English judge orders recovery of funds from fraudulent car buying company account
The National Crime Agency has succeeded in an action under the Proceeds of Crime Act 2002 to recover monies from the frozen bank account of a former English car sales company as the proceeds of unlawful conduct.
Niche Cars Ltd, which had its registered office in Bradford and had a single director and shareholder throughout, was allegedly set up to deal in expensive motor cars. The company was dissolved in 2018, making the action unopposed.
The case was heard in the High Court of Justice (Queen’s Bench Division) by Mrs Justice Maura McGowan.
Investing employee salary
The alleged unlawful conduct related to monies paid to Niche Cars purportedly as legitimate payments under an Enterprise Investment Scheme. These funds were in fact part of monies generated by a payroll fraud and being laundered by a group of nine companies, collectively known as the Bradleygieves companies, of which a Mr Nicholas Bradley was the sole director.
The fraud consisted of ‘client’ companies transferring their employees to one of the Bradleygieves companies, who could then ‘invest’ up to 100 per cent of their salaries into EIS-authorised companies including Niche Cars using a scheme operated by Bradleygieves. Under the terms of the agreements, the relevant Bradleygieves company was responsible to HMRC for payments of PAYE and VAT sums deducted from gross payments to employees of its client companies. These payments were never made to HMRC.
Between January and April 2016 one of the Bradleygieves companies, BGP Services Corporation Ltd, transferred around £3.8 million to the Niche Cars account said to be EIS payments from three other companies. Within that period, Niche Cars remitted £2.99 million to a bank account held in its name in the United Arab Emirates.
The director of Niche Cars, Mr Amjid Ali, was interviewed by the police in April 2016. In a prepared statement he claimed that Niche Cars was a legitimate business and that the sums received were legitimate payments under the EIS to enable the company to purchase stock in the UAE. The company was not a qualifying company for EIS and had been rejected by HMRC for advance assurance that it met the requirements of the scheme.
Niche Cars was dissolved by a compulsory strike-off on 23 October 2018. The NCA learned of the dissolution in February 2019 and sought a civil recovery order over the balance standing in a frozen bank account that was deemed to be bona vacantia under the Companies Act 2006. The account held a sum of just over £527,000 in May 2018.
It was submitted for the NCA that the sums in the Niche Cars account met the requirements for recovery under the 2002 Act. The Bradleygieves companies were involved in criminal activity contrary to several pieces of tax legislation and paid the funds to Niche Cars as a direct result of this.
No EIS scheme in place
In her decision, McGowan J began by noting: “Whether Niche Cars was party to the fraudulent trading, the fraud on the revenue or merely laundered the proceeds of the fraud, the NCA argues that the funds are recoverable property. The issue can be distilled quite simply; was there a fraud on the revenue and if so, did some of the proceeds of that fraudulent conduct find their way into the Niche Cars bank account?”
Noting that the Bradleygieves proposal was entirely based on an operative EIS being in place, she said: “Without such a scheme there is no reason for Bradleygieves to provide the payroll service to any client company. There was no other means of payment for the services which Bradleygieves offered. In fact there was no such EIS scheme in place.”
She continued: “Mr Ali knew that no such scheme had ever been established. Indeed on his knowledge of the absence of any trading on the part of Niche Cars, he must have known that no such scheme could ever have been established.”
McGowan J concluded: “There is no legitimate reason why Bradleygieves should have paid £3,805,852 to Niche Cars. Mr Ali has never offered any explanation which offers any sensible account for the method and sums of the transactions. In any event the pattern and amounts of money transferred to and dispersed through the Niche Cars account, set in all the surrounding circumstances, proves the use of that account to launder those funds.”
For these reasons, McGowan J made a recovery order for the funds and interest accrued in the bank account held in the name of Niche Cars.
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