Solicitors Journal, 3 January 2022
Ken Dulieu, Chairman of Capcon Ltd, comments:
At last fair and welcome Judgement for British businesses.
The enclosed article, drafted by Jane Fowler of Aquila Advisory, and published by Solicitors Journal – Crown Prosecution Service vs Aquila Advisory Ltd [2021 UKSC 49] – expertly describes the background and process of this case, whereby the Supreme Court reached their Judgement. There is of course another side which is the practical impact of illicit actions by errant directors on the business that employs and trusts them.
The CPS made much of the fact that Vantis Tax Ltd, a subsidiary of Vantis plc, had suffered no loss and stood to make a profit from the directors’ of Vantis Tax Ltd’s, Faichney and Perrin (F&P), illegal activity.
The amount of their fraud against HMRC was £4.55M, but only £1.4M was identified as recoverable.
A considerable sum, but when viewed against the enormity of F&P’s actions, which resulted in raids by HMRC teams on Company premises, the reputational impact and 90% drop in the share price, leading to administration, it can hardly be viewed that Vantis was not a loser. These actions were not the only reason for Vantis’ demise, but were a significant factor in the collapse of a second tier accountancy firm employing over 1000 personnel.
As the administrators had no funds to pursue F&P, Aquila took up the assignment on behalf of the creditors.
At no time did Aquila envisage it would turn out to be a battle not just between Aquila and the defendants, but the Crown Prosecution service (CPS) as interveners on behalf of the Crown, with limitless resources and funding at their disposal.
Had we known at the outset that this case would have taken over 10 years, involved a Crown Court Trial, three subsequent trips to the Court of Appeal (Criminal Division), a Chancery Division Trial, Court of Appeal (Civil Division), CPS Appeal to the Panel of the Supreme Court and, finally, leave to Appeal to the Supreme Court, Aquila nor I suspect any sane person would have taken the steps that we did. However, as a result of the Supreme Court Judgement, no other Company large or small will ever have to fight this type of legal challenge due to the precedent that has now been set.
The CPS asserted that the operation of their confiscation orders to recover the proceeds of the fraud should take precedence. The Supreme Court disagreed. It unanimously decided that Aquila’s right to recover the secret profits made by the Vantis Tax Ltd directors on the basis of Breach of Fiduciary Duty took precedence over the enforcement of the confiscation orders. As stated by Judge Mann in the High Court, the CPS had no greater right over these proceeds than the defendants, a fact the Supreme Court unanimously supported. Whether such intervention should ever have been made is now a moot point, but never again will the CPS be able to claim a Company is guilty due to the actions of errant directors without producing evidence to support their claim.
This ruling will help many Companies going forward, who find themselves the victims of fraud by their directors, to seek full recovery from those who abused their fiduciary duty to the company, without proving its claim in Court.
Justice for all businesses large or small, at last.
Ken Dulieu, Chairman of Capcon Ltd, is an experienced white collar fraud investigator with over 40 years’ experience. He is also Co- Partner with Jane Fowler in Aquila Advisory, a boutique forensic accounting firm.
