Royal Courts of Justice
Strand, London, WC2A 2LL
Before :
MRS JUSTICE JEFFORD DBE
IN THE MATTER OF KETAN SOMAIA | Defendant |
- and - | |
IN THE MATTER OF THE CRIMINAL JUSTICE ACT 1988 |
Mr Kennedy Talbot QC (instructed by Edmonds Marshall McMahon Ltd.) for the Prosecutor
Nigel Hood and Jon Colclough (instructed by Thakrar & Co) for the Third Party
Penelope Small (instructed by DPP Law) for the Defendant
Hearing dates: 8th to 11th May 2017
Judgment Approved
MRS JUSTICE JEFFORD:
Introduction
These proceedings arise out of a Confiscation Order made against Ketan Somaia in the Central Criminal Court (His Honour Judge Hone QC) on 12 January 2016 following his conviction on 13 June 2014 on several counts of fraud. His conviction followed a private prosecution brought principally on behalf of Murli Mirchandani who was defrauded by Mr Somaia of around £12 million between June 1999 and August 2000. The value of the benefit to Ketan Somaia was found to be £20,434,691.
The Confiscation Order was not paid and an application was made, pursuant to s.80 of the Criminal Justice Act 1988, to appoint a receiver to enforce it. This Act continues to apply where the crime was committed before the coming into force of the Proceeds of Crime Act 2002 and there is no issue that it is the relevant statutory provision in this case.
In that application, declarations were sought against Alka Gheewala (formerly Alka Somaia and the now ex-wife of Ketan Somaia) and others in relation to transfers to them. On 12 October 2016, Spencer J directed a trial of the Prosecutor’s application for the declarations including a declaration that a number of transfers by Ketan Somaia (set out in a schedule to the draft order and derived from the exhibit to the 7th witness statement of Tamlyn Edmonds, the Prosecutor’s solicitor) were “gifts caught by s. 74(10) of the Criminal Justice Act 1988”.
By the time the matter reached a trial before me, various settlements with other parties, and consideration of the evidence, meant that the only live proceedings related to Alka Gheewala and to 7 transfers of monies made to her by Ketan Somaia between April and August 2010. The purpose of the application is to have these monies declared as gifts caught by the Act and to open up the prospect that the Receiver may be empowered to enforce the Confiscation Order by recovering these gifts from the assets of Alka Gheewala.
For the reasons I set out below, the key issue in this case has, therefore, been whether the sums transferred were gifts (as Mr Talbot QC contends on behalf of the Prosecutor) or whether, as Mr Hood submits on behalf of Ms Gheewala, the sums were held on trust.
The legal framework
Part VI of the Criminal Justice Act 1988, the statutory predecessor to the Proceeds of Crime Act 2002, empowers the Crown Court to make a confiscation order which does not confiscate particular property but is an order to pay a sum of money (s.71(6)). Confiscation orders may be enforced by the appointment of a receiver as has happened in this case. Recognising that criminal defendants may often transfer assets to family members or trusted associates, s.74 makes provision for the amount that may be realised to include the value of gifts caught by the Act. In the terminology of the Proceeds of Crime Act 2002 these are “tainted gifts”.
The provisions of section 74 which have been relevant in this matter are as follows:
In this Part of this Act, “realisable property” means subject to subsection (2) below
any property held by the defendant; and
any property held by a person to whom the defendant has directly or indirectly made a gift caught by this Part of this Act.
….
For the purposes of this Part of this Act the amount that might be realised at the time a confiscation order is made is –
the total of the values at that time of all the realisable property held by the defendant, less
…..
together with the total of the values at that time of all gifts caught by the Part of this Act.
…
Subject to subsection (12) below, references in this Part of this Act to the value at any time …. of a gift caught by this Part of this Act are references to –
the value of the gift to the recipient when he received it adjusted to take account of subsequent changes in the value of money; or
where subsection (8) below applies, the value there mentioned,
whichever is the greater
…
A gift (including a gift made before the commencement of this Part of this Act) is caught by this Part of this Act if –
it was made by the defendant at any time after the commission of the offence or, if more than one, the earliest of the offences to which the proceedings for the time being relate; and
the court considers it appropriate in all the circumstances to take the gift into account.
…..
For the purposes of this Part of this Act –
the circumstances in which the defendant is to be treated as making a gift include those where he transfers property to another person directly or indirectly for a consideration the value of which is significantly less than the value of the consideration provided by the defendant; and ….”
Section 102(2) expressly provides that property includes money. Section 102(10) provides that property is transferred by one person to another if the first person transfers or grants the other any interest in the property.
I address the issues of interpretation arising from these provisions later in this judgment.
The evidence
At the trial of these issues the evidence on behalf of the Prosecutor was given by:
The 3rd, 4th and 5th witness statements of Gavin Pearson, a Fellow of the Institute of Chartered Accountants and a forensic accounting and expert witness partner at Hagen Streiff Newton Oshiro Accountants Ltd.
The 7th, 9th, 12th, 13th, 17th, 18th and 19th statements of Tamlyn Edmonds, director of the Prosecutor’s solicitors, Edmonds, Marshall, McMahon Limited.
I mean no disrespect to her in saying that Ms Edmonds’ evidence largely involved the identification and recitation of documents. It was not at all unhelpful to have the evidence presented in this way but Ms Edmonds’ evidence could not go further and in this judgment I refer primarily to the documents rather than her evidence about them.
On behalf of Ms Gheewala, statements were tendered in evidence from Meera Mavani (Ms Gheewala’s sister), Karan Somaia (her son) and Nurapati Neupane (who formerly worked as staff for the Somaia family). By agreement, these witnesses were not called for cross-examination.
John Muriuki gave evidence by witness statement and was cross-examined by video link to Nairobi.
Alka Gheewala gave evidence by her 1st to 7th statements. She too was cross-examined.
The transfers in issue
In 2010, Mr Somaia settled proceedings in Kenya (the nature of which is not material). The settlement was referred to as the Pattni Settlement. His Honour Judge Hone QC considered the Pattni Settlement in his ruling and he concluded that, apart from Mr Somaia evading UK tax on those monies brought into the UK, there was no taint of illegality or general criminal conduct in relation to the Pattni Settlement.
Monies from the Pattni Settlement were paid to Mr Somaia’s lawyers in Kenya, Ochieng, Onyango, Kibet and Ohaga (also referred to as Triple O). It is not in issue that some (but not all) of these monies were then transferred in 7 transfers to Ms Gheewala, by payment by cheque into an account held by Ms Gheewala with Prime Bank in Nairobi. These payments amounted to 61,086,590 Kenyan Shillings. Mr Pearson’s evidence was that the current value of the sums transferred (excluding the last amount transferred) was £516,383.78. Including the last sum transferred, the current value was said in submissions to be £576,071 although it remains unclear to me where that sum was set out in evidence.
In her first statement, Ms Gheewala provided a table which showed the payment of the Pattni Settlement monies into her account and out of it. It was not disputed and it showed the following:
On 8 April 2010, KSH 10 million was paid in. On 9 April 2010, KSH 8 million was paid out to Simba Technology Ltd.
On 20 April 2010, KSH 5 million was paid in. On 22 April 2010, KSH 6 million was paid out to Simba Technology Ltd.
On 11 May 2010, KSH 5 million was paid in. On 21 May 2010, KSH 5 million was paid out to Simba Technology Ltd.
On 3 June 2010, KSH 18 million was paid in. The same day, the same sum was paid out in cash. At this point, there would have been KSH 1 million of the Pattni Settlement monies in the account.
On 18 June 2010, a cheque for KSH 700,000 was paid to John Muriuki.
On 5 July 2010, KSH 10 million was paid in. On 7 July, KSH 7,760,000 was paid out to Arvind Patel; on 16 July 2010, KSH 522,621 was paid to Diamond Trust Bank; and on 22 and 28 July 2010, two sums totalling KSH 1,700,000 were paid to Simba Technology Ltd.
On 2 August 2010, KSH 6.5 million was paid in and on 5 August 2010, KSH 6.45 million was paid out to Allaudin Qureshi (who was Simba Technology Ltd.’s finance director).
On 26 August 2010, KSH 6,586,590 was paid in and on 30 August 2010 and 7 September 2010 payments were made to Allaudin Qureshi totalling KSH 6,560,920.
The evidence about the Prime Bank account
It was not in issue that Ms Gheewala held an account with Prime Bank in Nairobi which was an account in her sole name and of which she had control in the sense that she was the only person authorised to withdraw monies from the account. Her evidence was that the account was funded by her husband. She used monies from the account to pay for household bills, school fees and personal expenses. It was not, and I do not think could have been, suggested that such monies were somehow held on trust for those purposes. Rather it was the case that these monies were gifts from her husband – he may have had an intention as to their use and it may have been a common intention, but they were on the face of it outright gifts.
Ms Gheewala said that she did not see bank statements because they were sent to a box number and collected by her husband’s staff.
She also gave evidence that on occasion over the years she would sign blank cheques on the account and give them to her husband. She said that was just something that they did as husband and wife. Her evidence was that she did not know why her husband would put money in her account and then write cheques on her account but she just thought that was how things were done.
On my assessment of this evidence, the general position was that, at any time when Ketan Somaia put money into the account, his wife could withdraw that money by cheque or otherwise. There was no evidence of identifiable amounts of money that were held on trust and not available for her use.
The evidence about the Pattni Settlement monies
As set out above, the monies were paid to Mr Somaia’s lawyers and apparently held in a Prime Bank account. A large proportion of the monies were paid to other persons or companies, including Kingsley Napley, Mr Somaia’s solicitors in England, and Arctic Management Services Limited, a Somaia company. I infer that these payments were made on his instructions. The lawyers, it must be inferred also on Mr Somaia’s instructions, disbursed what Mr Pearson agreed to amount to about 15 % of the monies by writing a number of cheques payable to Ms Gheewala and the cheques were paid in at Prime Bank.
Mr Somaia personally or by others then used blank cheques provided, at some time, by his wife to pay these monies out of the account, as set out in paragraph 16 above. It was not suggested that the blank cheques used had been provided expressly for this purpose. Most of these monies were paid out very shortly after they were paid in, even on the same day. There was no complete or precise correlation of monies paid in and paid out but by the time of the last payment out, there was little left of the monies paid in.
At around the same time, Ms Gheewala’s evidence was that she had returned to Nairobi in about June 2010 (in circumstances that appear below) to close up the house. There were staff and bills to pay. It was not clear from her evidence how these payments were made but the only cheque she drew on the Prime Bank account was that payable to Mr Muriuki who had acted as chauffeur to the family. She said that before she did so, she checked with her husband that it would clear.
Mr Muriuki’s evidence was that he would collect cheques from Ketan Somaia’s lawyers when their secretary called Mr Somaia’s office. He would deal with the cheques in accordance with the lawyers’ instructions, either taking them to the bank or to Mr Somaia’s business partner, Mr Jatania (whose companies included Simba Technology Ltd. in which his wife, Mamta Jatania, was also involved). He said that Mrs Somaia, as she then was, was not involved in this.
The surrounding evidence
That is the specific evidence about the Pattni Settlement monies and Ms Gheewala’s Prime Bank account. There was, however, on the trial of the issues, rather broader evidence about the conduct of Mr Somaia and Ms Gheewala which the Prosecutor relied on variously as setting the scene for the dealings with the Pattni Settlement monies, as going to the credibility of Ms Gheewala’s evidence, and as to the exercise of the Court’s discretion to take the alleged gifts into account. I note that much of this background was set out in the ruling of His Honour Judge Hone QC.
Ms Gheewala and Mr Somaia were married in 1990. By this time, Mr Somaia had already acquired a flat (Flat 71, 25 Porchester Place, London W2) which was acquired from Ms Gheewala’s mother and held in the name of Eris Trading SA, a company incorporated in the British Virgin Islands. Ms Gheewala denied that she knew that the flat was in the name of a BVI company and claimed that she only found out about it when they started living in the flat in 2010.
After they married, they moved to London. Mr Somaia bought a house in Camlet Way in Barnet and they moved in there. Ms Gheewala again said that she did not know whose name the house was in and that she learnt only recently that it was in the name of Ashiwad Ltd.
In 1992, they moved to Dubai and lived in Ashiwad Villa. Again she said that she did not know whose name the villa was in although she accepted that she knew that the villa was later transferred to a creditor.
Ms Gheewala’s evidence was that they left Dubai in 2000/2001 and returned to London and to Camlet Way. The flat was used when they had guests visiting.
Mr Somaia was made bankrupt in 2001. Ms Gheewala denied knowing about this. She said that her husband did not tell her; that she knew there were problems; but that he did not give her details and said he was handling it. It was not something she read about in the papers in London.
From 2003 to 2006 Mr Somaia was the subject of criminal and civil proceedings in Kenya in respect of frauds in various African countries. In April 2003 he was arrested for fraud in Kenya: he was convicted in 2004 but an appeal subsequently allowed. Ms Gheewala at least knew that he had gone to prison in 2003. She accepted that she was aware that he was implicated in at least two frauds (the so-called Black Cab fraud and later the fraud involving Mr Mirchandani) and that people were after him for money but she said that he always told her it would be OK.
From 2004 they lived in Nairobi in rented accommodation.
In 2002, a complaint of fraud was made against him in the UK by Ashwin Shah in relation to a loan of $500,000. In 2008 Mr Somaia had a heart attack. Mr and Mrs Somaia went to India for their daughter’s wedding and to have Mr Somaia’s heart checked. While in India, he was arrested pending extradition proceedings in connection with the fraud against Mr Shah. He agreed to return to the UK but the prosecution was not pursued following a payment to Mr Shah made from the Pattni Settlement monies.
Ms Gheewala appears to have returned to London with her husband and she said that she joined his parents in Finchley. From 2010, they then moved into the flat. As mentioned above, she later returned to Nairobi to close up the house.
One of the principal issues explored by the Prosecutor with Mr Muriuki was the extent to which Ketan Somaia’s business activities and affairs were public knowledge. He was a former policeman and bodyguard who had been Mr Somaia’s chauffeur from 1992 to 2010. He agreed that, by 1992, Ketan Somaia was already a well-known businessman and that there had been stories about him the papers. He was aware that Mr Somaia was a suspect in a major corruption scandal, the Goldenberg scandal, which embroiled the then President Daniel arap Moi and nearly caused the collapse of the Kenyan economy, but he knew no more than that. He was asked about a number of deals and disputes and frauds in which Mr Somaia was or was alleged to have been involved and he said that he did not remember reading about them.
Mr Muriuki was aware that in 2008, Mr Somaia went to India for a wedding and was arrested for fraud. He read about the arrest and the case in London in the papers. He was aware that, in the summer of 2009, Ketan Somaia went to London and Mrs Somaia went too. He later read about Mr Mirchandani’s case in the papers.
The purpose of exploring this evidence was, as I understood it, to seek to establish that Ms Gheewala’s apparent ignorance of her then husband’s tribulations and the nature of the repeated allegations against him was simply not believable. She maintained that she was largely unaware of what was going on and her evidence was to some extent supported by that of her sister, Meera Mavani, to the effect that Mr Somaia would not share things with his wife and told her that everything was under control and not to interfere.
I say at this point that I accept that Ms Gheewala was to some extent kept in the dark by her plainly manipulative husband about many of his activities and led to believe that everything was in order or that he was the victim of jealous business rivals but I also have little doubt that she chose to accept what she was told or chose to turn a blind eye. By 2010, when Mr Somaia had been arrested with a view to his extradition and had returned to London to face trial, it is simply not credible that Ms Gheewala would not have been aware of the allegations against him and could have continued to regard his financial arrangements as wholly innocent and as just the way things were done.
Use of other bank accounts
Part of Mr Somaia’s modus operandi was to pass money through bank accounts in the names of others. He made use of the account of his daughter, Anisha Somaia, passing approximately £204,000 through her account from about January 2010. He used his sister, Sejal Padania’s, account in a similar way passing about £337,000 through that account.
From January 2009 to December 2012, Mr Somaia had control of a bank account in the names of Ms Gheewala and Divesh Gandesha who was variously described as an uncle or like a brother to Mr Somaia. Mr Somaia processed around £1 million through that account. His Honour Judge Hone QC found that this account was from its inception managed by or for the benefit of Ketan Somaia and that he was directing the use of this “front/nominee account” from the start. Ms Gheewala claimed that she knew about the existence of the account but never had any dealings with it.
It was not entirely clear to me what relevance the Prosecutor sought to attach to these activities. Although it was not put to her expressly, I assume that it also formed part of the background that the Prosecutor relied on as rendering it improbable that Ms Gheewala did not know about her husband’s fraudulent activities or modus operandi. Certainly, by 2012, it is simply not credible that she would have been wholly unconcerned by the existence of an account held in her name jointly with another for no apparent reason. Her evidence about this was somewhat confusing as she explained the account as one set up when they first moved to London in 1990 when that was clearly not the case.
There were two further Barclays Bank accounts in the name of Alka Somaia (00838187 and 13600890). Ms Gheewala accepted that her husband would pay money into the accounts. In particular, she was shown a number of instances, including around the time of his trial, when he would pay in money and she would take money out to give to him in cash. She said that when he wanted cash, he would say that he had put money in and then she had to get it out for him but she did not know how he put the money in. I note that she spoke in terms of what she “had to do”.
The first point to be taken from this is that it is another example of Mr Somaia using the bank accounts of others and Ms Gheewala was well aware of this – she cannot have regarded this bizarre method of getting cash as innocent. His Honour Judge Hone QC said that he saw no reason why the assumption (that is that in s. 72AA(4)) should be displaced in relation to receipts and payments from these accounts.
The second point is that there is a similarity between the use of this account and the way that the Prime Bank account was normally used but equally there is a contrast between monies paid in for living expenses and the arrangement Ms Gheewala described where her husband would pay money into the account expressly for her to give it to him in cash.
The Neptune Loan
When Ketan Somaia faced conviction for the fraud against Mr Mirchandani, he entered into an arrangement with his sister, Sejal Padania, and a Mr Bharat Thakrar relating to a property at Bishop Ramsey Close in Ruislip. The detail is set out in his Honour Judge Hone QC’s ruling but in short summary, using various means of funding, Mr Somaia purchased the property in the name of his sister who contributed little. The learned judge found that there was an overwhelming case for Mr Somaia having a substantial beneficial interest. Sejal Padania then obtained a loan of £500,000 from Neptune Finance Ltd., a company controlled by Mr Thakrar. Everything was very informal. Following Mr Somaia’s conviction, Neptune took steps to register a legal charge on the property. His Honour Judge Hone QC concluded:
“In my judgment, this transaction has all the hallmarks of a front. It seems most likely to me that the arrangement was for BT to allow Sejal Padania to recycle funds from KS’s general criminal conduct through BT’s corporate structure. This would be typical of the KS modus operandi. It is illustrated by KS’s spurious assertion that due to the charge obtained by Neptune in relation to monies loaned to Sejal Padania, there is no equity remaining in the property.”
It was not in dispute that some of the loan monies were paid to Ms Gheewala between June 2014 and February 2015 to provide for her but she denied being party to the arrangements for the loan. Whilst it might be inferred that she was aware that her husband was making some arrangements to provide for her, and against the background I have set out above, might have had some suspicions about them, there was no evidence that she was aware of the particular arrangements and their dubious nature.
The Rivaalka Ltd. story
In October 2014, Ms Gheewala set up her own business, Rivaalka Ltd., of which she was and is the sole shareholder and director and which provided her with some income. There was a substantial body of evidence about this company and its activities. The evidence was relied on by the Prosecutor as going to Ms Gheewala’s credibility and as to the exercise of my discretion. So far as her credibility was concerned, it was said firstly that if Ms Gheewala was the successful business woman she now appeared to be, it cast doubt on her portrayal of herself as a trusting wife and financial ingénue who was unaware of her husband’s activities. On the other hand, if the company was a sham, then I could infer that it was being used as a vehicle for monies from her husband or his associates to be channelled to her. Far more emphasis was placed on the latter point. In any event, the two arguments are not mutually exclusive and it seemed to me that what I was in truth being asked to infer was that Ms Gheewala was someone who had been at least aware of, if not involved in, her husband’s nefarious activities and was now, knowingly, still benefitting from them.
When the Prosecutor became aware of Rivaalka Ltd., questions were asked in correspondence. By letter dated 24 November 2016, Ms Gheewala’s solicitors gave the following information about its activities:
The company was originally set up as a jewellery distribution business but that was not particularly successful.
It then started to undertake consultancy services based on Ms Gheewala’s existing contacts.
The company makes business introductions between businesses and individuals.
The company acts as sales representative for a cigar manufacturer (although no transactions had yet materialised).
The company acts as tour agent for parties looking to make tours of Kenya for which it is paid commission.
“Another area of work related to certain film promotions”.
Rivaalka paid Ms Gheewala £1000 per month.
So far as film promotions were concerned, whilst maintaining that she had contacts, Ms Gheewala accepted that Rivaalka had done no business in this area.
So far as tours to Kenya were concerned, she had made only one introduction to a company called Serengeti Holdings Ltd. Her evidence was that a contact, Rajah Sangani from Granada Trading, had put her in contact with a group of 35 people from India who were interested in a tour and she had introduced them to Serengeti. Her explanation for this slightly convoluted sequence was that her contacts were aware that she needed work. For what appeared to have been little work, Rivaalka invoiced $30,000. Two versions of the invoice were produced in that amount, with the same date and number - one for “customer services, transportation to London” and one for “Introduction for tour group” – which was explained as a mistake.
The largest source of revenue for Rivaalka was Lyca Mobile (“Lyca”). The evidence was that Rivaalka had received two payments: (i) £13,000 on 9 March 2016 and (ii) £38,801.42 on 26 September 2016.
The first payment was made up of two sums:
£3000 was allegedly paid for an introduction for Lyca to sponsor an event at Wembley Stadium during a visit of Narendra Modi, Prime Minister of India, in 2015. In cross-examination, Ms Gheewala was pressed for further detail about this event and the work done. She repeated what was in her statement: that she had spoken to a Mr Desai about the event for which sponsors were being sought; she contacted Mr Seelan and Lyca; and visited Lyca’s offices to discuss the possibility. But she was not able to give any further detail of the event or the proposed sponsorship.
A further £10,000 was said to have been paid for setting up a meeting between Lyca and Sunil Mittal, one of India’s wealthiest men and owner of telecoms company, Airtel. Ms Gheewala said she was paid for setting up a meeting because Mr Mittal was not an easy man to get a meeting with.
In her 7th statement, Ms Gheewala said that this introduction had led to Lyca potentially acquiring a 51% interest in Airtel Sir Lanka. For her role in introducing the parties, she said that it was agreed that Rivaalka would submit an invoice for $50,000 (which has been paid) and if the deal went through Rivaalka would expect a further payment. There was no explanation for why Lyca would make further substantial and non-contractual payments on this apparently voluntary basis.
Further Rivaalka had been paid $40,000 by either Spicenet Holdings or New Sinda Networks Ltd. for the introduction of Vinay Choudary of New Sinda Networks Ltd. to Lyca. Ms Gheewala produced an undated “Business Finder Agreement” between New Sinda Networks Ltd. and Rivaalka. The agreement recited that New Sinda Networks was a major shareholder in Tangerine Ltd. in Uganda and was looking for financing and cash solutions to start national telecoms operations and that Rivaalka was in contact with companies or individuals that would potentially provide solutions. The agreement provided for a Consultancy Fee to be agreed in advance and “paid on a case by case basis”. Although there was no further evidence of the agreement of this Consultancy Fee, Ms Gheewala claimed that if the deal went through, Rivaalka would be paid a total of $300,000 (of which $40,000) had already been paid. It was also apparent, however, that in March 2017, she had asked Mr Choudary to write to Lyca asking them to release $240,000 which was due from him to Ms Gheewala (when she accepted that no further monies were yet due).
I make a number of points about the evidence relating to Lyca:
Subject to what I say below at sub-paragraph (vii), the inference it seems to me that I was being asked to draw was that Ms Gheewala and Rivaalka’s dealings with Lyca (and others) were a sham and a means of continuing to channel her husband’s money to her. This was properly and fairly put to her and she denied it and that she had anything to do with her ex-husband.
Some significance was attached to the relationship Ms Gheewala now had with Lyca mobile because Ketan Somaia had also had dealings with them. However, this was one instance in which His Honour Judge Hone QC had expressly found that Mr Somaia’s dealings were not fraudulent.
I did not regard the evidence of Rivaalka’s business activities as at all satisfactory. Ms Gheewala insisted that monies paid and to be paid were for her hard work but it was difficult to discern what this hard work was beyond her description of networking and facilitating. In relation to New Sinda Networks and Lyca she had done no more than introduce two people and attend meetings, as she put it, to make sure everyone was together. She was unable to provide coherent explanations of services provided and amounts paid to her; she had remarkably little recollection of what she had done for substantial sums of money; and she was unable to provide answers to straightforward questions. There was enough to raise the suspicion of impropriety but I do not consider that the evidence went as far as to establish, on the balance of probabilities, that funds were somehow being directed to her by Mr Somaia or his associates.
The suggestion that she had been trying to involve Mr Choudary in getting money that was not yet owed to Rivaalka did not take the matter any further. If anything, it was inconsistent with her having any special relationship with Lyca and, in any event, the ploy did not succeed.
The case was opened on the basis that another cause for suspicion was that payments from Lyca to Rivaalka were made in cash. Rivaalka’s bank statements showed payments from “LMUK Cash” which did not in itself establish cash payments. Ms Gheewala’s evidence was that she did not know how the money was paid into her account but was surprised by the statement that it was in cash. She obtained a letter from the Legal Department of Lycatel Services Ltd. stating that the payments were made by bank transfer and providing consistent documentary evidence from Barclays. It seems to me that the only conclusion I can draw is that the payments were not made in cash.
Finally, Ms Edmonds put in evidence certain online press reports about the involvement of Lyca employees in France in fraudulent dealings. There is not yet any proof of such activities and there was absolutely no evidence to relate these alleged activities or the persons involved to Ms Gheewala or indeed Mr Somaia.
Ms Edmonds was pressed in cross-examination to say what case was being advanced by the Prosecutor and whether she was alleging fraud by Lyca. Her answers were to the effect that she was putting evidence and suspicions before the Court but it was a matter for the Court to decide. I made it clear in the course of the hearing that I would not make findings of fraud against Lyca in their absence and I certainly would not do so on the basis of this sort of evidence. Mr Talbot QC realistically said that I was not being invited to find that Lyca was laundering Ketan Somaia’s money. This is important. Unless that is what I was being asked to find, then Ms Gheewala and Rivaalka’s dealings with Lyca may raise eyebrows but they cannot be relied upon to establish that she is receiving monies from her husband through this route and I cannot properly draw any of the inferences that might have followed from that.
The law
A statutory definition of “gift”?
I return then to the law and I refer to the statutory provisions set out at paragraph 7 above. Mr Talbot QC for the Prosecutor submitted in opening that ss. 74(10) and (12) created a self-contained code as to the meaning of “gift”.
Section 74(10) provides that a gift is caught by the Act if made after the commission of the offence. In itself, as Mr Talbot accepted, it provides no definition of the meaning of “gift”.
Section 74 (12) provides that the circumstances in which a person is to be treated as making a gift include “those where he transfers property to another person directly or indirectly” at an undervalue.
In the absence of any authority to the contrary, to my mind, the natural reading of s.74(10) is that it provides for when a gift is caught by this Part of this Act and “gift” not being defined it is to be given its normal legal meaning. That is consistent with the authorities I was referred to in which the normal legal meaning of terms was not to be displaced by statute without clear words including Larkfield Limited v Revenue & Customs Prosecution Office [2010] EWCA Civ 521 at [31] and [33] and Prest v Petrodel Resources Ltd. [2013] UKSC 34. Section 74(12) then expands the normal legal meaning of the word gift to include a transfer at an undervalue, thus identifying a particular circumstance in which a transfer will be treated as a gift although it would not normally be regarded as a gift (because of consideration).
The case relied on as authority contrary to my natural reading was the decision of the Court of Appeal in R v Richards [2008] EWCA Crim 1841. It is perhaps a statement of the obvious to say that the case turned on its particular facts but it is those particular facts that make it difficult, in my judgment, to derive from the decision a general proposition that the effect of s.74 (10) and (12) is to provide a complete code as to the meaning of gift.
Richards was a case under the Proceeds of Crime Act 2002. Rogers had transferred 5 properties to Richards, the appellant, for no or illusory consideration. At first instance, the judge made confiscation orders against both Rogers and Richards in both their cases taking into account, either as part of the available amount or the benefit, the value of the properties. Richards appealed and the end result of the Court of Appeal’s decision was a finding that no confiscation order could be made against him because he had no beneficial interest in the properties and Rogers had had no genuine intention to part with his interest in the properties.
At first instance, the judge had relied on the value of the properties at the time of the confiscation order. At paragraph 16, Toulson LJ said that that raised a fundamental problem for the prosecution case:
“If at the time of the order the beneficial interest in the unsold property and the proceeds of sale of the sold properties belonged to Rogers, as both parties to the appeal contend, how could the beneficial interest in the properties have belonged to the appellant at the time of transfers? [Counsel for the prosecution] submits that the properties had to be returned to Rogers because of the operation of the tainted gift provisions of section 77 of the Act, and that the beneficial interest in the properties, which had initially passed to the appellant, re-vested by operation of the law upon the making of the confiscation order by the judge.”
It was, therefore, the prosecution’s case that there was a gift (when the beneficial interest in the properties passed) but that it had to go back to the transferor. Against the background of that argument, the Court considered the “tainted gift” provisions in ss. 77 and 78 of POCA 2002.
I recognise that in paragraph 18, Toulson LJ said that: “”Gift” is defined by section 78, which provides that if a transfer is made by a defendant of property for a consideration which is significantly less than its value at the time of transfer, it is to be treated as a gift.” But at paragraph 19, he continued:
“Pausing there, certain things are clear. First, the tainted gift provisions only apply where there has been a transfer of property. Whether there has been a transfer of property and, if so, what is the nature of the proprietorial interest that has been transferred are matters to be determined by the law of property. In this case the tainted gift provisions cannot determine what interest in the houses passed to the appellant. Secondly, if there has been a transfer at a significant undervalue, the consequence in terms of the Act is not to prevent the transfer having such legal effect as it may have as a matter of property law. …. The effect under the Act is that the value of the property transferred at a significant undervalue is to be included in the valuation of the amount available to the defendant to satisfy the confiscation order.”
The first part of that paragraph confirms that the normal principles of the law of property are not displaced by the Act. Further, it makes clear that the Act does not determine the nature of the proprietorial interest transferred. In other words, nothing in the Act has the effect that a transfer for no value or at an undervalue necessarily transfers the beneficial interest. That is inconsistent with the submission that the sections provide a complete code. It also seems to leave the normal position as being that the transfer of the legal interest only (and not the beneficial interest) will give rise to a trust of some nature.
At paragraph 21, Toulson LJ then said this:
“The underlying purpose of the tainted gift provisions of the Act is plain. No self-respecting organised criminal would expect to be caught with high-value property in his own name readily identifiable, particularly since the enactment of legislation which is designed to strip such criminals of their profits. As a matter of standard practice he is likely to have taken steps to transfer high-value assets to nominee companies, offshore trusts or trusted associates who can be looked upon to harbour the assets until such time as he perceives that the danger has passed or he has served any sentence of imprisonment which he may have had the misfortune to have imposed upon him. Parliament has sought to address that mischief in various ways, including the tainted gift provisions presently under consideration. The scheme adopted by the act is to enable property transferred at a significant undervalue to be included in the calculation of the available amount. It is true that the interest to be valued is still his interest in such property, although the mechanism for its valuation is set out in the Act. But, dependent on the circumstances, a court may readily infer that the recipient is a nominee or in any event likely to be receptive to the transferor’s wishes and can be expected to value the defendant’s interest accordingly.…”
As I have indicated, I find it difficult to derive from this judgment, on these particular facts, a decision that s.78 (and its equivalent s.74(12)) is an all-encompassing definition of “gift”. What is said in paragraph 21 characterises the purpose of the Act as targeting gifts, in the normal legal sense, where there is an expectation (or at least a hope) that the gift will be returned, albeit that does not form part of the definition of a “tainted gift”. That expectation differs from a legal obligation to return the property where the beneficial interest would remain with the transferor. The scheme of including transfers at an undervalue captures what might otherwise be full transfers of the legal and beneficial interest for value.
On the facts of Richards there was no transfer of the beneficial interest and it is unclear what role, if any, the tainted gift provisions, therefore, played in the finding of the amount available to Rogers. The available amount would have taken into account the value of his beneficial interest without any reliance on the value of gifts.
That analysis of Richards chimes with what is said about the case in Millington and Sutherland Williams on the Proceeds of Crime 4th ed. at paragraph 9.158:
“The provision [s.78(3) of POCA 2002] is only triggered when property is “transferred”. It is important to establish what property right has in fact transferred in a given transaction before assessing whether there has been a sale at undervalue. This is a matter determined by the law of property in the ordinary way. In Richards…, Toulson LJ considered that a transfer from one criminal to another over legal title to a set of five properties was, on the evidence in that case, not in fact a transfer of the whole beneficial interest but only of the bare legal interest, beneficial interest remaining in the donor. As such, given that only a right of nominal worth was transferred, it would not be possible to consider the value of the property as a “tainted gift”, which requires transfer at a value “significantly less” than the value of the property. (However, by virtue of the same conclusion the value of the houses always remained the property of the transferring defendant in the normal way, and thus could be included in the available amount, albeit not as a tainted gift.)” (My emphasis)
Similarly, the authors of Mitchell Taylor and Talbot on Confiscation and the Proceeds of Crime at paragraph V.119 give the example of a defendant who transfers legal title to his property to his spouse: “If the purpose of the transfer was to hide his ownership and in reality the defendant still retains his beneficial interest in the property, then the gift provisions do not apply as nothing of value has been transferred by the defendant. Instead the asset falls to be treated as property, in which the defendant has an interest under s. 9(1)(a).”
In my judgment, therefore, the first issue which arises in this case is whether there was a gift of the Pattni Settlement monies to Ms Gheewala in the normal legal sense of that word.
Transfers in bad faith
Before I address that issue, I should add that Mr Talbot QC also submitted that the effect of the sections was that any “tainted” transfer or transfer in bad faith (even for full value) was caught by the Act. Mr Talbot submitted that, on the evidence, Ms Gheewala knew that the general purpose of putting money through her account was to evade creditors and that, therefore, even if I did not accept that the payments of the Pattni Settlement monies were gifts to her, he could still succeed on this basis.
That argument derived from the decision in R v The Maidstone Crown Court, ex p. Dickens (unreported, 4 March 1991). In that case, the Divisional Court was concerned with similar provisions under the Drug Trafficking Offences Act 1986. Amongst other findings, the judge had found that Mr Dickens’ third share of the former matrimonial home was a gift caught by the Act. It was Dickens’ case that this share had not been transferred to his wife as a gift but for valuable consideration. The prosecution case was that there was no substantial consideration because the purported consideration was the giving up of a claim for maintenance and Mrs Dickens had, in reality, no worthwhile claim for maintenance. Rose J held that the transaction was caught by being a transfer at an undervalue. He added:
“For my part, it seems to me furthermore that it is a necessary and appropriate implication in the Act that a transfer which is not bona fides can also be a gift caught by the Act.
It follows that, in my judgment, the judge … was entitled to hold on the material before him, that the transfer was not bona fides.”
This case seems to me to be at highest authority for the proposition that where there is apparently good consideration, the court may look at the reality of the transaction and may conclude that there is not good consideration because the transaction was not bona fides and was properly a gift. It does not follow that any transaction (whether for consideration or not) which may be regarded as lacking bona fides is, therefore, a gift.
The meaning of “gift”
I return then to the meaning of “gift”. Mr Hood, on behalf of Ms Gheewala, relied on the decision of Blake J in Meisels v Lichtman [2008] EWHC 661. At paragraph 33, Blake J quoted, with apparent approval, the definition of gifts made between living persons given in Halsbury’s Laws of England 4th edition:
“A gift made between living persons… may be defined shortly as the transfer of any property from one person to another gratuitously while the donor is alive and not in expectation of death. It is an act whereby something is voluntarily transferred from the true owner in possession to another person with the full intention that the thing shall not return to the donor. A gift appears to be effective when the donor intends to make it a gift and the recipient takes the thing given and keeps it knowing that he has done so. The mere fact that the recipient regards the thing given as a loan and intends so to treat it does not by itself prevent the transaction from being effective as a gift.”
At paragraph 74, Blake J derived from that passage two principles relevant to the matter before him:
(i) gifts are voluntary and gratuitous, that is to say made without consideration;
(ii) gifts require the donor to intend that the gift shall not be returned to him.
I adopt that definition except that it must require some modification in the context of the type of tainted gift provisions with which I am concerned in this case. I say that because, as Toulson LJ observed in Richards, such provisions target property ostensibly transferred as a gift but where there is an expectation that the recipient will be willing to return the property to the donor. In my judgment, however, there remains a distinction between a gift given in such hope or expectation and a transfer of property with no transfer of the beneficial interest.
Subject to that modification, in my judgment, Mr Hood is right to identify the relevant elements of an effective gift as follows:
there must be an effective transfer of property (that is a transfer of the legal and beneficial interest);
the donor must intend that the gift will not be returned to him (although in the context of “tainted gifts” he may have a hope and expectation that it will be);
the donee must accept the gift.
The arguments
Mr Talbot QC submitted that the evidence in relation to the Prime Bank account established the following:
This was a bank account which was in Ms Gheewala’s sole name but which both Ketan Somaia and his wife were using to their joint benefit and in relation to which each had a role to play. KS would make payments in. Ms Gheewala would sign cheques; she would take some decisions about disbursements; but she would also give signed blank cheques to Ketan Somaia to make payments, including payments of bills and school fees. This was the pattern of use.
Payments to the account were thus gifts to her. She knew that Ketan Somaia would transfer money into the account to meet cheques that she wrote. Such payments were intended as gifts and accepted by her as such. The payments which, as a matter of fact, represented part of the Pattni Settlement monies were gifts just as other payments into the account had been. She did not need to be aware of any particular payment on any particular occasion for there to be a gift: put simply all payments into the account were and should be treated the same way.
In support of those contentions of fact, Mr Talbot QC placed some reliance on the fact that during June and July 2010, as set out above, Ms Gheewala continued to use the account as she had done before for household expenditure, treating the monies in the account as hers, and in particular writing a cheque to Mr Muriuki.
On behalf of Ms Gheewala, Mr Hood argues that these transfers were simply not gifts. Rather, on the facts, the position was that Mr Somaia used Ms Gheewala’s account to receive and pay out the Pattni Settlement monies, with the monies promptly leaving the account and being paid to third parties involved with Mr Somaia. He had no intention to gift these monies to Ms Gheewala.
If Mr Hood is right about that, then it begs the question of the basis on which the monies were transferred to Ms Gheewala. Mr Hood’s answer is that the monies were transferred and held (briefly) on a bare legal trust. In support of the proposition that the monies were held on a bare legal trust, Mr Hood relied on the summary of the law relating to resulting trusts in Lewin on Trusts 19th ed. at paragraph 9-003:
“Where there is a gratuitous transfer containing no express or inferred provisions determining beneficial ownership, then the starting point is that there is a rebuttable presumption of resulting trust, in that the transferor did not intend to make a gift… It may be rebutted by a counter rebuttable presumption of advancement, that is that the transferor did intend to make a gift. There is a presumption of advancement if the transferor is the spouse or parent of the transferee or in a similar relationship. The presumption of advancement may itself be rebutted by extraneous evidence that the transferor did not intend a gift.”
Further the presumption of advancement is “readily rebutted by comparatively slight evidence” Pettitt v Pettitt [1970] AC 777, 739E per Lord Reid and 814 per Lord Upjohn.
In short, therefore, the presumption is that a transfer between spouses is a gift but that is a rebuttable presumption. Mr Hood submitted that that presumption was rebutted here for the same reasons that he relied on to argue that there was no gift.
Mr Talbot QC, on the other hand, submits that no issue of a resulting trust arises because that itself is a presumption in the absence of an agreement as to the nature of the transfer.
Addressing these issues seems to me to be somewhat circular and, as one goes round the circle, the burden of proof shifts (albeit only slightly). If I start with the question of whether there is a gift and conclude that there is, there is no need to consider whether there is a trust. If I am not satisfied that there is a gift, then I consider the basis on which monies were transferred to Ms Gheewala and I have to consider the rebuttable presumption that there was a gift. However, looked at as a whole, it seems to me that the questions I have to ask myself are still those in paragraph 76 above.
Conclusions
I accept that there is a body of evidence that supports the Prosecutor’s case. Monies were paid into the Prime Bank account by Mr Somaia for his wife’s use and there was no evidence of anything said or done by Mr Somaia to expressly distinguish the Pattni Settlement monies from any other payments into the account when the transfers were made. There was no evidence of anything said or done that could have restricted their use by Ms Gheewala. On the contrary, the evidence was of Ms Gheewala’s continued use of the account to pay household expenses.
There was also no obvious reason why, when the larger part of the Pattni settlement monies was paid directly to third parties (not apparently disguising their source), a proportion of the monies was paid to Ms Gheewala. It might be inferred from the absence of any other reason, that the intention was to make a gift of these monies (in common with other monies that had been paid into the account over the years).
However, it seems to me that there are far stronger factors which drive me to conclude that these monies were not a gift:
Firstly, the evidence about the Prime Bank account generally, and indeed the use of the Barclays account to make cash payments, lead me to conclude that, if there was an arrangement about the use of the account, it was one that enabled Mr Somaia to make payments in and take the equivalent sums out. Such monies were not intended by him to be and were not accepted as a gift. Ms Gheewala regarded herself as either having to provide Mr Somaia with blank cheques when he wanted them or as obliged to comply with his instructions about getting money from her accounts. So far as the Prime Bank account was concerned generally, there are two potential answers to this point. The first is that all monies (whether intended as a gift or not) were paid into the same pot of the account and so should all be treated in the same way. There is some attraction in that argument but it does not seem to me to be realistic and it would fail in respect of any monies that were clearly not gifts. Secondly, Mr Talbot QC relied on Richards as authority for the proposition that monies transferred under an obligation to disburse them (or, in this case, allow their disbursement) would still be a gift. I do not consider Richards authority for that proposition: as I have said the result of the decision in that case was that the beneficial interest in the properties had always remained with the transferor not that there were gifts that were taken into account.
In any case, so far as the Pattni Settlement monies are concerned, the pattern of payments in and payments out make it, to my mind, clear that, whatever may have been the position on other occasions, Mr Somaia was simply using the account as a conduit for payments by him. He perhaps perceived some advantage in its appearing that these monies came from his wife rather than from him. There was no question of his merely having a hope or expectation that the monies would be available to him because he was in possession of signed cheques that enabled him to take the monies from the account. In each of the instances where the monies were paid in and quickly paid out again, I am unable to conclude that Mr Somaia intended them not to be returned to him. They were, in a sense, returned to him in that he promptly used the money for his own purposes.
It is further difficult to see how it can be said that Ms Gheewala accepted the gifts that she knew nothing about, which it was accepted was the position. Again, with reference to the usual use of the bank account, it might be said that she generally accepted any monies that were paid in such that there was no need to do anything further to evidence acceptance of a particular “gift”. But that argument does not seem to me to meet the position where monies were paid in on Mr Somaia’s behalf and taken out by him before she had any knowledge of the payments. The only exception to this could be the amount paid to Mr Muriuki.
If the monies were gifts, then the position has to be that, either expressly or impliedly, Ms Gheewala had agreed that money gifted to her by her husband could then be given by him to others. In the general use of the account, this may have happened before (although the evidence about the prior use of account was sparse) but it seems to me that the proximity of the payments in and out militates against inferring such an agreement in respect of these monies. In this context, Mr Hood placed some reliance on the fact that monies were paid to a company called Simba Technology Ltd. which was part owned by Mamta Jatania with whom Mr Somaia, to Ms Gheewala’s knowledge, was having an affair. He argued that it was improbable that Ms Gheewala would have agreed to the payment of monies gifted to her to Mamta Jatania’s company. Whilst that may well be right on the facts, it does not itself address the wider argument that there was an arrangement under which monies were gifted to Ms Gheewala but then used, as and when, by Mr Somaia with her consent. If that were the arrangement and it applied here, it would not matter to whom the monies were paid. As I have said above, the real point here seems to me to be that these monies did not go into the pot of the account but were paid in for Mr Somaia’s benefit, with the intention that they would shortly be paid out on his behalf, as happened, without Ms Gheewala’s knowledge.
Lastly, as commented by His Honour Judge Hone QC and agreed by Mr Pearson, Mr Somaia’s modus operandi was to hide his assets in the name of others. His use of Ms Gheewala’s bank account to disperse part of the Pattni Settlement monies was consistent with that modus operandi. In my judgment, the more evidence there was of Ms Gheewala awareness of Ketan Somaia’s activities, and the more she was aware of how Ketan Somaia used the bank accounts of others, the more likely it is, if anything, that their mutual understanding was that her account could be used to process his money. That does not undermine the purpose of the Act, since in those circumstances the beneficial interest in the money would remain with the transferor.
Accordingly, I decline to grant the declarations sought and to declare that these transfers were gifts.
It is not, therefore, necessary for me to consider further whether I would have considered it appropriate to take the gifts into account. If I had reached the contrary conclusion, I would, on balance, have declined to take the gifts into account and I will explain why briefly.
I would not have started from the premise, as Mr Hood urged on me, that Ms Gheewala was wholly innocent. I mean that not in the criminal sense, since she has not been charged with or convicted of any crime, but in the sense that she had some level of awareness that her husband’s business dealings involved fraud and that he was using a bank account in her name, amongst others, to transfers funds for reasons which were suspect. She gained no direct benefit from the Pattni Settlement monies but that would often be the case where property was transferred to someone in the expectation that they would be prepared to return it and would, therefore, be the case in many instances of gifts caught by the Act. In any event, Ms Gheewala may have gained an indirect benefit in the sense that her husband avoided prosecution for fraud and she certainly continued to be able to enjoy her lifestyle, involving high levels of expenditure, which was a product of her husband’s fraudulent activities.
However, what I would have regarded as of great weight in this particular case is that the Pattni Settlement monies themselves were not tainted by illegality. Where the court is concerned with the assets of the criminal, their source may not be a matter of any concern; where the court is concerned with property that is still held by the recipient of the gift, the same is true. But here the declaration is sought in order to recover not the money transferred to Ms Gheewala (which has long since been disbursed to others) but to recover from her assets a sum equivalent to the value of a “gift” of legitimate monies. Her only current asset is her share of the flat.
In these circumstances, I would have considered the issue finely balanced but I would not have taken the gifts into account.