England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
MR JAMES GOUDIE QC
2007 EWHC 1405 (ADMIN)

		Royal Courts of Justice Strand, London, WC2A 2LL
		12/06/2008

Lord Justice May:

1. On the 21^st May 1999, Gene Gibson, whose application for permission to appeal the judgment and order now before the court this court dismissed on 10^th April 2008, was convicted of conspiracy to import large quantities of cocaine between 1^st October 1996 and 27^th March 1998. He was sentenced to 25 years imprisonment. He had been arrested on the 27^th March 1998 on a private aircraft arriving at Birmingham Airport from Dusseldorf. His co-defendant, Mr Halford, who was also convicted, was the pilot. They were both directors and shareholders of an air freight company, Venuetime Ltd. 49.7kgs of cocaine was found on the plane. There was evidence of 37 or 38 flights from Dusseldorf either to Liverpool or Birmingham. HH Judge Ensor was later to be persuaded in confiscation proceedings against Mr Gibson in the Manchester Crown Court that there were 35 importations of Class A Drugs and that Mr Gibson's benefit from drug trafficking for the purpose of the Drug Trafficking Act 1994 was in excess of £38 million.
2. The confiscation order was made on the 29^th March 2000. The judge determined that the realisable amount was £5,430,671.00 and made an order requiring Mr Gibson to pay that amount within 12 months, with a term of six years imprisonment in default of payment. Of this amount, £5m was a sum determined by the judge as representing hidden assets. Mr Gibson had produced no documents to support his assertions, and the judge decided that Mr Gibson had not disclosed the true extent of his realisable assets. The £5m was arrived at by a necessarily broad assessment, which had regard to the scale of the conspiracy and the amount of money which Mr Gibson appeared to have for his hobby or business of motor racing. The balance was the total of the value of a number of specific assets. These included a property at 50 Cartier Close, Warrington, which was Mr and Mrs Gibson's matrimonial home. The judge valued this property at at least £51,431 which represented the net proceeds of sale after repayment of an outstanding mortgage. In including the net value of the property in full, the judge observed that it was in joint names, and that it would be open to Mrs Gibson to challenge its full attribution to her husband in proceedings in the High Court – see section 31(4) of the 1994 Act and In Re Norris [2001] 1 WLR 1388.
3. Mr Gibson's appeal against his sentence was dismissed by the Court of Appeal Criminal Division on the 8^th December 2004. Leave to appeal against his confiscation order was refused. An application for leave to appeal against his conviction was abandoned. He remains in prison. He appeared by video link from prison to make the application for permission to appeal which this court refused.
4. There were proceedings in the High Court to enforce the confiscation order. In March 2006, Mrs Marion Gibson, the appellant, was joined to enable her to contend, as she did, that she was the beneficial owner of 50% of the equity in the matrimonial home. She also claimed to have a 50% interest in three endowment policies effected in joint names to support the mortgage, and in two bank accounts also in joint names. No separate issues arise in relation to the endowment policies and the bank accounts from those which arise in relation to the matrimonial home.
5. The Revenue and Customs Prosecution Office opposed Mrs Gibson's contentions. On 19^th June 2007, Mr James Goudie QC, sitting as a Deputy High Court Judge, decided that Mrs Gibson's beneficial interests in each of these assets was 12.5%. He awarded Mrs Gibson 25% of her costs, since she had succeeded as to 25% of her claim to 50% interests. Mr Goudie's judgment is at [2007] EWHC 1405 (Admin). He had written evidence from the prosecution and had heard oral evidence from Mrs Gibson. Mr Gibson did not attend or attempt to adduce evidence.
6. Mr and Mrs Gibson had bought 50 Cartier Close in 1990 and it was registered in their joint names. Mr Goudie referred at some length to the opinion of Baroness Hale of Richmond in Stack –v- Dowden [2007] UKHL 17, noting her observation that cases in which joint legal owners are to be taken to have intended that their beneficial interests should be different from their legal interests will be very unusual. He saw nothing to suggest that Mr and Mrs Gibson's intent at the time the property was purchased was that Mr Gibson should have a greater beneficial interest than 50%. Nor had he seen anything to suggest that their initial intention subsequently changed. As between themselves, therefore, Mrs Gibson was the beneficial owner of 50% of the equity in the property. The prosecution do not challenge this on this appeal and Mr Bartlett accepted that the burden is on the prosecution to displace Mrs Gibson's apparent beneficial interest – see Norris at paragraph 25. Mr Goudie stated that, if this had been a contest between Mr and Mrs Gibson in the Family or Chancery Divisions in which Mr Gibson was asserting that Mrs Gibson's apparent 50% interest belonged to him in whole or in part, he would reject his claim. That was not, however, an end of the matter. Mr Gibson's interest, be it his initial 50% or a subsequently enhanced interest, was subject to the confiscation order. The contest was now between the public interest and Mrs Gibson. The key question was whether public policy or the 1994 Act made any difference and, if so, what difference.
7. There was no doubt that Mr Gibson at least from 1993 had proceeds of crime on a huge scale; and that, between 1993 and 1998, large cash sums were paid into accounts from which mortgage payments and payments under the endowment policies were made. There were also funds from legitimate income of Venuetime which may have been sufficient to cover this expenditure. Applying paragraph 20 of the Court of Appeal judgment in R –v- Ginwalla [2005] EWCA Crim 3553, Mr Goudie found that, at least from 1993, tainted money was to be taken to have been used to fund the payments. Half of these were referable to Mrs Gibson's interest. In the passage in Ginwalla to which Mr Goudie referred, Richards LJ said that, where a person has a mixed income, partly legitimate and partly the proceeds of crime, it would be wholly artificial to try to separate out the source or sources of any individual payment. To engage in a tracing exercise would be a much too narrow approach in that case, although there might be circumstances in which it would be appropriate.
8. The issue was as to the effect of the taint on Mrs Gibson's half interest. It had to be considered whether she knew that the money was tainted, and if she did, whether that mattered. As to her knowledge, Mrs Gibson had given oral evidence. Mr Goudie found her an evasive witness whose evidence was not credible on this topic. He found that she was well aware that a lot of cash, some of which she handled, was washing around the Gibson household well beyond that for which there may have been a legitimate explanation. He found that she had guilty knowledge, which in the context means that she knew that money used to pay the mortgage was not legitimately earned.
9. Upon this finding the prosecution submitted that Mrs Gibson's beneficial interests in the home, the endowment policies and the bank accounts were available for confiscation in two ways. First, there was a matter of public policy; and, second, under section 8 of the 1994 Act.
10. Taking the second of these first, section 8 of the 1994 Act concerns gifts caught by the Act, and would apply to gifts within the period 1992 to 1998 whether they were tainted or not. By section 6(1), the amount which may be realised for the purposes of a confiscation order includes the total value of all gifts caught by the Act. Mr Goudie held that the relevant payments were not gifts, because Mrs Gibson provided consideration by bringing up the children and looking after the home. The prosecution accept this finding for the purposes of this appeal. Accordingly, Mrs Gibson cannot be deprived of her 50% interests by this or any other statutory provision.
11. As to public policy, however, Mr Goudie held that the taint of which Mrs Gibson had guilty knowledge should be taken into account against her, having regard to the general scheme of the 1994 Act and irrespective of Section 8. He reached this conclusion relying on two Family cases, which in my judgment do not sustain the conclusion.
12. The two decisions are Customs and Excise Commissioners –v- A [2003] Fam 55; [2002] EWCA Civ 1039 and CPS –v- Richards [2006] 2FLR 1220; [2006] EWCA Civ 849. These were each cases in which a husband had been convicted of drug trafficking offences and there were confiscation proceedings against them. Each of the wives applied in ancillary relief proceedings under the Matrimonial Causes Act 1973 for a property adjustment order or a lump sum payment from assets of the husband. In CPS v Richards, it was successfully contended by the prosecution that public policy required that drug dealers were deprived of the fruits of their crimes and that those fruits should not be distributed to others, least of all those who had guilty knowledge of the origin of the assets. This court held that, where assets are tainted and subject to confiscation, they should ordinarily and as a matter of public policy not be distributed. In most cases, the fact that the assets were tainted was the decisive factor in any balance. In Customs and Excise Commissioners v A., the former wife obtained a property adjustment order, but this was on the basis of specific finding by the judge that the house and the policies were not obtained with tainted funds, and that the wife herself had no knowledge of the husband's criminal activities.
13. Mr Goudie recognised that these were Family cases but did not find that relevant. He recognised that they were concerned with applications for property adjustment and distribution, and not with what might be characterised as an attempt to resist property adjustment. But he saw an underlying principle that, where assets are tainted and subject to confiscation, public policy and justice require that generally the taint is decisive where the applicant was complicit and had guilty knowledge.
14. As I have said, I do not consider that Mr Goudie's underlying principle can be derived from the Family cases to which he referred. Those cases concerned a husband's assets which were the subject of confiscation proceedings. The wife was seeking a discretionary order in her favour to transfer the assets to her. The court declined to exercise the discretion in her favour because the assets were tainted and she was complicit. In the present case, Mrs Gibson applies for no transfer in her favour and no exercise of the Court's discretion. The assets are hers without any court order in her favour. It is the prosecution who have to establish a public policy jurisdiction entitling the court to confiscate her assets, when she was not convicted; when no confiscation order has been made against her under the 1994 Act or otherwise; and when there is no statutory confiscatory provision in the 1994 Act or otherwise on which the prosecution can rely. The prosecution need to persuade the court that there is some free standing public policy jurisdiction to support their case.
15. Faced with this question at the hearing of this appeal, Mr Bartlett, for the prosecution, in effect submitted that public policy generally ought to see to it that Mrs Gibson did not retain the value of assets which to her knowledge had increased by the application of tainted funds.
16. There are powerful House of Lords dicta to the contrary in In re Norris [2001] 1WLR 1388; [2001] UKHL 34. This case holds that questions as to the beneficial ownership of property where there are confiscation proceedings are matters for the civil jurisdiction of the High Court. At paragraph 16, Lord Hobhouse of Woodborough, discussing sections 11, 12 and 13 of the Drug Trafficking Offences Act 1986, said that an order appointing a receiver of property does not override or confiscate the interests of others in the value of that property. He continued:

"Section 13(4) expressly provides that the powers shall be exercised with a view to allowing any person, other than the defendant or the recipient of a gift caught by the Act, "to retain or recover the value of any property held by him". This would be implicit even in the absence of an expressed provision as the confiscation order only applies to the convicted defendant and, indirectly through such defendant, donees caught by the Act. To apply it so as to confiscate the property of innocent third parties would be not only exorbitant but also outside the purpose of the Act. Any such confiscation would now also raise Human Rights issues."

The equivalent provision of the 1994 Act is section 31(4) under which the powers conferred on a court or a receiver are to be exercised with a view to allowing any person other than the defendant or the recipient of any other gift caught by the Act to retain or recover the value of any property held by him. Although, on Mr Goudie's finding, Mrs Gibson, though unconvicted, was not entirely "innocent", that nuance alone cannot in my view sustain the confiscatory jurisdiction necessary for the prosecution to succeed against her.

17. There is some further support for Mrs Gibson's case in R –v- Buckman [1997] 1 Cr App R. (S)325, where Brooke LJ said at page 329 that the correct approach, where property is held in joint names, is for the court to start with the prima facie position as to where the beneficial interests lay and then go on to find whether there are gifts caught by the Act which ought then to increase the realisable value of the property within the meaning of section 6 of the Act. On this basis, if Mrs Gibson's beneficial interests are not subject to gifts caught by the Act, as Mr Goudie held, and if they are not otherwise within the confiscatory ambit of the legislation, they do not fall to be confiscated. Furthermore, as is acknowledged, Mrs Gibson does not have to rely on illegality to establish her beneficial entitlement (as to which see Tinsley –v- Milligan [1994] 1 AC 340).
18. In further written submissions permitted by the court after the conclusion of the hearing, Mr Bartlett has striven to uncover some legal principle which would support in this case a general public policy that people should not retain the benefit of money obtained illegally. He points to paragraph 70 of the opinion of Baroness Hale of Richmond in Stack –v- Dowden, to the effect that parties' initial intentions as to beneficial ownership may change. He points to references to inferred or imputed intention (paragraph 60 and paragraphs 125 and 126 in the opinion of Lord Neuberger of Abbotsbury) and submits that public policy should impute to Mrs Gibson and her husband the intention that she should not benefit from money obtained illegally, but that only he should. Effect should be given to this imputed intention by adjusting their beneficial shares. Leaving aside the fact that Lord Neuberger said at paragraph 125 that an intention in this context might be inferred, but not imputed, it seems to me quite impossible for the law, in the guise of public policy, to attribute to Mr and Mrs Gibson an intention which they plainly did not have and would never have assented to. The prosecution cannot, in my view, by the language of imputation achieve a confiscation of Mrs Gibson's assets which the law does not otherwise enable, by imposing on her a notional and fictitious intention. Indeed Mr Bartlett accepted in oral submission that Mr and Mrs Gibson did not change their intention, but that they changed the means of preserving the property.
19. No more persuasive, in my view, is Mr Bartlett's submission that the prosecution should be put in a position equivalent to that of a victim whose money had been stolen and used to fund the Gibsons' mortgage. The victim, it is said, could obtain judgment and a charging order over Mrs Gibson's beneficial interest or could trace the stolen assets. But the prosecution is not a victim in this (or any) sense and, absent statutory provision, cannot reach Mrs Gibson's beneficial interest in this way. They do not have any kind of charge over them.
20. As to public policy generally, Mr Bartlett submits that there is a clear public interest that those who traffic unlawfully in drugs should be deprived of the proceeds. He suggests that the jurisdiction in matrimonial cases, where there is divorce, to decline to make a property adjustment order in favour of a spouse who is complicit in the illegality, should extend to those who are not divorced. But, as I have indicated, the nature of the Court's power which would be involved here is quite different. Declining to order the transfer to a complicit spouse of property which is not hers is one thing; confiscating property which she already owns is quite another.
21. There is thus, in my judgment, no identifiable power in the court, supported by a public policy which in general I acknowledge, to supplement presently existing statutory provisions to achieve what the prosecution want to achieve in violation of Mrs Gibson's rights under Article 1 of Protocol 1 of the European Convention on Human Rights. Although, in the language in that Article, the result contended for might be in the public interest, it would not be subject to conditions provided for by the law. I decline to invent such conditions judicially.
22. I would for these reasons allow the appeal, and hold that Mrs Gibson is entitled to a 50% beneficial interest in the matrimonial home and in the endowment policies and bank accounts. It is not, therefore, necessary to consider whether there might be an order for a rehearing to consider on additional material whether Mr Goudie was correct to conclude that mortgage payments were made with tainted money.

Lady Justice Arden

23. I agree with the judgments of May and Wall LJJ. Mrs Gibson acquired her interest in the 50 Cartier Close ("the property") on its acquisition in joint names. The effect of the concession made by the prosecution is that it was only later that the Gibsons agreed to use the proceeds of crime to pay the mortgage instalments. Mrs Gibson does not need to rely on that further agreement to establish her interest in the property.
24. If the Gibsons had at the outset entered into an agreement to acquire the property jointly and to use the proceeds of crime to pay off the mortgage in whole or as to at least a substantial part, the agreement would be likely to have been wholly unenforceable. In my judgment, the decision in Ginwalla (above, [7]) would have had no application and the court would not in those circumstances have upheld any interest in the property attributable to lawful sources of income. An interesting question would then have arisen whether Mrs Gibson could then have contended that she did not need to rely on the unlawful agreement and that a common intention to own the property should be inferred in accordance with the decision of the House of Lords in Stack v Dowden [2007] 2 AC 432 in consequence of the fact that the property is registered in their joint names. If she could, then the result of this case would have been the same whether or not the prosecution had made its concession.
25. I further agree with the submission of Miss Julie Case, for Mrs Gibson, the appellant that, when the court is considering what interests a husband and wife intended that they should have in a property in their joint names, the court is not exercising discretion as to what is fair. This point is made clear by Baroness Hale in Stack v Dowden at [61], where she emphasised that the search is for the result which the parties must, in the light of their conduct, be taken to have intended and not for the result which the court itself considers fair.
26. It is noteworthy that the argument in the court below and in this court has proceeded entirely on the basis that the principles which govern the rights of Mr and Mrs Gibson with respect to the property are those of a common intention constructive trust as recently set out in Stack v Dowden. No mention has been made of the presumption of advancement. Under this presumption, there is a one-sided presumption that a husband who transfers property into the name of his wife, intends to make a gift in her favour. The House of Lords has held that this presumption is no longer in keeping with modern conditions or at least is much diminished, or more easily rebutted, nowadays: see Pettit v Pettit [1970] AC 777 at 793 per Lord Reid, 811 per Lord Hodson and 824 per Lord Diplock, and see the observations in Stack v Dowden of Lord Walker at [16], and Lord Neuberger at [101]. The presumption has been entirely abolished by statute in relation to money and property derived from a housekeeping allowance (see Married Women's Property Act 1964, section 1 as amended).
27. I consider that the judge was correct to proceed as he did on the basis of Stack v Dowden. The present case demonstrates that, where property is transferred into joint names, the function of the presumption of advancement is now performed by the presumption of equal beneficial ownership of property held in joint names laid down in Stack v Dowden. This case further demonstrates that, contrary to the expectation of Baroness Hale at [43] in that case, there will be cases where the principles in Stack v Dowden fall to be applied even as between married couples, and that not all the problems as between them have been addressed or solved by statute.

Lord Justice Wall

28. I have had the advantage of reading the judgments of May and Arden LJJ in draft. I am in complete agreement with them that this appeal should be allowed. I add a few words of my own as we are reaching a different conclusion from that reached by the Deputy Judge; and because, like May LJ, I acknowledge and support the principle of public policy that those who traffic unlawfully in drugs should be deprived of the proceeds of their crimes. I would also like to express my specific agreement with what Arden LJ says in paragraphs [25] to [27] of her judgment.
29. As to public policy, Parliament has enacted a detailed and careful scheme for achieving the public policy objective identified by May LJ. That scheme depends upon the prosecution and conviction of the offender and confiscation proceedings deriving from that conviction. If a confiscation scheme is to extend to assets owned by third parties (other than gifts caught by section 8 of the 1994 Act) it is, in my judgment, for Parliament to enact the appropriate legislation. It is not for the courts to create such a jurisdiction.
30. With great respect to the Deputy Judge, I find an absence of reasoning in his bald conclusion that the appellant had a 12.5% interest in the property concerned, and a lack of nexus between his identification of the relevant public policy (with which I agree) and his conclusion that the appellant is required to forfeit a substantial proportion of what is, as between herself and her former husband, lawfully hers.
31. As to the question of the concept, as between husband and wife, of the presumption of advancement, Baroness Hale of Richmond points out in paragraph [43] of her speech in Stack v Dowden, that the redistributive provisions of the Matrimonial Causes Act 1973 have effectively rendered that concept redundant in conventional proceedings for ancillary relief between former husband and wife. In cases in which the attack on one spouse's beneficial interest comes from a third party (as here) I respectfully agree with Arden LJ that, where the property in question has been acquired by the spouses in their joint names, the function of the presumption of advancement is now performed by the presumption of equal beneficial ownership laid down in Stack v Dowden.
32. As to paragraph [24] of Arden LJ's judgment, I would, speaking for myself, prefer to reserve judgment on the interesting questions she addresses in that paragraph to a case in which they arise on the facts. On the facts of the instant case, the property was in joint names, and there was nothing to displace the presumption of equal beneficial ownership described in Stack v Dowden.
33. For these reasons, as well as for those given by May and Arden LJJ, I too would allow this appeal.