Revenue and Customs v Crossman

A bankruptcy petition may proceed where a confiscation order has been paid, provided credit is given for the amount recovered under that order. HMRC’s policy was not to pursue double recovery of the same debt, but it did not prevent recovery of an unpaid balance. A legitimate-expectation defence requires a clear and unambiguous representation; an ambiguous administrative letter is insufficient. Failure to disclose an intention to pursue civil recovery does not automatically bar a later bankruptcy order. The court must assess the overall justice of the case. A debtor asserting that bankruptcy would be futile bears a heavy burden of proving that he is too poor to be made bankrupt.

HMRC petitioned for a bankruptcy order against Richard Alan Crossman following his conviction for fraudulent evasion of VAT and excise duty. A confiscation order of £55,965.46 had been made under section 71 of the Criminal Justice Act 1988, and had been paid. HMRC later sought recovery of unpaid excise duty, originally claiming £343,450, but gave credit for the confiscation payment and pursued £287,484.54.

The respondent opposed the petition on three grounds: legitimate expectation arising from HMRC’s conduct and correspondence; HMRC’s failure to disclose its intention to pursue civil recovery when the confiscation order was sought; and alleged futility because he had no sufficient assets. The central issues were whether those matters justified dismissal under section 266(3) of the Insolvency Act 1986.

1. Legitimate expectation. The statements of HMRC policy recorded in Glyn Edwards v The Crown [2004] EWCA Crim 2923 and Regina v Bakewell [2006] EWCA Crim 2 did not establish a policy preventing recovery of an unpaid balance after a confiscation payment. They addressed the prevention of double recovery where the confiscation order matched the unpaid duty. HMRC’s internal guidance was consistent with recovery of the balance.
2. The April 2004 letter did not make a clear and unambiguous representation that payment of the confiscation order would release the respondent from the remaining duty. In any event, HMRC subsequently made its position clear before payment was made, and reliance was not established. The legitimate-expectation defence therefore failed.
3. Non-disclosure. HMRC should have disclosed to the confiscation court its intention to institute civil proceedings. However, section 71(1C) of the Criminal Justice Act 1988 did not require the confiscation application automatically to be adjourned. The court retained a discretion to make a confiscation order despite an intended civil claim. The proper question was the overall justice of making a bankruptcy order.
4. On the facts, bankruptcy proceedings substantially pursued the same recovery that would probably have been available had the intention to sue been disclosed. There was no evidence of other material creditors or prejudice caused by loss of an individual voluntary arrangement opportunity. This ground therefore failed.
5. Futility. The principle that a person may be too poor to be made bankrupt was accepted, but the burden of proving that condition was heavy. The respondent had not attempted to discharge it.

Subject to inspection of the amended petition and supporting evidence, a bankruptcy order was to be made.

First-instance decision. No prior appellate decision is stated in the judgment.