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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> HM Revenue & Customs v Begum & Ors [2010] EWHC 1799 (Ch) (15 July 2010) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2010/1799.html Cite as: [2011] BPIR 59, [2010] EWHC 1799 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		15/07/2010

Mr Justice David Richards :

Introduction

1. There are before the court applications to amend the particulars of claim in two actions.
2. The claimants in both actions are the Commissioners for Revenue and Customs (HMRC) and the claims made in both actions are for damages for conspiracy arising in respect of what are alleged to have been chains of transactions constituting "missing trader intra–community frauds" or "carousel frauds". It is alleged that these transactions and the associated conspiracy caused a loss of over £96.1m to HMRC. The alleged loss comprises repayments of £102.5m in VAT input tax made by HMRC, net of just under £6.4m in corresponding output tax. HMRC also makes claims in both actions under s.423 of the Insolvency Act 1986 in respect of payments totalling £10m made by Cellcom Limited (Cellcom), the second defendant, which is alleged to have been one of the companies in the chain.
3. The phenomenon of missing trader intra-community fraud (MTIC) is notorious. It sought to take advantage of the position that, while output tax was payable on the import of chargeable goods into the United Kingdom from another member state, input tax could be reclaimed from HMRC on the export of goods to another member state. The output tax would not be paid and the transactions would be arranged so that the importer would not have the funds to pay it, but the exporter would claim and receive the input tax.
4. A clear description of MTIC fraud was given by Blackburne J in Regalway Care Ltd v Shillingford [2005] EWHC 261 (Ch) at [3] – [7].

For present purposes, the following summary which HMRC seeks to introduce as paragraph 2A in each of the particulars of claim is sufficient:

"Missing trader intra-community (or MTIC) fraud typically involves the following:

1 A person registered for VAT (a "Defaulter") imports taxable goods into the United Kingdom from a supplier in another EU member state (an "EU trader"). The Defaulter does not pay VAT to the vendor because such imports are zero-rated.

2 The Defaulter then sells the goods (at a small profit) to another person registered for VAT in the United Kingdom (a "Buffer"), charging VAT on the consideration for such sale. However, payment for the said goods is (either in whole or in substantial part) not made to the Defaulter but to a third party.

3 The goods may then be re-sold one or more times to other persons registered for VAT in the United Kingdom, with VAT being charged on the consideration for each such sale.

4 Ultimately, the goods are sold and exported by a person registered for VAT in the United Kingdom (a "Broker") to a purchaser in another EU member state. No VAT is charged in respect of such sale because it is zero-rated for the purposes of VAT.

5 The Broker claims repayment from the Claimants of the input tax charged on its acquisition of the goods.

6 The Defaulter fails to account to the Claimants for the output tax charged on its sale of the goods.

7 17.5% of the price for which the Defaulter sells the goods is thereby extracted from the Claimants.

8 The business-transaction chains commonly involve back-to-back transactions in quick succession at small mark-ups (save for the export transaction, in which the exporter usually charges a significantly greater mark up).

9 The taxable goods traded are usually computer components or (as in all cases relevant to the present claim) mobile phones.

10 Participants are often companies with high turnovers but little capital."

5. The two actions in which the present applications are made were commenced in 2002 and 2007. The first defendant in the 2002 action was Mohammed Kamal Uddin, who is alleged at all material times to have been the sole director of the second defendant Cellcom. Cellcom is alleged to have participated as a buffer in numerous MTIC chains. It is incorporated in Gibraltar but was registered in the UK for VAT. It is alleged that its shares are and have at all material times been owned by Ward Enterprises Limited (Ward), a company incorporated in the British Virgin Islands. It is alleged that Ward has at all material times been owned by the third defendant STM Fidecs Trust Company Limited (STM Fidecs), a Gilbraltar based trust company, in its capacity as trustee of a discretionary settlement established by a deed dated 19 March 2000 for the benefit of Mr Uddin and members of his family (the Bibi settlement). I will refer in more detail to this settlement when I deal with the claims under s.423. The fourth defendant Sandeep Golechha is alleged to have been a friend and business associate of Mr Uddin and to have acted on behalf of Cellcom in transactions in the alleged chains.
6. As presently pleaded, the chains of transactions are alleged to have occurred between July 2000 and November 2001, but the proposed amendments would narrow the period so as to run from January 2001 to October 2001. In broad terms it is alleged that Mr Uddin, Mr Golechha and others conspired to establish and profit from the MTIC chains at the expense of HMRC and that Mr Uddin caused Cellcom to participate in the chains.
7. Mr Uddin and two others were arrested in November 2001 and charged with various offences in relation to the alleged MTIC frauds, including conspiracy to cheat the public revenue. Mr Golechha and one other were arrested in 2002 and charged in relation to the same alleged frauds. The investigation and prosecution were conducted by HM Customs and Excise and subsequently by HMRC as their successor (I will refer to both as HMRC). On 29 November 2001, restraint orders were made under the Criminal Justice Act 1988 freezing the assets of Mr Uddin and Cellcom. In compliance with the asset disclosure provisions of the order, Mr Uddin informed HMRC of the existence of the settlement.

Chronology of the civil actions

8. As the criminal restraint order would not, it appeared, be recognised or enforced in Gibraltar, HMRC decided to issue civil proceedings and seek a worldwide freezing order. The claim form in the 2002 action, endorsed with particulars of claim, was issued in the Queen's Bench Division on 11 April 2002.
9. The defendants were named as Mr Uddin, Cellcom and BDO Fidecs (the former name of STM Fidecs) as trustee of the Bibi Settlement. In addition to a claim for damages for conspiracy against Mr Uddin and a claim under s.423 as regards payments by Cellcom to BDO Fidecs, proprietary claims were made against the three defendants. On 18 April 2002, a freezing order was made against the defendants and the action was stayed until after determination of the criminal proceedings or further order. In May 2002 a company called Eastern Fusion Limited was joined as an intervenor, claiming to be the beneficial owner of sums held to the credit of a bank account which was subject to the freezing order. In early 2005 Mr Uddin and the other defendants in the criminal proceedings applied for a stay of those proceedings on grounds of abuse of process. Following a lengthy hearing from late February to late April 2005, Crane J granted the application in May 2005 and gave his reasons in a detailed ruling delivered on 24 June 2005.
10. In June 2005 HMRC applied to lift the stay on the 2002 action, to join Mr Golechha, Eastern Fusion Limited and a Mr Hassan Khan as defendants and for permission to amend the particulars of claim, principally by pleading the claims against the proposed new defendants. The new claims were for damages for conspiracy against Mr Golechha and for proprietary relief against all three proposed new defendants. On 23 June 2005 the stay was lifted and Mr Golechha was joined as a defendant but the application for permission to amend the particulars of claim, including amendments setting out the case and seeking relief against Mr Golechha, was adjourned to be listed with an estimate of half a day. It was later fixed to be heard on 14 October 2005. In late July 2005 a request for further information of the original particulars of claim was served on behalf of Mr Uddin, which was partially answered on 10 October 2005. At the same time, HMRC served a new set of proposed amendments. These included most of the amendments contained in the draft served in June 2005 but added some significant changes to the claims in conspiracy. They also introduced new claims that the assets of Cellcom and Ward should be treated as the assets of Mr Uddin and Mr Golechha and, in the case of Ward, as the assets of Mr Uddin alone. Further, they introduced a new claim that the Bibi settlement was established by Mr Uddin for the unlawful purpose of concealing the proceeds of the fraud allegedly committed on HMRC, which was therefore liable to be set aside as an illegal trust or a sham transaction and its assets treated as the property of Mr Uddin.
11. The late service of these new proposed amendments necessitated the adjournment of the hearing fixed for 14 October 2005 of HMRC's application to make the amendments served in June. Directions were given by HHJ Seymour QC sitting as a judge of the Queen's Bench Division. HMRC were given permission to join Eastern Fusion Limited and Hassan Khan. HMRC's application to amend in terms of the new draft was to be determined at a hearing with an estimate of 1-1½ days. HMRC indicated that they proposed to apply for summary judgment and they were directed to issue their application by 1 December 2005. Directions were given prospectively as regards such application, which would be determined some time after the application to amend. In late November 2005 HMRC sought agreement to delay the issue of a summary judgment application.
12. The application for permission to amend was fixed for 21 February 2006. A further revised draft of the amended particulars of claim was served on 17 February 2006, but the only change was to name Ward as a defendant and specifically seek relief against it. The facts relied on in support of the claim against Ward were already pleaded in the earlier draft.
13. Mr Uddin died on 20 February 2006 at the age of 32 and, on 21 February 2006, the proceedings were stayed, with liberty to apply. He had been diagnosed with terminal cancer in 2005.
14. There followed a lengthy period while attempts were made to appoint a representative of Mr Uddin's estate for the purposes of the action. In about late October 2006 it was proposed to HMRC that Ms Noorasa Begum, Mr Uddin's sister, should be joined for this purpose and as a representative beneficiary of the Bibi settlement. HMRC proposed instead the appointment of the Official Solicitor. Ultimately, agreement was reached on the appointment of Ms Begum, on terms which were set out in an order of Walker J on 30 April 2007. Ms Begum was not within the class of beneficiaries under the terms of the settlement, but the trustee exercised its powers under the settlement to appoint her to the class of beneficiaries. The order provided that she may advance and be heard on any argument which Mr Uddin or Cellcom could have made.
15. The consent order also provided that HMRC were to file and serve the version of their amended particulars of claim which they would in due course ask the court to permit. This was done on 8 May 2007. The proposed amendments represented a very significant expansion on what had previously been proposed. There were lengthy passages setting out, separately, claims for conspiracy to injure and claims for conspiracy to injure by unlawful means. In addition, claims arising out of the alleged MTIC frauds were pleaded as wrongful interference, deceit and dishonest assistance in the misdirection or continuing diversion or laundering of funds "belonging to" HMRC. A claim for the unpaid VAT was also made against Mr Uddin and Mr Golechha under paragraph 5 of schedule 11 to the Value Added Tax Act 1994. The grounds on which it was alleged that the Bibi settlement be set aside as a sham transaction were expanded to include an allegation that Mr Uddin and BDO Fidecs by its officer dealing with the settlement had a common intention that Mr Uddin should have control over the disposal of trust assets and that BDO Fidecs would exercise no real power or discretion. Reliance was placed on the alleged back-dating of the trust deed, the circumstances in which funds had been transferred to the trust and the circumstances in which it was said that BDO Fidecs had permitted Mr Uddin to withdraw funds from the trust. There was a corresponding expansion in the remedies sought. On 11 May 2007 a further version of this draft amended pleading was served, but there was no difference in wording except for the exclusion of three introductory paragraphs 1A to 1C.
16. On 10 May 2007 HMRC also issued a claim form in a new action. The defendants are the same as in the 2002 action, including those joined in 2005, but in addition they include Ward. The particulars of claim and the relief sought were identical to the draft amended particulars provided for the 2002 action on 11 May 2007. The new action was issued in order to overcome any limitation problems which might arise as regards the amendments proposed in the 2002 action, permission for which might well not be obtained, if at all, until more than six years after the relevant events.
17. The consent order made provision for a case management conference to be listed in late June or July 2007, but HMRC failed to take the steps necessary to fix it. Following a further order dated 6 July 2007, it was fixed for 22 November 2007. By this date five significant applications had been intimated but not issued: applications by HMRC to amend their particulars of claim in the 2002 action and for summary judgment in both actions, applications by Ms Begum and by BDO Fidecs to strike out parts of the particulars of claim in both actions, and an application by Ms Begum for a stay of both actions as an abuse of process. By the order made at the case management conference on 22 November 2007, both actions were transferred to the Chancery Division. HMRC were directed to issue "their final application to amend their Particulars of Claim" by 21 December 2007, with directions for evidence. Ms Begum and, if so advised, BDO Fidecs were directed to issue their strike-out applications by 21 March 2008, again with directions as to evidence. No direction was given as regards the time for issue of an application to stay the actions, but it provided for any such application to be heard with the amendment and strike-out applications. It was directed that any application by HMRC for summary judgment should not be issued until judgment had been given on the amendment, strike-out and stay applications. Time for service of defences in the 2007 action was extended until after the conclusion of the proposed summary judgment application.
18. On 28 December 2007 HMRC issued applications to amend the particulars of claim in both actions. The proposed amendments were substantially the same as the amendments proposed in the 2002 action in May 2007 and involved only limited amendments to the original particulars of claim served in the 2007 action. There were however some changes to the formulation of the wrongful interference claim, HMRC's loss and, in particular, to the constructive trust claim. There was also a new claim that if the Bibi settlement was not a sham BDO Fidecs held the trust assets on a bare trust for Mr Uddin and/or Cellcom.
19. In early 2008 there was a change of solicitors and counsel instructed by HMRC. The new team decided to propose different amendments. By a letter dated 8 February 2008, HMRC's solicitors informed Ms Begum's solicitors of the intention to propose new amendments and also of a decision by HMRC not to apply for summary judgment in either action. New applications for permission to amend, with draft amended particulars of claim attached, were issued on 28 March 2008 (the 2008 amendments).
20. The 2008 amendments involve significant and extensive changes to the December 2007 amendments. Among them are, first, the introduction of the general description of MTIC fraud which I quoted at the start of this judgment and which contains defined terms (defaulter, buffer and so on) which are then used in the case pleaded against the defendants. Secondly, under the heading "Cellcom's dealings" the steps in the chains of transactions said to have taken place between January and October 2001 and to have constituted MTIC fraud are set out. Thirdly, the claims in conspiracy are almost completely re-pleaded. Fourthly, the claims for wrongful interference, deceit and dishonest assistance and the claims under para 5 of Schedule 11 of the Value Added Tax Act 1994 are all dropped. Fifthly, all proprietary claims are dropped. Sixthly, the allegations of backdating in relation to the Bibi settlement are expanded. Seventh, the case under s.423 is retained but particulars are given of the allegation that the purpose of the transfers to the trust was to put assets beyond the reach of HMRC.
21. The proposed amendments to the particulars of claim in both actions would result in the claims in the two actions being identically pleaded. The only exception is that Ward is a defendant in the 2007 action but HMRC no longer seeks to join it as a defendant in the 2002 action. Both actions would be confined to claims in conspiracy and under s.423. All the proprietary claims and all the alternative personal claims presently pleaded are abandoned and, it is agreed, are to be deleted. It is therefore unnecessary to consider whether these claims were sustainable in law or in fact.
22. On 5 May 2009 Ms Begum issued applications to strike out parts of the particulars of claim in both actions, as detailed in a witness statement in support of the application. Many are those parts of the particulars of claim in the two actions which HMRC proposes to abandon. They include also the conspiracy claim in the 2002 action which HMRC seeks to amend extensively and the claim under s.423 against Ward in the 2007 action.
23. On 12 May 2009 agreed directions were given for the hearing of the applications, including a listing not before 22 July 2009.
24. The applications came before me in December 2009 and once again the chequered history of these actions asserted itself. At 2 p.m. on the fourth and last day of the hearing, Counsel for HMRC produced further draft amendments which were principally designed to meet or clarify certain points which had arisen in the course of argument and to introduce some of the further information provided in 2008 in response to a request made on behalf of Ms Begum. Counsel told me that HMRC was seeking permission to amend in the form of this latest draft. Counsel and solicitors had no opportunity to consider these further amendments and I accordingly gave them the opportunity to consider them and to respond in writing or orally. On 25 January 2010 I received a 26 page skeleton argument from counsel for Ms Begum in opposition to the latest amendments and I was told in an accompanying note that they wished to make oral submissions, which they anticipated doing at the further hearing, by then fixed for early February for these and other applications. In the event, that hearing had to be vacated because of the illness of counsel for HMRC and the first available date thereafter was in late April 2010. Accordingly, I heard further submissions at the hearing on 4 May 2010.

Limitation periods

25. As the events giving rise to HMRC's claims occurred in 2001, the impact of limitation periods plays a large part in the consideration of the applications to amend. Counsel for HMRC, having taken instructions, accepted that if the proposed amendments introduced new claims, the relevant limitation periods had expired. A six-year period applies to the conspiracy claims and the relevant alleged events and loss all occurred more than six years ago. Having executed search warrants against Mr Uddin and others and charged Mr Uddin in 2001, it is not suggested that there are grounds for any postponement of the period under s.32 of the Limitation Act 1980. The limitation period for claims under s.423 of the Insolvency Act 1986 varies according to the remedy sought. It is six years for a straightforward monetary remedy but twelve years if the remedy sought is such as to make it an action on a specialty, such as an order setting aside a trust deed executed under seal: see Hill v Spread Trustee Co. Ltd [2007] 1 WLR 2404. In the 2007 action it was pleaded that the Bibi settlement was liable to be set aside as illegal or a sham. In the course of the hearing, Mr Newey stated on behalf of HMRC that they were not pursuing this claim and that the only remedies sought under s.423 were monetary, such as orders for the payment of £8m and interest, so that six years was the appropriate limitation period.

Issues on the present applications

26. The principal issues in relation to the amendments in both actions are as follows. The first and second arise under s.32 of the Limitation Act 1980 and the associated rules in CPR 17.4. First, are any new claims raised by the amendments? Now that the joinder of Ward is not sought in the 2002 action, the issue is whether there are claims involving the addition or substitution of a new cause of action. Secondly, if and to the extent that there are new claims, does the cause of action in each new claim arise out of the same facts or substantially the same facts as a claim in respect of which HMRC has already claimed a remedy in the proceedings? If it does not, permission to amend to include the claim cannot be granted. Thirdly, should the court in the exercise of its discretion permit the amendment? It is not disputed that the principles set out by Peter Gibson LJ in a well-known passage in Cobbold v London Borough of Greenwich [1999] EWCA Civ 2074 are to be applied:

"..The overriding objective is that the court should deal with cases justly. That includes, so far as practicable, ensuring that each case is dealt with not only expeditiously but also fairly. Amendments in general ought to be allowed so that the real dispute between the parties can be adjudicated upon provided that any prejudice to the other party or parties caused by the amendment can be compensated for in costs, and the public interest in the efficient administration of justice is not significantly harmed. .. "

Amendment after expiry of limitation periods: principles

27. HMRC reject the suggestion that their proposed amendments raise in either action a new claim for the purposes of s.35 of the Limitation Act, while the defendants submit that they do. The relevant provisions of s.35 are:

"(2)   In this section a new claim means any claim by way of set-off or counter-claim, and any claim involving either—

(a)  the addition or substitution of a new cause of action; or

(b)  the addition or substitution of a new party;

and "third party proceedings" means any proceedings brought in the course of any action by any party to the action against a person not previously a party to the action, other than proceedings brought by joining any such person as defendant to any claim already made in the original action by the party bringing the proceedings.

(3)    Except as provided by section 33 of this Act or by rules of court, neither the High Court nor any county court shall allow a new claim within subsection (1)(b) above, other than an original set-off or counterclaim, to be made in the course of any action after the expiry of any time limit under this Act which would affect a new action to enforce that claim.

For the purposes of this subsection, a claim is an original set-off or an original counterclaim if it is a claim made by way of set-off or (as the case may be) by way of counterclaim by a party who has not previously made any claim in the action.

(4)    Rules of court may provide for allowing a new claim to which subsection (3) above applies to be made as there mentioned, but only if the conditions specified in subsection (5) below are satisfied, and subject to any further restrictions the rules may impose.

(5)    The conditions referred to in subsection (4) above are the following—

(a) in the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action; and

(b) in the case of a claim involving a new party, if the addition or substitution of the new party is necessary for the determination of the original action."

28. The Civil Procedure Rules contain provisions made in accordance with s.35(4). CPR 17.4(2) provides:

"The court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings."

While there is a difference in the wording of 17.4(2) as compared with s.35 (5)(a), it does not appear that there is any substantial difference in meaning, at least when applied to the facts on which the claimant relies. (The difference as regards reliance on facts pleaded by the defendant was removed by the decision of the Court of Appeal in Goode v Martin [2001] EWCA Civ 1899, [2002] 1 All ER 620). Nonetheless, as s.35(4) permits the rules to impose further restrictions in addition to those set out in s.35(5) and as CPR 17.4(2) is certainly not more liberal than s.35(5)(a), I shall focus on the requirement as expressed in 17.4(2): see Lloyds Bank plc v Rogers [1999] 3 EGLR 83 at 86A-B.

29. Section 35 and CPR 17.4 refer to "a new claim" and to a "claim already made", and s.35 refers also to "a claim involving a new cause of action". For present purposes, a claim is a new claim only if it involves "the addition or substitution of a new cause of action": s.35(2)(a). The authorities establish that "cause of action" carries the meaning given by Diplock LJ in Letang v Cooper [1965] 1 QB 232 at 242 – 3:

"simply a factual situation the existence of which entitles one party to obtain from the court a remedy against another person … [as distinct from] a form of action ... used as a convenient and succinct description of a particular category of factual situation"."

So, an amendment to include a claim for damages in negligence for personal injuries on facts already pleaded where the claim in respect of the injuries had been pleaded as a claim for damages in trespass to the person would not involve a new cause of action. In Lloyds Bank plc v Rogers, Auld LJ noted that what makes a new claim as defined in s.35(2) is "not the newness of the claim according to the type or quantum of remedy sought, but the newness of the cause of action which it involves." After referring to Diplock LJ's dictum in Letang v Cooper, Auld LJ continued:

"..It makes plain that a claim and a cause of action are not the same thing. It follows, as Mr Croally argued, that an originally pleaded 'factual situation' may disclose more than one cause of action, although one of them may not be individually categorised as such or the subject of a claim for a separate remedy. However, as Mr Browne-Wilkinson submitted, it does not follow that a claim so categorising it and/or seeking a remedy for it made for the first time by amendment is the addition of a new cause of action so as to render it a new claim.

That the draftsmen of section 35 and Ord 20 r 5 had the distinction in mind is underlined by their respective provision for new claims by reference to substituted new causes of action, as well as additional new causes of action. The remedy claimed – 'any claim' – may or may not be the same; what makes the claim 'a new claim' is the newness of the substituted cause of action. Thus, a claim for damages is a new claim, even if the same amount as originally claimed, if the claimant seeks, by amendment, to justify it on a different factual basis from that originally pleaded. But it is not, even if made for the first time, if it does not involve the addition or substitution of an allegation of new facts constituting such a new cause of action."

Lloyds Bank v Rogers was a decision of a two judge constitution of the Court of Appeal (Auld and Evans LJJ) and, while they differed on the issue as to whether the amendment introduced a claim involving a new cause of action, there was I think no disagreement on Auld LJ's statement of the underlying principles. In any event, the statement was cited with approval by the Court of Appeal in Aldi Stores Ltd v Holmes Buildings plc [2003] EWCA Civ 1882.

30. Thus, "claim" in the phrase "any claim involving … a new cause of action" refers to the remedy sought, while "cause of action" refers to the factual basis for the claim. Whilst the distinction is clear, it might be thought to lead to some tautology when applying the test in s.35(5)(a) as to whether "the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action". The answer lies in treating "cause of action" as those facts relied on in the statement of case as giving rise to a particular legal result and remedy. A change in the remedy may change the claim, but not the cause of action. A change in the essential features of the factual basis (rather than, say, giving further particulars of existing allegations) will introduce a new cause of action, but it may be permitted under s.35(5)(a) and CPR 17.4(2) if the facts are the same or substantially the same as those already in issue. I will return later to those provisions.
31. As well as referring to Letang v Cooper, Millett LJ in Paragon Finance plc v DB Thackerar & Co [1999] 1 All ER 400 at 405 cited "the classic definition" of a cause of action given by Brett J in Cooke v Gill (1873) LR 8 CP 107 at 116:

""Cause of action" has been held from the earliest time to mean every fact which is material to be proved to entitle the plaintiff to succeed, - every fact which the defendant would have a right to traverse."

Millett LJ continued:

"..I do not think that Diplock LJ was intending a different definition from that of Brett J. However it is formulated, only those facts which are material to be proved are to be taken into account. The pleading of unnecessary allegations or the addition of further instances or better particulars does not amount to a distinct cause of action. The selection of the material facts to define the cause of action must be made at the highest level of abstraction. .."

32. This passage was commented on by Peter Gibson LJ in Savings and Investment Bank v Finken [2001] EWCA Civ 1639 at para 30:

"As I see it, the exercise which is required is the comparison of the pleading in its state before the proposed amendment and the pleading in its amended state. I do not think that it assists to look at the endorsement on the writ (see Steamship Mutual at p 97 per May LJ). What must be examined is the pleading of the essential facts which need to be proved. To define the cause of action the non-essential facts must be left out of account as mere instances or particulars of essential facts. That is what I understand Millett LJ to have meant by stating that the selection of material facts must be made at the highest level of abstraction. Thus, to take the example provided by the facts in Letang v Cooper [1965] 1 QB 232, [1964] 2 All ER 929 discussed by Millett LJ at p 405 of the former report, the facts material to be proved to constitute the cause of action for trespass to the person did not include whether the trespass was intentional or unintentional."

The exercise to be undertaken in deciding whether there is "a new claim" as defined in s.35(2) is therefore to compare the essential factual elements in a cause of action already pleaded with the essential factual elements in the case of action as proposed. If they are the same, there is no new cause of action and therefore no new claim.

33. A question arises in this case as to whether and, if so, the extent to which for these purposes it is legitimate to have regard to further information provided by the claimant, whether voluntarily or pursuant to a request by the defendant. It is relevant in the present case, because HMRC served extensive further information in October 2005 in the 2002 action pursuant to a lengthy request. HMRC submits that it is permissible to have regard to further information, while Miss Newman submits that it is not.
34. In considering the question, Miss Newman rightly started with the relevant provisions of the CPR defining the purpose of statements of case and further information. Particulars of claim must include "a concise statement of the facts on which the claimant relies" (CPR 16.4(1)(a)), while the purpose of further information is to " (a) clarify any matter which is in dispute in the proceedings, or (b) give additional information in relation to any such matter." While further information may give particulars of facts alleged, sometimes in general terms, in the particulars of claim, the essential facts which the claimant must establish in order to succeed, in other words his cause of action, must be pleaded in the particulars of claim. To hold otherwise would enable a claimant to avoid the requirement for permission to amend his particulars of claim, or even to sidestep the requirements of s.35 of the Limitation Act.
35. While therefore it is legitimate to look at the further information for a fuller understanding of the claimant's pleaded case, it cannot be relied on to supply essential elements of the cause of action. NEC Semi-Conductors Ltd v IRC [2006] STC 606 concerned in part the amendment of particulars of claim and the application of s.35 and CPR 17.4. In a passage with which the other members of the court agreed (paras 84 and 89), Mummery LJ said at para 131:

"[131] While it is good sense not to be pernickety about pleadings, the basic requirement that material facts should be pleaded is there for a good reason—so that the other side can respond to the pleaded case by way of admission or denial of facts, thereby defining the issues for decision for the benefit of the parties and the court. Proper pleading of the material facts is essential for the orderly progress of the case and for its sound determination. The definition of the issues has an impact on such important matters as disclosure of relevant documents and the relevant oral evidence to be adduced at trial. In my view, the fact that the nature of the grievance may be obvious to the respondent or that the respondent can ask for further information to be supplied by the claimant are not normally valid excuses for a claimant's failure to formulate and serve a properly pleaded case setting out the material facts in support of the cause of action. If the pleading has to be amended, it is reasonable that the party, who has not complied with well-known pleading requirements, should suffer the consequences with regard to such matters as limitation."

36. I do not accept the submission for HMRC that Mummery LJ was not contemplating a case where further information had in fact been requested and provided. However, in deciding the questions posed by s.35(5)(a) and CPR 17.4(2), the facts already in issue and "the same facts or substantially facts as a claim" already pleaded include, in my view, facts set out in the further information provided they fall within the proper scope of further information. As Hobhouse LJ stated in Lloyds Bank plc v Rogers (CA unreported 20 Dec 1996):

"The policy of section 35 of the 1980 Act was that, if factual issues were in any event going to be litigated between the parties, the parties should be able to rely upon any cause of action which substantially arose from those facts."

37. A further point on which HMRC relies is that, in determining the questions under s.35 and CPR 17.4, it is entitled to take into account not only amendments already made, even outside the applicable limitation period, but also amendments which the court hearing the application will in any event allow. It was so held by the Court of Appeal in Welsh Development Agency v Redpath Dorman Long [1994] 1 WLR 1409 at 1416. Miss Newman accepted this proposition.
38. Although the proposed amendments will, if allowed, result in almost identical pleadings in the two actions, there are considerable differences between the existing particulars of claim in the actions, including the pleading of the conspiracy claims. The existing particulars of claim are the original particulars of claim in each case, save only that Mr Golechha, Eastern Fusion Limited and Mr Hassan Khan were joined in 2005 as defendants in the 2002 action. Permission has not been given, or refused, for any of the amendments previously put forward by HMRC.
39. The only claims which HMRC now wish to advance are in conspiracy and under s.423 of the Insolvency Act 1986. The particulars of claim in both actions already plead such claims. It will be convenient to take each head of claim, as pleaded and proposed to be pleaded in each action, in turn.

Conspiracy: principles

40. Dealing first with the claims in conspiracy, and as a preliminary to the issue as to whether the amendments raise any new claims, I will briefly consider the basic elements of the tort (or torts) of conspiracy which a claimant must allege and prove. Conspiracy has, in recent years, been subject to extensive consideration by the courts and it cannot be said that the law on all elements is now settled. However, a good deal is now settled by decisions of the House of Lords and the Court of Appeal and, as these are applications to amend, it is not appropriate to attempt to resolve differences of principle at this stage. If there is an element on which HMRC relies which is reasonably arguable, it cannot now be decided and the existence of reasonable arguments against it should not be a ground for refusing the amendment. This was Mr Newey's submission on behalf of HMRC, and it was not disputed by Miss Newman for Ms Begum. In particular, although Miss Newman advanced submissions and reserved her client's position that, following the decision of the House of Lords in the Revenue and Customs Commissioners v Total Network SL [2008] 1 AC 1174 (Total Network), a claim in damages for conspiracy was not available in respect of lost VAT against a person registered for VAT, she accepted that it was arguable either way and could not be decided on this application.
41. Both sides were content to treat a passage from the judgment of the Court of Appeal, delivered by Nourse LJ, in Kuwait Oil Tanker Co SAK v Al Bader [2000] 2 All ER (Comm) 271 as authoritatively stating the basic elements of civil conspiracy:

"It is common ground that there are two types of actionable conspiracy, conspiracy to injure by lawful means and conspiracy to injure by unlawful means. The first is sometimes described simply as a conspiracy to injure and the second as a conspiracy to use unlawful means: see eg Clerk & Lindsell on Torts, 17th Edn, para 23-76. In our view they are both conspiracies to injure and their ingredients are the same, with one crucial difference. In both cases there must be conspiracy to injure the claimant, but in the first case (in which the means employed would otherwise be lawful) the predominant purpose of the conspiracy must be to injure the claimant whereas in the second case, although the defendant must intend to injure the claimant, injury to the claimant need not be his predominant purpose.

We shall treat them as different torts, although, as it seems to us, they are better regarded as species of the same tort. It matters not. For present purposes we would define them as follows:

1. A conspiracy to injure by lawful means is actionable where the claimant proves that he has suffered loss or damage as a result of action taken pursuant to a combination or agreement between the defendant and another person or persons to injure him, where the predominant purpose of the defendant is to injure the claimant.

2. A conspiracy to injure by unlawful means is actionable where the claimant proves that he has suffered loss or damage as a result of unlawful action taken pursuant to a combination or agreement between the defendant and another person or persons to injure him by unlawful means, whether or not it is the predominant purpose of the defendant to do so.

We shall call them a "lawful means conspiracy" and an "unlawful means conspiracy" respectively."

42. I shall cite a further passage, on which both sides relied for different purposes:

"A further feature of the tort of conspiracy, which is also found in criminal conspiracies, is that, as the judge pointed out at page 124, it is not necessary to show that there is anything in the nature of an express agreement, whether formal or informal. It is sufficient if two or more persons combine with a common intention, or, in other words, that they deliberately combine, albeit tacitly, to achieve a common end. Although civil and criminal conspiracies have important differences, we agree with the judge that the following passage from the judgment of the Court of Appeal Criminal Division delivered by O'Connor LJ in R v Siracusa (1990) 90 Cr App Rep 340, [1989] Crim LR 712 at page 349 is of assistance in this context:

"Secondly, the origins of all conspiracies are concealed and it is usually quite impossible to establish when or where the initial agreement was made or when or where other conspirators were recruited. The very existence of the agreement can only be inferred from overt acts. Participation in a conspiracy is infinitely variable: it can be active or passive. If the majority shareholder and director of a company consents to the company being used for drug smuggling carried out in the company's name by a fellow director and minority shareholder, he is guilty of conspiracy. Consent, that is agreement or adherence to the agreement, can be inferred if it is proved that he knew what was going on and the intention to participate in the furtherance of the criminal purpose is also established by his failure to stop the unlawful activity."

Thus it is not necessary for the conspirators all to join the conspiracy at the same time, but we agree with the judge that the parties to it must be sufficiently aware of the surrounding circumstances and share the same object for it properly to be said that they were acting in concert at the time of the acts complained of. In a criminal case juries are often asked to decide whether the alleged conspirators were "in it together". That may be a helpful question to ask, but we agree with Mr Brodie that it should not be used as a method of avoiding detailed consideration of the acts which are said to have been done in pursuance of the conspiracy."

43. One of the elements which has subsequently been considered is whether in an unlawful means conspiracy, the unlawful means must themselves be actionable by the claimant. In Total Network, the House of Lords held that the commission of criminal offences both at common law and by statute could constitute unlawful means for these purposes, without necessarily being actionable in the civil courts. The case concerned a claim for damages for conspiracy brought by HMRC against defendants alleged to have organised or participated in MTIC fraud.
44. It is convenient here to mention two submissions made by Miss Newman. First, she submitted that in the case of a conspiracy to injure, that is to say a conspiracy where the predominant purpose of the conspirators is to injure the claimant, the means had to be lawful. If the means were unlawful, the correct characterisation was an unlawful means conspiracy, where only an intention to injure, not a predominant purpose, need be shown. Although the point will rarely matter, this submission is not in my judgment correct. It would be illogical, and lack any real merit or principle, to say that a claimant who can plead and establish that the predominant purpose of the conspirators was to injure him must show that the means used to injure him were lawful. In my judgment, a claimant who can plead and establish the predominant purpose to injure need not be concerned with whether the means used pursuant to the conspiracy were lawful or unlawful. This, I suspect, was the thinking behind the invitation of the Court of Appeal to HMRC in Total Network to consider whether to amend their claim to include an allegation of conspiracy to injure, an invitation declined by HMRC : see para 34 of the judgment of the Court of Appeal ([2008] 1 AC 1174 at 1190). One of the principal issues before the Court in that case, whether the means in an unlawful means conspiracy need be actionable at the suit of the claimant, would not have arisen if the case were put that way.
45. Miss Newman relied on the first sentence of paragraph 57 of the schedule to the judgment of Morgan J in Digicel (St Lucia) Ltd v Cable & Wireless plc [2010] EWHC 774 (Ch) ("There is certainly support in the authorities for the Claimants' submission that the tort of conspiracy is a single tort with two branches; one branch involves unlawful acts and the other involves lawful acts with a predominant intention to injure".) I take this as a description rather than a decision on the necessary elements of a conspiracy for the predominant purpose of injuring the claimant.
46. Secondly, Miss Newman submitted that it was a necessary element of a claim in conspiracy to injure by unlawful means that the defendants knew that the means in question were unlawful. This submission was based on passages in the judgments of Arden LJ and Toulson LJ in Meretz Investments NV v ACP Ltd [2008] Ch 244 and Briggs J in Bank of Tokyo-Mitsubishi v Baskan [2009] EWHC 1276 (Ch).
47. In the former case, the alleged unlawful means took the form of breaches of contract. At [127] Arden LJ said that the relevant intent to cause loss will not be present "where the causative act is something which the party doing it believes he has a contractual right to do as against the relevant person, notwithstanding that the act would coincidentally cause that person detriment or loss". At [174] Toulson LJ said:

"Although my conclusion on the issue of unlawful means makes it unnecessary to decide the point, I would support Arden LJ's view at 127 that it is a defence to an action for conspiracy to injure by unlawful means if the Defendant not only acted to protect his own interests, but did so in the belief that he had a lawful right to act as he did. Just as the tort of conspiracy to induce breach of contract is not committed if the Defendant believes that the outcome sought by him will not involve a breach of contract ...Mainstream v Young), so a Defendant should not be liable for conspiracy to injure by unlawful means if he believes that he has a lawful right to do what he is doing. This is consistent with Lord Hoffmann's comment in the OBG case [2008] 1 AC 1 para 56, when considering the tort of causing injury by unlawful means, that the common law in this area is designed only to enforce basic standards of civilised behaviour."

48. There are three points to note. First, Toulson LJ speaks of the defendant's belief in the legality of the means as being a defence to an action for conspiracy to injure by unlawful means, not as a necessary element in the cause of action. So far as any authorities cited to me go, it had not previously been suggested that knowledge of unlawfulness was an element of the cause of action. Secondly, Arden LJ and Toulson LJ were concerned with breaches of contract, not criminal offences, as the unlawful means. Knowledge that an act is an offence is not normally, if it ever is, an element of the offence and Miss Newman accepted, on the basis of the material that she put before me, that it is not an element in the criminal offence of conspiracy that the defendant knew that the acts to be undertaken pursuant to the conspiracy were offences nor was it a defence to prove that the defendant did not know they were offences. Thirdly, Toulson LJ refers to a defendant acting to protect his own interests. If a conspiracy to injure HMRC by cheating is established, it is difficult to see what legitimate interests the defendants could say they were protecting or whether they could seriously say that they did not know that cheating was unlawful.
49. This issue was considered by Morgan J in the Digicel case at paras 86-119 of the schedule to his judgment. He was not there concerned with unlawful means comprising criminal offences. He proceeded on the basis that if a defendant had a genuine belief that the relevant acts were lawful, he would not be liable in conspiracy to injure by unlawful means, but he left open, because it did not arise on the facts, whether the legal burden lay on the claimant or the defendant.
50. I find it difficult to see why ignorance that the relevant acts are criminal offences should provide a defence to a civil claim in conspiracy. In Belmont Finance Corporation v Williams Furniture Ltd (No. 2) [1980] 1 All ER 393, the Court of Appeal held that it did not. However, it is enough on this application to rely on the first point, that lack of knowledge is or may be a defence and that it is an open question whether the legal burden lies on the claimant or the defendant.
51. In the Bank of Tokyo case at [836] Briggs J cited part of the passage from the judgment of Toulson LJ set out above and said that in the Meretz case, "Arden and Toulson LJJ went further [than Lord Walker in the Total Network case] by requiring, as a condition of liability, that the defendant knows that the claimant's loss was to be caused by the use of unlawful means". I do not read that passage as saying that the claimant must prove that the defendant knew the means were unlawful but, if it does, it is not supported by Meretz or any other authority and, particularly where the alleged means are criminal, I would not consider it to be correct for the reasons already given.
52. Consideration of this issue provides further support for the view that a conspiracy with the predominant purpose to injure need not involve lawful means. If it did, it would mean that a defendant who (a) had the predominant purpose to injure, (b) used unlawful (non-criminal) means but, (c) genuinely believed the means to be lawful, would escape all liability under either head of the tort of conspiracy. This cannot be right.

2002 Action: conspiracy

53. The pleaded case of conspiracy in the 2002 action is as follows:

"3. Conspiracy to cheat the Public Revenue

3.1 Between July 2000 and November 2001 Mr Uddin together with Benno Mischke and other persons unknown agreed to set up transactions within the United Kingdom and in other EU member states whereby goods were traded between companies in such a way that repayments of VAT would be claimed from and paid by the Commissioners on the basis that genuine transactions were in fact occurring and that VAT was properly being accounted for by the companies concerned in the transactions.

3.2 This system of transactions set up by Mr Uddin involved the "zero rated" purchase of mobile telephone from EU traders (generally from a company under the control of Mr Mischke, the apparent circulation of the telephones through companies under his control (including Cellcom), the sale by Cellcom to exporters and the sale of the telephones back (at a "zero rated" price) to the original EU suppliers. The telephones would then be "re-circulated" through the same companies in subsequent transactions. The companies importing the telephones would produce invoices purporting to charge VAT to their customers but would not account for the tax shown on those invoices to the Commissioners. The exporters would receive on each re- circulation a repayment of VAT from the Commissioners which would itself be passed through the chain (via Cellcom) and be diverted to accounts under the control of Mr Uddin and his associates.

3.3 Between July 2000 and November 2001 repayments were made to exporting companies purchasing from Cellcom amounting to not less than £112,717,000. During the same period the companies in the chain controlled by Mr Uddin and his associates accounted to the Commissioners for VAT in the sum of approximately £2,717m. The sum paid out by the Revenue which has not been accounted for is not less than £110m. By reason of the matters aforesaid the Commissioners and the Public Revenue have suffered loss and damage. …"

54. As earlier mentioned, an extensive request for further information of the particulars of claim was served on behalf of Mr Uddin on 28 July 2005 to which HMRC provided an extensive response on 10 October 2005.
55. Leaving aside the Further Information, the pleaded case has the following principal features. First, the conspirators were Mr Uddin, Mr Mischke and "persons unknown". Neither Cellcom nor any of the other companies in the chains of transactions, which were known to HMRC, were alleged to be conspirators. Secondly, and following from the first point, it was those conspirators who agreed to set up transactions of the type described in paragraph 3.2, all falling within a system of transactions alleged to have been set up by Mr Uddin.
56. Thirdly, and this is not entirely straightforward on the pleading, all or some of the companies in the chain were controlled by all or some of the alleged conspirators. In paragraph 3.2 it is alleged that the system set up by Mr Uddin involved "the zero rated purchase of mobile telephones from EU traders (generally from a company under the control of Mr Mischke), the apparent circulation of the telephones through companies under his [i.e. Mr Uddin's] control (including Cellcom), the sale by Cellcom to exporters and the sale of the telephones back (at a zero rated price) to the original EU suppliers". In paragraph 3.3, it is alleged that "the companies in the chain controlled by Mr Uddin and his associates" accounted to HMRC for a certain amount of VAT. While paragraph 3.2 clearly pleads that the companies in the chain were controlled by Mr Uddin, paragraph 3.3 pleads that at least some of those companies were controlled by Mr Uddin "and his associates". The request for further information sought clarification of paragraph 3.3. The information provided by HMRC was that the companies referred to were the "missing traders" and the "primary buffers" (Sisley Limited and Silverwell Promotions Limited) and that the "associates" were Mr Mischke and persons unknown.
57. The upshot of the pleaded case, as I read it, is therefore that Cellcom was controlled by Mr Uddin, and that Sisley, Silverwell and the missing traders were controlled by Mr Uddin, Mr Mischke and persons unknown.
58. Fourthly, it was a conspiracy to cheat HMRC. The cheating involved either or both of two features: "repayments of VAT would be claimed from and paid by the Commissioners on the basis that genuine transactions were in fact occurring and that VAT was properly being accounted for by the companies concerned in the transactions". It is no longer contended that the transactions had no legal effect, although it is HMRC's case that the chains of transactions were set up only for the purpose of cheating HMRC. As regards the alternative feature, it is pleaded in para 3.2 that it was part of the system set up by Mr Uddin that the companies in the chains importing the mobile phones "would not account for the tax shown on those invoices to the Commissioners" and that the repayment of VAT claimed from the Commissioners would be "diverted to accounts under the control of Mr Uddin and his associates".
59. The unlawful means are not spelt out, but as a matter of necessary inference and as expressly stated in the heading to para 3 ("Conspiracy to Cheat the Public Revenue") and in paragraph 1 of the prayer for relief (damages "for conspiracy to cheat") they include the criminal offence of conspiracy to defraud. This was spelt out in the answer to requests 5 – 7 in the Further Information served in October 2005:

"The business carried on by Cellcom had no legitimate economic purpose. Its sole purpose was to defraud HMCE. The transactions in which it was involved were not conducted with a view to genuine trading in mobile phones but for the purposes of

a obtaining payment from exporters (who had received tax credits in circumstances where such credits should not have been paid) and

b the retention of corresponding output tax charged by the missing traders."

More specifically, in answer to the request to clarify what is said to be unlawful in the alleged agreement between Mr Uddin and Mr Mischke (request 11), HMRC replied:

"The agreement was unlawful in that it involved

(a) the commission of the offence of cheating the Public Revenue;

(b) the commission of offences under s.72 VATA;

…

(e) fraud."

60. The pleaded case involves the use of unlawful means, as now understood following the decision of the House of Lords in the Total Network case. It also necessarily involves a conspiracy with a predominant purpose to injure. The reason is that where persons conspire to obtain money by cheating or fraud, the necessary injury to the person cheated or defrauded is inseparable from the obtaining of the money. The conspirators cannot say that their predominant purpose was not to injure the victim but was to obtain money. They are the obverse of each other and necessarily both contribute the predominant purpose of the conspirators. The same would be true of, say, a conspiracy to burgle a house. I would respectfully endorse the approach of Lord Neuberger in Total Network at paras 228-229. I should add here that the pleading also necessarily involves an allegation that the conspirators intended to injure the Commissioners, in the sense required for an unlawful means conspiracy.
61. In my judgment, and leaving aside the question of particulars of the transactions, this was an intelligible and sustainable plea in conspiracy. The case in short was that Mr Uddin and his associates conspired to defraud the Commissioners by setting up chains of transactions arranged in such a way that VAT due from importers would not be paid but repayments of VAT due to exporters would be obtained.
62. The particulars of claim contain no pleading of the transactions referred to in paras 3.1 and 3.2. While the particulars of claim were certainly deficient in that respect, they were not on that account demurrable if particulars were supplied. Detailed schedules of [28] alleged chains of transactions were served with the Further Information in October 2005. They show, using the terminology of the proposed paragraph 2A quoted above, the dates of each chain of transaction, the names of the EU traders, Defaulters (or "Missing Traders"), Buffers (including, in the case of each chain, Cellcom), Brokers and ultimate EU purchaser (where known). They show quantities and model types of mobile phones, invoice totals and VAT and exhibit references to documents. These schedules were originally prepared and served on Mr Uddin in the criminal proceedings and the references are to exhibits in those proceedings. The schedules also give details of the registered directors and secretaries of companies in the chains. Revised schedules, correcting some of the figures, were served in February 2006.
63. In addition to this detail, the Further Information gives the following general particulars of the alleged system of transactions:

"The transactions were set up by Mr Uddin and his associates arranging

i) for goods to be despatched to London by the EU traders

ii) for those goods to be held by freight forwarders in the first instance in the name of the missing trader

iii) thereafter for the goods to be held in the name of the primary buffers (Sisley and Silverwell)

iv) for the goods to be thereafter held in the name of Cellcom

v) for the goods to be thereafter held in the names of the exporting brokers

vi) for the goods to be thereafter to be sold back to the EU traders and delivered back to them

vii) for VAT invoices to be prepared purporting to evidence these transactions

viii) for the exporting brokers to make repayment claims in the sums charged as VAT in the invoices addressed by Cellcom to them

ix) for the missing traders not to account for VAT shown on the invoices issued by them to the primary buffers"

64. Of "the apparent circulation of the telephones" in paragraph 3.2 of the 2002 particulars of claim, the Further Information states:

"The transactions involved the apparent 'buying' and 'selling' of telephones. The circulation of the telephones was 'apparent' and the sales transactions were contrived in that the telephones were not delivered to the parties purporting to buy them but retained by the freight forwarders until such time as they were despatched back to the original consignors in the EU. In the case of the missing traders the goods were not paid for by them. Sums were remitted as third party payments through the accounts of the primary buffers, Sisley and Silverwell."

65. The Further Information deals further with the identity of the alleged conspirators. In response to requests 1-4, HMRC stated that "The case is that the Defendants Mr Uddin and Mr Golechha and Cellcom Limited conspired together and with other persons with intent to cause loss to HMCE …". In response to request 20, for information as to the companies other than Cellcom under Mr Uddin's control, HMRC responded:

"The companies in question who formed the transaction chain were under the control of Mr Uddin and/or Mr Golechha or were acting under their direction or in combination with them – see drafted amended Particulars of Claim. Mr Uddin and Mr Golechha were organisers of the conspiracy."

The answer to request 44 states that it is alleged that Mr Uddin, Mr Golechha and Cellcom Limited are each liable in damages for conspiracy to cheat. It is repeated in the answer to request 59, in which HMRC claims damages for conspiracy against Cellcom.

66. These answers all go beyond, in my judgment, the proper scope of Further Information. There is no claim in conspiracy or pleading of conspiracy against Cellcom in the particulars of claim. The only claim against Cellcom is a proprietary claim. Moreover, the pleaded claim of conspiracy is inconsistent with a claim in conspiracy against Cellcom, because it is limited to Mr Uddin, Mr Mischke and "persons unknown". Likewise, there is no pleading that Mr Uddin conspired with any other company used in the chains of transactions and it is likewise inconsistent with the pleaded allegation of conspiracy. Any of these claims would have to be introduced by way of amendment to the particulars of claim, as HMRC appear to acknowledge in their answer to request 20. Having said that, the companies in the chain are alleged in the particulars of claim to have been controlled by Mr Uddin and his associates, so an amendment to the pleading to include them as conspirators would not be a large step, on the grounds that the controllers' knowledge would be attributed to the companies.
67. I turn now to the amendments proposed to the particulars of claim in the 2002 action as regards the claim in conspiracy.
68. The particulars of claim in the 2002 action start with references to relevant provisions of the VAT legislation, and no amendments are proposed save for those which flow from the position of HMRC as the successor body to the Commissioners of Customs and Excise. Paragraph 2 relates to the defendants. Amendments are proposed to paragraph 2.1 dealing with the death of Mr Uddin and Ms Begum's status in the proceedings. Amendments are proposed to paragraph 2.3 dealing with Cellcom, to include an allegation that Mr Uddin was its sole director at all material times and to plead an agreement that Cellcom would be jointly owned by Ward and a company owned by Mr Golechha. A paragraph 2.4 is proposed to be added, so as to plead that Mr Golechha was a friend and business associate of Mr Uddin and carried out deals in mobile phones on behalf of Cellcom. I consider that these amendments should be allowed. As regards paragraphs 2.3 and 2.4, Mr Golechha is and has since 2005 been a defendant and it is reasonable to plead something about his alleged place into the story. This includes the allegation of an agreed half share in Cellcom. I would also permit the introduction of paragraph 2A.1 which sets out the typical elements of MTIC and paragraph 3.2.1 which pleads the covertly recorded conversations involving Mr Uddin.
69. The amendments which HMRC apply to make to the pleaded case of conspiracy are very extensive. Virtually the entirety of paras 3.1, 3.2 and 3.3 would be deleted. The new paragraph 3.1 would read as follows:

"3. Conspiracy to cheat the Public Revenue

3.1 Between January 2001 and November 2001 Mr Uddin, the Second and Fourth Defendants conspired together with (a) the EU traders, (b) the Defaulters, (c) the other Buffers, (d) the Brokers and (e) Mr Benno Mischke, alternatively with one or more of them, with the object or purpose of inflicting harm on the Claimants as an end in itself or as a means to another end, to injure the Claimants by unlawful means (and which the conspirators knew to be unlawful), namely:

3.1.1 contravention by the Defaulters of their obligation to account for VAT on their sale of the goods under section 25 of the 1994 Act and/or paragraph 5 of Schedule 11 to the said Act and/or regulation 40 of the Value Added Tax Regulations 1995; and/or

3.1.2 the commission by the Defaulters and/or the Brokers of the common law offence of cheating the revenue; and/or

3.1.3 the commission by the conspirators of offences under section 72 of the 1994 Act."

70. The alleged conspirators therefore include the companies in the chain previously alleged to be controlled by Mr Uddin, Mr Mischke and persons unknown, and also the EU traders and "the Brokers" (previously called the exporters"). A conspiracy with "persons unknown" is no longer pleaded. Paragraph 3.1A pleads out the chains of transactions "in pursuance of the said conspiracy" by reference to the schedules of transactions served in 2006. Each of the companies in the chain, including the EU traders and the Brokers is alleged to have known and intended the essential elements of the conspiracy, that VAT due to HMRC would not be paid and that VAT would be claimed back from HMRC on export of the mobile phones to purchasers in EU member states. It is alleged that Mr Uddin, Mr Golechha and Mr Mischke arranged and carried the transactions into effect and that Mr Uddin and Mr Mischke funded them.
71. Paragraph 3.1B pleads dishonest acts against not only Mr Uddin and Mr Mischke but also Cellcom and all the other companies in the chains. It alleges against each of them offences under s.72(1) of the 1994 Act and against some of them offences under s.72(10). It alleges the common law offence of cheating the revenue against the Defaulters and the Brokers. In support of the allegation of conspiracy, para 3.2.1 pleads statements allegedly made by Mr Uddin in covertly recorded conversations in November 2001. Paragraph 3.2.2 pleads facts and matters from which the dishonesty of the dealings comprised in the chains of transactions is to be inferred. Paragraph 3.3 contains allegations of dishonesty and conspiracy specifically against Mr Uddin, Mr Golechha and Cellcom, the defendants against whom claims for damages for conspiracy are made.
72. When set against the original particulars of claim and such parts of the Further Information as merely provide explanation or additional information, it is in my view clear that the proposed amendments include additional causes of action in conspiracy against Mr Uddin and, for the first time, causes of action in conspiracy against Cellcom (and Mr Golechha).
73. It becomes necessary therefore to consider whether the new claims arise out of the same or substantially the same facts as the claims already pleaded. The essential elements of the new claims are (i) Mr Uddin conspired not just with Mr Mischke but also with Cellcom, Mr Golechha and all the companies in the chains, "alternatively with one or more of them", (these words have the effect of pleading a total of over 30 possible conspiracies) (para 3.1), (ii) Cellcom is liable in conspiracy (para 3.1), (iii) each of the companies had the knowledge and intention that HMRC would be defrauded (para 3.1A), the "Defaulters" dishonestly failed to account to the Commissioners for output tax and the "Brokers" dishonestly reclaimed input tax from the Commissioners, in each case knowing and intending that the public revenue would be deprived of such tax and thereby committing the common law offence of cheating the revenue (para 3.1B. 1-2), (iv) Mr Uddin, Mr Golechha, the Defaulters, the Buffers (including Cellcom) and the Brokers committed offences under s.72(1) of the 1994 Act (para. 3.1B. 3-4) and (v) the Buffers (including Cellcom) and the Brokers committed offences under s.72(10) (para. 3.1B.5).
74. Trial of the presently pleaded case would involve an investigation of the transactions detailed in the schedules and of the control by Mr Uddin "and his associates" of the "missing traders" and the "buffers", as well as their allegedly fraudulent purpose. A claim in conspiracy against those companies, including Cellcom, would need no new facts provided that the claim that the companies were conspirators was based on the control of them by Mr Uddin and Mr Golechha. The attribution to those companies of their knowledge would follow as a matter of law from a finding that they controlled the companies, and would not raise any new facts.
75. To that extent, a new claim in conspiracy against Cellcom and a new claim alleging conspiracy between Mr Uddin and those companies arise out of the same or substantially the same facts as the existing claim. It is, however, a claim which can only be made on the basis of control by Mr Uddin and his associates (now narrowed to Mr Golechha) of those companies. A claim in conspiracy which is based on those companies being independent actors with knowledge, intention and dishonesty not resulting from attribution to them of the state of mind of Mr Uddin or Mr Golechha as their controllers raises new and substantially different facts.
76. Different considerations apply to the conspiracy alleged with the EU Traders and the Brokers. As regards the EU Traders, most of the purchases are alleged in paragraph 3.2 of the present pleading to have been made from a company under the control of Mr Mischke. His knowledge would be attributable to that company and to that extent the claim of a conspiracy with his company arises out of the same facts as are already in issue. The same is not the case as regards other EU Traders.
77. As regards the Brokers, the position is more difficult. The un-amended particulars of claim contain no allegation that the Brokers (or "exporters") were controlled by Mr Uddin or his associates. Nor is there any clearly stated allegation that they were knowing participants in the conspiracy. However, paragraph 3.2 contains more than a hint that they were knowingly involved. The system of transactions involved the sale of mobile phones to exporters and their sale back to the original EU traders, and "the telephones would then be re-circulated" through the same companies in subsequent transactions… The exporters would receive on each re-circulation a repayment of VAT…" It is hard to see how the exporters could have been innocent participants in these transactions. The defendants' request for further information included a request for clarification as to whether it was alleged that the exporters were acting fraudulently. The answer was that "the exporting brokers were themselves aware that the business being conducted involved, and the repayments claims arose from, Missing Trader Fraud".
78. Trial of the un-amended claims would involve investigation of the Brokers' knowledge and intentions. A claim based on a conspiracy involving them is a new claim, but I consider that it arises out of the same or substantially the same facts as are already in issue.
79. The proposed amendments refer to the statutory provisions obliging the importers or "Defaulters" to account for VAT on the sales of goods by them and refer also to "the commission by the conspirators of offences under s.72 of the 1994 Act". Non-payment of VAT was of course at the heart of the original pleading and the addition of express reference to the statutory bases for the obligation is not an amendment to which objection can legitimately be made.
80. As regards s.72, it was made clear on behalf of HMRC that offences are alleged under ss 72(1) and 72(10). This is spelt out in paragraph 3.1B of the revised amended pleading. Section 72(1) makes it an offence if "any person is knowingly concerned in, or in the taking of steps with a view to, the fraudulent evasion of VAT by him or any other person", carrying a maximum sentence on indictment of an unlimited penalty or imprisonment for seven years. Section 72(10) makes it an offence, triable summarily and carrying a financial penalty:

"If any person acquires possession or deals with any goods, or accepts the supply of any services, having reason to believe that VAT on the supply of the goods or services, on the acquisition of the goods from another member State or on the importation of the goods from a place outside the member States has been or will be evaded. .."

81. The addition of these references does not of itself involve a new cause of action. Commission of both offences was involved in the original, as well as the amended, pleading. If there is a conspiracy to evade the payment of VAT or cheat the revenue, as here alleged, it appears to me that the alleged conspirators will also be guilty of the offence under s.72(1). The companies in the chain after the Defaulters will also, on the alleged conspiracy, be guilty of the offence under s.72(10). Miss Newman argued that loss to HMRC could not flow from the commission of offences under s.72(10), but in my view the loss flows from carrying the whole conspiracy into effect, and it is artificial to separate out the steps and say that loss does not flow from a particular step or steps. The point is at least arguable for HMRC.
82. A number of objections are taken to the proposed amendments in both actions on grounds of a lack of particularity, irrelevance or embarrassment. I shall not refer to those which I have already addressed elsewhere in this judgment.
83. First, it is said that there is a failure properly to identify the alleged conspirators. I do not accept this. When read with the schedules, the proposed amendments appear to me to be clear. To allay one concern raised by the defendants, HMRC will not be permitted to rely on generic descriptions in the particulars of claim to include alleged conspirators not identified by name either in the pleading or in the schedules.
84. Secondly, the defendants complain that what the conspirators allegedly agreed to do is not separately pleaded from what they are alleged actually to have done in pursuance of the conspiracy. The answer to this, in my view, lies in the opening words of paragraph 3.1A: "In pursuance of the said conspiracy". As counsel for Ms Begum themselves say in their third skeleton argument: "an action cannot be taken pursuant to a conspiracy if it does not fall within the class of matters that it was conspired would be done". Equally, if the conspirators agreed to do other things which in the event were not done, they are legally irrelevant to the cause of action.
85. Thirdly, it is said, correctly, that in the case of a conspiracy to injure by unlawful means, the alleged loss and damage must result from the unlawful actions taken pursuant to the conspiracy: Total Network at [93] and [95] per Lord Walker. It is submitted that it is not clear as to what unlawful actions are relied upon as causing the loss. I do not think that a fair reading of paragraphs 3.1, 3.1A and 3.1B should leave any real doubt on this issue. I can see that there might be more room for argument as to whether an offence under s.72(10) results in loss, as opposed to the common law offence of cheating the public revenue and s.72(1) where the causal connection is, I would think, clear. The answer as regards s.72(10) may be that it is a specific offence committed by some of the companies in the chains in the course of their knowing participation in the overall fraudulent scheme. In any event, this is an issue for argument at trial, if at all, and is not a good ground for refusing permission to amend to include reference to s.72(10).
86. Fourthly, various criticisms are levelled at paragraphs 3.1A and 3.1B. It is said that there is inadequate linking of the general allegations of transactions in paragraph 3.1A with the particulars given in the schedules. I do not accept that any difficulty arises in that respect. It is said that it is not clear what matters, precisely, in paragraph 3.1A are alleged to amount to the offences alleged in paragraphs 3.1B.3 – 3.1B.5. I do not accept that any such difficulty exists. It is said that because the commission of an offence by the EU traders is not alleged in paragraph 3.1B, the allegation against them in paragraphs 3.1A.1 should not be allowed. This does not follow. The EU traders are alleged to be parties to a conspiracy which involved an intention to injure HMRC by unlawful means causing loss to HMRC. It is not necessary that each party to the conspiracy itself committed an offence or other unlawful act. Paragraph 3.1A simply pleads the EU traders' acts pursuant to the conspiracy and their state of mind.
87. Fifthly, it is submitted that there are problems with the pleading of loss and causation which should be cured before permission to amend is given. The pleaded loss is the amount of VAT repayments made by HMRC in the chains of transactions particularised in the schedules, less the amount of VAT paid to HMRC in those chains. It is said that this is not a coherent plea of loss flowing from the unlawful means alleged. I do not agree. The loss flows directly from the chains of transactions which were put in place pursuant to the conspiracy and which, on HMRC's case, necessarily involved the commission of the pleaded offences.
88. Sixthly, there are a large number of detailed points made about the contents of the schedules. It is quite impractical to go through them on this application. It is for HMRC to consider whether to meet any of those points. If it fails to meet a point which is in truth necessary to an understanding of its case, on a particular chain of transactions, it will fail in its claim as regards that chain. I do not consider the points made are such as to justify a refusal of permission to amend.
89. In approaching criticism of the very detailed nature put forward by the defendants in this case, it is as well to bear in mind the following passage in the judgment of Saville LJ in British Airways Pension Trustees Ltd v Sir Robert McAlpine & Sons Ltd (1994) 45 Con LR 1 at 4 – 5:

"The basic purpose of pleadings is to enable the opposing party to know what case is being made in sufficient detail to enable that party properly to prepare to answer it. To my mind it seems that in recent years there has been a tendency to forget this basic purpose and to seek particularisation even when it is not really required. This is not only costly in itself, but is calculated to lead to delay and to interlocutory battles in which the parties and the Court pore over endless pages of pleadings to see whether or not some particular point has or has not been raised or answered, when in truth each party knows perfectly well what case is made by the other and is able properly to prepare to deal with it. Pleadings are not a game to be played at the expense of the litigants, nor an end in themselves, but a means to the end, and that end is to give each party a fair hearing. Each case must of course be looked at in the light of its own subject matter and circumstances. Thus general statements to the effect that global or composite claims are embarrassing and justify striking out, to be found for example in Hudson 11th Ed. paragraph 8–204 are not automatically applicable to every case. With regard to the particular pleadings in question, I remain unpersuaded that either McAlpines or PDP were put to any sort of material unfair disadvantage by the way the matter had been set out by the Plaintiffs."

90. To like effect, after the introduction of the CPR, was Lord Woolf MR in McPhilemy v Times Newspapers Ltd [1999] 3 All ER 775 at 792-3:

"The need for extensive pleadings including particulars should be reduced by the requirement that witness statements are now exchanged. In the majority of proceedings identification of the documents upon which a party relies, together with copies of that party's witness statements, will make the detail of the nature of the case the other side has to meet obvious. This reduces the need for particulars in order to avoid being taken by surprise. This does not mean that pleadings are now superfluous. Pleadings are still required to mark out the parameters of the case that is being advanced by each party. In particular they are still critical to identify the issues and the extent of the dispute between the parties. What is important is that the pleadings should make clear the general nature of the case of the pleader. This is true both under the old rules and the new rules. The Practice Direction to CPR 16 , paragraph 9.3 requires, in defamation proceedings, the facts on which a defendant relies to be given. No more than a concise statement of those facts is required.

As well as their expense, excessive particulars can achieve directly the opposite result from that which is intended. They can obscure the issues rather than providing clarification. In addition, after disclosure and the exchange of witness statements pleadings frequently become of only historic interest. Although in this case it would be wrong to interfere with the decision of Eady J, the case is overburdened with particulars and simpler and shorter statements of case would have been sufficient. Unless there is some obvious purpose to be served by fighting over the precise terms of a pleading, contests over their terms are to be discouraged."

91. As against those principles, Miss Newman relied on the requirement for proper particulars of allegations of dishonesty. I am satisfied that the case of dishonesty is sufficiently pleaded. It is to a significant extent based on what are alleged to have been Mr Uddin's statements in the taped conversations and on inference from facts which are pleaded in paragraph 3.2.2, the alleged transactions and the consistent failure by the importers to account for VAT. There are not general and vague allegations of fraud such as were addressed in Re Rica Gold Washing Co (1879) 11 Ch D 36 and Wallingford v Mutual Society (1880) 5 App Cas 685.

2007 Action: Conspiracy

92. The pleaded claim in conspiracy in the particulars of claim in the 2007 action, while containing much of what is in the 2002 action, expands upon it in significant respects.
93. Paragraph 3.1 contains the same allegation that Mr Uddin with Mr Mischke and "persons unknown" (to whom are added Mr Golechha) agreed to set up transactions whereby goods were traded between companies in such a way that repayments of VAT would be claimed from and paid by the Commissioners on the basis that VAT was properly being accounted for by the companies concerned in the transactions. It continues that in fact the transactions organised by Mr Uddin and the others:

"..would not constitute genuine commercial trading but would be carried out with the fraudulent intention that repayments of input tax should be made by the Commissioners but no corresponding payments of output tax would be made by the parties involved in the transactions. .."

94. Paragraph 3.2 is as follows:

"This system of transactions set up by Mr Uddin and Mr Golechha involved:

i) the "zero rated" sale of mobile telephones by EU traders (generally from a company under the control of Mr Mischke) to companies in the United Kingdom ("the missing traders");

ii) the apparent circulation of the telephones through a transaction chain comprising companies including Cellcom which were either under the control of Mr Uddin and/or Mr Golechha or who were acting under their direction or in combination with them;

iii) the sale by Cellcom to exporting brokers (or on occasions intermediate buffer companies);

iv) the onward sale of the telephones by the exporting brokers back (at a "zero rated" price) to the original or other EU suppliers;

v) on occasions the telephones would then be "re- circulated" through the same companies in subsequent transactions."

95. Paragraph 3.3 alleges that:

"The agreements between Mr Uddin, Mr Golechha, Cellcom and others constituted

I) a combination or combinations to injure the Commissioners and the Public Revenue by unlawful means:

II) a combination wilfully to injure the Commissioners and the Public Revenue done other than in the furtherance of any legitimate interests of the parties thereto."

96. Particulars are given of the unlawful means conspiracy. Paragraph (i) alleges that "Mr Uddin, Mr Golechha, Cellcom and all those in control of the companies involved in the transaction chains combined together to cause loss and damage to the Commissioners" by means including:

"(c) by arranging that the missing traders would not pay the debt to the Crown that arose by reason of the issue by them of tax invoices showing a supply of goods with VAT chargeable;

(d) fraud and cheating"

97. Particulars are also given of the allegation of conspiracy to injure, as follows:

"(i) Mr Uddin, Mr Golechha, Cellcom Limited and all those in control of the companies involved in the establishment of the transaction chains described above intended that the Revenue should suffer loss and damage by their diverting monies from the Revenue or depriving the Revenue of monies to which it was entitled;

(ii) the parties to the transaction chains thereby combined together wilfully to injure the Commissioners and the Public Revenue by acts done other than in the furtherance of any legitimate interests;

iii loss and damage to the Revenue resulted from the aforesaid combination."

98. In their written pre-hearing submissions, Miss Newman and Mr Smith make points about the confusion caused by apparently inconsistent allegations as to the identity of the conspirators. It is, however, to my mind clear that, notwithstanding these shortcomings, the conspiracy is alleged to include the companies in the transaction chains and the persons controlling the companies. Those companies are the EU traders, the missing traders, Cellcom and other buffer companies and the exporting brokers.
99. The proposed amendments are in the same terms as those proposed to the particulars of claim in the 2002 Action. The allegation is of a conspiracy between Mr Uddin, Mr Mischke, Mr Golechha, Cellcom, the EU traders, the Defaulters (missing traders), the Buffers (in addition to Cellcom) and the Brokers (the exporting brokers).
100. These amendments do not raise the same difficulties as in the 2002 action, because the particulars of claim in the 2007 action already allege that Mr Uddin and Mr Golechha were acting in combination with the companies in the chains of transactions, independently of whether they controlled or directed them.
101. The proposed amendments plead the specific offences alleged to have been committed pursuant to the conspiracy, including the common law offence of cheating the revenue. They are all, as it seems to me, implicit in the allegation of conspiracy in the un-amended particulars. Likewise, the allegations of knowledge and intention alleged in para 3.1A of the proposed amended particulars are necessarily involved in the existing allegation of conspiracy, as are the allegations spelt out in paragraph 3.1B.
102. I do not consider that the amended pleading of conspiracy involves a new claim but, if I am wrong on that, I am satisfied that it arises out of the same or substantially the same facts as the existing claim.

Section 423

103. The elements in a claim under s.423 of the Insolvency Act 1986 are comparatively straightforward. So far as relevant in the present case, the claimant must establish that a person has made a gift or entered into a transaction at an undervalue, for the purpose either of putting assets beyond the reach of a person who is making, or may at some time make, a claim against him, or of otherwise prejudicing the interests of such a person in relation to the claim which he is making or may make : s.423 (1) and (3). Any person who is, or is capable of being, prejudiced by such a transaction (called a "victim") may bring a claim under s.423 : ss.423 (5) and 424.

2002 Action: section 423

104. The un-amended particulars of claim contain a straightforward claim under s.423. In para 4.1 it is alleged that in June 2001 Mr Uddin instructed STM Fidecs (then called BDO Fidecs) to set up a discretionary settlement (the Bibi Settlement) of which his grandmother Shomuja Bibi would be shown as settlor. STM Fidecs was and remains the trustee. Mr Uddin was a member of the class of discretionary objects and it is alleged that by reason of provisions of the trust deed he was able to control the trust and its assets. It is alleged in paragraph 4.2 that during 2001 Mr Uddin caused Cellcom to transfer sums totalling £10 million to the Bibi Settlement. In paragraph 4.5 it is alleged that:

"... the payment of the said sums to the trustees of the Bibi Settlement constituted transactions falling within section 423 of the Insolvency Act 1986 and were entered into by Mr Uddin and Cellcom for the purposes of putting assets beyond the reach of the Commissioners (being persons who might at some time make a claim against them or otherwise prejudicing the interests of those persons in relation to such a claim). "

105. It is submitted that no complete cause of action is pleaded under s.423. First, it is said that there is no plea that HMRC are victims of the transactions, i.e. persons who are or may be capable of being prejudiced by them. In my view, this is clearly pleaded in paragraph 4.5, which is quoted above. On the facts pleaded in paragraph 3.2, Mr Uddin and Cellcom were persons against whom HMRC might make claims, and indeed did so in the 2002 action. The case pleaded earlier in the particulars of claim against Mr Uddin provides an ample basis for alleging the purpose of putting assets beyond the reach of HMRC. Miss Newman submitted that the pleading must explain how the payments might prejudice HMRC, pointing out that a solvent company can dispose of money. No-one is suggesting that Cellcom has or, after the payments, had substantial assets but in any event it is enough that these payments might prejudice HMRC as a potential claimant by reducing or eliminating the ability of Mr Uddin or Cellcom to meet judgments against them. Secondly, it is said that the pleading failed to allege that the payments were made for no consideration or for inadequate consideration. The particulars of claim do not contain any plea that the payments were made for any consideration and it is clearly implicit, if not explicit, that there was no consideration for them.
106. A number of amendments are proposed to the pleading of this claim, including the following. First, it is alleged that the trust deed establishing the Bibi Settlement was not executed in March 2000 but in October 2000. It is already pleaded that the trust deed purports to have been executed by Mrs Bibi on 19 March 2001 (to be amended to 2000) and the new pleading can properly be seen as expanding on that allegation. It does not add a new claim. Secondly, further provisions of the trust deed and a letter of wishes are pleaded. They provide further grounds for the case that Mr Uddin controlled the trust and its assets, but do not add a new claim. Thirdly, it is alleged that the payments from Cellcom were made not to the Bibi Settlement but to Ward, a company incorporated in the British Virgin Islands and alleged to be wholly owned by the trustees of the Bibi Settlement. This change in payee makes no significant difference to the claim under s.423. Fourthly, it is proposed to allege that Mr Uddin and/or Mr Golechha, as opposed to just Mr Uddin, procured Cellcom to make the transfers. This makes no significant difference to the claim, particularly when it is recalled that Cellcom has always been alleged to be owned by Ward. Fifthly, grounds are pleaded in support of the allegation that the transfers were made for the purpose of putting assets beyond the reach of the Commissioners as creditors of Cellcom. This purpose was in any event an obvious inference from the facts already pleaded, and these grounds do no more than add support for the existing case.
107. I am satisfied that the amendments neither plead a new claim nor, as Miss Newman submitted, add essential factual allegations without which HMRC did not have a sustainable claim under s.423. I can see no good grounds, whether under s.35 or CPR 17.4 or more generally as a matter of discretion, for not permitting these amendments.

2007 Action: Claim under s.423

108. The claim under s.423 is almost identical to the claim made in the 2002 Action, except that it is pleaded that the payments totalling £10m were made by Cellcom not to the trustee of the Bibi settlement but to "an account in the name of Ward Enterprises Limited (the shares of which are wholly owned by the trustees of the Bibi settlement)". Although Ward is a defendant and a claim is made against it as an alleged constructive trustee, the claim under s.423 is made against STM Fidecs as trustee but not against Ward.
109. The amendments proposed to the claim under s.423 are, except in one respect, similar to those proposed in the 2002 action and, for the reasons already given as regards those amendments, I am satisfied that the amendments proposed in the 2007 action do not involve making a new claim and should be allowed.
110. The one exception concerns Ward. HMRC proposes to abandon the constructive trust claim against Ward but wishes to make the claim under s.423 against it. While this is a new claim, it arises entirely out of the same facts as are already pleaded. The essential point, that the payments were made to an account in Ward's name, is already pleaded.
111. It is submitted that the amendment to include a claim against Ward should not be allowed because HMRC has no real prospect of satisfying the court at trial that Ward is sufficiently connected with England for an order to be made against it under s.423. The leading authority, as Miss Newman rightly submits, is the unanimous decision of the Court of Appeal in Re Paramount Airways Ltd [1993] Ch 223. In the only reasoned judgment, Sir Donald Nicholls V-C said at pp 239-240:

"The discretion is wide enough to enable the court, if justice so requires, to make no order against the other party to the transaction or the person to whom the preference was given. In particular, if a foreign element is involved the court will need to be satisfied that, in respect of the relief sought against him, the defendant is sufficiently connected with England for it to be just and proper to make the order against him despite the foreign element. …

Thus in considering whether there is a sufficient connection with this country the court will look at all the circumstances, including the residence and place of business of the defendant, his connection with the insolvent, the nature and purpose of the transaction being impugned, the nature and locality of the property involved, the circumstances in which the defendant became involved in the transaction or received a benefit from it or acquired the property in question, whether the defendant acted in good faith, and whether under any relevant foreign law the defendant acquired an unimpeachable title free from any claims even if the insolvent had been adjudged bankrupt or wound up locally. The importance to be attached to these factors will vary from case to case. By taking into account and weighing these and any other relevant circumstances, the court will ensure that it does not seek to exercise oppressively or unreasonably the very wide jurisdiction conferred by the sections."

Earlier in his judgment, in rejecting a narrow territorial limitation on s.423, Sir Donald Nicholls V-C gave as one of his reasons at p.236:

"Secondly, this criterion would leave outside the scope of the legislation a transaction by a debtor with an overseas company wholly controlled by him. Siphoning money abroad in this way is a typical case to which the new legislation must have been intended to apply."

112. Reliance is placed on the following factors as showing an insufficient connection with England for there to be any real prospect of an order against Ward. It is a company registered in the British Virgin Islands. It is and has always been wholly-owned by STM Fidecs, which operates out of Gibraltar. Its officers are and have always been employees of STM Fidecs and its only bank accounts have been with Credit Suisse in Gibraltar.
113. On HMRC's case, these are matters of form, not substance. On their case, Ward is a company owned by the Bibi Settlement, which was in substance established by Mr Uddin and was in reality controlled by him. The settlement and Ward were established to receive the impugned payments from Cellcom. Those payments originated from Cellcom's activities in England which, on HMRC's case, were part of the scheme orchestrated by Mr Uddin and others in England to cheat HMRC.
114. If HMRC establishes its main case and its case concerning the establishment of the settlement and Ward and the purpose of the payments to Ward, I am bound to say that I find it highly unlikely that the court would decline to make an order against Ward on territorial grounds. For present purposes, it is enough to say that HMRC has a real prospect of satisfying the court that there is a sufficient territorial connection for an order to be just and proper.

Discretion: all amendments

115. Having concluded that the amendments should not be refused on the grounds set out in s.35 of the Limitation Act 1980 or CPR 17.4(2), the issue remains whether as a matter of discretion they should be allowed. This arises under CPR 17.1(2) and 17.4(2). The burden of persuasion lies on HMRC as applicant, but it is convenient to consider the issue by reference to the grounds on which the defendants submit that permission should be refused.
116. First, to the extent that the amendments raise new claims to which the Limitation Act applies, it is a relevant factor that permission will deprive the defendants of a limitation defence: Hancock Shipping Co Ltd v Kawasaki [1992] 1 WLR 1025 at 1030.
117. Secondly, the court must be satisfied that the amended claims have a real, as opposed to a fanciful prospect of success. This has been addressed in the course of dealing with the questions under the Limitation Act. I am satisfied that there is a sufficient legal and evidential basis for the amended claims to meet this requirement.
118. Thirdly, it is submitted that, where claims are raised late, they must be fully pleaded so as to provide a clear explanation of the new case which the defendants must meet. It is submitted that the new claims are sparsely pleaded. The submission is based on the judgment of Neuberger J in Humberclyde Finance Group Ltd v Hicks (LTL 19.11.2001, unreported elsewhere) at para 109 where he said:

"Thirdly, and connected with the second point, it seems to me that the proposed new claims are pleaded very sparsely. This is connected with the second point, because, if the amendments were allowed, the sparseness of the pleading would render the onerousness of the task of the defendants all the greater. However, quite apart from this, particularly where complex new heads of damages are sought to be raised by a claimant very late, I think that he is under a duty to plead the case particularly fully, or at least to explain the nature of his case pretty fully in supporting evidence. In the present case, for instance, the valuation ascribed to the various properties in 1991, the likely investment and development values of the properties, and the likely costs and profits of projected development, are included in the baldest of terms, and appear to be based purely on Mr Hicks's assessment, and not that of an independent chartered surveyor. There is therefore no explanation as to how the figures are arrived at. Robson Rhodes' solicitors wrote to Mr Hicks's solicitors as long ago as March 2001 to ask how Mr Hicks had arrived at his valuations and assessment of his loss of opportunity, as well as asking for details of the guarantees and personal liabilities, whether those liabilities still existed, what steps had been taken to enforce them, and how the defendants' actions were said to have caused the loss. In a further letter of 11 April, the solicitors to Robson Rhodes wrote repeating their request for particulars, and also pointing out that the valuations ascribed to some of the six properties in the proposed amended Counterclaim were different from those contained in a statement of affairs prepared by Mr Hicks in March 1992, and seeking an explanation. While answers were provided to a very limited degree by Mr Hicks's solicitors on 25 April, it appears to me that the sort of details and particulars which the defendants, and indeed the court, would expect to see before it could fairly decide that the amendment should be permitted despite the potential prejudice to the defendants, simply remain unprovided."

The level of explanation required before permission to amend could be given had not been provided. This was one of a number of grounds on which the judge considered it right to refuse permission.

119. I do not consider that it can fairly be said that the amended claims are sparsely pleaded, or are such as not to make clear to the defendants and the court the case which HMRC propose to advance.
120. The fourth objection is the most formidable. It is submitted that, as a result of the delay in bringing forward these amendments, there is significant prejudice to the ability of the defendants to defend the claims.
121. It clearly has taken an extraordinary length of time to arrive at the proposed amendments. A significant part of this period does not result from any culpable delay on HMRC's part in the conduct of these actions. There was a stay from 2002 to 2005 while the criminal proceedings were on foot, although it may fairly be said that this proved to be wasted time as a result of HMRC's own conduct in relation to those proceedings leading to the stay imposed by Crane J. The second stay, which halted the proceedings from February 2006 to April 2007, resulted from the untimely death of Mr Uddin. HMRC have faced considerable difficulties in pleading their case as a result of changes in the understanding of the law relating to VAT and civil conspiracy flowing from a series of decisions in the period since 2002: the decision of the VAT and Duties Tribunal in Bond House Systems Ltd v HMCE [2003] UK VAT V18100, the decision of the ECJ in Optigen Ltd v HMCE [2006] EUECJ C-354/03, the decisions at first instance and of the Court of Appeal in Mbasogo v Logo Limited [2006] EWCA Civ 608, the decision of the Court of Appeal in Total Network given on 31 January 2007, the decision of the House of Lords in OBG v Allen given on 2 May 2007, and the decision of the House of Lords in Total Network given on 12 March 2008. Nonetheless, there have been significant periods of delay on the part of HMRC for which there is no real justification.
122. Even if there was no culpable delay, prejudice to the defendants' ability to meet the case could provide a sufficient ground for refusing the amendments: see Hancock Shipping v Kawasaki.
123. The most significant event was the death of Mr Uddin in February 2006. He will not be able to give evidence nor can he give instructions on the ways in which HMRC now put their case. As against this, Mr Uddin faced both the criminal and civil proceedings for over four years in his lifetime. It is accepted that he was able to, and did, give instructions to his solicitors on the case as then advanced. Miss Newman made clear that it was not suggested that they did not take a proof from him. The same firm of solicitors act for Ms Begum as acted for Mr Uddin and in a witness statement on this application Mr Robert Lawrie of that firm says that a great deal of documentation was provided during the criminal proceedings (over 30,000 pages of evidence, over 1,000 pages of witness statements and over 55,000 pages of unused material by 24 November 2004, with further evidence and unused material regularly served until the conclusion of the abuse hearing before Crane J).
124. The detail of the way in which HMRC put their case has changed with successive draft amendments, but the heart of the case has remained unaltered. The extent of the difficulties faced by the defendants will become clearer as the case progresses. The trial judge will be able to make due allowance for the consequences of delay and prejudice and it may well make it harder for HMRC to establish their case. The same is true of the danger of the fading memories of the unnamed witnesses which it is said would be called by the defendants.
125. Balancing these various considerations, I am satisfied that it is right to give HMRC permission to amend the particulars of claim in both actions.
126. It is submitted for the defendants that HMRC has been in breach of an order made by HHJ Seymour QC on 14 October 2005 for the return of documents and that permission to amend should be refused until there has been proper compliance with it. It appears that virtually all documents have been returned. Ms Begum points to a floppy disk3 and one or more computers as not having been returned. Criticisms are also made of the witness statement provided in compliance with the order. With all or almost the documents returned, such non-compliance, if any, as there may be should not in my judgment affect the grant of permission to amend.
127. I should say something about the claim to be introduced against Mr Golechha, although he did not appear and was not represented on the applications to amend. The present particulars of claim in the 2002 Action contain no claim against him but he has been joined as a party since June 2005. The Further Information served by HMRC in October 2005 made clear that a claim in conspiracy was or would be made against Mr Golechha. I have held the amendments to arise out of substantially the same facts as those already pleaded and, in view of the Further Information, I do not consider that it would be right to refuse permission as regards pleading the claim against Mr Golechha.

Conclusion

128. In conclusion, I accede to the applications to amend the particulars of claim in the two actions, save that the scope of the claim which may be made in the 2002 action is limited to the extent that I have earlier indicated. HMRC will need to consider how that limitation is made clear.