufficiently advanced and initial disclosure can be completed and served at or shortly after charge. ”

On 19 March 2018 the CPS wrote to the Claimant’s criminal solicitors. They were told that a Voluntary Bill of Indictment would not be sought. This was because in the light of the case history it was considered to be inappropriate to make such an application. It was stressed that this was not a Code test decision but one made on the basis that the instant case did not fall within the exceptional category identified by Fulford LJ in the Celtic Energy case. It was not conceded, however, that the schemes the subject-matter of the investigation were either commercial or lawful.

On 22 March 2018 Ms Helen Malcolm QC prepared what she called, “CPS Note for Hearing” due to take place the following day. She informed the Court, in line with the letter I have just referenced, that a decision had now been taken not to apply for a Voluntary Bill of Indictment, and on behalf of “the Crown” made the following additional concession:

“The prosecution accepts that the charging decision in the particular circumstances of this case was premature. This admission should be read in the context of the two admissions made previously the bear on the question of whether the decision was premature and whether the investigation had been completed. It is further accepted that not all available evidence (including material capable of informing the quality of that evidence) had been properly considered at the time that the charges were brought. It is accepted that these acts and emissions are stark and clear errors for the purposes of section 19 POA.”

On 11 May 2018 Ms Dorman wrote directly to the Claimant. She went further than the concessions made in the March documents. She accepted on behalf of the CPS that Mr Millington’s statement contained inadmissible material and that it should not be “construed as a definitive or accurate … summary of the evidence”. Further:

“… other elements of the case were not fully set out or explained. Please note in this context that at the time the decision not to apply for a VBI was made we were not in a position to apply the Full Code Test. It follows that we cannot say with certainty how any new case summary would have been framed.”

Mr Bowers draws on these additional concessions in support of his overarching argument that, if – as it appears to be accepted – the Full Code Test was not met in March 2018, it must follow that it was not met at all material times beforehand.

On 11 May 2018 Mr Lewis received a final warning at the conclusion of disciplinary proceedings. I would rather not dwell on the detail in this public judgment although I have considered the terms of the letter that he was sent. It is certainly one possible reading of Mr Lewis’ “defence” in these disciplinary proceedings was that he was placed under undue pressure by his line manager to complete the charging decision within four months. I consider that this is highly likely to be a reference to the period between early August and the end of November 2015.

HMRC initiated “Operation Ice-Rink” to review the quality of its performance in investigating these schemes. The key adverse findings of the investigation for present purposes were that officers of HMRC failed to comply with disclosure obligations under the CPIA by failing to provide appropriate management and oversight of the case; that officers of HMRC failed to comply with disclosure obligations by mis-managing unused material; and officers of HMRC failed to comply with disclosure obligations under the CPIA by not making the necessary and appropriate revelation to the prosecutor of material obtained during the investigation.

Mr Bowers referred me to other Defendant documents in support of his case. I bear these in mind but I have not thought it necessary to refer to them.

Mr Kinnear urged me to pay particular attention to the contemporaneous documentation rather than the views of others who arrived on the scene later.

The Amended Particulars of Claim target Mr Lewis, Mr Wise and Ms Hussain. I have already set out their respective roles and responsibilities, although I need to add that for the purposes of the prosecution Mr Lewis was technically “the prosecutor” at all material times between 10 December 2015 and 19 April 2017, and he was also the reviewing lawyer from November 2014. Mr Wise ceased being Mr Lewis’ line manager around the end of December 2016. Ms Hussain was Deputy Head of the Specialist Fraud Division between March 2015 and July 2017.

The obligation to comply with the Full Code Test reposed with Mr Lewis. The key elements of that test are extremely familiar, and in my view I need refer to just three paragraphs of the Code to Crown Prosecutors issued under section 10 of the Prosecution of Offences Act 1985:

“4.2

In most cases, prosecutors should only decide whether to prosecute after the investigation has been completed and after all the available evidence has been reviewed …

4.3

Prosecutors should any take such decision when they are satisfied that the broad extent of the criminality has been determined and that they are able to make a fully informed assessment of the public interest. If prosecutors do not have sufficient information to take such a decision, the investigation should proceed and the decision taken later in accordance with the Full Code Test set out in this section.

4.4

Prosecutors must be satisfied that there is sufficient evidence to provide a realistic prospect of conviction against each suspect on each charge. They must consider what the defence case may be and how it is likely to affect the prospects of conviction. A case which does not pass the evidential stage must not proceed, no matter how serious or sensitive it may be.”

Mr Kinnear accepted that the Full Code Test requires an objective assessment of the available evidence. He also accepted that the proper application of the test requires an objective appraisal of whether sufficient information exists to justify a decision being taken at the point in time under consideration. In my opinion, that assessment includes an evaluation of whether further lines of inquiry should be undertaken and whether the process of disclosure is sufficiently far advanced. Although, as I will explain, the obligation to perform the disclosure process fell on HMRC as investigator, that did not absolve the CPS from its responsibilities in connection with the overall conduct of the prosecution. Under section 3(2)(ee) of the Prosecution of Offences Act 1985, one of the functions of the DPP is:

“to give, to such extent as he thinks appropriate, and to such persons as he considers appropriate, advice on matters relating to:

(i)

a criminal investigation by the Revenue and Customs; …”

There was a case conference with counsel on 9 December 2015. In attendance were Mr Lewis as well as, representing HMRC, Mr Chris Hyland (team leader), Mr Paul Millington (case officer), Ms Celestine Taylor (disclosure officer), and Ms Emma Mulligan (team member). Counsel was provided with copies of detailed representations made on behalf of the Claimant. Counsel provided his written advice on charge shortly after the conference. It is not clear from this document exactly when that was, but it must have been before the charges were laid under the requisition procedure on 10 December.

I have examined counsel’s advice closely. Although it does not condescend to much detail, the advice does highlight the key features of these arrangements, namely that each of them “was designed to fail, or at the very least had as their main purpose the securing of a tax advantage”. As counsel explained:

“Accordingly, any person who deliberately designed, formed, promoted or used such an arrangement/arrangements in order to gain a tax advantage for themselves and/or another/others, knowing that they were not entitled to do so, is prima facie guilty of cheating HMRC. …”

Counsel did not advise that there was sufficient evidence to justify charging all the suspects. That, submits Mr Kinnear, is an important point.

As for the position of the Claimant, counsel’s advice was as follows:

“A partner in Zeus. Not as visible as Mr Ryder in respect of the arrangements. Nevertheless, he was a party to relevant emails from the very beginning of the enterprise, in 2007, and was the recipient and author of other key emails/correspondence throughout the operation of the enterprise which are indicative of knowing involvement in the formation and promotion of arrangements which had as their main purpose the securing of a tax advantage, and therefore is an enterprise to cheat HMRC as it primary purpose. [The Claimant] was also an “investor” and latterly financier and director in respect of [three schemes].”

Counsel also put his name to the Case Summary, the version of which I have seen is dated April 2016. I infer that this summary was a running document which was intended to be amended in advance of the trial. It is also reasonable to deduce that counsel relied heavily on Mr Millington’s statement.

In November 2016 a co-defendant, Mr Richard Royden, applied to dismiss the charge of cheating HMRC. On 21 November 2016 HHJ Drew QC refused the application, holding that there was a case to answer.

On 21 April 2017, which was just after Ms Dorman’s advent on the scene, counsel (that is to say, two QCs and one junior), provided a Note as to the current state of play. By way of summary, counsel advised as follows:

This “Note” was prepared just before this counsel team was removed from the case. Given Ms Dorman’s concerns about the state of disclosure and the later admissions made on behalf of the Crown which I have summarised, it is not clear (1) how abreast counsel were of the detail, and (2) what counsel had been told by Mr Lewis.

As is made clear from para 37 of the CPS’s Defence, counsel were also heavily involved in the decision-making process in relation to the position of HSBC. There were conferences with counsel on 10 August 2015, 24 January 2017 and 23 February 2017. Mr Lewis’ position in his disciplinary proceedings has been set out under §19 above. In an email sent by Mr Lewis to Mr Millington on 24 March 2017, the latter was asked to reconsider investigating Mr Bowman of HSBC with a view to prosecuting him.

Mr Kinnear’s submissions on the merits rightly focused on the case against Mr Lewis. Although he did not put the matter quite in these terms, if the Claimant’s case on malice does not succeed against Mr Lewis (taking his case at its reasonable pinnacle), it could not succeed against Mr Wise and Ms Hussain. In the disciplinary proceedings Mr Lewis was criticised for relying too heavily on counsels’ advice. In his final warning letter, it was not remotely suggested that he had acted in knowing dereliction of his duties.

The Amended Particulars of Claim target the following individuals: Mr Paul Millington; Mr Joe Rawbone; Mr David Cook; and, Ms Celestine Taylor.

Mr Millington was the case officer and lead investigator from November 2014 and February 2015 respectively, and he remained the lead investigator until the investigation concluded with the dismissal of the charges. There is some dispute between the parties as to whether he was the disclosure officer before May 2012 but in my view it does not matter. It is not arguable that any failures that occurred before that date could have been causative of anything.

Mr Rawbone was Assistant Director of the investigation from November 2010 until January 2015. He was OIC from August 2013 until February 2015.

Mr Cook was the disclosure officer from August 2013 until February 2014. Thereafter, he appears to have had some continuing involvement in the case. For example, he attended a case meeting with the CPS on 2 February 2015.

Ms Taylor was, at least according to the Amended Particulars of Claim, the disclosure officer from April 2014 to July 2016. Para 100 of HMRC’s Defence pleads that she was disclosure officer between June 2015 and 12 December 2017. Although Ms Taylor had some involvement earlier, her witness statement confirms those dates, and in my view I should proceed on that basis. Regardless of the precise timings, I have reservations about the Claimant’s forensic decision to involve her at all, but for the time being she remains in the picture.

HMRC’s investigatory obligations were governed by a Code of Practice issued under section 23(1) of the CPIA in 2015 (“the CPIA Code”). This placed specific and well-known duties on the officer in charge of an investigation, investigators and disclosure officers. The principal duties are to retain and record the relevant material, to review it and then to reveal it to the prosecutor. The Attorney General’s Guidelines on Disclosure emphasise the need for investigators and disclosure officers to work together with prosecutors to ensure that disclosure obligations are met, that there should be a lead disclosure officer who is the focus for inquiries etc., and for investigators and disclosure officers to be deployed on cases which are commensurate with their skills, training and experience. SFO guidance in fraud cases is that the disclosure process should be “front-loaded” if possible.

In his careful and patient oral presentation, Mr Payne sought to highlight a number of evidentiary matters in support of his overarching contention that the claims have no real prospect of success. I do not propose to set out all the points he made; I shall focus on the most important.

First, Mr Payne submitted, and I agree, that there is no evidence to suggest that Mr Millington deliberately withheld information about HSBC and/or any disclosure failings from the CPS, and there is no pleading to that effect. Indeed, I would go one step further. By 9 January 2015 at the latest, the CPS had been made fully aware of all relevant aspects of the case, including the state of the investigation and disclosure.

Secondly, Mr Payne drew my attention to a number of passages in Mr Millington’s statement dated November 2014. This is a very lengthy document which I have read in full. To be fair to Mr Millington, he did say in terms that Mr Bowman had a clear understanding of the nature of the transaction and in the concluding section, under “status of parties”, the further point is made that Mr Bowman did not comply with his duties under the Finance Act 2007 to submit documents relating to these tax avoidance arrangements to HMRC. At the same time, Mr Millington fairly stated that it was the Claimant’s defence that he acted at all material times under the cloak of professional advice. On the other hand:

“CPS have indicated that the number of suspects and nature of the complexity of the case requires consideration of reducing the number of suspects. I recommend that in order to bring this to manageable levels a number of trials are sought.”

Thirdly, Mr Payne took me through some of the contemporaneous documentation bearing on the thinking of HMRC officers at the time. In the time available, he could not include everything that he wished to draw to my attention but I have ensured that I have read all the documents referenced in his skeleton argument.

On 2 February 2015 there was a case meeting between various CPS and HMRC officers. The handwritten notes of the meeting were taken by Ms Taylor. The following was discussed:

“Evidence

Additional evidence available and scanning process started. Expect it available in a couple of months. Not to worry on timescale as have enough to charge now.

Disclosure

Essential disclosure officer knows the case. No approach into charging decision until disclosure done. Front load but somewhat [?] continuous process until up to and including trial. Good to have substantial unused (non-sensitive) in place. Need a protocol for digital material. …”

On 3 March 2015 there was a conference with counsel attended by officers of the CPS and HMRC. In relation to disclosure Mr Lewis advised:

“… that this will not and cannot be finished before charge, to do so would delay charging by a year. There should be sufficient time to complete this provided HMRC continue to schedule the material.”

In his disciplinary proceedings Mr Lewis stated that he expected that HMRC would be scheduling the material although in March or April 2015 he found out that it had not. He agreed that he should have checked on these matters earlier.

There was another case conference with counsel on 10 June 2015. Counsel advised on the need for everything to be scheduled, and Mr Millington stated that HMRC would try to get hard copy schedules by August. The position of HSBC was also discussed:

“Counsel: not chase Alliance & Leicester/HSBC or individuals.

Mr Millington: only thing to be aware is Ryder and Hughes both say HSBC etc. involved.

Counsel: Jury will have to decide … HSBC not promoting scheme. Not in public interest. Another player amongst others not being prosecuted.”

On 16 February 2017 (the same) counsel was asking HMRC “whether there is a case to be taken forward against employees of HSBC”. On 20 February a solicitor employed by HMRC sent an email to amongst others Mr Millington following a conversation that they had. Based on what he had been told by Mr Millington, the solicitor summarised the position and stated that it seemed to him that:

“there was plenty of evidence that the HSBC employees were aware of the big lie at the heart of the fraud [and] there seemed to me to be plenty to suggest that the HSBC employees knew that this was in fact a loss generating enterprise designed for the dominant (sole) purpose of generating losses against income tax.”

At a conference with counsel on 23 February 2017:

“it was generally agreed that we must consider the way forward with reviewing the HSBC/Bowman case re charging for the offence of facilitating tax evasion. This is an on-going matter.”

Fourthly, Mr Payne drew attention to various features of the report into Operation Ice-Rink which supported his case. The Claimant for his part does not accept that these findings went anything like far enough. According to the report, HMRC obtained a quantity of material from HSBC in 2014. At a conference with counsel in March 2015, the HMRC case team apparently “pushed the case” against HSBC. The CPS were against this course of action, wishing to minimise the number of suspects. By March 2017, when Mr Lewis seems to have changed his mind, “it may have been considered far too late to include them in the prosecution”.

Further:

“Operation Ice-Rink has not identified any evidence that there was any political motivation not to pursue HSBC and its employees. Nor has any material been provided by [the Claimant] or his team to contradict this view.

The available evidence indicates that active consideration was given to the position of HSBC and decisions were made by Prosecutors on matters to do with case management rather than on any other grounds.”

Fifthly, Mr Payne drew my attention to the role of Ms Taylor. In her witness statement dated 12 October 2023 she made clear that, although she had received some training, Operation Lunar was her first case as a disclosure officer. When she took over there were no MG06Cs and MG06Ds. She started preparing draft schedules and sent them to Mr Lewis for comment. He said that the “descriptions are really good”. According to her statement, considerable progress was made in the scheduling of unused material with the assistance of at least 12 colleagues. She, and no doubt they, were oblivious to any difficulties until Ms Dorman arrived on the scene in April 2017. The latter was soon to advise, perhaps on newly-instructed counsel’s advice, that the whole disclosure exercise would need to begin afresh.

The four ingredients of the tort are too well-known to merit exposition.

In my judgment, the Claimant has no real prospect of establishing that (1) HMRC was the prosecutor, and (2) regardless of the identity of the prosecutor, that there was no real and probable cause for bringing and continuing this prosecution. These are straightforward issues which may readily be addressed summarily.

Mr Bowers’ argument is that both the CPS and HMRC were prosecutors in this case, and that it would be artificial to hold otherwise. They were “joined at the hip” or acted “symbiotically”. The Amended Particulars of Claim do not go so far as to allege a conspiracy, and in my opinion the Claimant’s restraint in that regard was realistic.

Both Mr Kinnear and Mr Payne submit that there was only one prosecutor in this case and that was Mr Lewis. I agree.

In Martin v Watson [1996] 1 AC 74, the issue was whether a complainant who had falsely and maliciously made a complaint (in that case, of a sexual offence) could be regarded as the prosecutor notwithstanding that she had not signed the charge sheet. Lord Keith of Kinkel, giving the leading Opinion for the House of Lords, held that she could. This was because she was in substance the person responsible for the prosecution having been brought. Further:

“Where an individual falsely and maliciously gives a police officer information indicating that some person is guilty of a criminal offence and states that he is willing to give evidence in court on the matters in question, it is properly to be inferred that he desires and intends that the person named should be prosecuted.” (at 86G)

Lord Keith also endorsed the approach adopted by the trial judge, who found that the complainant was “indeed actively instrumental in setting the law in motion against the plaintiff” (at 87E).

In Commissioner of Police for the Metropolis v Copeland [2014] EWCA Civ 1014, the Court of Appeal, Moses LJ giving the sole reasoned judgment, held that the “simple quest” is to identify the person who is responsible for the prosecution (para 27). In my opinion, that formulation does not permit the kind of wide-ranging and unprincipled inquiry urged on me by Mr Bowers. What Moses LJ said was in the context of applying Lord Keith’s reasoning and conclusion. Further, it is implicit in Moses LJ’s judgment that there could be only one prosecutor.

The Court of Appeal returned to this issue in Rees and others v Commissioner of Police for the Metropolis [2018] EWCA Civ 1587. On the facts of that case, a police officer suborned a witness to give a false statement. The trial judge stated that the officer “contaminated the source of justice”. McCombe LJ reviewed a number of earlier cases where the courts had been addressing situations where deliberately false accounts were given by X to the relevant prosecuting authority, thereby rendering it impossible for the latter to exercise an objective and independent judgment. In short:

“58.

It seems to me that the case falls squarely within what this court said in AH(unt) v AB. DCS Cook deliberately manipulated the CPS into taking a course which they would not otherwise have taken (Sedley LJ). The decision to prosecute was "overborne and perverted" (c.f. Wall LJ) by DCS Cook's presentation of the material to the CPS with the implicit suggestion that its procurement was not tainted in the manner that it was.

59.

This is not to say, as Mr Johnson submitted it was, that the mere provision of false information to a prosecuting authority leading to a prosecution makes the provider a prosecutor. I accept that the test is, as he argued, "drawn more restrictively". However, the cases are fact specific: see in this respect the very different results reached in not entirely dissimilar cases in Martin v Watson and in AH(unt) v AB. This present case was one in which DCS Cook took it upon himself to present to the independent prosecutor for a prosecution decision a case which he knew included an important feature procured by his own criminality. There is nothing more likely to have "overborne or perverted" the decision to prosecute. The CPS were deprived of their ability to exercise independent judgment.”

Mr Bowers also relied on para 37 of the judgment of the Court of Appeal, Criminal Division (Rose LJ, Vice-President, Astill and Richards JJ) in AG’s Reference No 44 of 2000 [2001] 1 Cr App R 416. However, in the passage relied on it seems to me that the Court was addressing a rather different issue, namely the indivisibility of the Crown in the context of a criminal prosecution, and whether representations made by other than the CPS were binding.

In the instant case, there is no evidence of any deliberate manipulation of the CPS by HMRC, or that the former’s decision to prosecute was overborne and perverted by the latter. As I have already said, in early 2015 the CPS was fully aware of the state of the investigation vis-à-vis HSBC and the progress, or lack of it, in relation to disclosure. In any event, it is extremely difficult to see how omissions in these respects could possibly amount to deliberate manipulation. When counsel advised Mr Lewis in December 2015 that it was appropriate to charge the Claimant, he was able to give independent and objective advice which was not tainted by anything HMRC had done or failed to do.

It is not arguable that HMRC was the prosecutor, and for this reason alone the claim in the tort of malicious prosecution cannot succeed against the First Defendant.

In the circumstances, it is not necessary for me to decide whether, as a matter of principle, there can be only one prosecutor. That probably is the law. The real point here is that HMRC was not the prosecutor.

The claim in the tort of malicious prosecution cannot succeed if the Claimant has no real prospect of showing that the CPS did not have reasonable and probable cause for initiating and maintaining the prosecution.

Here, Mr Bowers’ argument is that there never was a fit case to be tried. That much was conceded in the documents I have highlighted under §§36-43 above. In my judgment, however, Mr Bowers is asking me to apply the wrong test. For “reasonable and probable cause”, the only issue to address is whether there was sufficient evidence to prosecute the Claimant at the time it was initiated, and at all material times thereafter.

The classic formulation of the test is Lord Devlin’s in Glinski v McIver [1962] AC 711, at 751-752:

“This makes it necessary to consider just what is meant by reasonable and probable cause. It means that there must be cause (that is, sufficient grounds; I shall hereafter in my speech not always repeat the adjectives “reasonable” and “probable”) for thinking that the plaintiff was probably guilty of the crime imputed: Hicks v Faulkner. This does not mean that the prosecutor has to believe in the probability of conviction: Dawson v Vandasseau. The prosecutor has not got to test the full strength of the defence; he is concerned only with the question of whether there is a fit case to be tried. As Dixon J (as he then was) put it, the prosecutor must believe that “the probability of the accused’s guilt is such that upon general grounds of justice a charge against him is warranted: Commonwealth Life Assurance Society Ltd v Brain.”

Two points should be made about this formulation. First, “fit case to be tried” is capable of being misunderstood. Lord Devlin was not of course referring to the Full Code Test which did not exist in the early 1960s. The test was, and is, sufficiency of evidence; and “fit case to be tried” is another way of making the same point. Secondly, Lord Devlin did not comment on Upjohn LJ’s somewhat broader formulation in Abbott v Refuge Assurance Co Ltd [1961] 1 QB 432, at 454, although that authority was cited to the House of Lords. In my view, what Upjohn LJ (as he then was) said cannot be regarded as authoritative.

Glinski was applied, without refinement or gloss, by the Court of Appeal in Thacker v CPS [1997] The Times, 29 December 1997. In Coudrat v Commissioners of Her Majesty’s Revenue and Customs [2005] EWCA Civ 616, Smith LJ (sitting with Mummery LJ and Sir Martin Nourse), encapsulated the position, at para 42:

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

Next, in Qema v News Group Newspapers Ltd [2012] EWHC 1146 (QB), Sharp J (as she then was) held, at para 71:

“Although the matter has been put in various ways in the decided cases, in my view, it is clear (whatever the language used) that whether one considers the objective or subjective element of reasonable and probable cause, the focus is and always has been on the sufficiency of evidence to support the prosecution of the offence in question., and the defendant’s knowledge of and honest belief in that. …”

In Rudall v CPS [2018] EWHC 3287 (QB), Lambert J explained that “reasonable and probable cause” imported a lower test (from a prosecutor’s perspective) than the Full Code:

“80.

I do not accept that the evidential Code test is the correct test to apply for the purpose of examining whether there is reasonable and probable cause. The exercise undertaken by the prosecutor in that context is to identify whether there is a realistic prospect of conviction which is a different, and higher, threshold than that which I must apply when considering whether there is a case fit to be tried or a proper case to lay before the court. The intensiveness of the scrutiny to be applied to the evidence is correspondingly different and greater than that relevant to the consideration of reasonable and probable cause. The evidential stage of the Code test includes an analysis of, not just the admissibility of the evidence, but the importance of the evidence, whether the evidence is reliable and credible and the impact of any defence or other information put forward by the suspect. By contrast, my role, in examining whether there is a reasonable basis for an honest belief in the charge by the prosecutor, is to address the question of whether there is prima facie admissible evidence in respect of each element of the offence (see Smith LJ in Coudrat), setting aside evidence which is plainly admissible. I accept that there may in some circumstances be a feature (which is, or should be, obvious to the reasonable prosecutor) which raises such a large question mark over whether otherwise admissible evidence could be "used in court" (to adopt the expression used in the Code) that a wider consideration including, for example, of the reliability of the evidence is reasonably justified. But, even in those circumstances, the degree of scrutiny will be at a level consistent with the need to establish whether the evidence could prima facie be used in court and not whether at trial there may be a successful argument mounted by the defence to exclude it.”

Mr Bowers relied on paras 74 and 75 of McCombe LJ’s judgment in Rees, in particular the latter’s references to a case fit to be tried. In my opinion, these paragraphs do not bear the weight placed on them by Mr Bowers. Apart from doing no more than applying Lord Devlin’s oft-cited passage in Glinski, all that McCombe LJ was saying was that a case founded on tainted evidence was not based on sufficient evidence.

I am not suggesting that the failure to pursue a straightforward and plainly necessary line of inquiry could never generate the absence of reasonable and probable cause, particularly if, without conducting that inquiry, a fair and objective assessment of the evidence obtained to date showed that it was tenuous. It is unnecessary for me to define the limits of any such exceptional principle because the present case is so far away from falling within its scope.

In my judgment, there clearly was sufficient evidence to enable the CPS at all material times to form the view that the Claimant could and should be prosecuted, and it is unsurprising that the Amended Particulars of Claim do not suggest otherwise. Although he disavowed it at various places in his oral argument, Mr Bowers’ case came close to equating “reasonable and probable cause” with the fulfilment of the Full Code Test, or something close to it. I consider that there was a clear prima facie case that this was an unlawful tax avoidance scheme which involved transactions which were destined to fail, or were highly likely to fail, and lacked any genuine commercial purpose. As part and parcel of that prima facie case, there was also clear evidence that the Claimant was fully sighted on the key salient aspects of these schemes, and therefore had the requisite mens rea for the common law offence of cheating the Revenue. Apart from various contemporaneous emails which I have been referred to, from which inferences as to his mental state are, at least arguably, capable of being drawn, the Claimant as an experienced commercial man would, at least arguably, have known the score.

The Claimant has a real prospect of proving that the failure to investigate HSBC was unwise, forensically naïve and wrong. The Claimant said from the outset that he acted with the benefit of the finest professional advice. Rather than just let the jury decide, that in and of itself should have led HMRC down the path of investigating HSBC. There was a brief discussion between Mr Kinnear and me as to where the HSBC investigation might have led. My conclusions on this topic are as follows. If it revealed that HSBC was aware in general terms of the “architecture” of these schemes but had not been made aware of relevant detail, no amount of evidence relating to HSBC could ever have availed the Claimant. If it revealed that HSBC was equally dishonest, that would be unlikely to have helped the Claimant either. If it revealed that HSBC was fully aware of how these schemes would be implemented in practice but believed that they were within the law, that might have assisted the Claimant. My assessment is that it was more likely that further investigations would implicate HSBC (my second category), which does appear to have been the position when they were eventually pursued. To say, as the Claimant does, that pursuing HSBC would have been likely to provide him with a solid line of defence is, in my judgment, untenable.

On any view, HSBC should have been investigated for the obvious forensic reason that the Claimant would have to be cross-examined on his contention that HSBC knew everything and yet gave the green light.

The authorities which I have cited demonstrate that the CPS’s failure to undertake a line of inquiry which might just have been relevant to the Claimant’s defence does not negative the existence of reasonable and probable cause.

In my judgment, the disclosure failures, whoever’s fault these were, fall into the same category: they do not bear on the existence of reasonable and probable cause visualised in terms of the sufficiency of evidence. Timely discharge of disclosure obligations was of course essential to getting this case tried (and here I am not holding that because only HMRC had duties under the CPIA the CPS has a complete defence to the allegation). However, even taking the matter at its very highest I do not think that full disclosure was capable of more than indicating possible lines of defence for the Claimant. That is not relevant to the existence or otherwise of reasonable and probable cause.

Given my conclusion that the Claimant has no real prospect of establishing that the prosecutor did not have reasonable and probable cause for beginning and then maintaining these proceedings, the issue of malice does not arise. Even so, I consider that I should comment on just two matters. First, there is force in the Claimant’s case that a charging decision was made prematurely in December 2015 because the CPS believed that the undertaking given in the related judicial review proceedings applied to them. However, although relevant to the fulfilment or otherwise of the Full Code Test, this factor is not relevant to the issue of malice. A rushed decision does not have the hallmarks of a decision taken with an improper motive. Secondly, although there is some indication that the reluctance to pursue lines of inquiry against HSBC was generated by a perception in the CPS, at least at one stage, that to do so would be a “political hot potato”, I do not believe that the Claimant has a real prospect of showing an improper motive. Not merely did the reasoning and motives of the CPS (and, indeed, HMRC) fluctuate on this issue, proof of an improper motive would require showing that relevant officers believed that an investigation of HSBC would be likely to help the Claimant and for that reason was not pursued. That is not the state of the evidence.