[2011] UKFTT 211 (TC)

TC01076

Appeal number:  LON/2007/8072

Excise – Duty suspended movements – Spirits – Irregularities – Haulier assessed as guarantor – Irregularities not detected in course of movement – Conspiracy involving EU purchasers – Whether spirits delivered to destinations – Held 64 consignments delivered but subsequent irregularity – Held consignment to Germany not shown as delivered – Haulier liable to UK excise duty on German consignment only – DSMEG Regs 2001 S.I. No.3022, regs 3, 4, 7 – Excise Directive 92/12/EEC Art 20 – Appeal allowed apart from duty on one consignment

FIRST-TIER TRIBUNAL
TAX CHAMBER

	SDM  EUROPEAN TRANSPORT LTD	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (Excise)	Respondents

				TRIBUNAL: 	 JUDGE THEODORE WALLACE
						 JOHN COLES

Sitting in public in London on 20-24, 27-30 September and 4, 6, 8 and 11 October 2010

Richard Barlow, instructed by BTG Tax, for the Appellant 

Jessica Simor and Suzanne Lambert, instructed by the Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2011

DECISION

1.	This is an appeal against an assessment to excise duty under regulation 7(1) of the Excise Duty Points (Duty Suspended Movements of Excise Goods) Regulations 2001 (“DSMEG Regs”) in the amount of £6,349,021 reduced on review to £6,306,137.

2.	The Appellant (“SDM”), a haulier, was the guarantor of 65 movements in 2006 involving consignments of spirits from duty warehouses in England to duty warehouses in Belgium, Germany and Latvia.

3.	63 consignments were of spirits sold either by Doktor Czech UK Ltd (“Dr Czech”) or by Liquid Marketing Ltd either to Tele Audio Group (“TAG”) based in Belgium or to Cyber Comp (“Cyber”) based in Luxembourg and consigned to Aldi SA (“Aldi”), a warehouse at Vaux-sur-Sûre in the Luxembourg province of Belgium.  The other two consignments were of spirits sold by Tradium Ltd to Sunman SIA in Latvia and by Pierhead Purchasing Ltd (“Pierhead”) to Intermediaire Europe Eurl Ltd in Germany.

4.	Customs contended that none of the consignments reached their destinations and that irregularities occurred under regulations 3 or 4 of DSMEG Regs giving rise to strict liability in the UK on SDM as guarantor of the movements.

5.	SDM contended that the consignments did arrive at Aldi and the other destinations and that if the consignments did not arrive the diversions neither occurred nor were detected in the United Kingdom.

6.	SDM was shown as the transporter on all the Administrative Accompanying Documents (“AADs”) and provided the movement guarantees.  All the movements were subcontracted by SDM.  SDM called five drivers as witnesses who gave evidence that they delivered consignments; the drivers of the other consignments were not called as witnesses.  Five subcontractors, four of whom were owner-drivers, have been assessed under regulation 7(2) of DSMEG Regs as having caused the occurrence of the excise duty points.  Their appeals have been stood over for this appeal.

7.	Dr Czech and Liquid Marketing have also been assessed under regulation 7(2) and their appeals have been stood over.  The consigning warehouses, Edwards Beers and Minerals Ltd (“EBM”) and Checkprice UK Ltd (“Checkprice”), have not been assessed; there was no allegation in the Statement of Case or otherwise that either of them caused the irregularities.

8.	There was no allegation in the Statement of Case or in Customs’ skeleton argument that SDM caused any irregularity.  The assessment was raised on the footing that SDM as guarantor was strictly liable for the irregularities.

The evidence

9.	Thirteen witnesses gave evidence for SDM and were cross-examined: David Cranny and Martin Hodgkins, directors of SDM; Andrew Airlie, director of Dr Czech; Deborah Dennis and Katie Hart, who were employees of Checkprice, which is now in administration; Terrence Edwards, managing director of EBM; Richard Patrick Hercules, managing director of Pierhead; Jason Bunce, who traded as J&J International (“JJI”) up to August 2006 and was transport manager of Connie International BV (“Connie”) a Dutch company, and who was himself the driver of one or two consignments; Stephen Waters, a self-employed owner-driver, who was the driver of eight consignments for JJI and Connie; Andrew Blunsden, a self-employed owner-driver trading as CT International, who was the driver of eight consignments; Allan Woods, subcontractor for four consignments; Timothy Francis, who drove four consignments for Mr Woods; and Andrew Parnham, a self-employed owner-driver, who was the driver of five consignments.

10.	Witness statements by Devinder Chahal, director of Liquid Marketing Ltd, who was unfit to give evidence, and Mark Wild, the driver of 14 consignments, who has emigrated to Canada, were admitted in evidence although the truth of the statements was not agreed.

11.	Six witnesses gave evidence for Customs : Paul Simpson, Higher Officer, who made the assessment and was the officer in charge of the case and visited SDM, Liquid Marketing Ltd, Mr Bunce and Mr Parnham; Valerie Mercer, Higher Officer, of the Alcohol Criminal Intelligence Team in London, who made a deposition on 13 March 2007 before the City of London Magistrates Court in connection with criminal proceedings in Belgium to which we refer later; Iain Calderwood, officer of the Excise Liaison Office in Glasgow, who was the supervising officer for the exchange of information between the UK and Belgian Excise Liaison Officers; John Arthur Boot, the excise assurance officer for Checkprice; Nigel James Smyth, excise assurance officer for EBM who also visited SDM and Liquid Marketing Ltd with Mr Simpson; and Susan Gibson, who visited Dr Czech, Mr Woods and Mr Francis.

12.	There were some 4,000 pages of documents including a core bundle of 370 pages and over 20 ring binders of documents, including bundles of authorities and legislation.

13.	The appeal was originally listed to start on 15 April 2010.  An additional statement by Mr Simpson and statements by the other five Customs’ witnesses containing 63 pages and 1531 pages of exhibits were served in March and April 2010, a different solicitor having taken conduct of the appeal; 1300 pages of documents were added to the bundles thereafter.

14.	The documentary material included CMR International Consignment Notes (“CMRs”), AADs, documents produced by SDM as evidence of the movements (which we have numbered by reference to a schedule produced by Customs), notes and reports of visits including visits by officers not called as witnesses, notes of interviews by the Belgian Customs authorities with Thibauld Godefroid, chief accountant of Aldi, a statement to Belgian police by Mireille Talbot, Head of Finance and Human Resources at the Aldi depot at Vaux-sur-Sure, a summons by the Crown Prosecutor’s Department to Schmit on charges of forgery of AADs and CMRs and to others on charges of bribery, an official report by Belgian Police and mutual assistance material.

Facts not in dispute

15.	There was no agreed statement of facts. The following facts in paragraphs 16 to 20 which were not contested by SDM are substantially based on Customs’ Statement of Case as amended on 20 May 2010.

16.	SDM is a haulier based at Biddenham, Bedford.  SDM contracted to transport 63 consignments of duty suspended spirits on behalf of Liquid Marketing Ltd and Dr Czech to the accounts of TAG and Cyber.  The consignments were to be transported from EBM and Checkprice duty warehouses in the UK to the duty warehouse at Vaux-sur-Sure in Belgium operated by Aldi.

17.	SDM also contracted to transport a consignment of 1,144 cases of vodka from the account of Tradium at EBM to Unistock SA, in Riga, Latvia and a consignment of 1,536 cases of Claymore Whisky from the account of Pierhead at EBM to Dialog Logistik GmbH (“Dialog Logistik”), in Germany.

18.	SDM subcontracted the movements to transport 63 consignments to Aldi and the consignments to Latvia and Germany to six hauliers: Jason Bunce trading as JJI, Connie, Alan Woods trading as JJL Transport, Mark Wild trading as Mark Wild Transport, Andrew Parnham trading as Parnham Transport and Andrew Blunsden trading as CT International.

19.	SDM was the transporter and guarantor for 3 consignments to Aldi in July 2006, the first being on 14 July, 4 consignments to Aldi in August, 9 consignments to Aldi and 1 to Riga in September, 27 consignments to Aldi in October, 20 consignments to Aldi in November and finally 1 consignment to Germany in December, all in 2006. 

20.	Following Early Warning System (“EWS”) enquiries by the National Verification Centre at Glasgow to the Belgian authorities made on 14 August 2006 and subsequently Customs were informed by the Belgian authorities on 31 October and thereafter  that the goods in question had not arrived at Aldi.

21.	After various visits and enquiries the assessment on SDM was notified on 26 April 2007 and was confirmed on review with a reduction of £42,884 arising from double counting.

22.	We now turn to the other material, about which there was no dispute, before turning to the witnesses.

23.	18 copy 3 AADs (“AAD3s”) were returned with forged Belgian Customs stamps and forged Aldi stamps and signatures; those were for Movements 1-11, 22, 31-33 and 57-59, the last being on 15 November 2006.  No AAD3 was returned for the other 47 movements.

24.	Apart from eight consignments, all CMRs to Aldi carried Aldi stamps of a type not in use at the time; the other eight carried no Aldi stamp. No tachograph discs were produced by any of the drivers or subcontractors covering any of the movements.

25.	On 26 October 2006 Thibauld Godefroid, the chief accountant of Aldi in Vaux-sur-Sûre, signed a statement for Belgian Customs stating that Edwards Beers Ltd and Edwards Beers and Minerals were not suppliers to Aldi and that Aldi had never done any commercial transactions with them; he stated that Aldi’s sole supplier of vodka (brand name Zaranoff) was Rola Weinbrennerei with German excise and VAT numbers; he stated that Aldi’s only English supplier was Whyte & Mackay which supplied Scotch Whisky. We observe here that the first EWS reference concerned Movement 6, a consignment of Glens Vodka despatched from EBM on 14 August 2006.

26.	On 27 November 2006 Customs sent an urgent Mutual Assistance request to the Belgian authorities following the Belgian response to EWS references in respect of Movements 30,34,35,36 and 64, the last being for a movement despatched on 20 November.  The e-mail responses for Movements 34-36 stated,

“the goods regarding above EWSE-Warning-message never have arrived the Trader Consignee Aldi NV”.

The Feedback on Movement 64 dated 22 November, the day after the EWS reference, stated,
“Consignment has not reached destination.”

The Mutual Assistance request included the following,

“[EBM’s] records indicate that roughly forty consignments have been despatched to Aldi SA with five copy AAD copy 3’s returned indicating delivery to the consignee in Belgium.
To enable the UK Excise department to determine if a diversion of goods has occurred I require your assistance to verify the following:-
The five AAD documents attached have been stamped and signed by a representative of Aldi SA and also with a stamp and signature indicating the consignment has been verified by Belgian authorities.  I require your validation of these stamps and signatures, in addition your confirmation as to whether these consignments were actually delivered.
I have also enclosed a copy of a schedule of movements, listing all consignments despatched to Aldi SA and request that you verify if any of the consignments listed have been received in Belgium.”

27.	On 1 December 2006 Mireille Talbot made a statement to the Arlon police in Belgium.  She stated that she was Head of Finance and Human Resources at Aldi.  She referred to the interview of M Godefroid.  She stated that on 27 November Aldi received 7 AADs from Checkprice asking for them to be filled in as if the merchandise had been received; since they had not been received, Belgian Customs were informed; these were for Movements 14,15,21,22 and 31-33.  She stated that although her name was written on the AAD 3 for Movement 8 from EBM she did not fill that document in, Aldi did not receive the product (Baileys) and did not sell it; she stated that the handwritten information appearing on the document was not written by the four ladies who dealt in particular with AADs.  She stated that her name never appeared on AADs regarding deliveries to the depot.  The stamp did not look like Aldi’s usual stamps although it was possible that that type may have previously been used.  She stated that Schmit was the previous Customs inspector before the current inspectors but that it was three or four years since she last had contact with him.  She stated that when AADs were received, all three copies would be filled in and sent to Customs to be stamped; Customs kept copy 4, returning copies 2 and 3 to Aldi which returned copy 3 to the consignor.

28.	On 18 December 2006 Schmit was interviewed by Belgian police and made a signed statement admitting falsely filling in signing and stamping six AADs between 26 and 31 August 2006.  He stated that he had been assured that the goods remained in England; the accuracy of this is one of the matters in issue.

29.	M Godefroid was interviewed again on 29 January 2007 for 1¼ hours at Aldi by Belgian Customs.  He stated that stamps of the type on 15 AADs shown to him had never been used at Aldi and produced examples of stamps in use from 14 July to 20 November 2006.  He stated that Aldi’s warehouse at Vaux did not receive excise goods for third parties.  He stated that the entry stock records for the period showed that Aldi did not receive any goods corresponding to those in a list shown to him.  He stated that he did not know of Edwards Beers, Checkprice, Dr Czech, Liquid Marketing, TAG or Cyber.  He stated that Aldi’s only British supplier was Whyte and Mackay.

30.	An official report dated 19 October 2007 by a police officer to the examining magistrate at Arlon, which covers Vaux, stated that Jean-Luc Marcel Schmit, Customs and Excise Collector of Arlon, was arrested on 30 November 2006 and on 1 December admitted before the examining magistrate having in exchange for reward in August 2006 completed and then cleared first four, then six, then finally an undetermined number of AADs dated from 14 July to 13 September 2006 exempting the payment of excise tax involving the British consignors Edwards Beers and Checkprice on behalf of the suppliers Dr Czech and Liquid Marketing to the Aldi warehouse, the only tax warehouse using an excise duty number under Schmit’s responsibility.  The report stated that the inquiry led by English Customs established the number of forged documents completed by Schmit to be 11 and that “this same department categorically states that those are fictitious exports to Belgium” which would be introduced into the British black market.  We observe that 18 forged AAD3s have been produced. The report stated that Schmit would declare having received the equivalent of 50,000 euros including £15,000 in order to do this from a person he claimed not to know.  The report stated that Schmit was charged with forgery by a civil servant and passive corruption.  The recipients of the alcohol shown on the AADs were Cyber (general manager, Mevlit Kucuker) and TAG (general manager Jean-Marie Motheu) the agent for TAG being Jean Renaix.  The report records the tapping of the telephone of Simon Vrielynck (the former managing director of TAG), after an e-mail was found on Schmit’s computer mentioning him, and the tapping of the telephone of Vrielynck’s lawyer.  

31.	Schmit, Motheu (alias Renaix), Vrielynck and Mevlit Kucuker were summoned to appear at the Tribunal Correctionnel, Arlon, on 8 September 2010.  Schmit was charged that on several occasions in August and September 2006 while carrying out his duties he committed forgery in distorting documents or signatures on 11 AADs and imitating the signature of Mireille Talbot and with three other charges; the others were charged with active corruption in proposing to Schmit an offer of £15,000 and €26,000 for the illegal discharging of 11 AADs.  We observe that the forgeries continued until the middle of November.

Documentary material for Movements 1 and 2

32.	We now set out the documentary material in respect of the first Movement comprising 2640 cases of Jack Daniels despatched from Checkprice on 14 July 2006 (“Movement 1”).  A fax from Mr Airlie of Dr Czech to SDM dated 13 July said that SDM had been recommended as a reliable transport company and asked for a quotation for a movement of spirits from Checkprice to Aldi.  A further fax from Mr Airlie  instructed SDM to pick up a load of Jack Daniels on Friday 14 July to go to Aldi for the account of TAG.  The internal AAD provided for the movement of 2640 cases of Jack Daniels from Thamesmead to Checkprice on 14 July; Checkprice was invoiced by European Beverages Ltd on 14 July for the sale of the Jack Daniels under bond for £116,133.60.  On 14 July Mr Airlie ordered the goods from Checkprice and instructed Checkprice to release the Jack Daniels to SDM for the account of TAG.  On 14 July SDM instructed JJI to collect 24 pallets of wine/various from Checkprice and deliver to Aldi for £400 confirming the tractor as BR HV 26 and the trailer as JJ 018; SDM informed Checkprice on the same day that “Load Jack Daniels” would be collected at around 1500-1600 hours.  The CMR was signed by a driver named Benford, the initial being illegible.  The AAD1 showed the despatch as on 14 July by trailer JJ 018; the AAD and CMR were signed by D Dennis. There was no Eurotunnel invoice. The CMR showed an Aldi receipt stamp and the date 17/7/06.  Checkprice invoiced Dr Czech for £120,164 on 17 July.  An AAD3 was signed as received on 17 July with an Aldi stamp and a name in capitals which appears to be “LERHO S.”; it carried a Belgian Customs stamp at Arlon dated 20 July.  SDM’s invoice to Dr Czech for transport was dated 21 July for £881.25.  Connie’s invoice to SDM dated 10 August was for £400.  A Movement Verification (“MV”) request, prepared by the National Verification Unit at Glasgow on 14 September 2006 but transmitted to Belgium on 23 November in relation to Movements 1, 2 and 3 on the ground that there were no AAD3s, asking for confirmation that the goods were entered in Aldi’s records, confirmation of the authenticity of Aldi’s stamp and that TAG had an account with Aldi, resulted in a response on 23 February 2007 that the goods were not received at Aldi and that Aldi had no transactions with Checkprice; “Entry in Trader’s records” and “Quantities Received” were marked “not confirmed”.  Meanwhile on 27 September Katie Hart at Checkprice had sent a fax to Aldi stating that no AAD3 had been received from Aldi and asking for a copy; Aldi responded on 2 October with a request for a copy AAD and delivery note.  There was no Eurotunnel evidence and no other evidence of the movement such as mobile telephone records, vignettes or food or fuel invoices.

33.	Movement 2 involved a consignment of 2730 cases of Courvoisier brandy sold by Dr Czech to TAG to be transported from Checkprice to Aldi.  The initial instructions by Mr Airlie to SDM were given on 13 July for 27 July. The consignment was bought by Checkprice again from European Beverages and was transported to Checkprice on 26 July.  On 28 July SDM instructed JJI to transport the 24 pallets of brandy giving the shuttle number for delivery on Saturday, 29 July at Aldi.  On 28 July SDM informed Checkprice that the load would be collected between 1200 and 1500 hours using tractor GN 55 CZH.  The CMR dated 28 July (a Friday) was signed by Mr Waters, the same date as on the AAD1.  The delivery note was signed by Mr Waters.  Vehicle GN 55 CZH was checked in by Eurotunnel at Folkestone for the outward journey at 2115 hours on 31 July (a Monday). The AAD was again signed by S. LERHO and dated 31 July; it carried a Belgian Customs stamp dated in August, the exact date being illegible.  The CMR carried an Aldi stamp as received on 31 July.  The MV request from Glasgow dated 14 September referred to in the previous paragraph covered Movement 2 also.  Apart from the Eurotunnel invoice, there was no documentary evidence of the journey to Aldi.

34.	It is convenient to cover the evidence of the Appellant’s witnesses in the chronological order in which on the evidence they became involved in the movements, rather than the order in which they were called.

Andrew Airlie

35.	Mr Airlie confirmed his statement of 19 August 2008.  He stated that he had been the director of Dr Czech for the previous 12 years and had been involved in wholesaling alcoholic and non-alcoholic beverages in the UK and overseas for six years.  At the relevant time the business operated from an office in Newcastle-upon-Tyne.

36.	He stated that 57 consignments of alcohol owned by Dr Czech were despatched to Aldi, Vaux-sur-Sûre, Belgium between 14 July and 20 November 2006 for the account of Dr Czech’s customers, 2 consignments for TAG and 55 consignments for Cyber.  10 consignments were despatched by Checkprice and 47 by EBM.  The consignments had been purchased from a number of suppliers and he had arranged for their transportation by SDM.

37.	He stated that on 17 May 2006 he was approached at a trade fair in London by a potential customer called Mr Melvit who put him in contact with a Mr Renoir (sic) who had a company called TAG which bought two consignments.  The remaining 55 consignments were bought by Mr Melvit’s company, Cyber.  During the negotiations over price and commodities Mr Airlie made enquiries to ensure that the transactions were valid.  Material in the due diligence file referred to Mr Melvit and Mr Renaix.  He validated the VAT numbers of both companies via the Europa website; he produced due diligence files including photographic identification.  EBM carried out bonded warehouse checks on Aldi.  SDM provided the movement guarantee.  He produced 348 pages of travel documents for the consignments.

38.	Cross-examined, Mr Airlie agreed that he had been assessed to about £2.8 million excise duty on the 55 movements under regulation 7(2) as having caused the irregularities.  We observe that the assessment is in fact on Dr Czech on the basis that Dr Czech was jointly and severally liable as owner at the time of removal from the warehouse and because the goods were caused to move under Dr Czech’s direction and was for £5,550,625.

39.	He agreed that he had been interviewed by Miss Gibson on 1 November 2006.  The main business was selling duty-suspended alcohol to cash and carries in France and Belgium.  He was a middle man making from £2,000-£5,000 on each deal before expenses; there was a higher margin on vodka, about 10 per cent.

40.	He was interviewed again on 28 November 2006 and signed the notes.  He was interviewed for a third time on 15 February 2007.  He said that he met Mr Melvit at a drinks fair in May 2006.  Mr Melvit had described his business as selling spirits and beers to cash and carries on the continent.  He first met Mr Melvit who passed him on to Mr Renoir or Renaix at TAG.  There were problems with late payments with TAG and after the first two movements he changed to supplying Cyber.  

41.	On 18 October 2006 he met Mr Melvit again at the Cottage Hotel, Calais.  All the payments were in cash and as part of the money laundering regulations he wanted to satisfy himself where the money was coming from.  Mr Melvit showed him invoices to cash and carries.  He did not know whether excise duty had been paid on the goods sold by Mr Melvit and did not visit any of the cash and carries.  He went to Calais because he was seeing another client.

42.	He was asked about a letter from Mr Melvit at Cyber on 1 August 2006 saying, 

“We also supply beers and wines to the Calais market, mainly for the British customer.  We generate a considerable amount of UK sterling cash.  To help us save money on the exchange rate we would like to pay for our stock with cash.”  

Mr Airlie said that cash was expensive to bank in charges; banks charged a flat fee.  On the continent there were also exchange commission charges.  Miss Simor then asked him whether the payments in cash rang alarm bells.  Mr Airlie said that he followed the money laundering regulations which was one of the reasons why he wanted to confirm where the money was actually coming from.  Even before the goods left the warehouse he had to declare on a Form W7 to HMRC at Cardiff that payment would be in cash.  Miss Simor then said,

“Can I make this absolutely clear.  I’m not in any way questioning your honesty.  You have declared all the cash payments as far as I know and you have never suggested that you were not paid in cash.”

Miss Simor then suggested that Mr Melvit may well have been selling to “a dodgy cash and carry that was not licensed” which was pocketing the excise duty.  Mr Airlie said that would be in Belgium or France.  He said that TAG and Cyber seemed legitimate businesses; they were VAT registered and provided details.  He said that he was not concerned at the quantity of goods as long as he was paid.  He said that he did not speak French.

43.	Mr Airlie said that typically the cash payments could be £20,000 in £20 and £10 notes in a suitcase.  The courier brought them to his home; he had met him at the trade fair.  He paid it into his bank HSBC, Chester-le-Street.  The £123,733.60 for the first movement possibly came in two payments: it was all in a file which Customs had copied; an officer from the money laundering section was with Miss Gibson.  Customs had a copy of his Sage accounts also.  He was fined £2,000 because he did not have the two pieces of identification required under the money laundering regulations.

44.	He said that sometimes the courier paid Dr Czech’s supplier direct and the payment would be credited to their account.  He would tell Cyber how much to pay the supplier.  Mr Airlie agreed that he had said when interviewed that he had a written agreement with Cyber that they would only purchase from Dr Czech.  Miss Simor asked Mr Airlie whether he was content that he was not being used as a cover man; the Tribunal expressed concern as to the relevance of this to this appeal; Miss Simor said that she was not challenging Mr Airlie’s evidence that he received payments in cash.  Miss Simor said that her point was that Mr Airlie was receiving cash not for the invoice but for the commission.  She did not pursue that line of questioning.

45.	Mr Airlie told Miss Simor that he could not remember who actually recommended SDM but that he visited SDM’s website and SDM was already working with Tesco.  He did not know that SDM was going to use subcontractors.

46.	Mr Airlie said that he did not know that Liquid Marketing was involved in any of the movements until receiving the assessment naming it.  He knew Liquid Marketing from a different perspective.

47.	He said that £221,000 remained outstanding from Mr Melvit.  His company had ceased trading.  He had tried to pursue SDM under the CMR, however since the movements to Aldi were completed he had no claim against SDM.

48.	Re-examined, Mr Airlie said that he was registered as a high value dealer because he was taking cash; every time he took goods out of bond he had to fill in a form for HMRC at Cardiff.

49.	He said that the courier had a Swedish sounding name and came by car.  The courier came to Mr Airlie having apparently been to Mr Airlie’s supplier first.  Mr Airlie would have faxed the amount to be paid to the supplier.

David Cranny

50.	Mr Cranny was the first witness from SDM although Mr Hodgkins made the first statement and was more involved in the operations.  Mr Cranny confirmed a statement dated 6 April 2010.  

51.	He stated that SDM was formed in 1998; at the time of the movements in issue he and Mr Hodgkins were the directors.  The haulage industry was cut-throat and it was difficult to make large profits; running costs and other overheads were high and margins low.  SDM spent a lot of time chasing work and arranging for lorries to be in a particular place at a particular time.  SDM’s largest customers were Nestlé, largely based in France, and MDC Foods, previously based in Belgium.  MDC Foods supplied Tesco, Aldi and Lidl.  A large proportion of SDM’s work was collecting work from European customers and transporting to the UK; SDM was always looking for matching export work.  Rates for transportation from the UK to Belgium were far less than for the return journey to the UK.

52.	SDM decided that alcohol was a potential area and in 2006 applied for a duty guarantee being visited by an officer.  He told her that SDM expected to transport a couple of consignments of wine, one or two of spirits and some beer each week.  SDM was granted a movement guarantee of £90,000.

53.	He stated that SDM then received requests from a number of companies asking for the transport of their alcohol, including Dr Czech and Liquid Marketing neither of which companies SDM had dealt with before.  It suited SDM to take on consignments to Belgium because MDC Foods was based there.  SDM dealt with Mr Airlie at Dr Czech and with Dave at Liquid Marketing.  The alcohol was to be collected from EBM at Leighton Buzzard or Checkprice at Norwich.  SDM subcontracted the vast majority of the work to its normal drivers.  Typically SDM received a telephone call from Dr Czech or Liquid Marketing to collect a consignment and contacted one of its normal subcontractors.  He and Mr Hodgkins had known Mr Parnham before SDM was formed; Mr Blunsden was a driver they had helped to get into business; they had known the other subcontractors for some years.

54.	Mr Cranny stated that the loads were transported between July and December 2006 and all went smoothly.  For the most part the alcohol was transported to Belgium and the drivers returned with goods for Tesco or for one of MDC Foods’ other UK customers.  He stated that until the HMRC action he had no reason to believe that there was anything untoward.  SDM had had no dealings with TAG or Cyber and was only aware of their names from the instruction faxes and from HMRC.  He produced Eurotunnel accounts for journeys where the subcontractors had used SDM’s Eurotunnel account and CMRs for return journeys including 14 by Mr Wild.

55.	Mr Cranny told the Tribunal that SDM did not disclose the name of the driver to the customer or the warehouse; SDM sent a fax to the warehouse with the vehicle registration number and the trailer number.

56.	Mr Cranny was cross-examined for over 5 hours.

57.	He said that in 2006 SDM had two vehicles and three trailers and had 10 owner/operators.  The vehicles were kept next to Mr Hodgkins’ office at Bicester.  He did not regard owner/operators as subcontractors because they worked for SDM all the time.

58.	He said that the business had expanded considerably by the visit on 22 November 2006.  SDM was using seven trailers and a number of subcontractors : Parnham, JJL Transport, JJ Transport, Mark Wild Haulage and maybe another.  SDM regarded the owner drivers as its own fleet; some pulled SDM’s trailers.  Not all the owner drivers were involved in the movement of alcohol.

59.	He said that one of SDM’s own vehicles was dedicated to Nestlé loads and the other was dedicated to Tesco’s, doing UK deliveries also.  Neither was used for alcohol.

60.	He estimated the fuel cost at around £1 a mile.  Dr Czech was charged £600 for the journey from Leighton Buzzard; the drivers charged SDM £325 including fuel and the crossing cost £165, leaving a profit to SDM of around £110.

61.	Mr Cranny said that SDM checked Dr Czech and Liquid Marketing with the warehouses which SDM knew already.  He was sure that Mr Hodgkins had a conversation and introductions from Mr Airlie before the fax on 13 July about prices.  Apart from Mr Hodgkins and Mr Cranny, Mr Young would be in the office.  SDM would have sent a fax quoting a price for the movement; the prices were all the same.  On 14 July SDM faxed instructions to Keith Plummer at JJI with the vehicle and trailer number.  SDM logged on the internet to Eurotunnel authorising the travel on its account within a 48 hour window giving the vehicle number but not the trailer; there was a shuttle crossing every 30 or 40 minutes.  Checkprice had been informed of the load which was to be picked up around 3.00pm.  He said that the driver would be expected to go direct from the warehouse to the tunnel.

62.	Mr Cranny said that there was a core of regular drivers: Woods employed Francis; Wild and Blunsden were regular drivers.  Connie had several different drivers including Waters.  Bunce only did one trip; Connie also had employees.  He did not know Benford who did Movement 1.  He did not know how many vehicles or trailers were used for the 65 loads, he had not checked.  He said that he had been told that Mr Wild had emigrated to Canada; none of the drivers knew where or when he went.  

63.	Mr Cranny said that the faxes quoting prices to customers were in the files which Mr Simpson had uplifted; these had not been returned.  The faxes for return journeys should be in the files.

64.	He said that normally a load would be collected on one day and delivered on the following day.  It would take between 3 and 4 hours to drive from Leighton Buzzard to the tunnel and 4 to 4½ hours to drive from Calais to Vaux.  Drivers were required to take a break of 45 minutes every 4½ hours.

65.	Mr Cranny said that drivers were told to ring in when loaded and also if there were delays; when they were empty they rang in for reload details.  Nestlé and Tesco were bringing goods back from different factories.  With owner drivers there was never no load back.  SDM had between 50 and 100 loads a week from the continent.

66.	He said that the position with Connie was different because Connie had more than one driver. Any instructions to Connie would be faxed before departure.  The instructions to other drivers were by telephone or text with faxes serving the function of invoicing.

67.	Mr Cranny said that if there was a breakdown or something happened there would be a trailer swap.  SDM would be told.

68.	He said that some journeys might be by ferry, maybe for drivers’ breaks.  He believed all outbound movements were by Eurotunnel which was quicker.

69.	Mr Cranny said that he could not explain the delay in Movement 2 between despatch on 28 July and arrival at Vaux shown on the AAD3 as 31 July.  He was asked about Movement 3 where the check in at Eurotunnel was recorded as 2.00am on 1 August but the AADs receipt was dated 2 August; he said that the driver might have taken his nine or eleven hour break at Calais and then driven to Vaux.  Miss Simor put further questions about Movements 4, 5 and 6.  Mr Cranny said that most day-to-day movements were arranged by Mr Hodgkins or Mr Young.

70.	Re-examined, Mr Cranny said that the fuel tanks carried around 1400 litres; drivers filled up in Belgium because diesel was cheaper there.  He said that all Tesco and Nestlé goods were carried in refrigerated vehicles or trailers.  Connie did work apart from that which it did for SDM; it had six or more vehicles.  All the tractors could pull trailers with refrigeration units.

Martin Hodgkins

71.	Mr Hodgkins confirmed a statement made on 13 June 2008 most of which was identical to that of Mr Cranny.

72	Cross-examined, he said that he was present throughout Mr Cranny’s evidence and had nothing in particular to add.

73.	He said that drivers would normally phone in if delayed whether on loading or on delivery or on the journey.  SDM was a busy office and he did not keep a record of calls.  He could not remember any particular incidents about delays; it was four years ago and SDM did many movements a day.  Apart from Parnham, Blunsden, Wild, Woods and Connie, there was a driver called Paul Atkins but he was not relevant to the case; he did not know who Benford was.

74.	Asked about the signatures on CMRs, Mr Hodgkins said that he did not deal with a lot of paperwork, the paper processing was done by Mr Cranny.

75.	He said that Blunsden and Wild although owner drivers were part of SDM’s core fleet.  Connie did not do inbound movements unless using a refrigerated trailer, it had its own customer base.  If Connie was using a refrigerated vehicle, SDM would endeavour to give a return load.  Most of Connie’s vehicles were not refrigerated.

76.	He said that SDM did probably 110 loads a week.  SDM handled a maximum of 50 per cent (we took this to include loads carried by core owner drivers) and subcontracted the other 50 per cent to third parties.  There was internal work when goods were unloaded in the UK for example in Scotland.  SDM used owner drivers for the alcohol.

77.	Mr Hodgkins said that he did not look at the CMRs at the time and would not look at the driver’s signature.  He did not ring the warehouse in Aldi:  the CMRs returned stated that the goods were delivered.  He had no contact with TAG or Cyber.

78.	Mr Hodgkins said that he and the transport manager, Mr Young, were responsible for organising transport.  Mr Young did the day-to-day planning and routing of vehicles.  Nestlé gave a weekly schedule; Tesco gave instructions on an automated system for the following day.  SDM would average 20 loads daily to be collected from different places in Europe.  SDM would route the core vehicles including owner drivers first and then subcontractors.  If a vehicle was up north, SDM would look for a load down, if possible to Kent.  22 or 23 alcohol movements in October would only represent 1/16th of inward loads.  Connie’s trailers were dry trailers without refrigerators apart from two and could therefore not be used for inward food.  Connie would look for its own load.  SDM’s schedules for movements were very basic.  Mr Young logged them on a large sheet but kept a lot of it in his head.

79.	He said that he believed that Jason Bunce was owner of Connie and Keith Plummer was his transport manager.  Mr Bunce was based at Snodland, Kent.  Mr Bunce’s English business, JJI, went bankrupt and he set up a Dutch company with English drivers based in England.

80.	Miss Simor asked him about Movement 65 where one of Connie’s drivers signed a CMR for the vehicle BJ ZN 02 and a trailer STT 56 but a scan at Eurotunnel showed the vehicle and trailer as empty.  Mr Hodgkins said that the correspondence showed that the loading was on Friday but that there was a tractor change and another tractor took the trailer out.  He remembered a call from Pierhead on 5 February 2007; that was the first he had heard about a problem with the delivery; Mr Hercules just wanted a copy of the CMR.  Mr Hodgkins sent the CMR which had no stamp in Box 17 for receipt.  He confirmed delivery with Connie and was told about a tractor change.  He said that SDM’s office would have sorted the tractor change but that he was unaware of the change.  He did not find out from Connie who had driven the vehicle.  He said that on 5 December 2006 Mr Young in SDM’s transport office would have told Pierhead that the goods could not be delivered to Dialog Logistik and was asked to take the goods to another site; the driver would have called Connie and Connie would have called SDM which would have called Pierhead.  Mr Hodgkins said that he was not aware of this at the time in December.  He did not know whether SDM ever received an amended bill from Connie for taking the vehicle to Halle instead of Neuss. SDM did not charge Pierhead extra.  He only knew from the documents in the bundle that no AAD had been produced for the movement.

81.	Re-examined, he said that in 2006 SDM only had three employed drivers; it was only obliged to keep tachographs for employed drivers.  None of the movements were by employed drivers.

82.	He said that the cabs had beds in which drivers could sleep overnight.  If the vehicle was loaded they would use secure parking.

83.	He said the Eurotunnel booking was by the vehicle registration number; the driver did not need any document.  He said that on Mr Simpson’s second visit on 5 December 2006 SDM was asked to supply its accounts between certain dates including Eurotunnel accounts; SDM sent them.

84.	He told the Tribunal that he believed all the CMRs had been returned by the drivers; he would not expect to see them.

85.	He said that if there was a tractor change in the UK SDM would have to advise Eurotunnel of a new booking before the tractor arrived, otherwise it would not be charged to SDM’s account. That would have been a routine office matter.

Deborah Dennis

86.	Miss Dennis confirmed a statement made on 16 January 2008, when she was bond manager of Checkprice, overseeing the day to day running of the bond, liaising with customers, suppliers and other bonds and carrying out SEED and WOWGR checks.  She oversaw paperwork and stock checks.

87.	She stated that a SEED check was done on Aldi on 20 September 2006 but she believed that there was an earlier check.  She had asked her assistant Katie Hart to send faxes to Aldi on 27 September and 6 November 2006 asking Aldi to send copy AADs.  The first fax asked for the AAD for Movement 1 which was returned by Aldi on 2 October with a request for a copy of the AAD and the delivery note with Aldi’s stamp.  Also on 2 October she received by fax from SDM a copy AAD3 front sheet with no back sheet and a CMR with an Aldi stamp dated 17.7.06.  The second fax on 6 November asked for the AAD3s for Movements 1, 15, 21, 22 and 31-33.  Aldi replied again asking for copies.  Miss Dennis assumed that those must have been received from Aldi, because those for Movements 31-33 were in Checkprice’s records shown as stamped by Aldi on 17 October 2006 with a Belgian Customs stamp.  That for Movement 33 carried the name “LER ro s” and the other two carried the name “TAL BOT”.  She confirmed that the Checkprice stamp and her signature were genuine.  She spoke to someone at Aldi about the AAD3s but both she and the person at Aldi had difficulty in making themselves understood.

88.	Cross-examined, Miss Dennis said that Customs visited Checkprice regularly, sometimes twice a month, sometimes not for four months.

89.	She said that Mr Feneron was the managing director.  He knew about everything although she handled the paperwork.  Checkprice had no relationship with Aldi before those movements.  Checkprice was asked to send goods to Aldi for TAG and Cyber which she did not know but there was no reason to think there was anything unusual.  She did not believe that Checkprice had a movement guarantee then; she believed that Checkprice had a fairly small movement guarantee for its own goods.

90.	She said that the delivery note for Movement 3 giving the delivery address as Liquid Marketing c/o Aldi was for Checkprice’s records.  It did not matter to Checkprice whether Liquid Marketing had an account at Aldi.  She did not know whether Cyber (which bought from Liquid Marketing) paid Checkprice directly in cash (for the movement).

91.	She said that Checkprice sometimes had 20 loads in and out in a day.  She never used to see the drivers.  The warehouse staff took the paperwork to drivers: AADs, CMR and delivery notes. She did not know about Checkprice having sold goods to Liquid Marketing which were the subject of 6 movements; she said that she did not remember without the paperwork.

92.	Miss Dennis said that on being given instructions normally by fax for a movement Checkprice would raise an AAD having done a prior SEED check.  The warehouse would be given a pink ticket to collect the goods in the correct location; spirits would not be moved until the truck arrived.  She said that Checkprice did not supply seals but noted the number if the driver put one on.
93.	She said that if Checkprice did not receive AAD3s within two months a Form W1 was sent to Customs.  Checkprice would have kept copies of those sent on 6 December.  She did not know when Checkprice received the AAD3s for Movements 31-33.

94.	Katie Hart told Miss Simor that she did not know when the AADs for Movements 31-33 were received or from where they came.

Terence Edwards 

95.	Mr Edwards confirmed a statement dated 20 September 2008.  He stated that he had been managing director of Edwards Beers and Minerals Ltd (“EBM”) for 30 years.  Current turnover was £10 million.  There was a retail element of the business and a bonded warehouse where customers owned the stock.  When asked to open an account, EBM ensured that the customer had a valid WOWGR certificate.  Customers selling overseas were responsible for arranging transport.  EBM would verify the movement guarantee held by the haulage company. EBM carried out a SEED check on bonded warehouses to where goods were to be transported.  Once the SEED check was confirmed EBM asked for the registration number and trailer number of the collecting vehicle and a release note from the customer.

96.	He stated that when vehicles arrived, EBM verified details of the lorries.  The driver would bring the CMR sometimes partially completed.  EBM would complete the CMR and obtain the driver’s signature.  EBM also completed the AAD and a picking slip to be signed by the driver.  One copy of the CMR, AAD and picking slip was retained and copies were given to the driver.  The lorry was sealed and the seal number noted.  EBM kept a separate file for each deal.  He stated that all of the files containing documents relevant to these movements were held by Customs who had uplifted the records on 15 September and 23 November 2006.

97.	Mr Edwards stated that a SEED check was carried out on Aldi on 9 August and confirmation was received from Customs.

98.	He produced a list of consignments for delivery to Aldi for Dr Czech containing 47 movements, the first being Movement 6 on 14 August and the last being Movement 64 on 20 November 2006.  The list showed that AAD3s had been returned for Movements 6-10. Forms W1 had been sent to Customs for the others, no AAD3 having been returned in spite of requests to Aldi.  

99.	He stated that on 22 November 2006 EBM received a direction from Customs that further goods must not be delivered to Aldi without Customs’ permission.  No further deliveries were made.

100.	Cross-examined, he said that he did not really know SDM other than as a transport company that worked out of the warehouse. He did not know the individuals.

101.	He said that he was not aware of any changes in the destinations on the AADs.  If there had been, he would have notified Customs as was required.

102.	He said that the time on EBM’s picking list was when it was generated by the computer.  There might be 30 to 45 minutes before the forklift driver took the goods from the warehouse.  Normally they were put straight onto the vehicle.  

103.	Re-examined, he said that normally picking was when the driver brought the documentation to the warehouse.  He said that EBM has not been assessed and its warehouse approval has not been removed,

Devinder Chahal

104.	Mr Chahal made a statement dated 9 June 2009.  On 4 October 2010 Mr Barlow put in an updated medical report stating that Mr Chahal seemed to be suffering from a severe flare-up of sciatica and was taking high dose medication; he would not be fit to attend court for the forthcoming couple of weeks.

105.	Mr Chahal could not therefore be cross-examined; evidence as to visits by Customs on 10 October, 7 and 23 November 2006 and 28 February are covered in Mr Simpson’s evidence.

106.	He stated that he had been co-director of Liquid Marketing since March 2005.  The other director was Mr Lidder.  The business was operated from an office in Luton and consisted of wholesaling alcohol in the UK and overseas.  It had an account with Checkprice since July 2005.

107.	He stated that Liquid Marketing purchased six consignments of spirits from Checkprice and sold on to TAG and Cyber between 31 July and 16 October 2006.  All were for delivery to Aldi.  Transportation was arranged by SDM.  He usually dealt with Mr Feneron at Checkprice.

108.	He stated that in July 2006 he was contacted by a potential customer called TAG and dealt with Mr Renaix who was based in Luxembourg.  He spoke to Mr Renaix on a number of occasions; Mr Renaix faxed documentation which Mr Chahal exhibited; much of this was in French.  Also in July he was contacted by Mr Melvit of Cyber who also faxed documentation.  He provided Europa validation for TAG dated 28 July 2006 and for Cyber dated 10 October 2006.

109.	He produced deal files for the six consignments.  These were Movements 3-5 (one on 31 July and two on 7 August 2006) and Movements 31-33, all on 16 October 2006.  These contained purchase orders by TAG and Cyber, purchase orders to Checkprice, faxes to SDM requesting transport, invoices from Checkprice, faxes to Checkprice informing them of the haulier, the destination and the customer, a copy of the AAD1s for Movements 31-33 and the invoices to TAG and Cyber.

Jason Bunce

110.	Mr Bunce confirmed a statement of seven paragraphs dated 18 May 2007.

111.	He stated that he was transport manager for Connie BV, a Dutch based transport company, and ran their operations in the UK and abroad.  He had held this position for about three years.

112.	He stated that about 28 consignments of spirits were delivered to the warehouse of Aldi by Connie on a sub-contract basis from SDM; on each occasion he arranged for the deliveries to be made by self-employed drivers to whom he regularly subcontracted work.

113.	He stated that the loads were collected from Checkprice or EBM.  The vehicles were leased or borrowed by Connie and he purchased the fuel and arranged maintenance.  The drivers passed their completed CMRs to him and he passed them to SDM and invoiced SDM for the service.

114.	He stated that he did not personally deliver any of the goods to Aldi but was satisfied that all deliveries were made.  No problems were reported either by drivers or by SDM.  

115.	Cross-examined, he said that he had probably received an assessment; he could not remember reading it.

116.	He said that he did not make any deliveries to Aldi and had never been to Aldi; he did make a delivery to Latvia but not to Germany.

117.	He said that in July 2006 he was a transport haulier trading as JJI which had two trucks.  He agreed that he was sole proprietor, that the business ceased trading in August 2006 and that he had since been declared bankrupt in 2006.  Connie NV was set up in Holland because it was cheaper; English insurance and tax was very expensive.  He was not a director of Connie, he was the owner.  He did not know the name of the director, it was a Dutch name.  The accounts were based in Holland and everything was sent there.  He was not very frequently paid in cash; when he was it went into general business expenses at the yard at Snodland where his office was.  He had receipts for diesel.  He was not the bookkeeper; he was a lorry driver.  It was a Dutch company so he did not pay tax in England.  Connie was already going before JJI ceased.  A man in Holland set up Connie.  Lots of companies were “flagging out” because tax and insurance were so expensive in England.  He was working for JJI and Connie at the same time.  He said that the visit by Customs was about a week before his son died.  If he had said that he had three vehicles and a trailer when Connie took over that would be right.

118.	Mr Bunce said that from August to December 2006 he did a lot of driving.  Keith Plummer in the office arranged the transport; he answered the phone and did some bookkeeping and faxing.  He did not know why Mr Plummer was not a witness; later he said that he did not know where he was and was not in touch with him, he said “I don’t like him.”  Mr Bunce said that he himself was probably doing the longer journeys to Spain.

119.	He said that for subcontracted work to Belgium he was paid £600-£700 a load and paid the self-employed driver £40 to £100; he provided the vehicles.  He had a website to get drivers; they came from anywhere.  He said, “I didn’t have a good driver in all my time of having lorries.”  He said that he tried to work for people who paid for the ferries and used their trailers.  He worked for SDM for about ten years and had one lorry dedicated for SDM’s work.

120.	He was then asked about the registration numbers of the tractors he used.  He did not recognise BR HV 26 (see Movement 1); he recognised GN 55 CZE (Movements 2, 9, 10 and 15); he recognised GN 55 CZH (Movements 3, 14, 28, 35, 45, 52, 56 and 63), also BJ ZN 02 (Movements 4, 6, 11 and 41) which was not his vehicle; he recognised GN 55 CZF (Movements 36, 47, 55, 59 and 64) and also BJ FN 02 (Movements 48, 60 and 65) and BJ FN 98 (Movements 5, 7, 8 and 12) both of which were his tractors.  He recognised GN 55 PVG (Movement 13) but not SA 52 FMM (Movement 33).

121.	He said that he borrowed trailers or used those of people he worked for.  He was asked about a list of trailers he used including JJ 18 (Movement 1) and said it was obviously one of his if it was JJ.  There was no registration number for trailers in England.  He used to put his own number plate on a trailer because when he got a job he gave the truck and trailer number.  He kept the number when he gave a trailer back.  He said, “It was just a personal thing to have my own trailer numbers.”

122.	Mr Bunce was then asked about his drivers.  He said one was Mr Waters and remembered the following names when they were put to him: Noble, Benford, Carl Robinson, Richard Griffin and possibly Konstantinas or Kosta.  Miss Simor asked about seven other names which he said he did not recognise.

123.	Asked whether he gave SDM their names, he said “I think you will find I did not give SDM anything.”  He did not remember SDM asking. In February 2007 when asked by Customs he said that he probably did not know which drivers had actually done the jobs.  He was not obliged to keep records of the drivers’ journeys, that was down to the driver.  He agreed that he was obliged to keep tachographs but only for one year.  He said that he was never asked to produce tachographs.  Asked about a request at the visit in February 2007 to provide evidence of journeys within 14 days, he told Miss Simor,

“My son died after that.  I wasn’t really bothered about tachographs or you lot, to be honest.  I didn’t care less about anything.”

He said that the tachographs went to Holland but they only had to keep them for a year.  Connie was not still trading.

124.	He said that SDM were pretty professional and would have sent instructions by fax giving the information needed.  The tractors and trailers were all rented or borrowed.  He or Keith Plummer would ring a driver.  The driver would sometimes know where he was going next.  He did not really keep in touch with the drivers by telephone during a journey; they would ring if there was a problem.  

125.	Mr Bunce was then asked about his signature on the CMR for Movement 11 to Aldi; he said that he could have loaded it.  He said that it was possible that he had collected the load and handed it to another driver possibly with another tractor unit, he really would not know.  He said that if a driver is out of time “then you swap drivers”.

126.	Miss Simor next asked him about Movement 65 to Germany, involving a consignment of 1,536 cases of Claymore sold by Pierhead and going to Dialog Logistik in Germany using BJ ZN 02 and trailer STT 56.  He did not recognise the signature on the CMR.  He said that he did not recall the load.  He denied a suggestion by Miss Simor that the load stopped at Coquelles where Intermediaire was based or at Portsmouth and that the journey never happened.  Asked about 46 cases from the same manufacturers’ lot being found at Stars Beers in Portsmouth in March 2007, he said that was six months down the line, the goods could have come back from Europe.  He said that the goods did leave the country and went to Germany.  He said that he could not shed any light on Movement 65.  He did not remember a change (in destination) from Neuss to Halle or being told about it or any question of an extra charge for going to Halle which was further.

127.	Mr Bunce said that he drove Movement 12 to Latvia.  He said that the load was collected on BJ FN 98 with trailer JJ 20 and he picked it up en route with BJ ZN 02; he did not go to Aldi with BJ ZN 02.  He said that he thought that he picked up the trailer and load at Calais.  He said that he might have taken BJ ZN 02 over to France empty.  He said that if he remembered rightly the driver was scared to go to Latvia.  He denied the suggestion that he never went to Latvia, saying “What about the CMR?”  He said that it would take about 3 days to drive to Latvia from Calais.

128.	Re-examined, he said that he fell out with Keith Plummer soon after his son died.  Earlier he had said that his son died shortly after the visit in February 2007.

129.	Asked about the Latvia trip he said that it was only possible to drive a heavy goods vehicle in Germany up to 10.00pm on a Saturday but that he would have been out of Germany and into Poland on Saturday September 16.  That was the only time he had been to Latvia.  He told the Tribunal that he had difficulty in finding the warehouse but that it was a massive big place and once he was near everybody knew of it: it was like an old brick steelworks.  The address was on the CMR and he had a map.  When he came into Riga off the motorway he asked at a big garage.  He did not have a satnav.

Stephen Waters

130.	Mr Waters, who was the driver for Movements 2, 15 and possibly 59 from Checkprice and for Movements 9, 10, 47 and 64 and possibly 55 from EBM, confirmed a statement dated 4 July 2008 for this appeal.  He also made another undated statement.

131.	He stated that he had been a haulage driver for approximately 35 years.  He had been employed by various haulage businesses but for more than five years he had been self-employed.  He did not own his own lorry.

132.	In around July or August 2005 he started to pick up some subcontracted work from Connie, a Dutch based haulage company; the deliveries were mainly frozen food which Connie was delivering for SDM.  Connie was run by Jason Bunce who was based in the UK.  Mr Bunce was his only point of contact.

133.	He stated that around late 2006 he was subcontracted by Connie on behalf of SDM to deliver some consignments of spirits to the warehouse of Aldi at Vaux.  He recalled personally delivering approximately six consignments around late October 2006 to Aldi using GN 55 CZF, which was also used at times by another driver, and GN 55 CZH.  He would drive to either Checkprice or EBM as instructed with a blank CMR; he would insert the vehicle registration number and trailer number and hand it in at the warehouse; he then waited with his lorry for the arrangements to be approved and the goods to be loaded.  Checkprice did not usually load spirits until the evening and quite often he waited for hours.  He used to wait a few hours at EBM although Mr Edwards liked lorries to be away by 4.00pm.  The CMR would be returned to him with the address of Aldi and with the AAD and loading list.  He personally sealed the trailer with a numbered seal once it was loaded.

134.	Mr Waters stated that when the goods were loaded and he received the documents he drove directly to Vaux via the channel tunnel which had been pre-booked by SDM.  He bought a Eurovignette to drive on Belgian roads using a credit card which Connie had given him.

135.	He stated that on arriving at Aldi he parked in a large holding area outside the warehouse and telephoned SDM to advise that he had arrived.  The gates to Aldi were usually unmanned.  He remembered a man coming out to the lorry and asking for the paperwork; he followed the man to the office walking up a couple of steps to a window.  The man then said that he could return to the lorry while the paperwork was dealt with.  He waited until the man came out again and directed him to a loading bay.  He drove through the gates and reversed into the loading bay; he opened the rear doors having broken the seal and handed it to one of Aldi’s staff.  Aldi’s staff unloaded the goods while he waited in the cab; he never unloaded any goods.  Unloading took approximately an hour.  Once the goods had been unloaded he checked that the trailer was empty before closing the doors.  He would then see the same man who had directed him to the loading bay in order for him to get the CMR which by now had been stamped.  He never went into the warehouse or the office.  Upon the one occasion when the security guard was on the gate, he was stopped and asked to open the rear doors of the trailer for the guard to see that it was empty.

136.	Mr Waters stated that he would then usually drive to Strasbourg to reload for the return journey; he never returned with an empty trailer; before collecting the return load, he would often buy fuel in Luxembourg which was about 60 kilometers from Vaux, fuel there being much cheaper than in the UK.

137.	He stated that on return he would hand the CMR and tachograph to Mr Bunce.

138.	He confirmed a sketch plan of the Aldi premises marked “Parnham A”.

139.	Cross-examined, Mr Waters said he did not know how many loads he actually did; he was a lorry driver and carried lots of different loads.  The first statement when he said he did three loads was probably made for Mr Bunce’s company.  He could only identify the loads by his signature on the CMRs.

140.	 He said that he would normally get a call or a fax from Keith in the office telling him to go to EBM or Checkprice.  Sometimes he would be waiting until 8 or 9pm at Checkprice or for two or three hours at EBM just for loads to be cleared; there was always some hold-up at EBM.  If he left EBM at 4.00pm it would take up to 3 hours to the tunnel and about 4½ hours from Calais to Vaux.  It took up to an hour to unload at Vaux.  After filling up with diesel in Luxembourg he would head to Strasbourg for a back load for another company.  He said that he handed in his CMRs, delivery notes, tachographs and fuel invoices to Connie’s office.

141.	He said that he found Aldi using a map.  He did not use the same way each time because of security: there were about three different ways.

142	Asked about the time between despatch of Movement 2 from Checkprice on 28 July 2006, and the date of receipt at Aldi shown as 31 July on the CMR and the AAD3, he said that 28 July was probably a Friday because there were no deliveries to Aldi on Saturdays and Mr Bunce would not let him go out on a Friday in case he got stuck out there all weekend with a load, so the lorry was parked at Snodland for the weekend and he thought he went out on Sunday night.  He said that he had not a clue why the Eurotunnel account showed the vehicle as checking in at Folkestone to go out at 2115 hrs on 31 July, a Monday: if he was loaded he always shipped out on a Sunday night; somewhere along the line there was a date wrong.

143.	Mr Waters agreed that he had picked up the load for Movement 9 on 8 September with GN 55 CZH.  Asked why there was no evidence that he used the tunnel for that movement, he said that sometimes he would go by ferry, it was the office which decided.  He said that again the lorry was in Mr Bunce’s yard for the weekend, while he went home by his car to Carshalton.

144.	Asked about Movement 10, where the picking list time at EBM was 1240 hrs on 13 September but the Eurotunnel check in was 2352 hrs, he said that he had not got a clue what he did in the intervening time.  He might have had a sleep, or there might have been a delay loading or a pile up on the M1; it was so long ago he could not remember.

145.	Miss Simor next asked him about Movement 15 involving GN 55 CZM again.  He said that he was the driver; although he drove other vehicles, no one else drove that vehicle.  Asked about the difference between the shuttle reference number shown on the instruction to Connie and that on the Eurotunnel account, he said that they quite often changed shuttle reference numbers.  The booking might already have been used or might have been wrong.  He could not remember what happened between the collection time advised to EBM (1345 hrs) and the Eurotunnel check in at 0755 hrs on the next morning: he might have run out of hours.  Asked whether there had been a trailer swap, he said that he doubted it very much.

146.	Mr Waters said that because he had signed the CMR he must have collected the load on Movement 47, but he was not sure whether he took the load out.  That vehicle GN 56 CZF was also driven by another driver.  He could not say why the load left at midnight when it was to be collected from EBM at 1400 hrs.  He might have had time off but this was speculating.

147.	As to Movement 55 he said that the signature on the CMR could be his; he did not have a clue why the check in at Eurotunnel was 2145 hrs on 9 November whereas the Aldi stamp was not until 11 November.  The CMR would have been stamped at Aldi and given back to him.

148.	He said that he was the driver for Movement 59.  He said that it was more than likely that the time between collection at Checkprice on 15 November until check in at Eurotunnel on the next morning was because he was out of time, having driven to Norwich and back to Connie’s yard.  On such occasions he would sleep in the cab overnight.

149.	Finally, Miss Simor asked him about Movement 64.  he said that he would not have said that the signature on the CMR was his but it could be; it might be Simon Withall or Carl Robinson or Howard Winters, none of whom he had seen for the last three or four years.  He could not throw any light on why there was no CMR stamp from Aldi.  He said that every load that came out from bond went to Aldi.

150	When the cross-examination was concluded, the Tribunal pointed out that it had not been put to Mr Waters that he did not deliver any loads to Aldi, drawing attention to EPI Environmental Technologies Inc v Symphony Plastic Technologies plc [2005] 1 WLR 3456. Miss Simor asked leave to put this to the witness.  Mr Barlow objected on the grounds that the cross-examination had been concluded.  The Tribunal after consideration refused to allow the cross-examination to be re-opened.

151.	Re-examined, Mr Waters said that he had very frequently experienced hold-ups at the tunnel; once he sat waiting for over 7 hours through various hold-ups.

152.	He said that he did not think that he brought back loads for SDM. The loads from Strasbourg were perfumes and women’s stuff.  He did not take loads from Tesco or Nestlé.

153.	He told the Tribunal that he did a maximum of three loads in a week, maybe 120 or 150 loads in a year.  He said that he did not remember any fixed booking times at Aldi; he was never kept waiting longer than an hour.  He did not know where the goods were put when unloaded.  There were a fair few unloading bays, he went to the same one, either 13 or 17, something like that.  He was not allowed into the bonded area, he backed up to a bay and they came out to unload.  He was not sure whether there were bays for bonded goods; the bays were raised and fork lifts were used.  He had been to Aldi before, every now and again.  He parked in a lorry park outside the warehouse area and the same person came out and called him in each time.  When he went into the warehouse the barrier was open, he only saw somebody there once.  He knew where the office was because he had been to Aldi before; he just handed the documents in.  He did not have any conversation with those working in the office.  When the goods were unloaded, one of those unloading would bring the two copies of the CMR out.

154.	In answer to further questions from Miss Simor, he said that he did not see the goods unloaded at Aldi; he said that he could be sure that the goods were not swapped in Bunce’s yard because the trailer had been sealed.  If Mr Bunce had swapped the trailers he would have known because he was sleeping in the cab.

155.	He said that he had probably delivered French beer to Aldi before and also foodstuffs.  It was not possible that the vehicle could have been filled with foodstuffs, he would have seen when he opened the doors before backing onto the loading bay.

Andrew Paul Blunsden

156.	Mr Blunsden confirmed a statement dated 10 June 2008.  He was the driver for Movements 17, 19, 22, 29, 38, 43, 50, 53, 57 and 61, the first of these being despatched on 28 September 2006.  He was driving GN 06 HCK each time.

157.	He stated that he had been in the haulage business for most of his working life and for the past seven years had been a self-employed owner/operator trading as CT International Transport and working as a sub-contractor for SDM which provided 99 per cent of his work.  He was contacted by telephone or text for the ten Movements by Mr Cranny, Jim Young or Martin Hodgkins, being instructed to load the consignments for Movements 22 and 57 at Checkprice and the other eight at EBM.

158.	He stated that as normal he collected the completed CMRs and AADs and travelled to Belgium via Eurotunnel, travelling on SDM’s account with Eurotunnel.  He delivered all ten consignments to the warehouse of Aldi in Vaux; it was a large building on the outskirts of Vaux near the motorway junction.  He found his way to Aldi using satellite navigation and maps.

159.	He stated that he would park outside the warehouse and walk over to the office to hand in the paperwork.  He would then return to his lorry until someone directed him to a loading bay.  Approximately twelve bays were used for unloading goods; he was usually directed to bays on the right of the building.  While the lorry was unloaded he would wait in the warehouse and saw the goods being unloaded from the lorry outside.  Sometimes he would unload the vehicle with help from the staff.  He never saw the goods being loaded into another vehicle or taken anywhere else.  He was never asked to drive the goods to any other destination.  When the lorry was unloaded, the man who handled the paperwork gave him the signed CMRs and left.  He confirmed a sketch plan marked “Parnham A” as accurate.

160.	He stated that he invoiced SDM monthly on a job rate basis enclosing the CMRs.  There was nothing untoward about any of the journeys.  He produced six fuel invoices, 14 road vignettes and itemised mobile phone bills.

161.	He stated that on 15 December 2006 Mr Simpson and another officer visited him at his home and asked a number of questions; he had not been shown their notes.  Mr Simpson took some records leaving a receipt.

162.	He stated that the reason why he had no tachographs was that between 26 and 30 December 2006 a briefcase containing the tachographs, two spare mobile phones, and other documents were stolen from his car.  Also stolen was a diary detailing his daily movements which he used as a running sheet.  He reported this to the police and was allocated a Crime number.

163.	He stated that on 13 January 2007 he wrote to Mr Simpson including the road tax vignettes and fuel invoices.  On 26 April 2007 he received a letter from Mr Simpson informing him that he had been assessed to £1,022,515 in excise duty.  He stated that he had nothing to do with any fraud and had delivered the consignments to Aldi.

164.	Mr Blunsden was cross-examined for 3¼ hours.  He said that at the time of the interview on 15 December 2006 he could not find any paperwork in relation to the movements.  Miss Simor said that a report after the interview said that he claimed that he may have difficulty in locating the records which had been moved for decorating work.  He agreed that he would have got a formal letter dated 21 December asking for the records when he got back from a journey.  He wrote to Customs on 13 January 2007 informing them of the theft of the briefcase with the tachographs.  He said that he imagined that he had found the tachographs around 28 December when he got home for Christmas and received the letter.  By then the office had been put back after the decorating.  He put the tachographs in the briefcase to sort out when he got back to work in the truck.  He was going to go through everything in his truck and send the correct paperwork to Customs.  Unfortunately he left his briefcase in his car on 26 December in a rush to catch the ferry and when he got back the car and other vehicles in the yard had been broken into.  It was in a transport yard at Yate, near Bristol, where he kept his truck.  Mr Blunsden denied the suggestion that he either did not keep any tachographs or destroyed them because the journeys he had made were not to Aldi.  He repeated that they were stolen.

165.	Mr Blunsden said that SDM guaranteed him a return load.  The instructions for a particular load were by telephone.  He said that he did not know SDM’s number by heart, it was on the speed dial.  Asked why he did not produce all the telephone bills he could not say.  He said that when he got the instructions by phone the address was on the CMR.  He then looked on his speed dial for SDM, “07810857828”.

166.	He said that it would take 3-3½ hours from EBM at Leighton Buzzard to Folkestone depending on the traffic and 4¼-4½ hours to Vaux.  SDM did not keep in touch by phone.  Nobody else called him.  The drop off at Aldi took 25 minutes to an hour.  If he had not been told already, he would phone for a back load.  At Vaux he was supposed to take a break of 45 minutes.  The tunnel counted as a break.  Unloading did not count.  Officially at Vaux he was supposed to take a nine hour break if he had driven from Norwich to Vaux.  He would park the lorry after tipping and go to sleep.  He had food in the cab.  He denied the suggestion that he never went to Vaux in relation to any of the movements.  

167.	Miss Simor then asked him about the particular movements.  In relation to Movement 17 he said that the difference between the 1527 hours on the picking list on 28 September and the Eurotunnel check in at 0924 hours on 29 September was probably because he had to have a break.  The vignettes would have been bought in the tunnel or when waiting.  On a good day he would be in France in an hour and a half plus the hour difference for continental time from checking in.  On a bad day it could be 20 hours.  He was then asked about a CMR for the return journey.  He said that the load (for Nestlé) had come from Illkirch (which is near Strasbourg).  It had been collected by a vehicle from a Slovakian company and taken to Bruges or Gullegem in Belgium where he had collected it at a cold store warehouse after having tipped at Aldi.  SDM coordinated it.  The load was sausages.  Miss Simor pointed out that the Eurotunnel account showed his vehicle as checked in at Calais on the return journey at 1846 hours on 29 September; she put it to Mr Blunsden that he could not have made the tunnel by that time having been to Aldi.  She suggested to him that he went to Illkirch on 28 September and did not pick up at EBM or go to Aldi; he responded that he did pick up at EBM and did deliver to Aldi.

168.	He was then asked about Movement 19, where the load was despatched from EBM on 3 October, his vehicle was checked in at Eurotunnel at 2020 hrs and a vignette was bought at 0824 hrs on 4 October in euros; the return journey check in was at 1527 hrs on 4 October.  He said that he picked up a load on the way back at Ooigem, just north of Kortrijk in Belgium near the French border.  Miss Simor said that it would have been impossible to drive to Aldi and return via Ooigem picking a load up even assuming that the vignette was bought on the Belgian border.  He said that he did go to Aldi; he would have gone through the border at Tournai and then gone by Mons and Namur to Aldi, staying in France for the first 2½ hours.  Miss Simor asked him why his mobile phone statement showed him as sending 10 calls when in Belgium from 0938 till 1408 hrs.  He said that mobiles pick up off the nearest mast and the route ran along the edge of the Belgian border.  He denied that he crossed with an empty vehicle and never went to Aldi.

169.	He was then asked about Movement 22, starting at EBM on the following day, 5 October, checking in at Folkestone at 2202 hours and buying a week’s vignette in pounds at 2307 hrs; the check in on the return journey was shown as 1559 hrs having come back via a Nestlé depot at Cuincy, near Douai in France.  He said that he had delivered at Aldi; from the time he would have got off the train it gave him 15 hours to do the trip.  Asked whether he would have had no sleep, he said that this happened with owner drivers.  He was asked about the mobile records which showed him as making calls from France from 1004 hrs on 6 October to 1546 hrs; he denied the suggestion that he went to Cuincy but never even went to Belgium.

170.	Mr Blunsden was next asked about Movement 29 starting on 13 October at EBM.  He said that he had no idea why he checked in at Eurotunnel at 0358 hrs on 14 October; it was possible to check in at any time.  Miss Simor said that the CMR for the return load was from a company called Herta at St Pol sur Ternoise in France on 14 October and the check in at Calais was at 1200 hrs on the same day; she said that it would have been impossible to get to Aldi and back even without going to Herta.  He said, “I did the load.  It was delivered.”

171.	On the next morning Miss Simor asked Mr Blunsden about Movement 43 which was despatched from EBM on 31 October whereas the Eurotunnel check in was at 1843 hrs on 1 November.  He said that he could have had a 24 hour break at some secure parking, perhaps at South Mimms, but he did not know: it was too long ago.  He denied that the extended period was used to do a trailer swap or to get rid of the goods in the UK.  The CMR was shown as stamped at Aldi on 2 November and the CMR at Geer was on the same day.  He said that he bought diesel at Veurne at 1125 hrs after Geer and checked in at Calais at 1310 hours.  He said that it was the first time he had been to Geer; it took 1½ hours from Aldi, 2 to 2½ hours from Geer to Veurne; loading at Geer was very professional taking 15 minutes.  He denied that he dropped the load in England, travelled with an empty vehicle and did not go to Aldi.  Asked why there were no mobile records, he said that it could be because no calls were made.

172.	Mr Blunsden said that the reason that there was no phone evidence for Movement 53 was possibly that he did not make or receive any calls on those days.  He said, “I don’t live on the telephone.”  He denied that there was a trailer swap and that he took out an empty vehicle.

173.	In relation to Movement 57 he said that the wrong trailer number (AB 10) was on the CMR, however he drove the vehicle and delivered the load.  The return CMR from Geer was despatched on 13 November.  He denied that he went out with an empty vehicle.

174.	Mr Blunsden said that he had no idea why a different trailer (AB 107) was shown on the AAD for Movement 61 despatched on 16 November or why there was no stamped CMR.  He said that he did go to Aldi on 17 November.

175.	Miss Simor then asked Mr Blunsden about his mobile records asking him what the number 07967805125 which appeared 46 times in his mobile bills was.  He said that it was in his phone which was flat at the moment.  We note that Mr Parnham later told us that he believed that it was Mr Wild’s number.  Miss Simor said that that number was in Mr Parnham’s records 39 times.  Miss Simor suggested that the reason why there were numbers common to his, Mr Parnham’s and Mr Woods’ accounts was that they were contacting each other swapping trailers or arranging drop-offs.  He denied this.  He said that he knew Mr Parnham and Mr Woods.  He was asked about some French numbers which were on his account.  He said, “It could be a colleague.  You meet drivers all over, they have our numbers, you speak to different drivers.”

176.	Re-examined, he said that he was charged for calls to France even when there was no answer.

177.	He said that he filled up in Belgium when he could because fuel was cheaper there.  The £1 a mile mentioned for costs covered everything including wear and tear and insurance.

178.	Mr Blunsden said that at Aldi once backed onto a bay, he handed his paperwork in to the goods-in office just inside; he used to tip the trailer himself because it was quicker operating an electric pallet truck and putting the pallets into the warehouse in a line.  It could be done in less than 20 minutes.  As the last pallet went out, he stacked it, and walked back to the desk; paperwork would have been stamped; “he gives you your CMR and you are gone.”  He had to give the CMR to SDM to get paid.  

179.	In relation to Movement 17, he said that the vignette was bought in England.  Watou shown on a fuel bill for a purchase at 1235 hrs on 29 September was on the Belgian border.  He was in England and then Belgium on 29 September.

180.	He said that on Movement 22 he bought diesel at Watou on 6 October.  (The time was shown as 1038 hours).

181.	He said that his signature was on the CMRs for Movements 29 and 53 stamped at Aldi with the date.

182.	Mr Blunsden told Mr Barlow that he did not always observe the speed limit. 

183.	Mr Blunsden told the Tribunal that several times over 20 years he had incurred on the spot fines for speeding in Europe.  He normally took the road through Tournai taking the E42 where there were not many police.  Modern vehicles could cruise comfortably at 70 to 80 mph; the speed limit on the continent was 56 mph or 90 kilometres per hour for heavy goods vehicles.  He could travel as fast fully loaded on the motorway as empty.  There were no toll points.  He could get to Aldi in 3½ hours speeding in the best conditions.

184.	He said that rates for work to Europe were very low. Rates for imports were always better.  He said it was impossible to compete with foreign transport because their costs were a lot less.

185.	He said that at Aldi he left the pallets on the lines running out from the bays inside the warehouse.  He said that he left them actually on the loading bay.  He did not know whether this was usual for bonded movements, he had not done any before.

186.	He said that if he worked with other companies and they had a trailer available he would pull it.

187.	He said that he had had to ask Vodaphone for the mobile records.

188.	In answer to a further question from Miss Simor, he said that the vehicle could cruise at 8 miles to the gallon comfortably.  It used more at 80 mph than 50 mph but not a vast amount.  If he went 25 per cent faster he did not necessarily use 25 per cent more fuel.

Allan Woods

189.	Mr Woods confirmed a statement dated 4 July 2008.

190.	He stated that he had been involved in haulage all his life and had been self-employed for 13 years trading as JJL Transport from his home in North Yorkshire. At the time he employed two drivers, Timothy Francis and Kevin Stone.  He had two lorries.

191.	He stated that he had been doing subcontract work for SDM for around 6½ years, his main contact being Mr Hodgkins.  Most deliveries were foodstuffs but in October 2006 he was contracted to transport  five consignments of spirits to Aldi, four from EBM and one from Checkprice between 4 and 31 October (Movements 20, 26, 31, 39 and 44).  He had stopped driving from October 2005 and around October 2006 was in hospital for a hip replacement.

192.	He stated that the job for spirits deliveries was first notified by fax to JJL, the job rate being £325. It enabled JJL to make money on an otherwise empty journey out, when collecting loads back; SDM paid for Eurotunnel.  Tim Francis carried out the deliveries using JJL’s lorry.

193.	He stated that the AADs and CMRs were all sent to SDM.  Mr Francis told him that there were very long delays loading at SDM.

194.	He stated that on 6 December 2006 he was visited at his home by Miss Gibson and another officer and questioned about the Aldi consignments.  In January 2007 he was seen at the HMRC office at Middlesbrough by Miss Gibson and a male officer.  The male officer told him how much trouble he was in.  He did not see notes of either meeting.  On 5 June 2007 he received a letter saying that he owed £597,827 relating to five deliveries to Aldi.  He stated that he had nothing to do with any fraud and as far as he was aware Mr Francis delivered the loads to Aldi.

195.	He produced an Orange telephone bill for the mobile Mr Francis was using, invoices for fuel and road tolls and vignettes.

196.	Cross-examined, he said that the Aldi job had looked a straightforward job because JJL was going to Belgium anyway and it doubled the profit margin.  He considered alcohol to be a “little bit of a prestige job”; the main contractor had to be very solid.  He was told afterwards that SDM had the guarantee. Mr Hodgkins told him that the goods had to be taken straight there and the paperwork sent back promptly to SDM; that is what he did.

197.	He said that Mr Francis did the journeys because he had had a hip operation.  Mr Francis had the works telephone; that was the telephone page exhibited.  Mr Hodgkins’ was the number ending 828; that ending 067 was his own master telephone; 262 Mr Blunsden; he did not know what 783 was.

198.	Mr Woods was then asked about the commerciality of £325 for the outbound movement.  He said that he paid Mr Francis £90 per day and £30 per night out.  His average diesel bill was about £1,000 a week.  It was one job of many which balanced out to make a profit.  He did not get paid to go out if the vehicle was empty.  Cash expenses were claimed afterwards by Mr Francis.

199.	Miss Simor then asked him about the tachographs. 	Mr Woods asked why Customs would need them.  He said that the drivers were under a lot of pressures.  There were delays at Aldi, putting pressure on their hours.  He took the tachographs to protect Mr Francis from VOSA, which used to be the Vehicle Inspectorate, and the police.  It was easier for Mr Woods to say “We haven’t got them.”  He was protecting Mr Francis from offences shown on the tachographs in his name – driving over hours and speeding.  At EBM there was delay, delay, delay.  Mr Francis had to bend the tachographs to make the delivery without stopping in a foreign country carrying alcohol.  Mr Francis did not ask him to destroy the tachographs, Mr Woods said, “I did it myself.”  He said that he had got rid of the tachographs before the interview; he thought they were only for VOSA.  Mr Woods denied that the tachographs would have shown that the distance to Aldi was not travelled.  He said that he had looked at the tachographs.

200.	Re-examined, Mr Woods said that the vehicles did 8.5 miles per gallon.  The total running costs including servicing and everything was about £1 a mile.  A trip was worthwhile at £325 plus the Eurotunnel ticket. The normal rate coming back was £550.

201.	He said that Mr Francis could sit at EBM for three, four, five, six hours; there was nowhere on the Belgian side where they deemed it safe to stop.  His break would always be in England unless it was on the return journey.

202.	He said that the instructions from SDM normally came the day before a Movement.  Since he was in hospital, Mr Francis dealt with Mr Hodgkins.  Nobody else would know that Mr Francis was going to drive.  Mr Francis would get the address on the fax (from SDM).  Mr Woods said that he arranged the first consignment before going into hospital.  The faxes went to his office at his home.  Mr Francis had one of his mobile phones while he was in hospital.

203.	He told the Tribunal that legally the tachographs had to be kept for 12 months.

Timothy Francis

204.	Mr Francis confirmed a statement made on 4 July 2008.  He was the driver for Movements 20, 26, 31, 39 and 44 in October 2006; Movement 31 was from Checkprice and the others were from EBM.

205.	He stated that he had been a haulage driver for approximately 16 years and was employed by Mr Woods from December 2005 to December 2007, delivering consignments around the UK and Europe.  Mr Woods provided the lorries.

206.	He stated that he delivered the consignments for the five movements to Aldi and had nothing whatever to do with any excise fraud.

207.	He stated that the arrangements for the first few consignments were made by Mr Woods with SDM, but when Mr Woods went into hospital SDM contacted him direct.  He had no say in what Mr Woods was paid; it was just another load.

208.	He stated that the routine was the same for each load.  He had a stack of CMRs in the lorry and took a CMR with the vehicle and trailer numbers to EBM.  There were severe delays at EBM; sometimes he waited all day.  When the goods were loaded he was given the CMR and AAD and travelled to Belgium via Eurotunnel using a rapid pass card in the name of SDM.  He used a DKV Euro Service credit card to buy Eurovignettes to drive on Belgian roads.

209.	He stated that on arriving at Aldi he parked in a holding bay just outside the entrance and took the paperwork to the Aldi office which looks like a bungalow handing it in at a desk; sometimes he had to wait behind other drivers.  When he had handed the paperwork over, he was allocated a loading bay or told to wait.

210.	He stated that when told to go to a designated loading bay he drove through the gates which were always open.  He was always allocated a bay to the right hand side of the building, but never the very end bay where empty pallets were stored.  Sometimes he unloaded the goods himself placing them in a row alongside the lorry, sometimes Aldi’s staff unloaded while he watched.  Once the goods were unloaded he would walk to the check-in desk in the middle of the warehouse where the consignment would be checked and the CMR was returned stamped, the AAD being retained.  He did not see the actual stamping but the documents were never returned in the office when he first arrived and he did not know how the paperwork was transferred to the loading bay warehouse where it was returned.  He then drove out leaving the goods in a row on the floor of the warehouse.

211.	He stated that he then drove to Geer to pick up a load for SDM to return to the UK.  On return to the UK he gave the stamped CMR to Mr Woods.

212.	He stated that an invoice from Orange produced by Mr Woods was for the mobile he was using.

213.	He stated that he was visited at his home in Yorkshire by two Customs officers on 11 December 2006 by appointment.  He was asked numerous questions but was not shown their notes.

214.	Cross-examined, Mr Francis said that he believed that he used the train each time, that he never diverted from the route and there were no trailer swaps.  At EBM he could wait for three, four or five hours.  He handed a blank CMR to EBM and only found out what the load was when loading.  He put Aldi’s address onto his Tomtom.

215.	He said that he was paid a daily rate, effectively £475 a week, into his bank.  On some days he could work 15/16 hours.

216.	He was then asked about calls on the mobile phone account including to Mr Blunsden.  He said, “As a circle of drivers you all get to know each other.  You stop in certain places together when you are eating, things like that.  You build up a friendship.”  He said that he might ring to see if there were any holdups on the motorways and for a general chit chat.  At times it was boring on his own in a vehicle and at times he rang a friend to see what he was doing.  The conversations were not necessarily work-related.

217.	He said that he would get instructions for a return load by telephone or text, sometimes before a delivery was completed.

218.	He said that he had discussed the tachograph with Mr Woods.  He gave those to Mr Woods with the paperwork and explained the problems with delays and what he had to do to make sure the goods were delivered.  Sometimes he had removed the fuse from the tachograph to stop it from recording.  When the fuse was put back, it put a mark up.  With the fuse removed there was no trace of the vehicle moving or of its speed.  When the fuse was put back there was no gap on the tachograph as regards time.  VOSA was concerned with all laws for heavy goods vehicles.

219.	Miss Simor put it to him that the tachographs were destroyed because with them it would have been possible to see that the journeys to Aldi did not take place.  Mr Francis denied this saying that all the loads to Aldi were delivered.

220.	He was asked why Movement 26 was checked in at Folkestone at 1852 hrs on 12 October when the instructions were to collect on 11 October and deliver on 12 October.  He said that on one of the weeks when he was doing this work he had been feeling unwell and parked up for the night at South Mimms where there was a big lorry park and service station off the M25.  He said that he had not been asked about this before.  He denied the suggestion that during that period there was a trailer swap or the vehicle was unloaded.  He said that he returned on 13 October, the CMR having been stamped at Aldi, and collected frozen peas from Geer; he was not certain whether he would have had to speed to get to Eurotunnel by 1815 hrs on 13 October, it was four years ago; he would not think he needed to speed.  He denied the suggestion that the journey to Vaux did not take place.

221.	Asked about Movement 31 Mr Francis had no explanation as to why there was a stamped AAD3 from Aldi but no stamped CMR; he could not remember a time when there was no stamped CMR.  He was asked if he recalled a journey without a back load and said that Mr Woods might have got a back load from a customer other than SDM.  

222.	He said in relation to Movement 44 that the CMRs collected from Hesbayefrost, Geer, in Belgium were printed before arrival; the CMR for collection on 1 November was obviously pre-printed on 31 October.

223.	Re-examined, he said that South Mimms is a major stopping point at the junction between the A1 and M25, where he had stopped before.  He said that he had collected quite often from Hesbayefrost and that the CMRs were always pre-printed.

Andrew Parnham

224.	Mr Parnham confirmed a statement dated 22 May 2008.  He was the driver for Movements 23, 32, 37, 51 and 58 between 5 October and 6 November 2006, three from EBM and two from Checkprice.

225.	He stated that he had been a self-employed owner/operator as A H Parnham Transport for 23 years.  At the material time he used vehicle V 8 AHP and trailer numbered AHP 305.  He had worked continuously for SDM for over five years but only transported five consignments of alcohol to Aldi in Belgium.

226.	He stated that he was instructed by Mr Young or Mr Hodgkins at SDM by telephone or text to load the goods at EBM or Checkprice.  At the warehouse he handed in a blank CMR, was given the completed CMR and AAD and travelled to Belgium via Eurotunnel using SDM’s account.

227.	He stated that Aldi’s warehouse was a large building on the outskirts of Vaux near the motorway junction.  He was given directions to Aldi by another driver, possibly Mr Wild or Mr Blunsden.  He produced a sketch plan of the Aldi site.  He saw no security measures at Aldi except a gate which was open whenever he delivered.

228.	He stated that he would park outside and walk over to the office to hand in his paperwork.  He waited at the lorry until someone from the office directed him to one of approximately ten loading bays which he marked on the plan; the plan included a checking desk near the unloading bays. 

229.	He stated that during unloading he waited in the warehouse sometimes assisting with an electric power pallet truck; usually one person from Aldi assisted or supervised.  The pallets were placed between painted lines.  He never saw the goods being loaded onto another vehicle.

230.	He stated that when the lorry was unloaded the man who had handled the paperwork gave him the signed CMR.

231.	He produced monthly invoices to SDM, a Eurotunnel ticket for 16 October 2006, mobile phone bills, vignettes, meal receipts and fuel invoices.

232.	He stated that he had destroyed his tachographs because he had insufficient insurance cover for the alcohol and decided to drive to Aldi as quickly as possible to lessen the chance of theft which was a real problem with high value loads.  He had admitted the irregularities to VOSA and his road haulage licence had been suspended.

233.	He stated that he charged SDM £1.10 per mile loaded plus 5% for fuel.  When invoicing SDM he sent the completed CMRs.

234.	He was visited at his home on 30 March 2007 by Mr Simpson and another officer.  He did not see their notes.  Mr Simpson took some records including three bundles of invoices with mileage breakdown sheets.  On 26 April 2007 he received an assessment for £484,206.

235.	He said he had not visited the Aldi warehouse apart from the five loads for SDM.  He said that he had collected goods from Hesbayefrost; the warehouse had a 24 hour loading schedule but the office closed at 5.00pm and printed CMRs for the night loaders, so that the CMRs might be printed on the day before loading.

236.	Cross-examined, Mr Parnham said that he was suspended by VOSA for one week because it was a first offence.

237.	He said that he had carried one load of beer for SDM to Calais some time earlier.  He operated one tractor with a refrigerated trailer.

238.	He said that 95 per cent of his work was for SDM, mainly frozen food.  This was the first time he had carried spirits; he had not seen AADs before.  He knew that they were high value loads.

239.	He said that he bumped into other drivers working for SDM for example at Geer where there might be three or four other drivers doing SDM work.

240.	He said that he did not keep copies of CMRs returned to SDM.  Since these loads, he had done maybe 400 loads for SDM.

241.	He said that he believed that the mobile number ending “125” was Mr Wild’s.

242.	He said that the quickest time from EBM at Leighton Buzzard to Folkestone was 3½ hours depending on the M25.  He said that Coquelles to Vaux might be 5 hours, maybe 3½ hours, he could not remember; 4½ hours sounded reasonable.  Unloading at Aldi averaged 30 minutes.  Vaux to Geer took an hour and a bit.  Loading at Geer could be only 20 minutes.  Geer to Coquelles took 3½ hours depending on the Brussels ring road, 3 hours with a good run but considerably longer if busy.

243.	He said that there was a sliding gate at Aldi which he never saw closed.  It was unmanned.  He said that the officer’s note that he had never been in the premises other than to use the facilities was not accurate.  It became apparent that unloading himself would be quicker.

244.	Mr Parnham denied that he destroyed the tachographs to prevent the detection of diversions of the goods; he destroyed them to prevent detection of lack of breaks in driving.  Speed made less difference to the time than shortening breaks.  The laws for drivers’ hours were very complicated.  Apart from a ¾ hour break after 4½ hours, there was a limit of 9 hours driving in a day which could be increased to 10 hours twice a week and a limit of 90 hours in two weeks.  He said that drivers commonly believed that to have no tachographs was better than having multiple offences.  A lot of Tesco’s bookings were for 2.00am and there was a tendency to get round the M25 before the traffic built up.

245.	Mr Parnham was then asked about Movement 23 on 5 October, which was his first movement.  Miss Simor put it to him that the substantial mobile conversations with SDM, Mr Wild and Mr Blunsden on 3, 4 and 5 October were because they were co-ordinating diversions.  He said that they were friends, there was no collusion as to actual loads.  He said, “I’m not saying that we never discussed work.  We were all working together.  But … to imply that there was anything untoward about the conversations is completely wrong.”  The contacts with drivers were all on a social level.

246.	He agreed that he had checked in at Eurotunnel at 2125 hrs on 5 October, had returned via Geer and checked in at Coquelles at 1655 hrs on 6 October.  Miss Simor said that he had plenty of time in the UK and Europe on that journey and no need to commit any offences requiring the tachographs to be destroyed.  He said that he might have done a day’s work before going to EBM; he might have gone back to Doncaster; without more information it was not possible to speculate.

247.	Asked about the absence of a CMR for Movement 32, he said that he would have provided one to SDM by recorded delivery; he did this every week.

248.	In relation to Movement 37 where the pick up time from EBM was to be 1100 hrs on Friday 20 October but the shuttle check in was 0725 on the Monday, Mr Parnham said that he took the vehicle home to Leadenham, Lincolnshire, where it was parked in an occupied farmyard over the weekend; that was 4 hours drive from Folkestone and he may have gone down on Sunday night.  He accepted that the earliest time he could have been on the motorway in France was 0925 hrs continental time.  He said that it would have been possible to drive to Vaux and back via Geer  checking in at Coquelles by 1827 hours; he said that he must have done it.  He said that SDM agreed to him charging for the journey via his home.

249.	He said that he checked in at Eurotunnel at 1908 hours on 7 November on Movement 51 having loaded at EBM on the day before because EBM was particularly busy that day and when he was loaded there was a problem on his vehicle with air pressure and he called in at Channel Commercials at Ashford for repair on the following day.  He denied that the goods were taken to a slaughter point.

250.	He said that the load on Movement 58 was collected on the Friday in Norwich and taken home for safekeeping over the weekend. It was not taken to a slaughter point.

251.	Re-examined, he said that the farmyard where he could park over weekends was his official operating centre approved by VOSA after an advertisement in a local paper.  There were gates to lock and the farmer had dogs.  He said that the minimum time to drive from Coquelles to Aldi was 4 hours guessing.  He said that the allegation that he was involved in a criminal conspiracy was completely untrue.

252.	He told the Tribunal that he only had the one vehicle; it was serviced every 6 weeks, this would show the mileage.  Customs did not ask to see the service records or the satnav.  He said that he had thrown out all tachographs, he did not select particular tachographs but threw away a month at a time.

253.	He agreed with Miss Simor that Customs had asked for any evidence supporting delivery of the goods; Mr Simpson had taken some things away after the visit.

Mark Wild

254.	An undated witness statement by Mark Wild appears to have been served on 13 June 2008.  As already stated he was not available to give oral evidence.  His statement was not agreed.  Mr Simpson’s notes of a meeting on 4 January 2007 and subsequent correspondence are covered at paragraph 297 below.

255.	He was the driver for 14 movements, between 27 September and 16 November 2006, namely Movements 16, 18, 21, 24, 25, 27, 30, 34, 40, 42, 46, 49, 54 and 62; all apart from Movement 21 were from EBM.

256.	He stated that he had been self-employed trading as Mark Wild Haulage for five years but had been driving since 1981.  He had been carrying out subcontracts for SDM for three and a half years.

257.	He stated that he transported the fourteen consignments of spirits from the UK to Aldi delivering all to the warehouse in accordance with the CMRs and AADs.

258.	He was instructed by SDM by phone, fax or text message to pick up the loads at EBM or Checkprice.  The warehouse filled in the CMR and provided the AAD and delivery instructions.  He personally loaded his lorry, generally with 26 pallets.

259.	He stated that he drove directly using the Channel Tunnel rail link paid for by SDM who had generally pre-booked.  The journey to Vaux took approximately 4½ hours.

260.	He stated that on arrival at Aldi he parked in a holding area handed the paperwork in at Aldi’s office and returned to the lorry.  One of Aldi’s staff would direct him to a loading bay where he personally unloaded, after which he was given his CMR completed and signed.  He always met the same Aldi employee who oversaw the delivery and signed the CMR.

261.	He stated that on the return journey each time he was able to pick up a return load to be transported by the tunnel.

262.	He stated that he had no knowledge of TAG, Cyber Comp, Liquid Marketing or Dr Czech other than that they appeared on the documents.

263.	He stated that on each occasion the lorry was sealed at the UK warehouse and was not opened again until on the loading bay at Aldi.  All completed CMRs were returned directly to SDM.

Patrick Hercules

264.	Mr Hercules confirmed a statement dated 3 March 2010 regarding Movement 65 to Germany, the final movement.

265.	He stated that he had been managing director of Pierhead for 34 years.  Pierhead had 15 employees and an annual turnover of £4.5 million importing and exporting wine, spirits and beers.  Pierhead had an account with EBM and two other bonds.

266.	He stated that Sarl Universal Boissons ordered two separate consignments of 1536 cases of Claymore Whisky deposited at EBM for delivery to Dialog Logistik, a bonded warehouse in Germany, and paid £57,650 in full in advance on 24 November 2006.  Sarl Universal Boissons was a regular client.

267.	He stated that Sarl Universal Boissons had already purchased one consignment which was delivered to a bonded warehouse in Calais.  He ordered a second consignment from Whyte & Mackay anticipating the Sarl Universal Boissons order; he was told that the order was being passed to Intermediaire Europe Eurl (“Intermediaire”), although payment had already been made to Pierhead.  Intermediaire placed an order dated 29 November for the 1536 cases for delivery to Dialog Logistik; Pierhead invoiced Intermediaire but was not paid because Sarl Universal Boissons had already paid.

268.	Mr Hercules produced an intake notification from EBM dated 27 November.  He stated that SDM was instructed to transport the goods which were collected around 1 December.  Shortly after the delivery he became aware that EBM had not received the AAD 3 for the delivery.  On 6 February 2007 SDM faxed a CMR which he produced; it had no receipt stamp.

269.	He stated that he was made aware by EBM that the goods may not have been delivered to Dialog Logistik and on 5 March 2007 wrote to Intermediaire for confirmation that the delivery was made.  On 17 April 2007 Mr Hercules received a letter from Dialog Logistik confirming that they had not received the whisky.

270.	He stated that on 15 May 2007 Intermediaire wrote in reply to the fax of 5 March that the whisky was not delivered to Dialog Logistik due to a problem there but was redirected to a bonded warehouse called Petzold Spedition GmbH (“Petzold”); the letter stated that a stamped copy of the AAD 3 was to be sent, however this was not received.

271.	He stated that he became aware in June 2007 that there had been a change in tractor.  He produced a fax from Connie to SDM dated 21 June stating that the original tractor BJ ZN 02 was replaced by BJ FN 98; such a change was not unusual.  On 13 August Intermediaire advised that they were having problems locating the AAD.  A letter from Pierhead to Petzold dated 30 August received no response.

272.	He stated that Pierhead had made deliveries to Petzold in September and October 2006 without any problem.  He produced a SEED verification for Petzold dated 7 September.

273.	Cross-examined, he said that the AAD referred to in Intermediaire’s letter of 15 May was never received by Pierhead but that Intermediaire were content that they had received the goods and he had had the money.  He said that he doubted that it was possible that Intermediaire received the goods in Calais at the warehouse of MT Manut.

274.	We now turn to the witnesses called by Customs in the order in which they gave evidence.
Paul Simpson

275.	Mr Simpson, a higher officer, based at Leicester Business Centre, a multi-functional office covering VAT as well as excise, stated that he was part of the Alcohol Strategy Team with responsibility for auditing and investigating movements of excise goods.  He confirmed a composite statement of 23 pages dated 17 March 2010, expanding on earlier statements made in 2008.

276.	He told us he was the officer in charge of the case.  We observe that he was not present during the first week of the hearing.

277.	He stated that on 10 October 2006 he visited Liquid Marketing with two other officers and spoke to Mr Chahal and Mr Lidder.  The visit was in response to an urgent excise reference on 31 August in respect of three loads (Movement 3 on 31 July and Movements 4 and 5 on 7 August) from the officer responsible for Checkprice.

278.	He stated that Mr Chahal told him that originally TAG contacted him by telephone, then fax, then M. Renaix visited Liquid Marketing.  He was told that TAG initially agreed to pay by telegraphic transfer but then offered cash which Liquid Marketing refused.  TAG then agreed to pay direct to Checkprice the cost of the purchase by Liquid Marketing; this was done but Liquid Marketing’s gross profit of £13,000 was outstanding.  Mr Chahal told them that he had refused further offers to settle with cash.

279.	He stated that he was told that SDM was used for the haulage on the recommendation of another customer.

280.	Mr Simpson produced a copy of his reply dated on 11 October 2006 to the reference of 31 August.  This stated that Liquid Marketing had no further knowledge of TAG or Aldi.  The reply apologised for the late response to the query due to a combination of trader’s holidays and staff sickness.

281.	Mr Simpson stated that he visited Liquid Marketing again on 7 November.  This was by appointment.  The officers were told that Liquid Marketing came to deal with Cyber through TAG which now received a commission on the supplies; the contact at Cyber was a Mr Melvit.

282.	He stated that he visited Liquid Marketing again on 23 November and informed Mr Chahal and Mr Lidder that the Belgian authorities had visited Aldi and that the goods consigned had not arrived.  Mr Chahal had told him that he had met M. Renaix and M. Melvit at the South Mimms services on the M25 in mid-July and was given some paperwork; Mr Chahal thought at that stage that M. Melvit was M. Renaix’s driver.  We note that the information from Belgium must relate to M Godefroid’s statement, see paragraph 25 above.

283.	 He stated that he visited Liquid Marketing again on 28 February 2007, this time with Mr Smyth.  They were told that Liquid Marketing had received no payment from Cyber and had neither authorised direct payments to Checkprice nor informed anybody of what Liquid Marketing owed to Checkprice.  Mr Simon Sutcliffe, Liquid Marketing’s representative, told them that he had contacted Checkprice and had asked for further information about the payments and that Mr. Feneron had told him that he did not know where the money had come from and was too busy to answer questions.  Mr Chahal told them that the £13,000 had still not been received from TAG and that the matter had been passed to their solicitors together with the amount outstanding from Cyber; together they amounted to £21,000 which was the gross profit on the six movements.  He stated that details of the payments received by Checkprice for their supplies to Liquid Marketing had been passed to Mr Boot.

284.	On 26 April 2007 Mr Simpson sent a letter to Liquid Marketing headed “without prejudice” notifying assessments to £553,868 excise duty under regulation 7(2) of DSMEG Regs and £205,954 VAT on the footing that Liquid Marketing owned the goods and that the goods were caused to be moved under its direction.  On 12 June 2007 Liquid Marketing’s WOWGR registration was revoked.

285.	On 22 November 2006, with Mr Smyth, Mr Simpson visited SDM and saw Mr Hodgkins.  This followed information from the excise office at Glasgow that 40 loads of spirits consigned from EBM to Aldi had not arrived.  Mr Hodgkins told them that SDM had undertaken 20-30 movements to Aldi in the past month, all for Dr Czech by subcontracted hauliers; movements had also been undertaken for Liquid Marketing.  Mr Hodgkins produced records relating to the movements.

286.	Mr Simpson stated that on 5 December 2006 he visited SDM with Ben Graham (his senior officer at the time) and spoke to Mr Hodgkins and Mr Cranny.  He advised them of the non-arrival at Aldi of a number of loads transported by SDM’s subcontractors.  He produced a visit report. The report recorded Mr Cranny as confirming that after the subcontractor had been notified of the collection details by fax, SDM would have no further contact unless there were mechanical problems or unforeseen delays and that SDM had no knowledge of the specific drivers used; the directors had contacted the subcontractors since the last visit and were told that all goods had been correctly delivered.  The report recorded Connie, Mr Blunsden and Mr Wild as subcontractors.

287.	On 16 March 2007 Mr Simpson and another officer visited SDM and saw the directors and told them that the Belgian Customs authorities had visited Aldi and confirmed that none of the goods had arrived and that Aldi was not a third party warehouse.  Mr Simpson then asked about Movement 65 of Claymore Whisky to Dialog Logistik in Germany and Movement 12 of vodka to Latvia; he told them that the vehicle collecting the goods on 1 December 2006 in the movement to Germany was found to be empty in a Eurotunnel security scan on 4 December travelling outbound and that the Latvian authorities confirmed that the vodka in Movement 12 had not arrived.  The directors could provide no further information.

288.	On 23 March he wrote a “without prejudice” letter to SDM referring to the material from Belgium and stating that an irregularity had been detected in the UK.  On 26 April 2007 SDM was advised of an assessment for £6,349,021 under regulation 7(1) of DSMEG Regs as guarantor.  On 9 May 2007 SDM was informed that its movement guarantee was lapsed from that day.

289.	Mr Simpson stated that on 13 December 2006 Mr Edwards had informed Customs that no AAD3 had been received for Movement 65 but that EBM’s records showed an AAD3 as received for Movement 12 although it could not be located and that it might have been uplifted by Customs.

290.	Mr Simpson produced an Early Warning System (“EWS”) verification request dated 15 September 2006 to the Latvian Customs for Movement 12 of Glens vodka despatched on 14 September.  The Feedback form from Latvia dated 8 February 2007 stated, “Consignment has not reached destination.”

291.	In relation to Movement 65, Mr Simpson produced a barely legible print-out from Eurotunnel showing the trailer being pulled by BJ ZN 02 scanned as empty on 4 December 2006.

292.	Mr Simpson produced Feedback forms from Belgian Customs for Movements 40, 45, 46, 50, 52, 53, 54 and 64 dated 22 or 23 November 2006 which apart from Movement 40 dated 9 November stated that on documentary checks “consignment has not reached destination.”  Audit reports from Belgian Customs dated 31 October 2006 stated that Movements 30, 34, 35 and 36 never arrived at Aldi.

293.	Mr Simpson stated that on 15 December 2006 he and another officer visited Mr Blunsden at Bristol.  Mr Blunsden told them that he only operated one tractor unit S2 OFH (previously registered GN 06 HCK) and one refrigerated trailer CT 003.  Mr Simpson told him that the Belgian authorities stated that the goods had not been received at Aldi but Mr Blunsden was adamant that he had delivered them.  Mr Simpson stated that he asked Mr Blunsden to produce his tachograph discs and other documentation but was told that they had been moved during recent decorating work and he could not locate them.  On 21 December Mr Simpson wrote asking him to produce tachograph discs and fuel invoices for twelve dates from 28 September to 16 November.

294.	On 16 January 2007 Mr Simpson received a letter from Mr Blunsden stating that his briefcase, which had been stolen from his car between 26 and 30 December 2006, contained a year’s tachograph charts; he had reported the theft.  The letter included eight vignettes and six diesel invoices at Veurne and Watou.  On 1 February 2007 Mr Simpson received a police compliments slip with the crime reference number.

295.	On 26 April 2007 Mr Blunsden was assessed for £1,022,515 excise duty under regulation 7(2).

296.	On 30 March 2007 Mr Simpson and another officer visited Mr Parnham at Leadenham, Lincolnshire.  They were told that he operated one tractor unit V8 AHP and one refrigerated trailer AHP 305.  Mr Parnham said that on arrival at Aldi he handed in the paperwork to the office and was then directed to reverse onto a loading bay; once unloaded the stamped CMR was returned and he left.  He said that the Aldi premises was “in the middle of nowhere” and the delivery office had a pointed roof.  He stated that when asked to produce tachograph discs, Mr Parnham said that he had thrown away any which were more than a couple of months old; he said that with no discs the Vehicle and Operator Services Agency (“VOSA”) could only penalise him for lack of record keeping rather than for any number of infringements such as breaking driving time rules.  Mr Parnham was assessed under regulation 7(2) for £484,206 excise duty.

297.	Mr Simpson stated that on three occasions in December 2006 he tried to contact Mr Wild on his mobile phone without success.  He wrote using recorded delivery on 4 January 2007 asking Mr Wild to produce tachograph discs, continental fuel invoices and Eurotunnel paperwork for Movements from 27 September to 18 October 2006.  On 25 January he received an unsigned letter stating that fuel invoices were sent on 6 January and asking for them back for his accountant.  Mr Simpson replied that he had not received the invoices or tachograph discs.  Mr Simpson stated that on 15 February he received four fuel invoices.  Later on that day he received 7 Eurotunnel statements by fax from SDM.  A further request to Mr Wild on 19 February for the tachograph discs produced no response.  On 23 March Mr Simpson sent a pre-assessment letter.  On 11 April 2007 he received an unsigned letter from Mr Wild stating that all the loads were delivered at Aldi.  The letter stated,

“You are in receipt of all relevant documentation that you requested on your letter dated 4 January 2007, including signed and stamped CMR, train receipts, fuel receipts, tachographs and Belgian road tax.”

Mr Simpson stated that he had not received the tachograph discs or Belgian road tax documents.  On 26 April Mr Wild was assessed to excise duty of £1,302,036 on 14 movements under regulation 7(2).

298.	Mr Simpson stated that on 21 February 2007 he and another officer visited the premises of Connie at Maidstone and spoke to Mr Bunce; the visit took 2 hours.  Mr Bunce initially confirmed that his previous business JJI ceased trading in August 2006 and that since then he had been declared bankrupt.  He told the officers that he was a director of Connie, a Dutch company, but that the business was run from the UK with him acting as transport manager.  Mr Simpson stated that Mr Bunce could not explain how he became a director or who the other directors were; Mr Bunce told them that the paperwork was sent to Holland for retention but that invoices were issued in the UK by a “boffin” in his yard but could not give his name.  They were told that Connie operated three vehicles in the UK from a yard at Snodland; Mr Bunce could only give one vehicle number BJ NZ 02 and said that one of the drivers was called Carl and the other was a Russian.

299.	Mr Simpson stated that Mr Bunce said that he had never delivered goods himself to Aldi; Mr Bunce could give no explanation for the non-arrival of the goods but was sure that they had been correctly delivered.

300.	Mr Simpson stated that he then asked Mr Bunce why the trailer attached to BJ NZ 02 which was recorded as collecting Movement 65 on 1 December 2006 was scanned as empty on 4 December at Eurotunnel; he stated that Mr Bunce could not explain why and could not identify the driver.

301.	Mr Simpson stated that Mr Bunce said that he was the driver of Movement 12 and had completed the delivery to Latvia; he had travelled in BJ ZN 02 having collected the trailer from BJ FN 98 en route.

302.	Mr Simpson stated that Mr Bunce had no paperwork in his possession and could not provide any evidence supporting the queried movements.  Mr Simpson asked for the documentation within 14 days.  He received nothing.  On 25 April 2007 Mr Bunce was notified of assessments to £2,998,533 under regulation 7(2) in respect of 36 movements, the first two being by JJI and the rest by Connie NV..

303.	Mr Simpson produced a letter dated 21 June 2007 from Mr Hercules of Pierhead.  This referred to the Claymore Whisky in Movement 65.  The letter said that Mr Edwards had contacted Mr Hercules in March because he had not received the AAD3; Mr Hercules contacted Dialog Logistik who confirmed that the load had not been received; he then contacted Intermediaire who eventually told him that the load had been delivered to a different bond as mentioned in his fax of 15 May.

304.	Mr Simpson stated that on 23 July 2007 he spoke to Mr Hercules who said that the haulier had told him that there had been a vehicle swap.  He said that the goods had been delivered to Petzold in Halle, Germany on the instructions of Intermediaire without his knowledge.  He stated that on 7 August 2007 he received a letter from Mr Hercules confirming what he had said.  The letter included a fax from Connie to SDM which included the following,

“I refer to your recent fax with regards to vehicle BJ ZN 02 and to a load that loaded in the UK on 1 December 2006 to tip Hale (sic) in Germany.
I can confirm that a trailer change took place and that vehicle BJ FN 98 left the UK with the trailer for Germany.”

He produced further correspondence from Pierhead stating that Intermediaire still could not locate the AAD.

305.	Cross-examined, Mr Simpson said that it was his view that all 1,082,010 bottles of spirits in the movements were sold in the UK.  He said that he could not say whether any spirits had turned up in the UK:  there was no evidence.  He said that he did not know where the goods were physically diverted; the country was not established by any direct evidence but he relied on circumstantial evidence for the UK.  There was no evidence of goods returning to the UK apart possibly from some Claymore in Movement 65.  No trailers were scanned as empty apart from the one in Movement 65.

306.	Mr Simpson said that he was satisfied that the goods involved in the movements left the warehouses with AADs and CMRs and that the warehouses did not have any information that the goods were not going to Aldi, Latvia or Germany.  If he had considered EBM to be at fault it would have been assessed.

307.	He told Mr Barlow that SDM was assessed as guarantor not as haulier.  All subcontractors were assessed on the basis that they caused the irregularities, as were Dr Czech and Liquid Marketing.  He was aware that the Statement of Case did not allege dishonesty.  He did not know of the application by HMRC to wind-up SDM when the matter was under appeal.  Miss Simor said that this was withdrawn by Howes Percival.

308.	He said that he had never visited Vaux and had no reason to believe that any other officer had done so.  He did not know whether it was in the middle of nowhere but accepted that its population was 824.  

309.	Mr Simpson accepted that at the time of the second visit to Liquid Marketing on 23 November 2006 his enquiries were still only at an early stage.  He could not say whether the Belgian enquiries were ahead of his enquiries.  He agreed that at the time of the visit on 28 February 2007 (see paragraph 283 above) Customs had no clear conclusions about any liability in the UK.  By the pre-assessment letters on 23 March Customs were close to a decision.

310.	He was then asked about the Eurotunnel scan on Movement 65.  He agreed that a scan can never identify any particular trailer.  He did not know whether most trailers were scanned since scans were carried out by Eurotunnel not by HMRC.  He did not know what proportion of trailers was scanned. He said that German Customs did not send any documents stating that the goods did not arrive.  He was not aware of any enquiries to German Customs or Petzold. Customs relied on the fact that the AAD3 was not returned.

311.	He said that the only response from Latvia as to Movement 12 was the Feedback on 8 February 2007 stating that no goods were received with the relevant AAD number and that there was no contract with EBM; that was in response to an EWS Warning on 15 September 2006.  He was not sure what “physical check” meant; in the UK it would be a visit to the warehouse.

312.	He said that he did not visit Mr Wild; he could not contact him.  He had rejected Mr Wild’s assertion that he went to Belgium because Mr Wild did not produce the tachographs.

313.	He agreed that when he visited Mr Parnham on 30 March 2007 he was told that he had thrown away the tachographs.  He said that Mr Parnham had produced three sales invoices and associated mileage sheets.

314.	Mr Simpson said that if Mr Blunsden had produced tachographs he would have analysed them and hopefully come to some conclusions about the actual distances covered.  This should have been possible given knowledge of the route but he could be wrong.  He agreed that there was other evidence that Mr Parnham had travelled to the continent at around the right time.  He agreed that Mr Karim his colleague on the visit had noted “Right at Bastoing” (sic) and that Mr Parnham had showed some vignettes for Belgian roads. We observe that Bastogne is close to Vaux.

315.	Mr Simpson told Mr Barlow that the first visit to SDM was unannounced and was based on the information given by the Belgian authorities.  Mr Hodgkins had handed over the subcontractor files and a file for Dr Czech.  He agreed that there was no undue delay in producing documents not available on that day.

316.	Asked about the second visit to SDM he agreed that Mr Cranny had said that SDM would not know the subcontractors’ drivers.  He accepted that there was no evidence that SDM told anybody else who the drivers for their movements were.  He said that the warehouse was only interested in the vehicle.  He accepted that the vendors were not told who the drivers were.

317.	Mr Simpson accepted that the Belgian authorities were the first to allege that the goods had not arrived.  He agreed that the EWS letters were simply routine requests to check on the arrival of the goods and confirm the movement.  Miss Simor pointed out that they referred to high risk.

318.	Re-examined, he said that he was aware of the service station at South Mimms with lorry facilities with washrooms but not whether there was any secure parking.  Mr Coles said that it is a very common stopover for heavy goods vehicles.

319.	He said that he did not know when SDM provided more detailed records of crossings but that it was not before 16 March 2007.  Miss Simor said that the material provided on 22 November 2006 was at pages 526-1024 of the bundle.

320.	In answer to a question from Mr Coles, he said that he did check when BJ FN 98 left the UK and it was on or about the material time (for Movement 65). Miss Simor said that BJ FN 98 and BJ ZN 02 left within an hour and a half of each other on 4 December; she said that Mr Bunce’s evidence was that he swapped the tractors in Calais.

321.	Mr Simpson told Mr Coles that he did not know that there were software packages available from which goods vehicle journeys could be modelled; he had not consulted any.

322.	He said that he had not attempted to trace any of the phone numbers common to several drivers’ bills.  

323.	He said that there was no other officer co-ordinating the case.  He said that he was not aware of any attempt to see whether M Godefroid could attend to give evidence.

324.	Mr Simpson said that he was in charge of the activities relating to the identified hauliers.  His line manager, Ben Graham, had overall control of the enquiry but had moved to a different job in Customs.

Valerie Mercer

325.	Miss Mercer confirmed a statement dated 6 April 2010.  She said that in 2006 she was in the National Alcohol Intelligence Team.

326.	She stated that in early December 2006 she became aware of a Belgian criminal investigation involving alcohol movements from UK warehouses to Aldi.  The Belgian investigation followed an MV request from the UK.  She was not aware of any UK civil investigation at the time.

327.	She stated that all traders sending alcohol under duty suspension to another EU state were required to fax a copy of the AAD1 to Customs’ National Verification Centre (NVC) at Glasgow no later than when the goods leave the warehouse.

328.	On 11 August 2006 NVC officers became aware of movements to Aldi and over the next two months sent several electronic verification requests to Belgium.  On 27 October NVC were notified of the non-arrival of Movements 18 and 23 despatched on 2 and 5 October.

329.	She stated that NVC notified teams (including her) of a report from Belgium that Aldi only traded with Whyte and Mackay in the UK and on 21 November NVC were informed by officers at Leicester that 40 consignments had left EBM for Aldi.  She said that on 29 November NVC sent a mutual assistance request to Belgium in relation to Movements 6 to 10 despatched between 14 August and 13 September sending photocopies of the AADs; on 30 November Mr Calderwood received a request from Belgian Customs advising of the start of an investigation in Belgium and requesting the original AADs in question.

330.	She stated that following this she requested UK excise offices to identify all movements of alcohol from UK to Aldi and to uplift the AADs and CMRs from EBM and Checkprice.  In a deposition sworn before City of London Magistrates Court on 13 March 2007 for use in Belgium she listed 58 AADs and 63 CMRs.  For a reason which was not explained only 35 AADs and 40 CMRs were listed in her witness statement for this appeal.

331.	Miss Mercer stated that she had been involved with Arlon police and with Esther Van der Kelen, Director of Excise for alcohol in Belgium; she had spoken to Belgian Customs in August 2010.  Mr Barlow objected to additional evidence in chief  being given without knowing its content.

332.	Cross-examined, Miss Mercer said that she assumed that the mutual assistance request she referred to at paragraph 329 above was that dated 27 November but it may have been a request received by Ian Calderwood on 30 November which she had not seen.

333.	She said that she did not visit Aldi on her visit to Arlon on 9 January 2007.

334.	Re-examined, Miss Mercer said that the Arlon police were looking purely at the corruption angle; they were not looking at any excise diversion at all.

Iain Calderwood

335.	Mr Calderwood, of the Excise Liaison Office (“ELO”) in Glasgow, confirmed a statement of 12 April 2010.

336.	He stated that in 2006 he was the supervising officer overseeing information exchange between the UK and ELOs conducted under EC Council Regulation No.2073/2004.

337.	He stated that the EWS was an EU wide system enabling real time verification of the arrival of duty suspended consignments.  Traders submitted copy AADs to the NVC for consignments leaving their premises.  On receipt of the AAD at the NVC, information was transferred onto an electronic template and sent to the relevant Member State.  Member States could reply in a template response form or by secure e-mail.

338.	Mr Calderwood stated that due to the passage of time he could not recall any specific detail but he had reviewed the papers held by his team.

339.	He stated that from August 2006 a total of 55 AADs were sent to the NVC and some 43 notifications were issued by the NVC to the Belgian ELO.  He produced a copy of a schedule of the 43 notifications up to Movement 64 dispatched on 21 November; this showed the EWS reference, the AAD number, the date the AAD was received at the NVC and the warehouses of despatch and destination.  All 43 notifications were by EBM.  We observe that the schedule was not complete since it omitted Movement 12 to Latvia for which there was a template response and Movement 30 for which there was also a response.  

340.	He listed 32 AADs where he stated that the response was that the goods did not arrive or were not received at Aldi.  The schedule in fact showed the result of Movements 10 and 43 as being satisfactory.

341.	He said that the despatching warehouse would prepare a draft AAD perhaps 48 or 24 hours before despatch and send it to the NVC although 24 hours was not a legal requirement.  For these movements the AADs were sent within a 48 hour window.

342.	He said that the officer or team monitoring a warehouse decided whether the warehouse was required to notify to NVC.  On receipt of notification NVC decided whether to send an MV request to the Member State of destination; this was not automatic but selective.  It was up to the receiving Member State to decide whether to make any physical check on the goods.  A physical check meant looking at the trader’s records.  He could not tell from the responses here to what extent Belgian Customs had checked the records.

343.	Cross-examined, he was asked about the possibility of the wrong AAD number being keyed in and said that human errors could happen.  He said that two administrative officers sent out the MV requests; it was routine and took up 60 per cent of their time; they sent hundreds of requests a week.

344.	He said that not all EWS requests led to further enquiries; they gave an opportunity to visit near the time of arrival.  A visit to await the arrival of the goods would be exceptional.

345.	He said that the schedule of notifications (paragraph 339 above) was prepared by officers in his team.  The first five movements on the schedule (Movements 6 to 10) were sent to Belgium initially to monitor the results; replies on Movements 6 to 9 and some others were received on 27 October.  He did not know why the responses on Movements 10 and 43 were “satisfactory” indicating that the consignments arrived and that no discrepancies were found.  He agreed that, based on his own e-mail of 22 November, initially Belgian Customs had responded that all five of Movements 6 to 10 were satisfactory.  He said that he was surprised that this was not in his witness statement.  He said that he knew that a representative of Aldi told the Belgian authorities that the goods had not arrived and that Aldi did not buy that type of goods or store them for third parties.  Having looked through the records, Mr Calderwood did not find any copies of the original responses indicating that the movements were satisfactory.  He said that all the information was recorded on a database from which the schedule of notifications was produced; the schedule was produced at some time after 21 November (the date of the last movement to Aldi).  The database could be updated and changed.

346.	Re-examined, he said that the decision whether to notify under EWS started with an AO who checked the data checking for areas of concern; an AO could make an EWS reference or if unsure could review it with Mr Calderwood to decide whether to send a warning.  The duty at risk would be a factor in a high risk warning.  In some cases the reference would be mere information.  There was a high turnover of referrals and a referral only became a matter for further investigation if there was a negative or unsatisfactory response.  Warning messages were a very small proportion.

John Arthur Boot

347.	Mr Boot, the assurance officer for Checkprice from June 2005, confirmed a statement dated 8 April 2010.

348.	He stated that Checkprice was approved as a general distribution and storage warehouse at Norwich holding goods for itself and third parties.

349.	He visited Checkprice in August 2005 when he became aware of Dr Czech for which Checkprice had a valid WOWGR certificate.

350.	He stated that during a visit on 8 August 2006 he noticed the Movements 1 to 5 of spirits to Aldi.  On 15 August he received an e-mail from Dover asking for information about Movements 4 and 5 using SDM and Connie and asking who Aldi and TAG were and for their addresses.  He said that during visits on 23 August and 5 September Fiona Harrison took up copy paperwork for Movements 1 to 5 including receipted and stamped AAD3s for Movements 2 to 5 and an AAD1 for Movement 1; on 21 September Fiona Harrison made references to the assurance officers for Dr Czech and Liquid Marketing; she sent copies of the AADs for Movements 1 to 5 to Glasgow for verification of those movements.  A report by Fiona Harrison dated 7 September recorded that pre-notifications had been received from the trader for Movements 1 to 5.

351.	He stated that at a visit on 3 November he was advised that some Smirnoff Vodka was having the duty stamps defaced prior to export.  This stock was subsequently released for Movement 58.

352.	He stated that he visited Checkprice on 16 November to obtain information on dealings with Dr Czech and on Movements 1 and 2.   He filled in a questionnaire and took up various copy documents.

353.	Mr Boot produced a Direction to Checkprice on 24 November that goods currently stored in the account of Liquid Marketing could only be removed from the warehouse on full payment of UK excise duty.  A similar Direction was made on 8 December in relation to goods held on the account of Dr Czech.  He stated that those directions were issued because Customs had been advised that loads of spirits shipped to Aldi had not arrived and that Aldi stated that they only received spirits direct from manufacturers.

354.	He stated that on 8 February 2007 he received an e-mail from NVC at Glasgow containing the replies from Belgium to the MV requests for information on Movements 1 to 5.  The replies stated that the receipt of the goods was not confirmed and that the entry in Aldi’s records was not confirmed; the authenticity of the stamp was not confirmed.  It was stated that no commercial transactions took place between Aldi and Checkprice.

355.	He stated that on 28 February 2007 he visited Checkprice and confirmed that a message had been passed on requiring Checkprice to notify NVC under the EWS procedure of the future movement of spirits; he stated that such notification was not compulsory but in view of the problems with movements to Aldi, Checkprice was asked to commence using it.  During the visit he recorded details of payments received by Checkprice from Liquid Marketing.

356.	Cross-examined, he said that apart from some Martell brandy the bottles at Checkprice would have been without duty stamps.  On export any stamps had to be defaced.  It would be suspicious if any bottles with defaced stamps were on sale in the UK.

357.	Asked by Mr Barlow whether he was satisfied that Checkprice had carried out the correct procedure on the movements in this case, Mr Boot said, “I have no reason to believe they have not.”  He accepted that Checkprice had satisfied itself that there was a guarantee before the goods left, that the goods were accompanied by AADs and CMRs, that the goods did leave the warehouse and that Checkprice had no reason to suspect anything other than delivery to the destination.

358.	There was no re-examination.

Nigel Smyth

359.	Mr Smyth, who was excise assurance officer for EBM from April 2005 to April 2006, confirmed a statement made on 26 March 2010.

360.	He stated that EBM was an authorised warehousekeeper from 26 September 2002.  Authorised warehousekeepers were required to provide a W1 return with details of AAD3s for intra-EU movements which were outstanding for two months or more.

361.	He confirmed that EBM made a SEED check of Aldi’s registration as a tax warehouse and made a check of SDM’s movement guarantee.  EBM notified Customs under the EWS system of the movements to Aldi.

362.	He stated that on 21 November 2006 NVC at Glasgow forwarded to him EWS messages relating to five movements from EBM to Aldi stating that the consignee never received the goods and “Aldi have no dealings with Edwards Beers Company (sic)”.  The messages from Belgium were not exhibited; the references were for Movements 34-36 and 64 and EWS 26034, the last not being on Mr Calderwood’s schedule of 43 EWS references.  A separate e-mail on the same day from NVC referring to movements from EBM stated that 41 movements to Aldi had taken place from 14 August; that was the date of Movement 6, the first movement from EBM.

363.	He said that he and EBM interpreted Notice 703 as being mandatory and required all the movements to be notified to NVC by faxing a copy of the outgoing AAD as near to the time of departure as they could.  The owner would have pre-notified the movement to EBM and the transporter would notify the tractor number and trailer identifier.  EBM would be able to part prepare the AAD on their computer system but would not print it until the driver arrived.  Once the driver had arrived a pick list would be produced to collect the goods and load the vehicle.

364.	He said that he had required EBM to ensure that loads leaving were sealed.  The seal number would normally be entered in Box 11 on the AAD.  The driver might well fix the seal.  Once the vehicle was loaded and the seal applied, the picking list was returned to the office and the final AAD was produced and given to the driver.

365.	He said that EBM shut at 5.00pm.  Generally Customs would not allow goods to be released after 5.00pm but sometimes EBM would be allowed to extend time to facilitate offloading and storage of excise goods.  On occasion by request EBM were allowed to open on Saturday mornings to receive goods.

366.	Cross-examined, he agreed that with a relatively small amount of spirits EWS notification was routine.

367.	He said that the seal (on trailers) was not a Customs seal.  Warehousekeepers would have their own stock but sometimes the transporter provided them.

368.	He said that the AADs were NCR (or no carbon required) documents so that the writing on the top copy showed through.  There were four copies.  If copy 3 was signed the imprint would show on copy 2 if not separated.

369.	Mr Smyth said that the movements were lawful from EBM’s perspective since they had done the necessary checks.

370.	He said that if the AAD3 was not returned within four months Customs would consider alternative evidence; this would include CMR, ferry, weighbridge tickets and similar material or a substitute AAD3.

371.	He said that apart from Form W1 to NVC at Glasgow, Customs would expect the warehousekeeper to notify his control officer of outstanding documents.  Customs would expect the warehousekeeper to contact the consignee to ask why the AAD3 had not come back.

372.	He said that the visit to SDM on 22 November with Mr Simpson was unannounced.  Mr Hodgkins had readily produced documents and made no attempt to hide the fact that SDM used subcontractors or who they were.

373.	He said that he did not associate Movement 65 to Germany with the issue with Aldi.  He agreed that he could not prove that the goods found at Portsmouth had anything to do with the transactions with which this case was concerned; he said that he could not prove the converse either.

374.	Re-examined, he said that the 46 cases of Claymore Whisky found at Portsmouth was a smallish quantity which Whyte and Mackay said was part of a larger lot.  Part of the lot went to Finland, some went to Jersey but the bulk went to EBM.  He had obtained details from EBM.  From EBM there were three separate consignments one of which was to Dialog Logistik in Germany and another to Calais.  His report showed the consignment to Germany which is Movement 65 released on 1 December 2006; the Claymore was found at Portsmouth following an interception at Cheriton on 12 March 2007.  He said that the AADs found on the lorry at Cheriton were not Edwards’ AADs.  He could not say whether there was any evidence that the Finland or Jersey consignments did not arrive.

375.	Questioned further by Mr Barlow, Mr Smyth did not know how many bottles were covered by the lot code at Whyte and Mackay.  He did not know the size of the two movements to Jersey.  He said that duty would be payable on excise goods from Jersey.

Susan Gibson

376.	The final witness for Customs was Miss Gibson, of an Alcohol team based at Middlesborough, who confirmed a statement dated 23 March 2010.

377.	She stated that on 1 November 2006 she made a routine visit to Dr Czech which had been a registered owner since June 2005.  She saw Mr Airlie at the accountant’s office.  A report following the visit recorded suppliers of spirits to Dr Czech as Checkprice, York Wines and European Beverages and customers as including TAG and Cyber.  She noted that Mr Airlie said that the majority of payments received were cash in sterling brought by a courier which he deposited into the bank; he had completed Form W7 and submitted it to Customs.

378.	She stated that following information that duty suspended movements from Dr Czech’s account at EBM to Aldi had never been received she visited Dr Czech again and saw Mr Airlie who confirmed his trading activities with TAG and Cyber.  He stated that there could be third party payments to Dr Czech’s suppliers.  The interview was for three hours with a record being taken.  The evidence given to the Tribunal by Mr Airlie was consistent with the notes and we do not repeat it.

379.	She stated that she carried out a further visit to Dr Czech on 15 February 2007 jointly with an officer dealing with High Value Dealers; Dr Czech was registered as a High Value Dealer and subject to routine visits.  Mr Airlie said that he had tried without success to contact Mr Melvit since the last visit and that Cyber owed £221,352 on seven invoices.

380.	Miss Gibson stated that on 6 December 2006 she visited Mr Woods who said that he often did work for SDM and had a trading relationship for about 5 years.  Due to his illness Mr Francis had undertaken the deliveries.  Mr Woods was unable to produce the tachographs.   Her report stated that SDM normally contacted him giving only 24 hours notice and that SDM always provided a back load for EU movements usually for Tesco.  All CMR notes were returned to SDM.

381.	She stated that she saw Mr Francis.  Her report shows that this was on 11 December at his home at Malton, North Yorkshire.  He told her that in Mr Woods’ absence he had received calls from SDM to collect goods from EBM and deliver from Aldi.  Because EBM did not operate a booking system he had to wait around leading to “a lot of down time.”  He took the ferry or the train using SDM’s account.  He never diverted from the route and there were no trailer swaps.  The destination at Aldi was a vast warehouse with several loading bays.  He made all deliveries during working hours.

382.	She stated that on 23 March 2007 Mr Woods attended the Customs office at Middlesborough and stated that he was unable to locate the tachographs for the journeys in question.

383.	Cross-examined, Miss Gibson  said that Mr Airlie had said that York Wines were informed that a courier would come but not who it would be.  She said that as far as she was concerned no suspicions had arisen about the transactions until the Belgians got in touch.  Her visit on 28 November was generated by the mutual assistance request.

384.	She said that Dr Czech was registered as a High Value Dealer but that she could not comment on whether there was any complaint as to that aspect.

385.	She agreed that by 21 November 2006 the Belgian authorities were confirming to Customs that the goods had never been received.

386.	Miss Gibson said that Mr Airlie had readily produced documents when she asked for them and brought them to the meetings at his accountant’s office and Customs’ office.  The visit on 15 February 2007 was routine because he was a High Value Dealer.

Submissions for Customs

387.	Miss Simor said that it was for SDM to establish on the balance of probabilities its grounds of appeal, namely that the goods reached their intended destinations.  Failing that, there was no evidence before the Tribunal that the goods were diverted at any particular place; the Tribunal would have to conclude either that it occurred in the UK or that the place was not known.  The default position if the Appellant failed to establish that the goods were duly delivered was that duty is owed in the UK.  It was not for Customs to prove that the goods did not reach their intended destination.

388.	She said that SDM’s evidence came nowhere near to establishing that the goods reached their intended destination: certain journey times were simply impossible; there were long delays in many movements before leaving the UK; phone calls between drivers indicated planning; there were anomalous and impossible dates on documents; there was a lack of AADs, evidence of non-arrival by the Belgian and Latvian authorities, a lack of tachographs, false stamps on CMRs, cash payments and other matters.  She submitted that it was more likely than not that the goods remained in the UK.  She emphasised the absence of Mr Wild and Mr Chahal and other key witnesses who might have been called such as Mr Feneron from Checkprice and Mr Plummer from Connie.

389.	Miss Simor said that the only question under DSMEG regulation 7(1) was whether an excise duty point had arisen; if a duty point had arisen SDM as guarantor was liable regardless of its culpability or dishonesty; Customs did not have to allege or prove that SDM was either responsible for the irregularities or was dishonest.  If dishonesty was revealed in cross-examination it was open to the Tribunal to make a finding even though it was not pleaded.  She referred to Fen v D’Cruz [2007] EWCA Civ 319 at [24].  Dishonesty only had to be pleaded if it was an element of a claim or defence.  There was no need to plead dishonesty against SDM or the drivers.  There was no acceptance by Customs that SDM was honest in relation to these movements.  Miss Simor said that she had put it to Mr Airlie whether he was content that he was not being used as a cover man and that he was receiving cash not for the invoices but for commission.  She said that she would have put it much more strongly to Mr Chahal but she had no chance to cross-examine him.

390.	She said that an excise duty point could arise under either DSMEG regulation 3 or 4.  Regulation 4 applied if the Tribunal was not satisfied that the irregularity occurred or was detected in the UK and the duty-suspended movement was not discharged by arrival as in this case.  If the Tribunal considered on the balance of probabilities that the irregularity occurred in the UK, the excise duty point arose under regulation 3.  She said that it was not necessary for the Tribunal to decide whether regulation 3 or 4 applied provided it was satisfied that one of them applied, see Anglo Overseas Ltd v Revenue and Customs Commissioners [2007] V&DR 71 at [57] and Re The Arena Corporation Ltd [2004] EWCA Civ 371 at [50].  Regulation 3(1)(b) implemented Article 20.1 of the Excise Directive 92/12/EEC and regulation 4 implemented Article 20.3.

391.	Miss Simor said that under Article 6 of the Directive duty was chargeable on any departure, including irregular departure, from a suspension arrangement.  Article 15 covered movement of goods; she said that a guarantee is not discharged without the goods being legitimately received by the consignee as evidenced “in particular” by the AAD, see Article 15.4; she accepted that “in particular” showed that some other proof was not precluded.  She accepted that, if the Tribunal is satisfied that the goods reached the tarmac at Aldi and were diverted there, then the diversion occurred in Belgium and SDM owed duty there rather than in the UK; Customs could not simply rely on the non-return of the AADs.  The only positive evidence of arrival was however that of the drivers.

392.	She said that Article 20.2 applied when an irregularity was detected in the course of a movement without it being possible to determine where it was committed; however when Article 20.3 applied because of non-arrival, the irregularity was deemed to be in the country of departure; she referred to the Advocate General at paragraph 71 in Distillerie Fratelli Cipriani SA v Ministero delle Finanze (Case C-375/00) [2002] ECR 1-11877.  If Article 20.3 applies, Article 20.2 does not apply.

393.	She said that in Anglo-Overseas at [69] the Tribunal rejected the argument that the Italian authorities detected the irregularities when responding to the enquiries by Customs.  She submitted that the excise authorities who initiate an enquiry must be taken to have detected the irregularity even if the consignee’s authority confirms it, see Jigsaw Wholesale Ltd v Revenue and Customs Commissioners [2010] UK FTT 164 (TC).

394.	She said that if the Tribunal was not satisfied that the irregularities took place in the UK then regulation 3 did not apply and regulation 4(1) which implements Article 20.3 applied.  Regulation 3(3) was only concerned with the time of detection where the irregularity was in the UK.

395.	Miss Simor accepted that if the Tribunal concluded that an irregularity occurred in Belgium that would be a defence to the assessment for UK duty.  Customs would only enforce regulation 4(1) in a way that was compatible with Article 20.3. Customs did not rely on the fact that SDM was not the warehousekeeper; SDM was fully entitled to prove arrival under regulation 4(3) although it was not the warehousekeeper.  The defective implementation of Article 20.3 did not assist SDM.

396.	She said that the rationale of Article 20 was clearly set out at [59] in Re Anglo German Breweries Ltd [2002] EWHC 2458 (Ch).

397.	Turning to the evidence, Miss Simor accepted that the evidence provided by the Belgian authorities was relevant as any other hearsay evidence but said that special weight should be given to it because it was provided under the administrative cooperation Regulation EC/2073/2004, Article 31.1 of which provided that information communicated under the regulation may be used to establish the assessment base and in connection with judicial proceedings.  Articles 23 and 24 provided for the EWS and MV systems and Article 17 contained obligations to exchange information on irregularities or the risk of irregularities.  She said that the Tribunal must seek to give effect to those provisions of Community law.  She said that the Belgian evidence was fairly contemporaneous, it did not involve multiple hearsay and there was no motive on the part of the Belgian officials to conceal or misrepresent matters.

398.	Miss Simor said that the two interviews with M. Godefroid, the interview with Mireille Talbot, the EWS responses and the lack of copies 2 or 3 of the AADs were all positive evidence of non-arrival at Aldi; these were more than only evidence that the goods had not been recorded as having arrived.

399.	Miss Simor produced summary sheets for 39 of the movements with detailed observations and a table covering all movements, both prepared by Counsel.  She said that there were 18 forged AAD 3s and 47 movements for which there were no AAD 3s or receipted AAD 2s.  There were five CMRs with no stamp and no signature.

400.	She said that the suggestion by Mr Barlow that there was a corrupt employee at Aldi was not credible.  It was not credible that a million litres of spirits could be unloaded into bays “without anyone batting an eyelid.”  M Godefroid was interviewed at Aldi on 26 October and was told that Aldi’s name and stamp were being used; it was not credible that Aldi did nothing and that controls were not stepped up. On the same day Movement 40 with 1144 cases of Glenns was supposed to have arrived and to have been unloaded in the afternoon.  There were fourteen further alleged deliveries after 26 October by Parnham, Wild, Connie, Woods and Blunsden.  It was not credible that all this happened without someone at Aldi who was not corrupt noticing.  She asked why if someone at Aldi was using a forged stamp the correct one was not used : the drivers said that the CMRs were stamped at Aldi and given back to them.

401.	Miss Simor said that there was no credible reason for Mr Airlie (Dr Czech) or Mr Chahal to have been in the supply chain or to have been paid cash when in Mr Airlie’s case the main payment was going to York Wines direct.

402.	She said that the only evidence that goods went to Aldi was that of the drivers.  The evidence that the tractors travelled through Eurotunnel was not evidence that the trailers or the goods travelled.  She accepted that there was no evidence as to the proportion of trailers checked by Eurotunnel.  There was no evidence from drivers for 25 of the movements.  Mr Bunce was unable to identify his drivers including Benford.  Mr Wild had gone to Canada and negligible weight should be given to his statements.  Including Mr Wild’s 14 movements, there was effectively no evidence for 39 of the 63 Aldi movements; on those 39 movements SDM must fail on the balance of probabilities.

403.	Miss Simor said that the evidence that all the drivers destroyed or lost their tachographs was not credible.  It was highly significant that there was not a single tachograph available to show the time of stops or the mileage.  She submitted that they were destroyed, hidden or not produced because they revealed that the goods did not go to Aldi and would show when the vehicles stopped possibly showing a consistent pattern.

404.	She said that the evidence of Mr Bunce was wholly lacking in credibility.  He showed a disdain for the law.  As early as 21 February 2007 he said that he could not remember who the drivers were.  He said that he did not arrange the drivers but that Keith Plummer did, however  Mr Plummer was not a witness.

405.	In one statement Mr Waters said he did two movements, then he said six and in evidence covered seven.  It was not credible that he had slept in his cab for three nights in Movement 2.

406.	She said that there were numerous examples of significant delays before leaving the UK which could not be explained by the witnesses.  She accepted that Mr Parnham went home on Movement 37 but said that he may well have dumped the load and gone home before driving empty to Geer; it was surprising that he could remember the specific detail of going to Ashford on Movement 51 because of a problem with air pressure.  She submitted that the delays in the UK were indicative that the loads were taken to slaughter points and unloaded.

407.	Miss Simor also relied on lost days on the continent; there was no explanation for the delay of the entire day of 1 August before the CMR receipt was signed on 2 August for Movement 3; there were three days between travel to France and the CMR receipt date on Movement 6 and three days before the CMR and AAD were signed on Movement 7.

408.	Miss Simor said that the consistent evidence of the drivers was that it took up to three hours to drive from EBM to Folkestone and 4½ hours to drive from Calais to Vaux; their evidence at to the journey times on the continent got shorter as they realised the implications.

409.	She said that the explanations for Movement 12 to Latvia and Movement 65 to Germany did not make sense, in particular the suggestion that Movement 65 went 442 kilometres east of the original destination and that no one knew.

410.	In addition to her oral submissions in closing, Miss Simor handed in six pages of notes covering movements for which there was driver’s evidence, providing a copy to Mr Barlow.  We have considered these with care although we do not summarise them in this decision.

Submissions for Appellant

411.	Mr Barlow said that both parties agreed that if the goods did in fact arrive at their destinations and were then diverted duty was payable in the country of destination and not in the UK.  He submitted that this was the case if the goods arrived in the country of destination although SDM’s case was that the goods did arrive at Aldi and the other places of destination.

412.	He said that if the Tribunal was to find that it could not determine whether the goods did arrive at the destinations or where the irregularity occurred then the country of detection was in issue, see Article 20.2 of the Directive and DSMEG regulation 3(1)(b).  He said that irregularities in the Aldi consignments were detected in Belgium, M. Godefroid’s statement at the end of October was the trigger.  The EWS requests to Belgium were routine and did not constitute detection.  Detection meant finding out that something has happened, not asking somebody else to find out if it has happened.

413.	Mr Barlow submitted that regulation 4(3) which provides for the warehousekeeper to account for the goods within four months did not transpose Article 20.3 correctly; Anglo Overseas at [63] was incorrect on this.

414.	He said that Article 15.4 which provided that the liability of the warehousekeeper or transporter may only be discharged by proof that the consignee has taken delivery was expressly subject to Article 20 and did not address in which country liability arose.  Article 20 contained a hierarchy: under Article 20.1 duty was due in the country where the irregularity was committed; Article 20.2 covered detection where it was not possible to determine where the irregularity was committed; Article 20.3 was irrelevant in this case because Article 20.1 and 20.2 took priority.

415.	Mr Barlow said that the legal burden of proof on SDM as appellant involved calling credible evidence of the facts essential to its case; an appellant does not have to call evidence to rebut every allegation, submission or innuendo.  In relation to facts beyond those covered by the legal burden, it is a matter of the evidential burden. He said that the evidential burden was on Customs to prove the allegation of conspiracy.  He said that the allegation of conspiracy should have been pleaded, although he was not taking any technical point on that.  He said that there was no evidence to support a conspiracy based on the drivers’ telephone records.  He said that the Statement of Case contained no allegation of dishonesty against SDM or against the drivers; it was inconceivable that the goods were diverted in the UK or on the continent without dishonesty.  It was illogical as a matter of fact.

416.	He said that any conspiracy involving the drivers had to involve Cyber and TAG, the purchasers of the goods who did not complain about non-arrival, and also M Schmit.  However SDM which was not involved in the conspiracy decided which sub-contractor including owner-drivers was going to carry the loads.  He said that in order for the conspiracy to work, the conspirators would have to ensure that all drivers who might be given the loads were involved.  SDM did not tell the warehouse or the owner of the goods who the driver would be.  SDM only gave the warehouse its name and the number of the vehicle.  He posed the question how anybody could have found out who all the drivers were and recruited them and submitted that it would be quite impossible.  He said that if the goods did not go to Aldi it could not have been by accident.  The drivers could not have crossed the channel with the trailers empty without knowing it.

417.	Mr Barlow said that logically if the Tribunal found that some of the drivers were not involved in the conspiracy none of them were.  It beggared belief that all were involved.

418.	He said that the evidence showed that there was a conspiracy in Belgium which made complete sense without any UK involvement. This undoubtedly involved TAG, Cyber and M Schmit and at least one person on the inside at Aldi.  He referred to M Schmit’s interview by an examining magistrate on 1 December after his arrest and to his further interview with Belgian police on 18 December (see paragraph 28 above) and also to the statements by M Godefroid and Mireille Talbot.  He referred also the official report to the examining magistrate dated 19 October 2007 (see paragraph 30 above); he said that although the report showed that a large number of telephones were being tapped, it contained no reference or suggestion that anybody in the UK was involved in the fraud.  He submitted that M Schmit’s statement on 18 December that he was assured that the goods remained in England was to diminish his guilt in Belgium.  He said that some of the EWS requests were originally returned by Belgian Customs as satisfactory; there must have been some contact between Belgian Customs and somebody at Aldi to give that report.

419.	Mr Barlow said that it was impossible to imagine that all of the drivers had been recruited to the conspiracy.  There was a conspiracy in Belgium.  The most sensible conclusion was that the goods were diverted after they arrived at Aldi.

420.	He said that as far as the German load (Movement 65) was concerned it went to one of two places in Germany; Customs had made no enquiries of Petzold.  A letter from Intermediaire to Mr Hercules stated that they were trying to get a duplicate AAD from Petzold.

421.	As to Latvia (Movement 12) there was a negative EWS response but potentially it was in respect of the wrong AAD, No. 7033.  He submitted that Mr Bunce’s evidence of delivery was credible and there was a Unistock stamp on the CMR.

422.	Mr Barlow said that by the time the assessments were raised SDM was in the difficult position of asking witnesses to recollect routine events which had happened months before.  At the time of the hearing the drivers had done hundreds of journeys since those in question.  The clarity of their recollection varied but he submitted that they were witnesses of truth; Mr Parnham and Mr Francis in particular came across as people who had a clear recollection of having been to Aldi.  Apart from Mr Waters there was no evidence that any of the drivers had been to Aldi on any other occasion.

423.	He said that there was nothing surprising in Mr Bunce’s evidence that another driver may have taken the load for Movement 12 to Latvia across to the continent which he had picked up.  He said that there was no proof that the trailer scanned as empty on 4 December 2006 was the one which was supposed to be carrying the goods for Movement 65.  It had been suggested that the goods found at Portsmouth were part of the consignment in Movement 65, but there were five other consignments from that lot number and the 46 cases were found three months later.

424.	As to the drivers’ times he said that the Tribunal should be cautious even as to their average speed.  Drivers had said that they stopped at South Mimms or Snodland for security reasons; these were obviously safer than a lay-by in Belgium.  The evidence was that there was a restriction on lorries in France from 10.00pm on Saturday to 10.00pm on Sunday.

425.	He said that some of the receipt dates at Aldi on CMRs may have been wrong; an employee at Aldi may have put the wrong date to cover himself or through carelessness; it would not be surprising if a driver did not notice the wrong date.  At Geer some CMRs were dated in advance by the warehouse.

Conclusions

426.	This appeal raises difficult questions both of fact and law.  We start by considering the law which at the material time was governed by the Excise Directive, Council Directive 92/12/EEC, more specifically by Article 20, which provided as follows:

“1.	Where an irregularity or offence has been committed in the course of a movement involving the chargeability of excise duty, the excise duty shall be due in the Member State where the offence or irregularity was committed from the natural or legal person who guaranteed payment of the excise duties in accordance with Article 15(3), without prejudice to the bringing of criminal proceedings.
Where the excise duty is collected in a Member State other than that of departure, the Member State collecting the duty shall inform the competent authorities of the country of departure.

2.	When, in the course of movement, an offence or irregularity has been detected without it being possible to determine where it was committed, it shall be deemed to have been committed in the Member State where it was detected.

3.	Without prejudice to the provision of Article 6(2), when products subject to excise duty do not arrive at their destination and it is not possible to determine where the offence of irregularity was committed, that offence or irregularity shall be deemed to have been committed in the Member State of departure, which shall collect the excise duties at the rate in force on the date when the products were dispatched unless within a period of four months from the date of dispatch of the products evidence is produced to the satisfaction of the competent authorities of the correctness of the transaction or of the place where the offence or irregularity was actually committed.
Member States shall take the necessary measures to deal with any offence or irregularity and to impose effective penalties.”

Article 20.4 is not material to this appeal.  Directive 92/12/EEC was repealed with effect from 1 April 2010 being replaced by 2008/118/EC.

427.	Articles 20.1, 20.2 and 20.3 were alternatives as is clear from the sixteenth recital to the Directive and take effect successively, Article 20.3 being the default position.  The basic rule was that the duty is payable in the Member State where the irregularity was committed.  The words “where the offence or irregularity was committed” in Article 20.1 logically refer to the Member State rather than to a particular place within such Member State since Article 20.1 was concerned with the Member State by which the duty is to be collected and the recital refers to “the Member State on whose territory the offence or irregularity has been committed.”  Similarly the words “where it was committed” in Article 20.2 must refer to the Member State. 

428.	The interpretation of the words “where it was detected” in Article 20.2 is less clear.  Paradigm fact situations are a vehicle being physically detected during the course of a movement carrying dutiable goods which are not covered by an AAD, or where there is a shortage or maybe no excise goods at all, or going in the opposite direction to the destination.  However with no border controls in the single market such detection is not easy.

429.	The words “in the course of movement” show that the time of detection was limited to the movement.  While they may cover a shortage or irregularity being discovered on arrival at the destination, the words did not in our judgment cover a situation where an irregularity was discovered as a result of later enquiries.  Although a movement clearly starts with goods leaving a warehouse under duty suspension, such movement does not continue indefinitely.  Miss Simor accepted that in this case if the excise goods arrived on the tarmac at Aldi the irregularity occurred in Belgium.  She did not contend that SDM could be liable to UK duty in such circumstances.

430.	If the Tribunal is not able to determine whether or not the goods did arrive at Aldi or the destinations in Germany and Latvia, it would also follow that the Tribunal could not determine in which Member State the irregularities were committed.  If the goods did leave England it does not follow that any irregularity was in Belgium, Germany or Latvia, rather than (say) France.  It was not contended by Customs that the fact that there was a conspiracy involving ordering goods for delivery to Aldi and the other destinations meant that the irregularity was committed at the time when the goods left the UK warehouses.  Any such contention would have given rise to additional evidence and submissions.

431.	The word “detected” is as a matter of language clearly capable of applying to discovering the existence of a fact, or, as Mr Barlow put it, finding out that something has happened, or indeed that something is happening.  It is not confined to sensory perception and can extend to the receipt or collection of information.

432.	There was some debate as to the stage at which the irregularities in this case were detected in this sense and whether it was by the UK or other authorities.  In our judgment the sending by Customs of routine EWS notifications to Belgium before M Godefroid’s first interview on 26 October 2006 could not constitute detection on any view.  Detection must involve at the least a provisional judgment that there has been an irregularity.

433.	Mr Simpson’s evidence in cross-examination was that at the time of his visit to Liquid Marketing on 28 February 2007 Customs had come to no clear conclusions about any liability in the UK.  If that was the position in February 2007 we do not see how it could be said that Customs detected irregularities in the course of movements when they started in the previous year.  The Urgent Request for Mutual Assistance on 27 November 2006 listed 41 AADs, the last being for Movement 64, “to enable the UK excise department to determine if a diversion of goods has occurred”.  In our judgment this is inconsistent with detection having been made by UK Customs at that stage.

434.	We are not aware of a single movement where the Belgian Customs gave a prompt response to an EWS reference from UK Customs.  The warning on 17 October 2006 by UK Customs of a “high risk movement that requires a prompt reply” on Movement 30, which was despatched from EBM on 16 October, received a response on 31 October that the goods had never arrived which was clearly based on the interview with M Godefroid on 26 October.

435.	The Latvian response in relation to Movement 12 was dated 8 February 2007.  There was no EWS response from Germany for Movement 65.

436.	We conclude that there was not a single movement in which the irregularity was detected in the course of the movement however wide an interpretation is given to the word “detected” and to the words “in the course of movement”.

437.	The structure of the DSMEG Regulations is wholly different to that of the Excise Directive, being solely concerned with duty payable in the UK.  However those Regulations must be interpreted so as to comply with the Directive.  The UK cannot impose excise duty in respect of an irregularity committed in another member State since that would be incompatible with Article 20.1 of the Directive.  If this would otherwise be the effect of the regulations they must pro tanto be disapplied.

438.	Liability to pay excise duty under regulation 7(1) as guarantor arises where there is an excise duty point under regulation 3 or 4.  Regulation 3 only applies where “there is an irregularity which occurs or is detected in the United Kingdom”, see paragraph (1)(b).  We have already concluded that no irregularity was detected in the course of movement; applying Article 20.1, that conclusion means that no irregularity was detected in the UK within regulation 3(1)(b).  If the Appellant satisfies the Tribunal on the balance of probabilities that the irregularities occurred in a Member State other than the UK, then regulation 3 has no application.

439.	Regulation 4(1) contains four cumulative conditions.  Conditions (a) and (c) present no problem. Condition (b) is that “the duty suspended movement is not discharged by the arrival of the excise goods at their destination” within four months; condition (d) is that there has been an irregularity.  Clearly if the goods did not arrive at their destination there must have been an irregularity, and, if it is not possible to determine in which Member State the irregularity was committed, then an excise duty point arose under regulation 4(2) on removal of the goods from the UK warehouses.  This is compatible with Article 20.3.

440.	In order to succeed the Appellant must satisfy us on the balance of probabilities that the irregularities were committed in a Member State other than the UK so that the duty is due in that other Member State under Article 20.1 rather than in the UK. If it is not established that the goods arrived at their destinations and it is not possible to determine where the irregularities were committed, then the irregularities were deemed under Article 20.3 to have occurred in the UK being the Member State of departure and there was an excise duty point under regulation 4 on removal from the warehouse.  Mr Barlow did not submit that there was evidence on which we could determine where the irregularities were committed if these occurred before arrival at the destination shown on the AADs.  In relation to the Belgian consignments the issue is therefore whether we are satisfied on the balance of probabilities that the goods were delivered to Aldi.  Movements 12 and 65 to Latvia and Germany require separate consideration and in our judgment do not assist in deciding whether the Aldi consignments arrived.

441.	We are satisfied that the goods were never entered into bond at Aldi.  It is clear that there were irregularities either in the course of the movements to Aldi or after arrival there.  No assessments have been made by Belgian Customs.  It is inescapable that there was a conspiracy or a series of conspiracies which involved the goods being both ordered and paid for by TAG and Cyber and receipts and stamps for CMRs being forged together with some AAD3s.

442.	If the irregularities were committed without the goods being delivered at Aldi, the drivers must have been involved.  The ringmasters could only involve the drivers if they knew who the driver would be for the particular movements. The unchallenged evidence which we accept was that the warehousekeepers, EBM and Checkprice, were not given the names of the drivers; although the drivers signed the CMRs on loading, most signatures were illegible and there was no suggestion that either EBM or Checkprice was involved in any conspiracy.  There was no suggestion or evidence that Mr Airlie (of Dr Czech) knew the identity of the subcontractors let alone the individual drivers.  In our judgment there was no basis on which we could find on the evidence that Mr Airlie was a party to a conspiracy as opposed to being used.

443.	We accept the evidence of Mr Cranny and Mr Hodgkins that they did not know the names of the drivers, with the reservation that they did know the names of their core owner-drivers.  It was not suggested to either of them either that they were party to a conspiracy or that they informed anyone of the identity of the owner-drivers used for any movement.  The documentary evidence showed SDM as merely giving the numbers of the vehicles and trailers to the warehouses.  No explanation or even theory was advanced by Miss Simor as to how the ringmasters could have known the identity of the drivers of each movement if the goods were never delivered at Aldi.  We observe that if a driver had become involved in one diversion, he could have told the ringmasters about further movements by him.  That would not explain how such driver could have become involved initially if his identity was not known.

444.	The last three paragraphs address the scenario implicit in the submission for Customs that the goods were not shown to have been delivered at Aldi.  There are however also substantial difficulties implicit in SDM’s case that the drivers were not involved in the irregularities and did deliver the goods to Aldi.

445.	Diversions at Aldi after the goods were unloaded would have involved at least one dishonest employee at Aldi and very probably more than one.  Although such insiders would no doubt have been informed by TAG and Cyber that the individual consignments had been ordered from England, the insiders could not know when the goods would arrive.  All of the drivers gave evidence that they went to the office on arrival.  The insider would have needed to ensure that the AADs and CMRs were not processed by anyone not involved in the conspiracy and that the consignment was not entered into Aldi’s stock records.

446.	It is to be noted that the movements to Belgium continued for over three weeks after M Godefroid was interviewed by Belgium Customs at Aldi on 26 October.  Either all insiders were reckless or they were unaware of the enquiries by Belgian Customs.  Although that interview is recorded as taking half an hour it contains little detail.  The inference must be that M Godefroid simply checked Aldi’s records and answered on the basis of those records, being asked no further questions.  It does not appear from Mireille Talbot’s interview whether she knew of the October visit at the time; it is unclear from her interview whether she had checked with the four ladies dealing with AADs as to the writing on the documents or whether she relied on her knowledge of their signatures.  M Godefroid’s statement on 29 January 2007 when interviewed for 1¼ hours makes no reference to any enquiries apart from examining the entry stock records.  He was however aware of the faxes sent by Checkprice on 27 September and 6 November asking for missing AAD3s (paragraph 87 above).

447.	Regardless of whether or not the consignments did arrive at Aldi, it is clear that the movements consigned to Aldi involved a criminal conspiracy to evade millions of pounds or euros of excise duty on around a million bottles of spirits involving 18 AAD 3s and 57 CMRs on which stamps or receipts were forged in Belgium.  It is to say the least surprising that more detailed enquiries were not carried out both in Belgium and the UK.  It appears that the Belgian authorities accepted a categorical statement by British Customs that the exports were fictitious (see paragraph 30); we have seen no evidence to warrant such statement.

448.	Faced with two alternative scenarios both of which present substantial difficulties we turn to consider the evidence of the drivers as to the movements.

449.	It is clear that there was an overall conspiracy in relation to the Belgian consignments on either scenario, although different persons were no doubt involved at different times. Logically if we are satisfied that any one of the drivers did deliver the goods at Aldi, that would show that there were one or more dishonest insiders at Aldi and this would be relevant to all the Belgian movements.  Equally if we conclude that any one driver was involved in the conspiracy and did not deliver to Aldi, that would show that somehow the ringmasters were able to discover in advance who that driver was and presumably who the other drivers were.
450.	This appeal involved the problem that all witnesses including the drivers were giving evidence of events some four years before the hearing and that all the drivers had carried out large numbers of deliveries or collections to differing warehouses meanwhile.  In those circumstances it was no surprise that the quality of their recollection of details of times and incidents varied.  Apart from Mr Bunce, who did not give evidence of any deliveries to Aldi, none of the drivers made statements before the middle of 2008, approaching two years after the events; they had however apart from Mr Francis been interviewed in December 2006 or early 2007.

451.	At this point it is relevant to state that Mr Coles had extensive experience of the transport industry involving heavy goods vehicles at national, European and global level.  He was Director of Materials Management at Glaxo Pharmaceuticals Ltd, Logistics Director at Cow and Gate Ltd, Operations Director for Nutricia Northern Europe and Director Supply Chain Infrastructure Worldwide at Royal Numico BV. In fact early in his career he served for 10 years as an officer of Customs and Excise. The parties were informed of this experience at the beginning of the hearing.        .

452.	Before considering any particular movements we set out in outline the legal position in relation to driving time and breaks under EC Regulation 3820/85 which had effect throughout the European Community.  The maximum permitted driving time in any week was 56 hours and in any two week period was 90 hours; the maximum driving time per day was 9 hours which could be extended to 10 hours on no more than two days in a week.  A break of 45 minutes was required every 4½ hours, but this could be split into three breaks of 15 minutes each; time spent on a train counted as a break provided a bed or couchette was available.  Time spent waiting to load or unload counted as a break if no work was performed.  One break of at least 9 hours was required each day or of at least 8 hours if there were 3 separate breaks.

453.	Thus, for example, if a driver took a 9 hour break before boarding a train at Folkestone, he could legally drive 4½ hours from Coquelles to Vaux without a break, spend 15 minutes waiting and ½ hour being unloaded and drive straight back to Coquelles giving a return time Coquelles to Coquelles of under 10 hours, however he would then need another long break.

454.	Drivers were required under Regulation 3820/85 to have a tachograph functioning with a disc.  Operators were required to keep the tachograph discs for a year.  Tachographs were required to check the speed, the maximum for which for heavy goods vehicles is 90 kilometres per hour on the continent and 96 kph on motorways and is 80 kph on trunk roads in the UK, as well as to check on breaks.  It was an offence under the Road Traffic Act 1968 section 197 to fail to keep a tachograph disc or to destroy a disc; failing to take the statutory breaks and exceeding the speed limits were offences which would appear from the tachograph disc.

455.	We start by considering Movement 1 since on any view the conspiracy must have started before this movement. We accept the evidence of Mr Airlie who we found an honest witness that he was approached by Mr Melvit in May 2006 who put him in contact with TAG.  Mr Airlie validated TAG’s VAT number and carried out due diligence; he negotiated a price with TAG.  The documentary evidence as to the movement is summarised at paragraph 32 above.  Having considered the timings we do not accept Miss Simor’s written submission that it was not credible that the goods moved from London to Norwich and back to Folkestone on the same day; she commented on the lack of Eurotunnel evidence, however the instruction to JJI referred both to the ferry and to SDM’s shuttle account and had no shuttle number.  The date of the CMR receipt at Aldi was 17 July whereas SDM instruction was to deliver on 15 July; 15 July was a Saturday.  Although Mr Waters said that there were no deliveries to Aldi on Saturdays, it was not apparent how Mr Bunce could have known this on the first load unless Mr Waters or another driver had told him from his own previous knowledge of Aldi. The driver’s signature on the CMR was Benford; that was one of four CMRs with his signature and the only movement using BR HN 26, the other three (Movements 5, 7 and 8) were with BJ FN 98.  Mr Bunce could not remember who the driver was when interviewed in February 2007, but he confirmed at the hearing that Mr Benford drove for him.

456.	We get little assistance from Movement 1 in deciding whether Mr Barlow’s scenario is the more probable.  The delay between Mr Melvit meeting Mr Airlie and the departure of Movement 1 is consistent with either scenario; it clearly took time for the ringmasters to set up the arrangements, including recruiting M Schmit.  Movement 1 does not assist Mr Barlow’s scenario there being no driver as a witness, but it is not wholly inconsistent with that scenario; although the date of the Aldi receipts are not until three days after despatch on the Friday, that is not inconsistent with the possibility of Aldi being closed for excise movements over the weekend.  Movement 1 does not assist the alternative scenario either.

457.	Movement 2 is important because the driver, Mr Waters, did give evidence.  He was having medical tests on 24 September but attended to give evidence on 27 September, a Monday. The documentary evidence on Movement 2 is covered at paragraph 33.  The instruction by Mr Airlie to SDM was given on the same day as that for Movement 1, two weeks before the movement.  The instruction by SDM to JJI was to deliver on 29 July at Aldi. The CMR which Mr Waters said was returned stamped to him at Aldi had the date 31 July, whereas he collected the load from Norwich on 28 July, a Friday.  His explanation for not going out on the Friday night is consistent with the timings on Movement 1.  If Aldi was closed or was believed to be closed for excise deliveries on Saturdays it would make sense to be parked at Snodland. However his evidence that if loaded he always shipped out on a Sunday conflicts with the Eurotunnel account for SDM which shows GN 55 CZM, the tractor used for the movement, as checking in at Folkestone at 2115 hrs on Monday, one of five entries for that day; Mr Waters said (paragraph 142 above) “somewhere along the line there is a date wrong”.  His demeanour when asked about this did not give us the impression at the time that he was being untruthful or evasive.  

458.	Although Mr Waters’ signature varied somewhat and was not very clear, we find that he collected the consignments for Movements 9, 10 and 15 using GN 55 CZH and those for Movements 47, 55, 59 and 64 using GN 55 CZF.  Since he was engaged by Connie for all those movements his evidence was that he handed in his tachograph discs and fuel invoices to Connie’s office and did not keep them himself.  SDM did not subcontract return loads for these movements and there were therefore no invoices to SDM by Eurotunnel for return journeys.

459.	There was no outward Eurotunnel invoice for Movement 9; Mr Waters said that he could have gone by P&O ferry; however there was no invoice for that either.  There was no outward Eurotunnel invoice for Movement 64.  There were delays on all the other movements between collecting the loads and checking in at Folkestone, the shortest time being 8 hours on Movement 55.  In view of the regulations on driving hours we do not find it surprising that there were delays quite apart from week-ends, however the 15 hour delay on Movement 15 was lengthy.  The only apparent timing problem on the continent was in relation to Movement 55 where the CMR date stamp was 11 November (a Saturday) whereas the Eurotunnel check-in time was 2145 hours on 9 November.  We note that the date stamps on the two CMRs exhibited for Movement 55 were not applied at the same time, although both have an initial by the carrier.  If the stamps were applied on the date shown that indicates that Aldi was in fact open on a Saturday.

460.	No conflicts were identified by Miss Simor between the evidence of Mr Waters and that of the other drivers.  As recorded at paragraph 150 it was never in fact put to Mr Waters that he did not deliver any loads to Aldi, although it was pleaded at paragraph 38(c) of the Statement of Case that the goods did not reach the warehouse of intended destination.  It was not pleaded or put to Mr Waters that he was part of an overall conspiracy although this was implicit in Customs’ case. The requirement to put matters in cross-examination is long established.  In Browne v Dunn (1894) 6 R 67 (cited in Hamilton on Tax Appeals (2010) at paragraph 17.179) Lord Halsbury said at page 76,
“To my mind nothing would be more absolutely unjust than not to cross-examine witnesses upon evidence which they have given, so as to give them notice, and to give them an opportunity of explanation, and an opportunity very often to defend their own character, and, not having given them such an opportunity, to ask the jury afterwards to disbelieve what they have said, although not one question has been directed either to their credit or to the accuracy of the facts they have disposed to.”

In the present case Mr Waters was cross-examined for some two hours and was questioned on each movement.  We approach Mr Waters’ evidence on the basis that there was an implicit formal challenge to the deliveries.  However the fact that there was no actual challenge reflected the fact that there was no point in his cross-examination when a challenge was clearly to be expected in the light of his answers and of his demeanour.

461.	Mr Waters was of course engaged by JJI and Connie.  In his statement he said that Mr Bunce was the only point of contact, although in his oral evidence he said that he would normally get a call or fax from Keith.  Mr Plummer was not a witness.  Mr Bunce’s evidence as to the operation of Connie was anything but satisfactory.  When interviewed on 21 February 2007 he could give little information as to the drivers. He said that all the paperwork was sent to Holland including tachographs and fuel invoices.  He agreed to send them to Customs but nothing was received.  Although Connie is no longer trading, there was no suggestion that Connie was not trading in February 2007.  While we can accept that the failure to produce tachograph discs and other evidence in March 2007 was due to his son’s death shortly after the interview, that does not explain why these were not produced at any time since then, in particular when he made a witness statement in 2008. However the fact that Mr Bunce produced no material to corroborate the evidence of Mr Waters does not mean that no material was given to him by Mr Waters.

462.	CMRs bearing an Aldi stamp were collected from SDM at the unannounced visit on 22 November.  The evidence that the CMRs were provided to SDM by the subcontractors including owner-drivers was not challenged.  The evidence of Mr Waters that he gave the CMRs in to Connie’s office was not challenged.  The evidence that the stamps and initialling were unauthorised and thus forged does not mean that the drivers were not given them at Aldi.  The CMRs are therefore capable of supporting the evidence of Mr Waters and the other drivers that they delivered the consignments to Aldi and indeed they lend support to SDM’s case generally, since there is no evidence that the drivers knew the Aldi stamps to be unauthorised.

463.	Miss Simor’s criticisms of Mr Blunsden’s evidence focussed in particular on his explanation for the lack of tachograph discs.  We do not find his evidence that they were moved during redecoration to be in any way incredible.  Nor do we find his evidence of a theft of his briefcase from his car to be implausible.  We do not find the number of mobile telephone calls to other drivers including Mr Francis and Mr Parnham or the fact that not all of his phone records were produced to be indicative of a conspiracy between the drivers.  We note that there was no specific criticism in Miss Simor’s closing note of the timings on his movements.  We do find the times shown on the paperwork for Movement 29 to be impossible involving covering 780 kilometres in six hours, however none of his other 10 timings was impossible.   At this distance of time it was no surprise that Mr Blunsden did not have an explanation for Movement 29.

464.	Mr Woods explained to Miss Simor that he destroyed the tachographs for journeys by Mr Francis to protect Mr Francis.  We accept this evidence.  While it is a matter for serious criticism, we accept that some drivers do destroy tachograph discs to avoid offences being discovered by VOSA.  Mr Francis said that he had removed the fuses, itself an offence.

465.	The evidence of Mr Parnham that he destroyed all his tachographs even if they did not reveal an offence is again credible albeit not creditable.  We observe that in journeys of the type in issue it is only too likely that the tachograph discs would reveal offences.

466.	Although Mr Bunce’s evidence overall was not impressive, we found his evidence in respect of the actual movement to Latvia to be credible.  He was able to describe how he undertook the journey and to give details of the premises.  It was a six-day return journey to a remote destination entirely outwith his usual work.  It is not unreasonable that he should remember the journey, even after such a long period of time.  The fee paid by SDM to Connie was £1,425 compared with £475 for Movement 11 to Aldi. His evidence was that he did the longer trips himself.  A signed CMR was produced stamped “UNISTOCK Latvija Riga”.  It was never suggested that either the stamp or the signature might be forgeries or where or how they might have been applied other than at Unistock. 
 
467.	Miss Simor contended that many movements were impossible within the timescales indicated by the documents.  We heard evidence from the drivers that they variously timed their arrivals on the continent for the early part of the day when the roads were quiet, chose routes which were known to have few traffic police and did not strictly observe legal speed limitations.  Under these circumstances they were able to cruise at speeds of up to 80mph.  The Tribunal analysed the timings of all of the movements identified by Miss Simor in the light of the drivers’ evidence, and concluded that only one movement, Movement 29, was impossible.  However, the evidence indicates that this movement was originally intended to be part of a three vehicle delivery, subsequently amended to two vehicles, and which included collection of a backload from a customer in France.  It was not clear which vehicle or vehicles carried out which part or parts of the journey, and it may well be that the actual journeys performed by the individual vehicles were different from those originally planned.  Overall, we conclude that the journey timings offer no support to Customs’ case that the goods could not have reached Aldi.

468.	This is a particularly difficult case given the inadequacies of the evidence on both sides.  We have observed earlier that there was clearly a substantial criminal conspiracy in respect of the Aldi consignments.  If Customs believed and indeed told the Belgian authorities there were consistent diversions in the UK, we find it extraordinary that there was not a co-ordinated inquiry in this country.  If there was such co-ordinated inquiry we heard no evidence of it.  The Belgian authorities apparently acted on the assumption that the consignments never reached Belgium, let alone Aldi.  There was no evidence of any inquiries at Aldi beyond M Godefroid and Mirelle Talbot in spite of the serious charges against M Schmit and others.  It is evident that there was substantial telephone tapping in Belgium none of which apparently implicated anyone in the UK.

469.	We are surprised that UK Customs did not obtain any evidence from Aldi once it was clear that SDM were calling drivers to give evidence that the goods were delivered there.  Clear evidence as to how excise goods were handled at Aldi, the security arrangements, and the opening hours would have assisted greatly.  It should not have been difficult for Customs to obtain from Connie NV via the Dutch authorities the material which Mr Bunce said was sent there or to establish its absence.

470.	We recognise that it would have been difficult for SDM to obtain material from Holland unless Mr Bunce did so.  There was no evidence as to any attempt by Mr Bunce.  Nor was there any evidence of any attempt to trace Mr Benford, Mr Winter and the other drivers for Connie movements, apart from Mr Waters.

471.	Ultimately we are faced with two scenarios: (a) Customs’ scenario that the goods never reached Aldi which involves active participation by the drivers wherever the diversions occurred and knowledge by the ringmasters as to the individual movements and the drivers; and (b) Mr Barlow’s scenario that the drivers were not involved and the diversions or irregularities took place after arrival at Aldi.

472.	Miss Simor correctly submitted that as a matter of law SDM’s liability as guarantor is strict and does not depend on an allegation of dishonesty by or on behalf of SDM.  However as a matter of fact she was unable to advance any explanation as to how diversions before arrival at Aldi could have been organised without involving the drivers and how the ringmasters could have identified the drivers without participation by SDM.  Participation by Mr Bunce would not have assisted with movements by SDM’s core owner-drivers. 

473.	Having heard both Mr Cranny and Mr Hodgkins cross-examined at length, we found them both to be honest witnesses.  Not only was it not put to them that they participated in a criminal conspiracy, but on the material before us we do not consider that such an allegation could properly have been put. There was no evidence or suggestion that SDM made anything more than a normal commercial profit.

474.	On the other hand Mr Barlow’s scenario that the goods reached Aldi and the irregularities occurred thereafter has real difficulties since it is likely that it would have had to involve a number of staff.  The lack of evidence regarding procedures at Aldi makes this impossible to assess. There is no reason to believe that M Godefroid and Mireille Talbot were involved; however, Aldi had every reason not to encourage inquiries which might have led to it being found liable for excise duty in Belgium.

475.	Faced with the difficulty of the two competing scenarios, the burden of proof which rests on SDM is important.  Having heard the evidence of Mr Waters, Mr Blunsden, Mr Parnham and Mr Francis, we are satisfied on the balance of probabilities that they did deliver to Aldi; their evidence tips the balance in respect of those deliveries.  Similarly we are satisfied on the balance of probabilities that Mr Bunce delivered to Latvia.  

476.	A detailed comparison of the evidence relating to Mr Wild’s movements and those performed by the other drivers does not indicate any material differences between his movements and the movements of the drivers whose evidence we accept. We do not consider it appropriate to disregard Mr Wild’s statement on the ground that he has gone to Canada having received an assessment of £1.3 million.  There was nothing exceptional about any of his fourteen movements.  In fact he exhibited fuel receipts from Veurne which is on the road from Coquelles to Vaux about one hour from Coquelles; these were timed and dated and fit well with a journey  to Vaux.  Twelve of the fourteen movements have evidence of return loads of food.  Although Mr Wild did not send Eurotunnel paperwork to Mr Simpson, SDM did.  There were stamped CMRs for all his movements except Movement 62.  It is clear that he did not send his tachograph discs to Mr Simpson despite repeated requests, but we accept the evidence of the other drivers that tachograph discs were commonly not retained by drivers.  Although the fact that he was not available for cross-examination is relevant (since we had no opportunity to assess his credibility) the evidence produced did not indicate any qualitative difference between Mr Wild’s movements and the movements of the drivers whose evidence we accept.

477.	So far as Movement 62 is concerned we have only a Eurotunnel invoice, and no stamped CMR or AAD.  However, if we were to conclude from this that this movement followed a different route to all the previous movements by Mr Wild, the implication would be that after thirteen movements to Aldi, Mr Wild was persuaded by the ringmaster to divert his last load en route, involving him knowingly for the first time in the conspiracy and breaking an established, and so far successful, methodology of diversion.  Whilst we accept that this is possible, there is no evidence to support such a contention.  We therefore find on the balance of probabilities that Mr Wild delivered all fourteen consignments to Aldi.

478.	We turn finally to the movements for which there were no drivers as witnesses and no witness statement.  These movements were all carried out by JJI/Connie acting as an independent sub-contractor to SDM which paid only for the carriage and tunnel crossing.  SDM could only identify the drivers and obtain supporting documentation such as eurovignettes, telephone records, and petrol receipts through Mr Bunce.  Return loads were also JJI/Connie’s own responsibility.  

479.	We must therefore examine the implications of the scenario that some or all of the remaining 22 movements were diverted before reaching Aldi.  If diversions took place en route either Mr Bunce must have been approached and recruited drivers willing to take part in the fraud, or the drivers must have been approached individually.  It was never put to Mr Bunce that he had taken such a role, thus the ringmasters would have had to approach the individual drivers direct, and we accept the evidence of one of Mr Bunce’s drivers, Mr Waters, that he did not divert his loads en route to Aldi.  The orders for the goods were placed on Dr Czech and Liquid Marketing who were responsible for arranging transport. The evidence is that although there may have been preliminary discussions (paragraph 61) Mr Airlie of Dr Czech first approached SDM for a quotation on the day before the first movement took place.  Thus when TAG placed the first order on Dr Czech, Mr Airlie did not know who would be transporting the load.  There is no evidence that, when Mr Airlie approached SDM, Mr Airlie knew that SDM would sub-contract the load to JJI/Connie, nor that SDM knew which driver Connie would use.  It is inconceivable that TAG, or whoever was masterminding the operation, would have been able to identify, approach and suborn the correct driver within 24 hours.

480.	Similar difficulties occur if we conclude that at some point the ringmasters decided to change an already established and proven routine to allow some loads to be sent to Aldi, whilst others were diverted knowingly by the drivers en route.  There is no evidence that TAG or Cyber, or anybody else, knew that Dr Czech and Liquid Marketing would continue to use SDM to carry the loads, or which loads SDM would sub-contract to Connie, or which loads Connie would place with a driver who was party to the fraud rather than with a driver (e.g. Mr Waters) who was not.  Such a conclusion would imply that on some multi-vehicle deliveries (or in the terminology used here single deliveries comprising more than one “movement”) some of the drivers would divert their load en route, whilst others would deliver to Aldi.  There is no evidence that any such diversions actually did take place.  Finally, with the exception of one load for Aldi (Movement 63), and the load to Germany (Movement 65), all of those loads have forged CMRs similar in nature to those for the movements about which the drivers gave oral evidence.  We have previously noted that the drivers would require a receipted CMR to confirm that they had made the delivery (paragraph 178).  The CMRs  albeit with forged receipt stamps are evidence of delivery if the drivers were not themselves involved in the conspiracy.  There was no direct evidence that they were involved. The evidence was that SDM received the CMRs from Connie, which had been given them by the drivers.  If Mr Waters and the other drivers who were witnesses were given them at Aldi, it would be not unreasonable to infer that all the drivers were given receipted CMRs at Aldi.

481.	Mr Benford was the driver for the very first movement which we have covered at paragraph 32 and also for Movements 5, 7 and 8, despatched on 7 August, 29 August and 7 September respectively.  There was no outward Eurotunnel invoice for Movement 1; the invoice suggested on the Appellant’s schedule had a date that was impossible being prior to despatch from EBM.  For Movement 5 there is a delivery note by Checkprice dated 3 August signed by Mr Benford whereas the despatch date on the CMR also signed by him was 7 August; the Eurotunnel check-in was at 0013 hrs on 8 August and the date of receipt on the CMR was 9 August.  For Movement 7 there were two clear weekdays between checking in at Eurotunnel at 2141 hrs on 29 August and the AAD3 receipt date and the receipt date on the CMR which was 1 September.  For Movement 8 in contrast the Eurotunnel check-in was 0513hrs on the same day as the CMR receipt at Aldi.  There was no other supporting evidence for the four movements.  Mr Barlow advanced no explanation for the delays between check-in and receipt dates at Aldi for Movements 5 and 7, although he did point to an apparent error on a Eurotunnel invoice for another movement.

482.	Mr Winter was the driver for Movements 3, 14, 28, 35, 45, 52, 56, and 63.  For Movement 56 the Eurotunnel check-in was at 2159 hrs  on 9 November but the Aldi receipt date was 11 November, a Saturday.  There is no apparent problem with the timings on the other movements once allowance is made for breaks.  The Eurotunnel check-in for Movement 63 was 1711 hrs on 19 November, a Sunday, following despatch from Norwich on the Friday; the instruction from SDM was to deliver on Monday at Aldi; although the date on the confirmation of load was incorrect.  There was no CMR receipt at Aldi.

483.	The movements for which there was no identified driver were Movements 4, 6, 13, 33, 36, 41, 48 and 60.  In addition while Mr Bunce collected the consignment for Movement 11, his evidence was that he did not deliver it. 

484.	Movements 4 and 6 both have unexplained delays after check-in at Eurotunnel.  For Movement 4 the instructions by SDM were to deliver to Aldi on 8 August; the check-in at Eurotunnel was 2238 hrs on 7 August on Monday, however the CMR and AAD3 were not stamped until 9 August involving a delay of at least 24 hours.  For Movement 6 the instructions were to deliver on 16 August; the consignment was despatched on 14 August (the picking list being timed at 1129 hrs) but check-in at Eurotunnel was not until 2158 hrs on 15 August, the receipt at Aldi was stamped on 18 August; there were therefore substantial midweek delays on both sides of the tunnel.  Although there was at first sight a delay with Movement 36, the instruction was to collect on a Friday and deliver on a Monday which was what was done.  There is no receipted CMR for Movement 33, but the AAD3 would indicate prompt delivery.  

485.	Movement 65 raises different problems.  The guarantee covered a movement to Dialog Logistik.  The correct procedure for a change of consignee was not followed.  There was no evidence that the goods arrived at Dialog Logistik although there was second-hand evidence that the load was diverted to Halle. There was no evidence from the driver and there was no receipted CMR quite apart from the lack of an AAD3.  Even if we accepted that the goods did reach Halle, we are not satisfied on the balance of probabilities that the irregularity occurred in Germany. 

486.	The other four movements for which there is no identified driver (Movements 13, 41, 48 and 60) do not have any delays which could not be explained by statutory rest periods or weekends.  There was however no supporting evidence beyond the Eurotunnel invoices apart from the forged or unauthorised CMR receipts.

487.	In relation to the Aldi consignments for which there was no evidence of delivery by a driver and no statement, we have to decide whether we are satisfied on the balance of probabilities that the conspiracy followed the same method in that the drivers were given falsely receipted CMRs at Aldi following delivery there.  The alternative scenario is that the drivers were recruited by the conspirators and agreed to divert the goods either on the continent or in England.  We have already referred to the difficulties which this alternative scenario would have involved.  We would add that the combination of different methods of diversion would have increased the risk of detection from the very beginning since seven of the first eight consignments were collected by drivers who were not witnesses, whereas we have concluded that Mr Waters did deliver Movement 2 to Aldi.

488.	On the other hand there were substantial unexplained delays on the continent in two of Mr Benford’s movements and no Eurotunnel invoice for a third.  There were unexplained delays on the continent in Movements 4, 6 and 56.  We accept that there could be considerable delays at Eurotunnel after check-in but there was no suggestion that these were more than occasional.
489.	We have had considerable difficulty in reaching a conclusion in relation to the Aldi consignments for which there was no driver evidence.

490.	The mere fact that there was no direct evidence of delivery is not decisive in spite of the burden of proof.  In legal proceedings of any nature facts can be established by inference.  We have to decide whether the inference of a consistent system of diversion or concealment of diversion by the ringmasters is sufficient to satisfy us that it is more probable than not that all the drivers delivered their consignments to Aldi being given receipt stamps on the CMRs and that they were not personally involved in the conspiracy.

491.	We have concluded that on the balance of probabilities all of the Aldi consignments were delivered by the drivers to Aldi and that the irregularities occurred thereafter.  The appeal therefore succeeds in relation to all movements except Movement 65 to Germany.

492.	We direct that any application for costs under Rule 29 of the VAT Tribunal Rules 1986 pursuant to the Direction released on 6 August 2009 shall be made within three months.  Such application does not need to be accompanied by a schedule of costs since there will not be a summary assessment.

Summary of conclusions

493(a)	There were no movements in which an irregularity was detected in the course of the movement (paragraph 436);
      (b)	In order to succeed the Appellant must satisfy the Tribunal on the balance of probabilities that the consignments arrived at their destinations (paragraph 440);
      (c)	There was a conspiracy or a series of conspiracies involving TAG and Cyber, but in which SDM, EBM, Checkprice and Mr Airlie (of Dr Czech) were not involved (paragraphs 441-3);
     (d)	Mr Waters, Mr Blunsden, Mr Parnham and Mr Francis delivered the consignments for which they were the drivers to Aldi and Mr Bunce delivered the consignment to Latvia (paragraph 475);
     (e)	Mr Wild delivered his consignments to Aldi (paragraphs 476-477);
     (f)	The Appellant has not satisfied the Tribunal that the consignment in Movement 65 arrived at its destination or that the irregularity occurred in Germany (paragraph 485);
     (g)	The Appellant has satisfied the Tribunal that the other consignments, the drivers for which neither gave evidence nor made a witness statement, did arrive at Aldi (paragraph 491);
     (h)	In the event that the parties cannot agree the amount of the reduced assessment, the Tribunal shall be notified within one month;
     (i)	Any application for costs must be made within three months (paragraph 492).
 
494.	This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

THEODORE WALLACE
TRIBUNAL JUDGE
RELEASE DATE: 28 March 2011