ON APPEAL FROM QUEEN'S BENCH DIVISION
Mr Justice Collins
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE WILSON
LORD JUSTICE TOULSON
| ALAN GLAVES
|- and -
|CROWN PROSECUTION SERVICE
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Mr Richard Thomas (instructed by Howells LLP) for the Respondent
Hearing dates: 12 October 2010
Crown Copyright ©
Lord Justice Toulson:
"(1) If, on an application made in respect of a confiscation order –
(a) by the defendant …
the High Court is satisfied that the realisable property is inadequate for the payment of any amount remaining to be recovered under the order the court shall issue a certificate to that effect, giving the court's reasons.
(3) Where a certificate has been issued under subsection (1) above, the person who applied for it may apply –
(a) where the confiscation order was made by the Crown Court, to that court..
for the amount to be recovered under the order to be reduced.
(4) The Crown Court shall, on an application under subsection (3) above –
(a) substitute for the amount to be recovered under the order such lesser amount as the court thinks just in all the circumstances of the case; and
(b) substitute for the term of imprisonment or of detention fixed under subsection (2) of section 31 of the Powers of Criminal Courts Act 1973 in respect of the amount to be recovered under the order a shorter term determined in accordance with that section in respect of a lesser amount."
Criminal Justice Act 1988
1. Has the defendant (D) benefited from the relevant criminal conduct?
2. If so, what is the value of the benefit D has so obtained?
3. What sum is recoverable from D?
"…the sum which an order made by a court under this section requires an offender to pay shall be equal to -
(a) the benefit in respect of which it is made; or
(b) the amount appearing to the court to be the amount that might be realised at the time the order is made,
whichever is the less."
"As has been emphasised in a number of authorities, the effect of section 4(3) of the Act is to impose on a defendant the burden of satisfying the court that the amount that might be realised in respect of property is less than the value of the proceeds of drug trafficking.
This must, in our view, mean that where a defendant has an asset in the form of a debt, the onus is on him to satisfy the court that the realisable value of the debt is less than its face value. In our view, this he must do by producing clear and cogent evidence; vague and generalised assertions unsupported by evidence will rarely if ever be sufficient to discharge the burden on the defendant."
"It is clearly established by authority and was accepted in this case that the burden of establishing that the realisable amount was less than the benefit so as to justify a lower figure for the confiscation order was on the appellant to the civil standard on the balance of probabilities and it is equally clear that if he sought to establish that he had to do so by clear and cogent evidence; Wallbrook and Glasgow…followed in Anderson  EWCA Crim 3384. Following from that, it is also clear that there is no burden on the prosecution to show a prima facie case of hidden assets, but for the appellant to provide evidence demonstrating the extent of his realisable assets: Barwick  1 Cr App R (S) 129 (p 445) and Barnham  1 Cr App R (S) 16 (p 83)."
"To hold that the prosecution must, in some way, show a prima facie case that the defendant has hidden assets in our judgment would defeat the object of the legislation. It is designed to enable the court to confiscate a criminal's ill-gotten gains. The expression "hidden assets" is indicative of the fact that the prosecution can have no means of knowing how and where a defendant may have dealt with or disposed of the proceeds of his criminal activities."
(1) The burden lies on the applicant to prove, on the balance of probabilities, that his realisable property is inadequate for the payment of the confiscation order (see Re O'Donoghue  EWCA Civ 1800, per Laws LJ at para 3).
(2) The reference to realisable property must be to "whatever are his realisable assets as a whole at the time he applies for the certificate of inadequacy. If they include assets he did not have when the confiscation order was made, that is by no means a reason for leaving such fresh assets out of consideration" (Ibid and see also Re Phillips  EWHC 623 (Admin)
(3) A s83 application cannot be used to go behind a finding made at the confiscation hearing or embodied in the confiscation order as to the amount of the defendant's realisable assets. Such a finding can only be challenged by way of an appeal against the confiscation order. (See Gokal v Serious Fraud Office  EWCA Civ 368, per Keene LJ at paras 17 and 24).
(4) It is insufficient for a defendant to say under section 83 "that his assets are inadequate to meet the confiscation order, unless at the same time he condescends to demonstrate what has happened since the making of the order to realisable property found by the judge to have existed when the order was made". (See Gokal para 24 and Re O'Donoghue at para 3).
(5) The confiscation hearing provided an opportunity for the defendant to show that his realisable property was worth less than the prosecution alleged. It also enabled the defendant to identify any specific assets which he contended should be treated as the only realisable property. The section 83 procedure, however, is intended to be used only where there has been a genuine change in the defendant's financial circumstances. It is a safety net intended to provide for post-confiscation order events. (See McKinsley v Crown Prosecution Service  EWCA Civ 1092 per Scott Baker LJ at paras 9, 21-24, 31 and 35).
(6) A Section 83 application is not to be used as a "second bite of the cherry". It is not an opportunity to adduce evidence or to present arguments which could have been put before the Crown Court judge at the confiscation hearing (para 38 of Gokal and paras 23, 24 and 37 of McKinsley).
The respondent's application for a certificate of inadequacy
"11. Hidden assets – amount realised £0 – value in Order £22,634.50 – Do not assert inadequacy."
"I do not have any hidden assets. However, I understand that a finding of hidden assets cannot be re-litigated at this stage and I accept I will have to pay the £22,634.50."
"On 07 July 2006 the defendant was ordered:
Confiscation Order under s71 CJA 1988 for £145,000.00 or in default to serve 30 months imprisonment consecutive to any term of custody which the defendant is liable to serve for the substantive offence(s) (s75(3) & (4) of the Criminal Justice Act 1988).
PAYMENT is to be made to HMCS at the address below.
Confiscation Order of £145,000.00 to be paid within 12 months."
"7.32 – Cash Withdrawals
7.33 National Westminster Bank PLC business account number 30906113 in the name of ASG Skips. As previously outlined the defendant and his brother opened up their own Waste Transfer Station namely ASG Skips, Stevenson Road, Sheffield S9 3XG whilst still supposedly in full-time employment with Hansons.
7.34 During the 18 month period of the conspiracy charge, 1st December 2001 to 22nd May 2003 this account saw cash withdrawals totalling £45,262.50. The use and ultimately the current whereabouts of this money remain unknown. Unless the defendant can provide supporting documentary evidence to show the ultimate use of this money then the prosecution would invite the court to treat this money as a "hidden asset" attributable to the defendant.
7.35 This same account, during the period 5th January 2005 to 23rd December 2005, saw cash withdrawals totalling £107,095.00. The use and ultimately the current whereabouts of this money remain unknown. Unless the defendant can provide supporting documentary evidence to show the ultimate use of this money then the prosecution would invite the court to treat this money as a "hidden asset" attributable to him.
7.36 Subject to any information to the contrary the prosecution would invite the court to jointly apportion the above cash withdrawal jointly between [the respondent and his brother]."
"In relation to paragraph 7.34, and cash withdrawals, these represent money which was taken out in order to pay wages and bills in cash. Initially, the bank did not supply a cheque book for the business and therefore payments had to be in cash. This is a working business account and cash payments were made for wages, diesel, repairs to vehicles, cost of tyres, tipping costs, the costs of the lease on the yard (£1,500.00 per quarter), and the purchase of a skip lorry and other running costs of the business.
Paragraph 7.35 refers to cash withdrawals from the 5th January 2005 to 23rd December 2005. Again, the cash payments have been for bills and wages and running costs of the business. Details of the income and expenditure was supplied to Inland Revenue through the accounts."
"7.34 CASH WITHDRAWALS
NOT ACCEPTED. During the 18 month period 1st December 2001 to 22nd May 2003, the ASG Skip Hire National Westminster Bank PLC business account saw cash withdrawals totalling £45,262.50. The defendant states that in relation to these cash withdrawals, they represent wages and other expenses connected with the business and to this end he has produced certain documents and invoices dated in 2004 and 2005.
The defendant has also produced a schedule giving an explanation for the various cash withdrawals, this schedule is not accepted as being sufficeint to explain the cash withdrawals. Although the defendant has produced some invoices none of the documentation yet produced covers this period in time when the £45,262.50 was withdrawn in cash. It is not accepted that payments to Railtrack were made in cash.
The defendant is required to produce "clear and cogent" documentary evidence to prove this assertion [a reference to Wallbrook and Glasgow], if he is unable to do this the prosecution maintain that the courts should treat these monies as a "hidden asset".
NOT ACCEPTED the defendant states that in relation to paragraph 7.35 of the prosecutor's statement that these cash withdrawals represent wages and other expenses connected with the business and to this end he has produced certain documents and invoices. Having examined these documents in some detail, it is the prosecution's stance that these documents are not sufficient to dispel the burden of proof placed upon him. The defendant is required to produce "clear and cogent" evidence to prove this assertion."
The appellant's argument
"As has been said many times in the authorities, it is not enough for a defendant to come to court and say that his assets are inadequate to meet the confiscation order, unless at the same time he condescends to demonstrate what has happened since the making of the order to the realisable property found by the trial judge to have existed when the order was made…Any other approach would amount to an attempt to go behind the finding embodied in the confiscation order, and such an attempt would be an abuse of process."
"Where a defendant has been in possession of an asset, such as the £35,500.00 here, the question obviously arises what he has done with it and whether, as might in the ordinary way be the case, interest or "other fruits" as the judge put it, have been obtained in respect of it. In that case, if the defendant is simply silent as to what has happened to the asset, the court on a section 83 application is liable to find that he has not satisfied the section's requirements and accordingly is not entitled to a certificate of inadequacy. Whether that conclusion is arrived at or not will obviously depend on the court's appreciation of all the evidence."
"The judge has a fact-finding exercise to conduct under section 83(1) of the Criminal Justice Act 1988. He has to assess the current value of realisable assets as a whole. All I would add, whilst expressing full agreement with what My Lord has said, is that the judge needs to keep a sense of proportion in conducting that exercise, however dishonest or uncooperative a defendant may have been with respect to what has been found to be one or more of his realisable assets. There could be cases where, on an overall view, it would be open to the judge to hold that the value was on balance of probability inadequate within the meaning of the section, even if the defendant has declined to condescend to give an explanation with respect to every single asset."
"37. …once it is appreciated that the property held by the defendant included unidentified assets forming part of the total value of the realisable property at the time of the order, it is impossible for Telli to establish that the realisable property is inadequate now to meet payment of the outstanding amounts. The order was made in 1996. If a defendant fails to identify all the assets he holds, no one will know their true value and by the time of the application, the value of the assets he failed to identify may have increased, particularly after ten years. Absent consideration of current value, no court could be satisfied that the realisable property was inadequate. If the assets remain unidentified no conclusion can be reached as to their current value.
38. In short, the appellant's application fails because he is not able to identify the current value of his realisable assets whilst he chooses not to identify all of those assets."
"140 …So far as this court is concerned at this stage, the question is what his realisable assets now are. He cannot go behind, as I have already said, the finding of the Crown Court against him on the existence, so far as the order was concerned, of hidden assets. But he can, and should be able to, establish that he has made nothing out of those hidden assets, even if his assertion is that they never actually existed, provided that he produces sufficient evidence before the court, and the court is satisfied that he has been honest in showing that he did not actually make anything out of those presumed hidden assets. In my judgment, that would be entirely unfair, and would lead to this being a punishment as opposed to an asset stripping exercise if he were liable to be sent to prison on the basis that he had made a profit, which in this case is over 50% of the assets which were found against him, simply because he has not accepted and has never accepted that those assets existed.
141 It will be a very difficult task for any defendant in his position to persuade the court, if he has not cooperated in the past and has not appealed against the finding of the Crown Court, that that is indeed the position. But he cannot, in my judgment, be precluded from undertaking that exercise, and if, but only if, the court is persuaded that this is now the position will it be appropriate for a certificate to be granted in whatever sum is appropriate."
Lord Justice Wilson:
Lady Justice Arden: