Richards and Others [2015] EWCA Crim 1941

In The Crown v Michael Richards and Others [2015] EWCA Crim 1941 the Court of Appeal (Criminal Division), constituted by the President of the Queen’s Bench Division (Sir Brian Leveson), Lord Justice Gross and Lord Justice Fulford, allowed the prosecution’s application for leave to appeal and set aside an order staying the proceedings as an abuse of process.

The eight respondents had been charged following an investigation by HMRC into an allegedly large‑scale fraudulent tax mitigation scheme said to have operated between 2005 and 2007. The prosecution case was that the respondents had dishonestly created and marketed a scheme using UK Limited Liability Partnerships to generate tax relief claims totalling some £107 million on purported research and development expenditure of £269.8 million. The schemes involved high net worth investors who invested 20 per cent of their own funds and borrowed the remaining 80 per cent from an offshore lender, the Environmental Guarantee Corporation. Partnerships were said to have entered contracts with Carbon Positive Trading Limited for research into carbon sequestration or bio‑fuels. The prosecution alleged the true purpose of the scheme was personal enrichment for the respondents, that the loans were circular (the investors’ own money being recycled) and the research contracts were shams whether or not any research occurred, because the separate corporate entities were not acting at arm’s length and were under common ownership and control, and the financing structure was not what it purported to be.

On 19 July 2007 HMRC executed search warrants at business and residential premises and arrested the respondents. Material seized included 85 computers and other electronic devices containing approximately 7 terabytes of data, together with 152,865 pages of hard copy documentation. Charges were brought in 2010. Initial case management hearings took place before the Recorder of Westminster and Bean J, with directions that the prosecution serve its primary evidence and a case summary (which it did) and that the respondents serve statements of issues (which the prosecution contended was never properly done). Ramsey J, who had been appointed to manage the case and conduct the trial, held a series of case management hearings from April 2011 onwards. At the hearing on 20 April 2011 counsel for the prosecution submitted that the principles for initial disclosure concerned whether unused material undermined the prosecution case or assisted the defence, and that the law did not permit the defence to be given the keys to the warehouse. Counsel for one respondent identified as a key issue whether there was a trade and, if so, whether it fell within tax considerations, indicating that evidence of trade materially assisted the defence case or undermined that for the prosecution.

By July 2011 the respondents had served search terms totalling some 3,791, later reduced to just over 200. At hearings on 7 June and 29 September 2011 the judge expressed concern that detailed scheduling of the electronic material would deprive the respondents of timely access and indicated that an alternative method should be considered, drawing on approaches taken in civil disclosure. At the hearing on 7 June 2011 he observed that it was not practical for the prosecution to go through each document on the sub‑database and proposed that the prosecution provide expanded descriptions and directory structures of each device together with search terms applied, invite further search terms from the defence, apply all those terms and then disclose a dataset of all documents or emails identified. The prosecution agreed to this proposal, subject to being allowed time to comply. The judge fixed a trial date for September 2012.

The prosecution disclosed by 16 December 2011 the classic unused material comprising some 166,000 items that had been hit by prosecution search terms and reviewed by investigators. Graphics files that could not be searched by the software then in use (FTK version 1.7) were sent to Iron Mountain for optical character recognition and defence search terms were applied, with disclosure completed by 21 September 2011. The prosecution also provided directory structures and applied both prosecution and defence search terms. In the course of 2012 it became apparent that the forensic software (FTK) presented various difficulties, including in relation to the identification and removal of material subject to legal professional privilege. Various directions were given requiring the production of a global dataset and the migration to more advanced software. An Intella dataset containing approximately 5.5 million files hit by the defence search terms was served on 13 July 2012, but concerns emerged about LPP material, missing or corrupted files and difficulties with the format.

The trial date of September 2012 was adjourned on application by the prosecution. At a hearing on 21 June 2012 Ramsey J found that the prosecution was responsible for delay of some 11 months from seizure until November 2009 and further delay until April 2011 without much progress, but concluded that there could still be a fair trial and re‑fixed the trial for September 2013. By February 2013 it had become apparent that further technical difficulties persisted. On 8 February 2013 the judge vacated the September 2013 trial date and directed that electronic disclosure be completed by 28 March 2013. On that date the prosecution reported that it could not comply because of technical difficulties in relation to embedded LPP files. The prosecution then instructed Deloitte to assist. A global dataset was loaded onto a web‑based platform called Relativity. The respondents made a further application to stay the indictment as an abuse of process on grounds of disclosure of LPP material and delay. That application was heard in July 2013 and dismissed by judgment of 15 October 2013. The judge held that the point had not been reached where the prosecution should be stayed because of delay and there was no proper risk of an unfair trial. However, he identified four areas in which the dataset loaded onto Relativity needed to be refined to remove or identify correctly LPP material.

At a hearing on 22 November 2013 the prosecution outlined a three‑phase process for removing LPP material, proposing that initial disclosure would be completed by May 2014, allowing for a trial date of April 2015. That date was not met. On 27 June 2014 the judge agreed a revised timetable with initial disclosure to be completed by 8 September 2014, leading to a trial date of 11 January 2016, and warned that the consequences of not complying would be serious. On 8 September 2014 access was provided to Relativity datasets comprising a CPIA dataset for all accused (some 3,288,563 files) and separate PACE datasets for each individual defendant relating to their own devices. On 10 September 2014 the prosecution wrote to the defendants indicating that initial disclosure was complete. A very large proportion of the emails were subsequently threaded. The respondents served expert evidence from Mr Sebesta of LDM Global which criticised the Relativity dataset on grounds including inadequate metadata, difficulties with parent and child determination (emails and attachments), incomplete email threading (between 60 per cent and 80 per cent successful) and issues with duplicates. Mr Sebesta opined that the dataset was wholly unusable, lacked forensic integrity and that the search process was compromised.

By judgment handed down on 1 May 2015, Sir Vivian Ramsey (who had retired from the High Bench but continued to sit) stayed the prosecution in respect of all counts of the draft indictment as an abuse of process. He accepted the respondents’ expert evidence substantially and concluded that the dataset was not fit for purpose, lacked forensic integrity and did not allow proper and efficient searching and analysis. He held that the prosecution had failed on 8 September 2014 and had continued to fail to make available a dataset that could properly be regarded as CPIA compliant. He concluded that in a fraud case of this kind a properly usable and searchable dataset with forensic integrity was required, that the respondents should not commence work on a flawed dataset (to do so would waste time and cost which could not be recovered from public funds, a point also made by the Legal Aid Agency) and that, on this third occasion on which he had been asked to consider an application to stay for delay, the point had been reached where the delay had deprived the case of the fairness which the respondents and the public were entitled to expect. He described the stay as an appropriate sanction.

The prosecution gave notice of intention to appeal pursuant to section 58 of the Criminal Justice Act 2003 and contended that the judge had adopted an incorrect approach to initial disclosure and in any event had been wrong to stay the entire prosecution. The appeal was referred to the full court. Each respondent was separately represented but the thrust of the response was advanced on a common basis by Mr Brendan Kelly QC. The court also invited and received submissions from the Attorney General (represented by Mr Richard Whittam QC) on the law relating to disclosure in cases of this type and from the Legal Aid Agency, although it quickly became clear that decisions as to legal aid had not in fact had any impact on the conduct of the case.

The court began by reviewing the statutory scheme for disclosure. Section 3 of the Criminal Procedure and Investigations Act 1996 requires the prosecution to disclose any prosecution material which might reasonably be considered capable of undermining the case for the prosecution against the accused or of assisting the case for the accused. Prosecution material is defined in section 3(2) as material which is in the prosecutor’s possession and came into his possession in connection with the case, or which he has inspected in connection with the case in pursuance of a code operative under Part II of the Act. The statute proceeds in stages. Primary disclosure under section 3 is to be followed by the service of a defence statement setting out the nature of the accused’s defence and indicating the matters of fact on which he takes issue with the prosecution (section 6A). Where the prosecutor has complied or purported to comply with section 3 and the defendant has been charged with an indictable offence, service of a defence statement is compulsory (section 5). Once the defence statement has been served the defendant may make an application for specific disclosure under section 8 of material which he has reasonable cause to believe should have been disclosed pursuant to section 3. The prosecution is under a continuing duty of disclosure under section 7A which requires it to keep under review the question of whether at any given time there is material which satisfies the test in section 3.

The court referred to R v H [2004] UKHL 3, in which Lord Bingham observed that bitter experience has shown that miscarriages of justice may occur where unused material is withheld and that the golden rule is that full disclosure should be made. Section 3 does not, however, require the prosecutor to disclose material which is either neutral or adverse to the defendant. Prosecutors have been consistently discouraged from disclosing material that they are not obliged to disclose so as to avoid over‑burdening and distracting the trial process. The legislation does not prescribe the method of disclosure but is focussed on the end result. There is an ample framework of law and guidance in the Criminal Procedure Rules, the CPIA Code of Practice 2015, the Attorney General’s Guidelines on Disclosure 2013 and the Judicial Protocol on the Disclosure of Unused Material in Criminal Cases (December 2013), the latter incorporating recommendations contained within the Review of Disclosure in Criminal Proceedings conducted by Gross LJ in September 2011.

The Code of Practice defines material as relevant if it appears to an investigator or disclosure officer that it has some bearing on any offence under investigation or any person being investigated or on the surrounding circumstances of the case, unless it is incapable of having any impact on the case. Material which may be relevant to an investigation and which has been retained and which the disclosure officer believes will not form part of the prosecution case must be listed on a schedule. The Code provides that each item of material should be listed separately and numbered consecutively, with a description sufficient to enable the prosecutor to decide whether he needs to inspect it before deciding whether it should be disclosed. In some enquiries it may not be practicable to list each item separately. Where there are many items of a similar or repetitive nature these may be listed in a block and described by quantity and generic title. Even if some material is listed in a block, the disclosure officer must ensure that any items among that material which might satisfy the test for prosecution disclosure are listed and described individually. Neither the statute nor the Code requires the disclosure of schedules to the accused by the prosecutor, but this has become a requirement in practice for transparency and to command the confidence of the court and the defence.

The Attorney General’s Guidelines on Disclosure issued in April 2005 provided that disclosure officers or their deputies must inspect, view or listen to all relevant material that has been retained by the investigator and that generally such material must be examined in detail, but that exceptionally the extent and manner of inspecting, viewing or listening will depend on the nature of material and its form. For example, it might be reasonable to examine digital material by using software search tools or to establish the contents of large volumes of material by dip sampling. If material is not examined in detail it must nonetheless be described on the disclosure schedules accurately and as clearly as possible, and the extent and manner of its examination must also be described together with justification for such action. The court drew careful attention to the fact that the 2005 Guidelines did not adopt the approach contained in paragraph 9 of the 2000 Guidelines, often termed giving the keys to the warehouse, under which if unused material was too large to inspect and schedule but the possibility that it contained disclosable material could not be eliminated, the defence would be permitted controlled access to it, thereby transferring responsibility for ascertaining relevance to the defence.

Further Guidelines issued in 2011 were designed to supplement paragraph 27 of the 2005 version and to meet the rise in investigations where very large volumes of electronic material were found. The objective was to set out how material satisfying the tests for disclosure could best be identified and disclosed without imposing unrealistic or disproportionate demands on the investigator and prosecutor. It was not the duty of the prosecution to comb through all the material in its possession on the look‑out for anything which might conceivably or speculatively assist the defence. In some cases the sift could be conducted by an investigator or disclosure officer manually assessing the content of computer material from its directory and determining which files were relevant. In other cases such an approach might not be feasible. Where there was an enormous volume of material it was perfectly proper for the investigator or disclosure officer to search it by sample, key words or other appropriate search tools or analytical techniques to locate relevant passages, phrases and identifiers. In cases involving very large quantities of data the person in charge of the investigation would develop a strategy setting out how the material should be analysed or searched to identify categories of data. Where search tools were used to examine digital material it would usually be appropriate to provide the accused and his or her legal representative with a copy of reasonable search terms used or to be used and invite them to suggest any further reasonable search terms. If search terms were suggested which the investigator or prosecutor believed would not be productive, the investigator or prosecutor was entitled to open a dialogue with the defence representative with a view to agreeing sensible refinements. The purpose of this dialogue was to ensure that reasonable and proportionate searches could be carried out.

The 2013 Guidelines replaced both the 2005 and 2011 versions, with the text of the latter being contained in an annex. The 2013 Guidelines were intended to operate alongside the Judicial Protocol. They emphasised that properly applied, the CPIA should ensure that material is not disclosed which overburdens the participants in the trial process, diverts attention from the relevant issues, leads to unjustifiable

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R v Brendan Pearson and Paul Cadman [2006] EWCA Crim 3366
Jisl [2004] EWCA Crim 696
R v Olu [2010] EWCA 2975
Malook [2011] EWCA Crim 254
I & Ors [2009] EWCA Crim 1793
Horseferry Road Magistrates’ Court ex parte Bennett [1994] 1 AC 42
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Latif & Shahzad [1996] 1 WLR 104; [1996] 2 Cr App R 92, [1996] UKL 16, [1996] 1 All ER 353
Mullen [2000] QB 520
Attorney General’s Reference No. 1 of 1990 [1992] QB 630
M & Ors [2003] EWCA Crim 3764
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Transcript

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