THE COURT of Appeal had no jurisdiction to entertain an appeal against a ruling at a preparatory hearing held under the Criminal Justice Act 1987 that the Crown Prosecution Service had power to prosecute for an offence of tax evasion in respect of which the Inland Revenue had accepted a settlement. The court nevetheless expressed the view that the Crown Prosecution Service was not precluded from prosecuting in such circumstances.
The applicants face trial on an indictment charging them both with two counts alleging conspiracy defraud. A third count, conspiracy to account falsely, was severed from the indictment and ordered to be tried first, and the application for leave to appeal related to the proceedings on that third count.
The allegations arose out of the applicants' activities in running company A, the prosecution case being that bogus invoices were submitted to company A by company B as a means of channelling to the applicants the proceeds of frauds perpetrated in connection with company A. The prosecution asserted that the applicants had two motives: to siphon off pounds 3m worth of assets with a view to liquidating company A, and thus fraudulently to evade almost pounds 800,000 in corporation tax. In May 1997 the Inland Revenue agreed to a settlement by the two companies in respect of duties, interest and penalties.
At a preliminary hearing on 15 January 1998 the judge ruled against the applicants' contention that the Crown was not empowered to prosecute them for the offence of conspiracy to account falsely. The applicants sought leave to appeal against that ruling.
Sydney Kentridge QC, Robert Rhodes QC, Andrew Mitchell and Simon Stafford Michael (Middleweeks, Manchester) for the applicants; Michael Shorrocks QC and Bernard Lever (Crown Prosecution Service) for the Crown.
Lord Justice Rose VP said that counsel for the applicants had identified the question of law in relation to which leave to appeal was sought as follows:
If the Crown through the Inland Revenue has elected not to prosecute tax evasion but instead accepts tax, penalties and interest, is the Crown through the Crown Prosecution Service nonetheless empowered and entitled to ignore that election and to prosecute in respect of that tax evasion?
He had submitted that that was a question of law within section 9(3)(c) of the Criminal Justice Act 1987; that the judge's ruling assisted in the management of the trial within section 7(1)(d); and that an appeal therefore lay to the Court of Appeal under section 9(11).
However, in R v Hedworth  1 Cr App R 421 it had been held that section 7(1) presupposed a valid indictment, and that the preparatory hearing was concerned with applications and orders which would facilitate the trial. The purpose of an application to quash the indictment (to which the application in the present case was akin) was diametrically opposed to that purpose. There was, accordingly, no jurisdiction to entertain an appeal under section 9(11).
That was sufficient to dispose of the application, but both Crown and defence had urged the court to deal with the merits. The court had accordingly heard full argument from both sides, and conscious that any conclusions it expressed would be obiter dicta and therefore not finally determinative of the question, would neverthless express a view as the point might be of some wider significance.
It was clear, on principle and authority, that the Revenue's common law power to prosecute was ancillary to, and supportive of and limited by, their duty to collect taxes. In contrast, the statutory duty of the CPS to take over and conduct criminal proceedings was free-standing, unconfined (for present purposes) and reflected much wider public interests, concerns and objectives.
Accordingly there seemed to be no necessary dichotomy or logical inconsistency in the Crown's position if the CPS prosecuted in circumstances where the Revenue had decided not to.