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HMRC raid on claims management company was lawful, High Court rules

files and computer [1]

HMRC returned the computers and most of the documents

HM Revenue and Customs (HMRC) did not act unlawfully when it searched and removed files from a claims management company it was investigating, the High Court has ruled.

Accident Claim Helpline Limited (ACHL), based in south-west London, argued that the searches and seizures went beyond the purposes for which the warrants were issued, and included “large quantities” of material protected by legal professional privilege.

Lord Justice Fulford said ACHL had been the subject of “investigations spanning some years”, leading HMRC to suspect “large-scale fraud” relating to VAT, PAYE and National Insurance contributions.

He said that Bristol Crown Court issued search warrants in 2011, allowing HMRC to search nine addresses and seize “many thousands of files”, along with the computers on which the files were stored.

Delivering judgment in R (on the application of Mohammad Mumtaz Chaudhary) v Bristol Crown Court and HMRC [2014] EWHC 4096 (Admin) [2], Lord Justice Fulford said ACHL “sought and secured” the return of a number of documents and laptop computers.

He said that ACHL suggested that HMRC was aware, when the files were seized, that “the contents included large quantities of privileged material”.

Mr Chaudhary, director and sole shareholder of ACHL, issued an application in 2013 for the return of all the seized material, at least the return of all the legally privileged material. Judge Bromilow ruled early this year that he had no jurisdiction to grant the application, and in any event would have refused it on its merits.

In its application for judicial review, ACHL argued that the judge erred when he concluded that he had no jurisdiction, the warrants breached the Police and Criminal Evidence Act 1984 (PACE) and the searches and seizures went beyond the purpose for which the warrants were issued, in breach of section 16(8) of PACE.

Lord Justice Fulford said the computers were returned and only 260 paper files were seized.

“These have been returned save for two documents from each file. The first document in each case related to the signed mandate provided to the company by the client of ACHL for the solicitor to pay ACHL a fee of £350 out of any compensation payment.

“This fee was in addition to the referral fee paid by the solicitor to ACHL, and it potentially constituted a second stream of income which HMRC believes has not been declared by ACHL. The second document is the ACHL claim form, which contains factual details of the client’s name, address and accident.”

Fulford LJ concluded: “On the facts of this case, I do not consider that the claimant has made out his case.”

He ruled that the trial judge was entitled to accept the evidence called by HMRC, and by implication he found there had not been any material breach of section 16(8) of PACE.

Lord Justice Fulford ruled: “On the evidence before the judge, there was no outstanding material that fell to be returned. Judicial review is a discretionary remedy and there is no sustainable basis for granting relief in these circumstances.”

Mr Justice Nicol agreed.