Criminal Assets Bureau v. Craft [2000] IEHC 134 (12th July, 2000)

1. At 7.30 in the morning of Thursday 7th May, 1998 a team of local Gardai, officers of the Criminal Assets Bureau and the National Drugs Unit under the supervision of Detective Inspector Patrick Byrne carried out a dawn raid at Cloonkeen, Westport Road, Castlebar, Co Mayo where the Defendants, who have since married, were living together as common law man and wife. The first Defendant was aggressive and could not be interviewed: the second Defendant was interviewed and I have been told about this in evidence.

2. Fifty minutes later at 8.20 a.m. the first Defendant was arrested and subsequently detained under Section 2 of the Criminal Justice (Drug Trafficking) Act, 1996. He was released at approximately 9.00 p.m. on the following day Friday the 8th. A thorough search was carried out at the house during the rest of the morning.

3. The background to this episode was that members of the Plaintiff were in possession of information that packages of cannabis had been delivered to the first Defendant at these premises and subsequently passed on by him. They suspected him of being engaged in drug trafficking and on one earlier occasion had arrested him at Shannon Airport without positive result. Evidence was given in this case by Detective Inspector Byrne in regard to the first Defendant's criminal record which includes a drug-related offence in Scotland.

4. While the first Defendant was in custody the second Defendant was questioned by Detective Inspector Byrne in the presence of Detective Garda Rice and I have been given evidence of what she said. On Friday the 8th May the instant proceedings were issued and a mareva injunction obtained from the late Shanley J. freezing the assets of the Defendants below £170,000. Furthermore, on the 7th May Revenue Officer members of the Criminal Assets Bureau completed tax assessments for some £138,000 for income tax for the year 1996/7 and three Value Added Tax assessments for the period March/April 1995 to November/December 1997 for some £158,000 and on the 8th May these assessments were served on the first Defendant while he was in custody.

5. Both these assessments were appealed on the 27th May, 1998 on behalf of the first Defendant by his accountant John Allen of O'Connell Street, Limerick but these appeals were rejected on the 29th May, 1998 on the basis that the appeal was not accompanied by the amount (£56,000 plus) admitted due. It was stated in evidence on behalf of the Plaintiff that this rejection was communicated promptly whilst there was still time for a valid appeal at least in the case of the income tax.

7. The first Defendant comes originally from Scotland and came to Ireland in January, 1994. The second Defendant came with him. He was last in this jurisdiction on the 15th July, 1998 for an appearance in Court in connection with assault charges. At that stage he informed the Gardai that he was leaving the country for the Isle of Man but not Scotland where he was being sought on criminal charges. The house at Cloonkeen was in the joint names of the Defendants as was a bank account with the TSB bank at Castlebar.

8. The second Defendant came to this country in January, 1994 with the first Defendant and lived with him in Castlebar as his common law wife. They were married in November, 1998. Whilst in Castlebar she drew social welfare and the authorities are claiming (not in these proceedings) that she has been overpaid by some £6,000 plus. When interviewed on the 7th May, 1998 she told the Gardai that the money in her account had been put there by the first Defendant "so that tax would not have to be paid on it" as it was the profits from his windscreen replacement business. At all times both Defendants denied that the first Defendant was involved in drug trafficking and both have sworn affidavits to that effect.

9. The Plaintiff is an individual officer of the body known as the "Criminal Assets Bureau" which is a body corporate established pursuant to Section 3 of the Criminal Assets Bureau Act, 1996. Section 10(4) of that Act provides that where a Bureau officer who is an officer of the Revenue Commissioners (as is the individual Plaintiff in these proceedings) exercises revenue functions he shall do so in the name of the Bureau and not in his own individual name. That is why the Plaintiff is styled "The Criminal Assets Bureau" notwithstanding that he is an individual who remains anonymous pursuant to an Order which I made under Section 10(7) of the Act of 1996 following evidence from Detective Inspector Byrne that he would be concerned for the safety of and could not rule out threats to the Revenue Officers of the Bureau if their names were disclosed. Documents containing the name of the Plaintiff and another anonymous officer of the Bureau who gave evidence were handed to me with the names disclosed but to the Defendant's lawyers with the names obscured.

10. The Plaintiff claims in excess of £350,000 arrears of Income and Value Added Tax plus interest, a declaration that the first Defendant is beneficial owner of monies lodged to two identified accounts at the Trustee Savings Bank Castlebar and of the dwelling house at Cloonkeen, a further declaration that the first Defendant was obliged to discharge Income Tax and Value Added Tax for the appropriate years and that he failed so to do.

11. The declaration sought that the first Defendant is beneficial owner of the monies in the bank accounts and of the house is grounded on an allegation in the amended Statement of Claim to the effect that he transferred monies into those accounts and an interest in the house to the second Defendant with the intent of defrauding his creditors including the Revenue Commissioners and as such transfer is void pursuant to Section 10 of the Fraudulent Conveyances Act, 1634. A claim for an account of the amount of tax due in the original Statement of Claim was abandoned at the hearing because the Plaintiff contends that the amount of the assessment has now become "final and conclusive" the appeals having been rejected.

12. The defence of the first Defendant (the second Defendant having withdrawn from the case in circumstances to be described in detail hereafter) asserts that the dawn raid was part of a conscious and deliberate plan to arrest him and keep him in detention whilst proceedings were issued and an injunction obtained freezing his assets in violation of his constitutional rights. He says that the arrest under the Drug Trafficking Act was spurious, the true intention being to detain and question him to secure information about his tax arrears so that the assessment could be finalised and served on him while he was in custody. He says that the assessment and the evidence obtained in this fashion are "fruits of a poisoned tree" and cannot be relied upon in a court of law.

13. He raises a number of technical defences relating to proofs and also says that there was no prior demand of the tax allegedly due in breach of the tax code itself and of fair procedures and also that he was deprived of any reasonable opportunity to appeal the assessment, his assets being frozen at the material time by the mareva injunction. Furthermore, the first Defendant raises a number of constitutional points and has served two notices pursuant to Order 60 of the Rules of the Superior Courts. The foregoing is a short summary intended to give a flavour of the defences raised by the first Defendant and is not intended to be a full description.

14. As stated the proceedings were issued and an interim mareva injunction obtained on the morning of the 8th May, 1998. An interlocutory mareva order was made on the 31st July, 1998. Order 60 notices were served and the case came on for hearing before O'Higgins J. on the 24th, 25th and 26th November, 1999. On the first of these days the learned trial judge allowed the amendment referring to the Fraudulent Conveyances Act following which, after an adjournment for consultation and advice, the second Defendant represented by Dr Michael Forde formally withdrew from the case. O'Higgins J. himself later recused himself from the case which therefore had to be heard by another judge.

15. On the 16th and 23rd March, 2000 an application was made to me by Dr Forde on behalf of the second Defendant for various reliefs including liberty to come back into the case. On the 30th March, 2000 I refused such liberty making clear that the second Defendant would be given an opportunity to apply for costs at the end of the proceedings before me. Accordingly, the case proceeded against the first Defendant only.

16. The hearing before me commenced on 6th April, 2000 and continued for 13 days. I heard evidence initially from Detective Inspector Byrne as indicated already and made an Order pursuant to Section 10(7) of the Criminal Assets Bureau Act, 1996 preserving the anonymity of the Plaintiff and another officer of the Bureau.

17. During the proceedings the first Defendant sought to rule out evidence of his statement and of the Assessment to Tax served on him while in custody and completed following information garnered from what was alleged to be an illegal search and which therefore had been tainted by illegality. The Plaintiff submitted that this defence was not pleaded and I so held. The Defendant's Counsel thereupon applied to amend the pleadings but only on the basis that I would be prohibited from considering any question of costs arising out of such application. I refused to consider the application on this basis and accordingly the case proceeded without this particular defence open on the pleadings. The Defendant's Counsel submitted that notwithstanding this the Court had a duty as clarified in the State (Trimbole) -v- The Governor of Mountjoy Prison ([1985]: IR: 550 ff.) (hereinafter "the Trimbole point") to investigate breach of the first Defendant's constitutional right to freedom from arrest if made aware of such an allegation.

18. Subsequently, it emerged that the Plaintiff had not complied strictly with the Order of O'Higgins J. giving him liberty to amend his Statement of Claim to incorporate the reference to the Fraudulent Conveyances Act. No Order had been made up but the transcript made it clear that the liberty was to furnish the amended Statement of Claim "by this afternoon". In fact the document was furnished much later and with some of the original reliefs omitted. Counsel for the Plaintiff initially requested me to overlook these defects on the basis that there had been an obvious slip and that the Defendant was aware of the case being pleaded. Having regard to the fact, however, that I had ruled that the Defendant's pleadings had not covered the "fruits of the poisoned tree" doctrine notwithstanding the strenuous submission of his Counsel that the Plaintiffs were perfectly well aware from legal submissions exchanged at the earlier trial that this point was being raised, I held that the Plaintiff should make a formal application for an enlargement of time within which it could comply with the Order of O’Higgins J. This application was made on notice to the second Defendant.

19. I agreed to enlarge the time but on the terms that the first Defendant could now introduce a pleading to cover the “fruits of the poisoned tree” point but not, as he sought, further constitutional points. The second Defendant renewed her application to be permitted to participate in the case but I ruled, once again, that she could not do so.

22. I. The Defendant says that the Plaintiff has failed to prove the consent of the Minister for Finance to the appointment of witnesses called to be Bureau officers for the purpose of the Criminal Assets Bureau Act, 1996 as required by Section 8(1)(a) of that Act;

23. II. The Defendant says that pursuant to Section 869(1)(b) of the Taxes Consolidation Act, 1997 (“the 1997 Act”) the assessment should have been served by the Revenue Commissioners or an inspector or other officer thereof rather than by a member of An Garda Siochana; and

26. B. The first Defendant alleges that a deliberate and conscious violation of his rights by the Plaintiff renders inadmissible evidence of what the Defendants said when questioned on the 7th and 8th May, 1998 respectively in Castlebar and also the assessment to tax which relies partly on information obtained in the search. Furthermore, the first Defendant says that the pleadings should be struck out in their entirety as being tainted by such a violation.

27. I. The first Defendant says that the Plaintiff is not entitled to seek remedies beyond the statutory remedies and therefore is not entitled either to join a claim for both income tax and VAT in the same proceeding or to seek the various declarations already referred to. Furthermore, the Plaintiff has no locus standi to claim the tax and certainly the income tax on a plenary summons because Section 966 of the Act of 1997 authorises only a summary summons;

28. II. The first Defendant says that a prior demand is mandatory before proceedings can be issued. This is clearly required by Section 961 of the Act of 1997 (at least in the case of income tax) and, further, such a demand is required in the case of both taxes on the principle of fair procedures. The proceedings should be struck out in the absence of such a demand.

29. III. This Defendant says that there was no opportunity to appeal the assessments and that the money thereunder did not become due and payable in such a way as to authorise initiation of these proceedings. Furthermore, by reference to the wording of the assessments themselves this Defendant had a legitimate expectation that no proceedings would commence before the expiry of the appeal period (30 days in the case of the income tax and 21 days in the case of VAT). Alternatively, the Plaintiff is estopped from issuing proceedings within the appeal period in these circumstances.

30. IV. The Plaintiff is not entitled to a declaration that the first Defendant is beneficially entitled to the bank accounts and property identified in the pleadings both because of the presumption of advancement which operates in favour of the second Defendant and secondly because the Court will not permit the first Defendant to “gain” by his turpitudinous action in transferring his assets to the second Defendant in order to evade tax. The Plaintiff in making this claim stands in the first Defendant’s shoes as against the second Defendant and is accordingly clothed with his turpitude.

31. As already indicated, I refused to permit the first Defendant to expand on the constitutional points raised in the notice served under Order 60. In fact two such notices were served by this Defendant and I left over for determination the question whether he should be entitled to rely on the points raised in both notices and Counsel dealt with the argument on the basis that he would be. I consider that in principle the first Defendant should be permitted to raise the points under both Notices but of course these arguments will be considered by the Court only if the first Defendant fails on the non-constitutional points. It should be clarified that the notices refer only to the income tax code and not to the VAT Acts. The points thus raised are as follows:-

“If a stage should be reached where this Court was compelled to come to the conclusion that the ordinary law and police disciplinary measures have failed to secure compliance by the police with the law, then it would be preferable that a rule of absolute exclusion should be formulated rather than that every trial Judge, when the occasion arises, should also be asked to adjudicate upon the question of whether the public good requires the accused should be free without full trial rather than that the police should be permitted the fruits of the success of their lawless ventures.”

“In my judgment, however, a far greater principle is at stake: that part of the Executive represented by the Garda authorities and those others responsible for what I have termed the plan to extradite the prosecutor must not be permitted to think that conduct of this kind will at worst result in a judicial rebuke, however severe. It will result in the immediate enforcement, without qualification of the constitutional rights of the individual concerned whatever the consequences may be. If the consequences are such as to enable a fugitive to escape justice then such consequences are not of the Courts’ creation; they stem from the police illegality.”

38. The first Defendant submits that the evidence shows that there was a deliberate and conscious plan by the Plaintiff and other members of the dawn raid party to detain him in custody so that these proceedings could be issued and a mareva injunction procured, the assessment (itself reliant in part on information obtained in the dawn raid) could be served on him while in custody and that he would be deprived of an opportunity to contest the assessment or appeal from it prior to the issue of these proceedings and, indeed, during the entire of the appeal period. Furthermore, it is asserted that the first Defendant’s arrest was unlawful as it was never seriously the intention of the arresting party to interrogate the first Defendant in relation to drugs but only to secure information in relation to arrears of tax.

39. Evidence was given by Detective Garda Daniel Rice who said he is a member of An Garda Siochana and a bureau officer. He accepted that information obtained in the search following the dawn raid “piggybacked” on the drugs search warrant. The evidence was that the assessment was 80% complete prior to the dawn raid itself.

40. Detective Inspector Patrick Byrne gave evidence that he is a Bureau officer, was in charge of the dawn raid and was aware of the first Defendant since October of 1997. He had information that packages of cannabis resin were delivered to the Defendant in Castlebar. It was put to him in cross-examination that the note of his interview with the first Defendant, which he accepted contained all relevant information obtained, was completely inconsistent with any serious questioning in relation to drugs trafficking. The Defendant was not asked who his supplier was, the questions were innocuous and indeed it was put to him specifically that his note to the effect that the first Defendant approved the Statement was incorrect and that this had been demonstrated and accepted by him.

41. He accepted that his notes were made up after the questioning and answering was over contrary to what he had stated to O’Higgins J in the first trial but he insisted that he had information that the first Defendant was a serious drugs trafficker and had been arrested in Shannon before the dawn raid without success and he emphasised that money laundering was vital to drugs trafficking and that his interest in the movements into and out of the first Defendant’s bank accounts comprising some hundred thousand pounds to an account in the Isle of Man and £50,000 to a Scottish contact for the purpose of buying a car, was highly relevant to his perception of the first Defendant as a drugs trafficker. He also stated that his was not the only interview with the first Defendant and that the discovery of airline ticket documentation showing the first Defendant had travelled to Barbados was confirmatory of information that he had in connection with his drugs activity.

42. The Plaintiff gave evidence that he is a Bureau official. He stated in evidence that he was not aware in advance of the intent to arrest the first Defendant but accepted when presented with the transcript that he had said he was so aware to O’Higgins J in the first trial. In this trial he said that he was wrong then. He vehemently disagreed that there was an overall plan to arrest the Defendant for the purpose of completing the assessment, serving it on him, issuing these proceedings and obtaining a mareva injunction all while the first Defendant was in custody. He said that any action by the Revenue arm of the Criminal Assets Bureau prior to the drugs related arrest and detention could have prompted the first Defendant to escape. He said he became aware that the first Defendant was in custody prior to obtaining the mareva injunction and he stated that the drugs squad operation took precedence to the Revenue operation.

43. The context in which this matter has to be viewed is that the gardai had already arrested the first Defendant without success in Shannon that they were aware that he had a record in connection with possession of drugs for supply in Scotland and that the mareva injunction was obtained on the basis of an affidavit which clearly set out this information available to the gardai in the affidavit of Detective Superintendent Felix McKenna. Notwithstanding these allegations the first Defendant has not given oral evidence at the trial before me nor was any evidence given on his behalf, for example by his accountant. It is true that he has sworn an affidavit stating that he was not involved in drugs trafficking and that all his money came from the proceeds of his windscreen replacement business but he has not been cross-examined on these assertions. He also accepted that he evaded paying tax on these monies.

44. My impression of the evidence tendered by Detective Inspector Byrne and the anonymous Revenue official who is the Plaintiff in these proceedings and in particular in the case of the latter is that they were apprehensive in the context of the arguments made on the Trimbole point about the legal status of co-operation within the various departments of the Criminal Assets Bureau in connection with the dawn raid and that they were reluctant to be forthcoming and felt on the defensive particularly on the questioning of prior knowledge of an intention to arrest the first Defendant. Despite persistent cross-examination I was left with the impression, notwithstanding these reservations, that the first Defendant was arrested because of his involvement in drug trafficking and that the search was for the purpose of finding evidence in relation to this.

45. It is equally clear, and in fact undisputed by the Plaintiff, that the assessment to tax relied in part on information obtained from the first Defendant himself (to the effect that he returned only three or less out of every £7,000 worth of profits for tax purposes) at the interview while he was in custody. I am also of opinion that all members of the Criminal Assets Bureau involved in the dawn raid and in these proceedings kept in contact with each other and exchanged relevant information (as indeed is their entitlement under Section 8(7) of the Act of 1996) and that specifically Detective Inspector Byrne would have been aware of the likelihood if not the high probability that the first Defendant would be arrested in the context of the dawn raid itself.

“In the present case, the learned trial Judge was perfectly satisfied that in arresting the Defendant in respect of a scheduled offence of malicious damage that the gardai were acting bona fide and that they had a valid suspicion that each of the accused had committed a scheduled offence. Even though the scheduled offence in question faded into relevant insignificance when compared with the homicide with which it was directly connected there was a genuine case of malicious damage. That means the Judge has held that the motive for the arrest was not simply that of having an opportunity to ask questions about the murder, but that the arrest was a genuine one for malicious damage even though it would provide an occasion whereby questions could also be asked about the murder. Apart from the statutory obligation imposed on the Accused to furnish their names and addresses under s.30 and to put the questions authorised by s.52 the Gardai had no other particular power to interrogate them which was any greater than the power they have to ask questions of persons in custody if the provisions of the Offences Against the State Act had never been invoked. It, however, gave the Gardai the advantage of having persons whom they wished to question in a position where such persons could not walk away from them. Apart from that factor, all the other safeguards envisaged by the law and already referred to were applicable and there has been no evidence that any of these safeguards were violated. Accordingly, the arrest under s.30 was lawful.”

46. In order to succeed on this point it seems to me that the first Defendant would have to convince me that the arrest and detention of the first Defendant for drugs related activity was entirely spurious and a masquerade with the sole purpose of providing an opportunity to interrogate him in relation to arrears of tax. The evidence is that the guards had information that he had already been convicted in Scotland for possession of drugs with intent to supply, they had tried once unsuccessfully to arrest him at Shannon, and they had information that packets of cannabis were being delivered to his home in Castlebar.

47. Detective Inspector Byrne gave his opinion that he was a member of a major criminal gang dealing in drugs and whilst the search itself produced nothing hard so to speak, some confirmation was discovered in documentation showing that he had flown to Barbados and also in a draft deed of attorney which seemed consistent with flight by the first Defendant leaving the second Defendant with power to deal with their assets. Furthermore, the assessment to tax was already 80% complete so that one has to assess the likelihood that this entire operation was set up to procure that extra 20% which resulted in the finalisation of these assessments. Neither the first Defendant nor the second Defendant came into Court to give oral evidence and to face cross-examination. The first Defendant's accountant was not called.

48. The members of the Criminal Assets Bureau are entitled to exchange information amongst themselves and clearly they would be in dereliction of duty if they failed to do this in an appropriate case. In my opinion the evidence establishes nothing approaching the kind of deliberate and conscious plan to violate the first Defendant’s rights as applied in the Trimbole case itself.

50. Detective Garda Daniel Rice gave evidence that he was a garda and a bureau officer and that he served the demands for payment of the assessed tax on the 9th June, 1998. He attended at the interview of the first Defendant conducted by Detective Inspector Byrne but did not take notes, he was not at any meetings prior to travelling to Castlebar.

51. The anonymous witness who is not the Plaintiff gave evidence that he is an inspector of taxes and that he made up the assessments amounting to £280,000 plus on the 7th May, 1998. They were 80% complete before the events in Castlebar. He knew the first Defendant had returned some VAT returns with small amounts of VAT payable which were inadequate in his opinion, more recently he had made some returns with no money and more recently still he had ceased making any VAT returns. Furthermore, in his opinion his income tax returns were inadequate. He made up the amount of the assessments in reliance on information from the first Defendant’s bank accounts, his turnover and also the information to the effect that three or four out of every £10,000 worth of turnover had actually been included in the tax returns. He rejected the appeals against the assessments made on behalf of the first Defendant promptly so as to leave time (at least in the case of the income tax appeal) for submitting a valid appeal, that is an appeal accompanied by the amount of tax admittedly due.

52. Detective Inspector Patrick Byrne said that he was aware of the first Defendant since the 7th October, 1997. He had information that packages were being delivered to him in his home in Castlebar containing cannabis, that he had bought a BMW in Scotland, that he had travelled to the Barbados, that he smuggled cocaine into Scotland and that he was sentenced there in January of 1994 for possession with intent to supply. He believed that he was a member of an organised gang and he gave evidence of cash movements in and out of the first Defendant’s bank accounts which included £100,000 transferred from a TSB bank account on the 21st January, 1998 and later lodged to an Isle of Man account and a withdrawal of £35,000 odd on the 10th March, 1998 which was sent to an associate in Scotland who has criminal connections and on the 5th January, 1998 a further withdrawal of £7,300. He referred to withdrawals from the second Defendant’s bank account including £29,000 odd withdrawn on the 11th February, 1998, £2,000 in March 1998, £2,500 in November 1997 and £50,000 plus sent on the 21st March, 1997 to a bank in Scotland.

53. He was aware that the first Defendant had been awarded some £55,000 some years previously as a result of a motor accident in which no other vehicle was involved and on which occasion he had information that the first Defendant was "high" on cannabis. He said that the social welfare services were claiming that some £6,390 had been overpaid to the second Defendant and that the first Defendant had last been in the jurisdiction in July of 1999 in connection with a Court case. He emphasised the importance of money laundering without which no drug trafficker could operate and denied that the dawn raid had been a cover to get tax information. He said he did not want to identify his informant as that could give rise to a life threatening situation.

54. When it was put to him in cross-examination that his attitude was that if they did not succeed in advancing their case in drugs as a result of the arrest and detention of the first Defendant they would get him for tax evasion: he replied that that was within their sphere of operation. As I already indicated this witness accepted that his notes of the interview with the first Defendant were misleading but contended that they were an accurate summary conceding that if any relevant information was obtained it was included in the note.

55. The Plaintiff who is an anonymous Revenue official gave evidence that he was a member of the Revenue Commissioners since 1986 and a collector since then and became a Bureau officer in October of 1996. He authorised the issuing of the proceedings and was heavily cross-examined in regard to his foreknowledge of the intention to arrest the first Defendant on the occasion of the dawn raid in Castlebar. As I have already indicated he gave evidence in the trial before me which contradicted the evidence which he gave to O’Higgins J on the earlier occasion. He insisted that there was no concerted plan with the sole objective of detaining the first Defendant for the purpose of serving him with assessments while in custody, issuing proceedings and getting an injunction while he was in detention and hampering his ability to appeal the assessments.

57. I. Counsel for the Defendant says that the Plaintiff has failed to prove the appointment of the Revenue bureau officers by the Minister for Justice “with the consent of the Minister for Finance” , as authorised by Section 8(1)(a)(ii) of the Act of 1996. Counsel for the Plaintiff says that the Plaintiff, a Revenue Inspector, is not relying on his appointment as a bureau officer which appointment does not affect his power to issue proceedings as is made clear by subsection (10).

58. I do not accept this response because the Plaintiff has relied on the Criminal Assets Bureau Act, 1996 not alone to disguise his own individual identity by suing in the name of the Criminal Assets Bureau but also to protect the identity of another bureau Revenue official.

60. In my view the presumption of regularity (see In Re McClean (1950:IR:180)) applies and indeed the learned trial Judge in Deighan -v- Hearne & Ors., (1990:1:IR:499) was held by the Supreme Court to have been entitled to presume that various documents had been posted when they were meant to have been. In the present case, unlike in McClean, there was no evidence at all to the effect that the Minister for Finance had not given his consent. In the absence of such evidence I would reject this point.

61. II. The point is made that by Section 869(1)(b) of the Act of 1997, the assessment should have been served by a Revenue official and not by a member of An Garda Siochana. No detriment is claimed and this is acknowledged to be a merely technical point. I would apply the de minimis rule and regard the assessments as properly served.

62. III. Objection is taken to the introduction of hearsay evidence in reliance on Section 8 of the Proceeds of Crime Act, 1996. It is stated that this deprives the Defendants of the opportunity to cross-examine the detective inspector on his sources. Reliance is placed on Gallagher -v- The Revenue Commissioners & Ors ., (1995:1:IR:55). The core (as distinct from peripheral) evidence necessarily relied upon by the Plaintiff relates simply to the sequence of events relating to the raising and serving of tax assessments and appeals therefrom. None of this evidence relies on hearsay. Insofar as hearsay evidence is relied upon it is not relevant to the establishment of these core facts and is justified by Section 8 of the Proceeds of Crime Act, 1996. In accordance with the usual discipline of the Courts I defer considering the constitutionality of this section unless and until it necessarily arises. I note in the context of the non-constitutional point, however, that the condemned hearsay evidence in Gallagher was quite central to the allegations made in that case so that he was deprived of an opportunity to cross-examine on the essential evidence against him. This contrasts with the impugned section in The Employment Equality Bill, 1996 (1997:2:IR:321) where Hamilton CJ said (page 378):-

“Proof by way of certification is an interference with the norm of a trial viva voce . A certificate is an appropriate form of proof when it is proportionate to the ends to be achieved. It is a justifiable method of proof when the process is, for example, of a technical nature and there are other issues before the Court.”

64. With regard to this submission in the context of “the Trimbole Point” my view is that the circumstances of the Trimbole case itself are quite different from those applying to the present case. As already indicated the various divisions within the Criminal Assets Bureau are authorised to communicate amongst themselves and in my view would be in dereliction of duty if they failed so to do. There is no direct evidence of what was the intention of the arresting garda although it was open to the first Defendant to call him. The first Defendant did not attend at the hearing so that his bald denial on Affidavit to the effect that he was not involved in drugs could not be tested on cross-examination. The evidence is that the gardai arrested him at Shannon Airport, in the context of drugs albeit without success. He has a record in Scotland in connection with drugs. There was some confirmatory evidence found in the search of his home in the shape of documentary proof that he had visited the Barbados Islands.

65. Even without relying on any hearsay evidence there is sufficient evidence which is admissible to raise a reasonable inference that the gardai are likely to have had a suspicion that the first Defendant was involved in drug trafficking and to have arrested and detained him in that context. The Defendant has gone nowhere near establishing either that the arrest was a sham and a cover, as alleged, for the purposes merely of eliciting information in relation exclusively to Revenue offences or of keeping him in detention while they issued Revenue proceedings and procured a mareva injunction. Again, hearsay evidence is not relied upon to establish the point arising under the Fraudulent Conveyances Act.

68. Counsel for the Plaintiff relies on the Rules of the Superior Courts which, without citing them, clearly entitle the Plaintiff to join various causes of action in the one proceedings (see Order 18 generally). Furthermore, Order 19, Rule 29, specifically accommodates the inclusion of declaratory relief. In response, Counsel for the Defendant submits that the rules are subject to the statutory provisions and that there is no explicit authorisation in these to justify the inclusion of these reliefs in one set of proceedings. Since the Plaintiff is a creature of statute it can do only what the statute explicitly authorises and nothing more.

69. I disagree with this submission: it would be necessary, in my view, for a statute to explicitly rule out the inclusion of separate causes of action in particular cases if it were intended to suspend the ordinary application of the Rules of the Superior Courts. In holding against the Defendant on this point I am not holding, necessarily, that the Court will grant the declarations sought but merely, at this point, that the Plaintiff is entitled to join the various reliefs in the same action.

70. The Defendant submits that these proceedings can be brought only by way of summary summons because they rely on Section 966 of the Act of 1997 which permits only proceedings by way of summary summons. I dealt with this point in a judgment in Criminal Assets Bureau -v- McSweeney , (unreported: 11th April, 2000) and for the reasons I gave then I consider that the Plaintiff does have locus standi and is entitled to seek the reliefs sought in these proceedings by way of plenary summons.

71. The next issue raised by the first Defendant is that the proceedings are premature in that they should have been preceded by a demand for the tax claimed thereunder. As indicated that demand was actually made on the 9th June, 1998 almost one month after the proceedings had issued.

“(1) When income tax becomes due and payable, the Collector-General shall make demand of the respective sums given to him or her in charge to collect from the persons charged with those sums, or at the places of their last abode, or on the premises in respect of which the tax is charged, as the case may require.”

75. In the first place they say that having regard to the overall structure of Chapter 1 of Part 42 of the Act of 1997 which is concerned with “collection and recovery” in the case of “income tax”, it should be inferred that the step of making demand precedes the other steps set out subsequently in Chapter 1.

78. Next it is submitted that the following three sections which are dealing with proceedings in the Circuit Court for collection of the money can only be read, or can more appropriately be read as predicated upon the assumption that the proceedings were preceded by a demand. In particular, Section 965(1)(d) specifies that:-

79. It is submitted that there would be no point in making provision for the proof that “ demand for the payment of the tax has been duly made” unless that was a necessary proof. Furthermore, it is noteworthy that the demand has been “duly” made which suggests that the making of a demand is something which is “ due”.

81. A similar point is made in regard to this subsection, namely, that it is clear that the framers of the legislation in making provision for proof that before the institution of proceedings the relevant sum was “duly demanded” clearly intended that no such proceedings would be commenced prior to such due demand.

82. In response, Counsel for the Plaintiff submitted that nowhere is it explicitly stated that a demand must precede the commencement of proceedings under these sections. He submitted that the proof in relation to due demand was not to establish the satisfaction of a necessary precondition to the institution of proceedings but rather to present material to the Court which may have a bearing on costs.

85. It has been submitted by Counsel for the Plaintiff that income tax becomes “due and payable” before it becomes “final and conclusive”. In principle, therefore, proceedings may issue before the amount sought becomes “final and conclusive” and in that context a claim for an account of the amount due is appropriate.

86. In my opinion it was the intention of the legislature to make the issuing and serving of a demand a precondition to the commencement of proceedings for the recovery of income tax which had become due and payable. In my view proof that a demand has been “duly” made is provided for in the Act because the making of a demand is due.

87. Furthermore, it seems to me that proceedings are contemplated by the legislature only after a point when the income tax which is due and payable has become “final and conclusive”. Under Section 961 a demand must be made once the tax becomes “due and payable” - that is at a point in the process prior to the tax becoming final and conclusive. I do not think it is open to the Revenue Commissioners to commence proceedings as soon as income tax has become due and payable without first issuing a demand on the tax payer. I do not think that is the intention of the legislature as it does not seem to me to arise either from the actual language used or the sequencing of the various relevant sections.

88. This finding has been critiqued by Counsel for the Plaintiff in these proceedings upon the basis that it is introduced by the phrase “ as has been decided by Murphy J in the High Court ...” . Counsel has suggested that a close analysis of the judgment of Murphy J in the High Court in Deighan does not reveal that he made any such holding. It is true that in the High Court the passage to which the foregoing excerpt is apparently linked is dealing with the suggestion that the inspector was carrying out a judicial function and is concerned to explain the nature of the inspector’s function as purely administrative - albeit complex in the case of an assessment. Be that as it may, it seems to me clear that the Chief Justice in Deighan expresses the judgment of the Court to the effect that the relevant section of the Income Tax Code at that time (which ante-dated self-assessment) imposed no liability on anybody until the assessment became final and conclusive. This judgment, certainly, does not in terms state that no proceedings may be issued until such liability has been imposed but I would have thought that the statute should make explicit provision for issuing proceedings in advance of liability or in advance of a due and payable sum becoming final and conclusive if such were the true intention of the legislature.

89. I would view the provisions of Section 965(1)(b) and Section 966(5)(a)(i) as indicating an intention under the Act of 1997 that proceedings would not issue before tax liability had become final and conclusive. Whilst Deighan was dealing with a different regime the present one which imposes a self-assessment obligation on the tax payer operates more onerously and I see no reason to distinguish the present code from that under consideration in Deighan.

90. My conclusion must be, therefore, that not only is a prior demand required by the statutory provisions but also insofar as the collection of income tax is concerned the current provisions of the Act of 1997 authorise the commencement of proceedings only after the tax has become final and conclusive.

91. No elaborated case was made to the effect that the statutory provisions in relation to V.A.T. impose an obligation to issue and serve demand prior to commencement of proceedings. The case was made, rather, on the basis of fair procedures. In this context Counsel for the first Defendant referred to Section 25(2)(dd) of the Value Added Tax Act, 1972 which specifies that the provisions of the Income Tax Acts relating to " The refusal of an application for an appeal hearing” should apply to an appeal in relation to V.A.T. The reference to a refusal of an application for an appeal hearing is to the relevant provisions from the Income Tax Acts specifying that the appeal should be refused unless accompanied by the amount of tax admitted due. Counsel for the first Defendant says that this amounts to an unfair procedure and indeed further submits that Section 25(2) of the 1972 Act must be seen merely as procedural and did not in fact impose the substantial burden on an appellant to pay the amount of tax admittedly due.

92. I have carefully considered the provisions of Section 25(2) and I am not persuaded that they are merely procedural. In this context I note that there is an explicit allusion (at sub-paragraph (j)) to “the payment of tax which is agreed not to be in dispute in relation to an appeal” .

94. My primary function is to assign to the relevant words used in the statutory provisions their ordinary meaning. Nowhere is there a reference to a prior demand. It is scarcely necessary to point out that V.A.T is in a wholly different category to income tax. V.A.T is not the property of the tax payer: he or she is an involuntarily recruited tax collector who may be entitled to deductions from the amount collected. There is clearly room for dispute or debate but where the tax payer admits that a sum is due I can see nothing unfair in requiring him or her to pay it even whilst at the same time continuing to dispute through the appeals mechanism the balance of the amounts claimed.

96. A point was raised by the first Defendant under these headings. It arises by reason of the wording on the assessments (both in relation to income tax and V.A.T) issued by the Plaintiff. As I have already held that the proceedings in relation to income tax are premature it is not necessary for me to consider this point in relation to the income tax claimed from the first Defendant. In relation to the Value Added Tax notice of assessment the following is the relevant paragraph:-

97. I do not understand the first Defendant’s Counsel to have pressed this point strenuously with regard to the V.A.T claim. Correctly so in my view. The language is unambiguous: the amount which the tax payer believes to be due must be paid. Whilst this phraseology does not, in terms, state that the appeal will be rejected if the amount is not paid it could by no stretch of the imagination in my opinion be construed as indicating that the Appeal Commissioners have a discretion to accept an appeal which the law otherwise requires to be rejected. As I have indicated I consider that the effect of Section 25(2) of the Act of 1972 is clear and there is nothing in the notice of assessment which conflicts with it. I do not consider that the first Defendant is entitled to succeed under this heading.

98. Counsel for the first Defendant has submitted that because of the common law "man and wife" relationship operating between the first Defendant and the second Defendant a presumption of advancement operates in favour of the second Defendant in respect of any monies lodged by the first Defendant either to an account in their joint names or in the sole name of the second Defendant.

99. The second Defendant in her interview with Det. Inspector Byrne has accepted that " ... the money was put through my account so that tax would not have to be paid on it." In those circumstances I am satisfied that the Court will not apply any equitable doctrine or principle which has the result of assisting or advancing such a nefarious purpose.

100. In my view, insofar as these proceedings claim income tax and interest thereon, the present proceedings are premature for the reasons already given. In light of this finding and as the only constitutional points raised on the pleadings relate to the income tax Acts it is not necessary to deal with any of them.

104. The evidence in relation to the ownership of the money in the bank accounts comes from the interview with the second named Defendant. She has sworn an Affidavit saying she would abide by any Order of the Court and a second Affidavit in response to the Affidavit of Felix McKenna denying that her husband was involved in drug trafficking but not claiming any ownership or part ownership in the monies in the bank accounts nor explicitly in the house.

106. In my opinion the Plaintiff is entitled to declarations as sought in relation to the monies in the bank accounts. With regard to the dwellinghouse there is no explicit acknowledgement by the second Defendant that it was paid for exclusively by the first Defendant (as there was in regard to the monies lodged in the bank accounts). On the contrary when asked who owns the house she replied “ it is in both our names, we paid about £85,000 for the house”. I understand that there is a substantial mortgage. In my view in order to be entitled to a declaration as sought in regard to the dwellinghouse the Plaintiff should have established at least to a greater extent than they did the source of the monies used to purchase the house and of the mortgage repayments. I am assuming that the house is in fact in joint names. I do not think the Plaintiff has established his case with sufficient particularity to entitle him to a declaration in regard to the dwellinghouse.

108. Accordingly, there will be a decree in the appropriate amount in relation to Value Added Tax and arrears of interest thereon and a declaration that the first named Defendant is the beneficial owner of the monies lodged to the two accounts identified at paragraph (b) in the prayer of the amended Statement of Claim.

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	High Court of Ireland Decisions
You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Criminal Assets Bureau v. Craft [2000] IEHC 134 (12th July, 2000) URL: http://www.bailii.org/ie/cases/IEHC/2000/134.html Cite as: [2000] IEHC 134

High Court of Ireland Decisions

Criminal Assets Bureau v. Craft [2000] IEHC 134 (12th July, 2000)