Crown Prosecution Service v Aquila Advisory Ltd

Appellant
Andrew Sutcliffe QC
Julian Christopher QC
Anne Jeavons
(Instructed by CPS National Proceeds of Crime Unit)

Respondent
Stuart Ritchie QC
Martin Evans QC
Sam Neaman
(Instructed by Kingsley Napley LLP)

LORD STEPHENS: (with whom Lord Lloyd-Jones, Lord Sales, Lord Burrows and Lady Rose agree)

Introduction and overview

1. Mr Robert Faichney and Mr David Perrin exploited their position as directors of Vantis Tax Ltd (“VTL”), in breach of fiduciary duty, to make a secret profit of £4.55m. Aquila Advisory Ltd (“Aquila”), which has acquired the proprietary rights (including choses in action) of VTL, relies, in particular, on the judgment of this court in FHR European Ventures LLP v Mankarious [2014] UKSC 45; [2015] AC 250 (“FHR”), to assert that Mr Faichney and Mr Perrin are to be treated as having acquired the benefit of that secret profit on behalf of their principal, VTL. The result, Aquila argues, is that the secret profit was beneficially owned by VTL under a constructive trust, the beneficial interest in which has now passed to Aquila.
2. The amount of £4.55m was also the benefit obtained by Mr Faichney and Mr Perrin from the crime of cheating the public revenue by dishonestly facilitating and inducing others to submit false claims for tax relief. Those crimes were committed by Mr Faichney and Mr Perrin in relation to four tax avoidance schemes. Following their criminal convictions, the Crown Prosecution Service (the “CPS”) sought confiscation orders under the Proceeds of Crime Act 2002 (“POCA”) against Mr Faichney and Mr Perrin. The judge in the criminal trial found that Mr Perrin’s benefit from the offence was £4.55m but that the available amount was £809,692. An order was made requiring Mr Perrin to pay that amount. Subsequently, an order was made requiring Mr Faichney to pay £648,000, which was the available amount in his case. However, Aquila asserts that as it has a proprietary claim to the secret profit of £4.55m (from which secret profit all the property assets of Mr Faichney and Mr Perrin were obtained) it has priority over the confiscation orders, as those orders do not give the CPS any form of proprietary interest in the assets of either Mr Faichney or Mr Perrin. If that is correct, then Aquila will be entitled to all of Mr Faichney’s and Mr Perrin’s assets leaving nothing to satisfy the confiscation orders.
3. There were a number of parties to these civil proceedings but by the date of the trial before Mann J and by virtue of two settlement agreements, the only parties participating in the trial were Aquila and the CPS. The issue between them, as defined by the judge (at para 1) was, in essence, whether the proprietary rights to which Aquila would otherwise be entitled against Mr Faichney and Mr Perrin could be asserted “in the face of” the confiscation orders obtained by the CPS against Mr Perrin and Mr Faichney under POCA, which were obtained by the CPS after the…