Larkfield Ltd & Ors v Revenue & Customs Prosecution Office & Ors

For the purposes of Part VI of the Criminal Justice Act 1988, a dispute with a third party about beneficial ownership is determined by the High Court in civil proceedings according to ordinary property law, subject to express statutory exceptions. The confiscation regime does not itself disregard separate corporate identity or ordinary trust principles. Registration of title supplies the starting presumption of beneficial ownership. Evidence that an offender negotiated a purchase or had funds with a company is insufficient, without appropriate findings, to establish a beneficial interest in property bought by that company. A genuine loan may leave rights against the lender, but does not itself create an interest in the purchased property.

Larkfield, a Bahamian company registered as proprietor of a London flat, claimed beneficial ownership. The Revenue and Customs Prosecution Office contended that Raymond George May was the true owner and that corporate and trust structures concealed his interest. Mr May had pleaded guilty to VAT carousel fraud and was subject to a confiscation order under the Criminal Justice Act 1988.

After a trial, His Honour Judge Mackie QC declared the flat to be Mr May’s realisable property and dismissed Larkfield’s claim. The appeal challenged the judge’s treatment of separate corporate identity, trusts and the alleged loan arrangement. The central issue was whether Mr May held an interest in the flat within Part VI of the Act.

Etherton LJ gave the judgment, with the Chancellor and Elias LJ agreeing.

1. Disposition. The appeal was allowed. The finding that the flat was Mr May’s realisable property was unsustainable on the evidence and the judge’s findings.
2. Applicable principles. A Crown Court’s inclusion of property in an offender’s realisable assets does not resolve a third-party dispute about beneficial ownership. That dispute is determined by the High Court in civil proceedings according to ordinary principles of property law, except where the Criminal Justice Act 1988 expressly provides otherwise: Re Norris [2001] UKHL 34. The tainted-gift provisions were such an exception, but the prosecutor had never alleged that the flat was acquired with a gift from Mr May.
3. The registration of Larkfield as proprietor gave rise to the ordinary starting presumption that it was beneficially entitled to the flat: Stack v Dowden [2007] UKHL 17. The confiscation legislation did not, at the ownership-identification stage, dispense with ordinary corporate and trust law. R v Modjiri [2010] EWCA Crim 829 applied standard property and trust principles; its reference to the lower judge’s reasoning did not endorse a general power to treat company assets as an offender’s assets without a legal basis.
4. The evidence did not establish that Mr May beneficially owned Larkfield’s shares, that the purchase money was held on trust for him, or that the recorded loan from Valeo was a sham. His negotiation of the purchase and his substantial funds with Valeo were insufficient to establish a beneficial interest in the flat. Any possible interest in money recovered in respect of the loan would be a matter between Mr May and Valeo, not an interest in the flat.
5. The case was not remitted. In light of the pleadings, evidence and cross-examination, it was no longer open to the trial judge to find that the loan was a sham.

• Court of Appeal (Civil Division): On 12 May 2010, the court allowed the appeal and declined to remit the case. [2010] EWCA Civ 521
• High Court of Justice, Queen’s Bench Division: His Honour Judge Mackie QC, sitting as a Deputy Judge, ordered on 22 July 2009 that the flat was Mr May’s realisable property and dismissed Larkfield’s beneficial-ownership claim.