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THOSE WHO ARE interested in the development of Revenue information powers will not have failed to notice that the Revenue has started to cut some new teeth recently. One came through in the new Criminal Justice and Police Act, which received Royal Assent on 11 May this year, and took the form of extending the Revenue's and Customs and Excise's powers of search and seizure, to enable them to remove and retain information which they would not previously have had the power to seize. The other was included in the Bill, but did not make it into the Act, though presumably it will re-surface at some point, and will grant the Revenue and Customs permission to pass information to other authorities, such as the Police.
More powers of search and seizure
Section 50 of the Act extends the Revenue's powers of search and seizure in two ways. Firstly, it permits a person who is searching under a warrant to remove material, if he believes it may contain items he is authorised to search, and take it away to determine whether it does. This applies in cases where it is not reasonably practicable to determine whether the material is something he is entitled to seize, or whether it contains something which he is entitled to seize. Secondly, the Act states that where a person searching under a warrant finds something that he is entitled to seize, but it is comprised in something which he has no power to seize, he may remove the item in which the non-seizable item is comprised, provided that it is not reasonably practicable to separate the two on the premises.
This section of the Act addresses problems which were highlighted in the decision of the Divisional Court in R v Chesterfield Justices and Chief Constable of Derbyshire ex parte Bramley [2000] 1 All ER 411, which was given on 5 November 1999. This case was an application for judicial review which was brought by Mr Bramley, a car dealer whose premises were subjected to a search by Derbyshire Constabulary. Police officers removed papers including correspondence with Mr Bramley's solicitors, which were subject to legal privilege, and he challenged the removal of the documents. In fact it was conceded that the search warrant and seizure were unlawful before the hearing, and paid damages, but because of the importance of the legal principles involved, all parties agreed that the court should be asked to give a ruling. It was decided that if a police officer seized items, which were later found to be outside the scope of the warrant, the current provisions of the Police and Criminal Evidence Act 1984 provided no defence against an action for damages. Hence the need for section 50, which extends various existing powers of seizure, including those of the Inland Revenue and Customs and Excise.
In practice
There are two key situations in which section 50 may become of relevance. The first is where the material is so voluminous that it would not be reasonably practicable to examine it on the premises in order to exclude items which are not within the warrant. The second is where documents, which are subject to legal privilege, are held on the same computer hard drive as documents which are seizable under a warrant. In either of these cases, section 50 would permit the seizure of the material for examination elsewhere. However, it is still not permitted to use any legally privileged material seized as evidence in its own right.
There are various 'remedies and safeguards' following section 50 which govern how material seized in accordance with this section must be kept, and what must be returned, to whom, and when. For instance, material seized in accordance with this section must be kept separate from other material and examined as soon as is reasonably practicable. In certain circumstances, including when the material is legally privileged and an application is made to judicial authority, it must also be kept secure, and there are also provisions which allow an application to judicial authority to request the return of the material seized. With or without judicial authority, if the material either is or contains a legally privileged item, the legally privileged item must be returned, with one proviso. Where it is not reasonably practicable for that item to be separated without prejudicing the use of the rest of the property, the material may be retained. For example, it may be that the hard drive of a computer needs to be retained so that the evidence as to the date of creation of the document is not compromised. If that hard drive also contains legally privileged documents, they will also be kept. These documents are referred to as 'inextricably linked'.
So the general principle will be that the authorities will have a right to seize legally privileged material, if it is included along with a fair bit of other stuff, and have a good look through it in the privacy of their own offices to decide whether they can keep it or not. Some of it they will have to give back, and some of it they will not.
Little privilege left
The new sections represent a potentially serious erosion of the rules of legal privilege. In the past, such material not only could not be used as evidence, but it could not be taken and scrutinised in the first place. In the past, lawyers have often been on hand at 'dawn raids' precisely to prevent actions such as the unlawful seizure of documents. Now it will be possible for the Police and Inland Revenue to seize almost anything, so long as it is not 'reasonably practicable' for them to decide at the time whether they are entitled to it. 'Reasonably practicable' is defined in terms of, among other things, whether there is a lot of material, and whether it would take a long time to look through it. So 'reasonably practicable' is about as broad as the proverbial piece of string is long.
In recognition of this, sections 61 and 62 make a concerted effort to ensure that material seized, and retained, under the new provisions is not used for any purpose other than to avoid compromising the usefulness of other evidence. Provided that the relevant application is made, the legally privileged material must be kept secure, must not be examined or copied, and must not be used for any purpose not authorised by the Act. That is all very well, but in fact the material has already been examined to establish whether it is legally privileged or not. It is quite ridiculous to imagine that it will not be pored over and considered in detail, and while it will not be possible to use it in evidence, it will be there in 'deep background' to the investigation.
What recourse does the owner of the material have? The Act does grudgingly allow for the possibility that the owner of the hard drive, document or whatever might want to be present or represented at the initial examination of the document, but it does not actually grant any such permission but simply says that due regard shall be had to the desirability of having the person present (section 53(4)). The opportunity was not taken to word this provision to ensure that the owner of the material has a right to be represented at the initial examination of the material, to secure that only that material, which really must be retained, is retained. As for who would be suitable to represent such a client, this looks like an opportunity for all those lawyers with expertise in computer forensics to stand up and be counted.
Worse to come?
All this is worrying enough, but if the provisions which were excised from the Bill before Royal Assent, concerning power to pass information to the Police, etc., are enacted at some later date, the interaction of the two could be decidedly Orwellian. It is somewhat disturbing to note the wording of section 62(4), which covers the use to which the information may be put. Such use is 'use which is necessary for facilitating the use, in any investigation or proceedings, of property in which the inextricably linked property is comprised' (italics mine). The phrase 'in any investigation or proceedings' echoes precisely the wording of the provisions which would have enabled the Revenue and Customs to pass such information on to the Police, for the purposes of furthering any investigation or proceedings, whether actual or merely contemplated. And they would not only be available to authorities in the United Kingdom, but anywhere in the world. It has not happened yet, but watch this space…
Catherine Pearce is a senior consultant with the tax investigation group at WJB Chiltern plc. She can be contacted on 020 7446 6989, or by email to pearcec@wjbchiltern.com
