England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL
CRIMINAL DIVISIONON APPEAL
FROM THE MANCHESTER CROWN COURT

		Royal Courts of Justice The Strand London WC2A 2LL
		13th October 2000

1. LORD JUSTICE JUDGE: Mr. Justice Andrew Smith is out on circuit. He contributed to the judgment and is party to it. Mr. Justice Holman will give the judgment.
2. MR. JUSTICE HOLMAN: This appeal raises two points as to the construction and effect of the provisions as to confiscation orders under Part VI of the Criminal Justice Act 1988 ('the Act'). As most of the offences of which the appellant was convicted were committed before 1st November 1995, we make it clear that in this case and throughout this judgment we are considering Part VI of the Act as later amended, but excluding the considerable amendments which were made to it by the Proceeds of Crime Act 1995 which came into force on 1st November 1995, but does not apply if any of the offences were committed before that date (see the effect of section 16(5) of the 1995 Act).
3. THE ESSENTIAL FACTS
4. Over a period of about ten years from 1987 to 1997 the appellant, who already had a substantial criminal record, tricked three women into parting with sums of money totalling over £500,000. In the vernacular, he was a con man. It is unnecessary for the purpose of this appeal and this judgment to recite any of the details. Essentially, he befriended vulnerable women and persuaded them to lend him money on a variety of pretexts and on the dishonest assurance that he would repay them. Very little indeed was actually repaid. Ultimately, he was prosecuted and pleaded guilty to 21 counts of theft and one count of evading liability by deception. On 25th March 1999 he was sentenced in total to four years' imprisonment. His renewed application for leave to appeal against that sentence was refused on 5th November 1999 by this court, who observed that it was totally without merit. If a fuller account of the facts of these offences is required for any purpose, we respectfully adopt the judgment given by this court on that occasion.
5. The Crown applied for a confiscation order under the provisions of Part VI of the Act. Detective Constable Sutton of the Greater Manchester Police Financial Investigation Unit investigated the affairs of the appellant and he made a statement to the court pursuant to section 73 of the Act. In a part of his statement headed "Assessment of Benefit" he concluded that the total sums obtained by the appellant from the relevant offences was £502,595. In Appendix 2 of his statement, he set out detailed calculations in relation to each sum stolen by the appellant, applying to it the change in the retail price index between the date of the theft and the date of the statement. From the fourth page of the statement it is clear that he did so in express reliance upon the provisions of section 74(5)(a) of the Act. He calculated that the change in the value of money since the theft of each respective sum produced a total inflationary increase of £102,062.09, so the total benefit obtained, adjusted for inflation, was £604,657.09. Before the judge and before us, there has been no challenge to the correctness of that figure, or to the application of the adjustment to reflect subsequent changes in the value of money for the purpose of calculating the benefit.
6. The second part of D.C. Sutton's statement was headed 'Amount that might be realised'. In summary, the police were unable to identify any significant assets held by or on behalf of the appellant or to trace where the stolen money had gone. D.C. Sutton said that the appellant had claimed that he had lost a considerable part by gambling, but reported that the casinos named by the appellant had only recorded a relatively low volume of gambling by him. D.C. Sutton said in summary:-

"This is a case where I believe that there are substantial assets available for confiscation which are being hidden from the court. My reasons for this belief are:-

1.The defendant amassed a large amount of cash during the course of the offences of which he is convicted.

2.There is no evidence of the defendant having lived an extravagant lifestyle, the recent years he has spent living in rented accommodation with his wife.

3.There has been no documentary evidence produced whatsoever by the defendant to quantify the spending necessary to dissipate such an amount.

It is known that the defendant intended to invest his ill-gotten gains by way of property. The defendant has consistently through his actions indicated that it was his intention to purchase property in Spain."

7. D.C. Sutton did not himself quantify what the realisable amount might be.
8. THE JUDGMENT AND CONFISCATION ORDER
9. At a hearing on the 26th August 1999, His Honour Judge Phipps considered the report of D.C. Sutton and an affidavit in reply by the appellant, and heard oral evidence from the appellant. He held that the benefit was £604,657.09, as assessed by D.C. Sutton and not disputed by the appellant. He then said as follows:-

"It is a two-stage process. First of all, I must establish what the benefit is, and the onus is on the Crown to establish that, and the second stage is, I have to decide what, if any, realisable assets there may be, before coming to a decision as to whether I should make a confiscation order. I state what is now settled law; that, so far as the second stage of this process is concerned, the burden is upon the defendant to establish, on the balance of probabilities, that there are no realisable assets and, as counsel for the Crown has observed during the course of final submissions, that involved the defendant establishing, on the balance of probability, what he has done with the money.

There really, as I understand it, is no issue as to the benefit here. There cannot really be any issue as to that, in any event. The benefit claimed by the Crown equates with the sums listed in the indictment, to which the defendant has pleaded guilty. Plainly he had the money – he has accepted having the money – and that, as I have already observed, is something in excess of £600,000. It is the second stage which has caused difficulty in this case."

10. The judge then recited the evidence at length and then said:

"I now come to my conclusions about this matter. Despite the tenor of some of the defendant's answers, I repeat what I started this judgment with; the onus is on him to establish, on the balance of probabilities, that there are no realisable assets. The onus is not upon the police to chase around looking for realisable assets. If the police find realisable assets, all well and good, but the onus here is on the defendant to establish, on the balance of probabilities, that there are no realisable assets. In seeking to establish that before me today, he has relied solely upon his own evidence; that is the only evidence that he has called. I was troubled by various aspects of the evidence that he gave me today..."

11. After reviewing aspects of the evidence, the judge continued:-

"I have to say, with regret, that the defendant's evidence before me today, he was about as unconvincing a witness as it would be possible to imagine. The impression that he gave me from the witness box, when he gave evidence, was such that I would have difficulty believing a word that he said. His evidence was characterised by vagueness, prevarication, evasion and, at times, a tendency to assume the role of victim. I am quite satisfied, of course, that he has received – that he benefited – in the sum spoken of. I am quite satisfied that he has not told me the truth about what has happened to it. The affidavits, I have already referred to; evasive, hiding the truth, rather than helping. He has not persuaded me that he has no realisable assets, despite his repeated assertions that he has no realisable assets. I just cannot believe it and I do not accept it. I do accept that he has spent some of the money. In the nature of things, he would have spent some of the money. I do not suppose he salted it all away, although I am satisfied that a large part of it has been salted away somewhere. We know, for example, that he lost something like £10,000 at Stakis. Counsel for the defendant says that the evidence shows that he is a gambler. That is right, although only a small-time gambler. He has taken holidays, people do take holidays. He has failed businesses, he says.

I have to do the best I can. What I am going to do is to reduce the sum claimed, or at least reduce the amount of the benefit, to acknowledge the fact that some of this money has gone. I may be doing more justice to the defendant than he deserves, but it seems to me, doing the best I can, that if I reduced it by a sum of £150,000 or thereabouts and made a confiscation order in the sum of £450,000, that would be doing as broad a justice in this case as I feel able to do. I make a confiscation order in the sum of £450,000."

12. The judge then fixed a term of imprisonment of 2½ years in default of payment, which would, of course, be consecutive to the term for the substantive offences.
13. THE GROUNDS OF APPEAL
14. With leave of the full court, Mr Webster on behalf of the appellant argued two grounds of appeal. First, he argued that the judge was wrong, in the passages we have quoted, to place a burden of proof on the appellant to establish that he had no realisable assets or how the proceeds of the offences had diminished. He submitted that there is a burden of proof on the Crown to prove both the benefit and also the amount that might be realised. In short, he submitted that unless the Crown could prove (on a balance of probabilities) and quantify the existence of realisable property, no order could be made.
15. Secondly, he argued that the effect of the judge's overall approach was wrongly or unjustifiably to assume that the actual proceeds of the offences had, in the hands of the appellant, increased in value in line with inflation. As a result, the judge had mistakenly concluded that the amount that might be realised was more than the evidence justified.
16. THE STATUTORY FRAMEWORK
17. Section 71 empowers the court to make a confiscation order in certain circumstances if the offender has benefited from the offence. It then distinguishes between two key concepts: (a) the benefit which was obtained, and (b) the amount that might be realised at the time the order is made.
18. Section 71(4) defines benefit as follows:-

"For the purposes of this Part of this Act a person benefits from an offence if he obtains property as a result of or in connection with its commission and his benefit is the value of the property so obtained."

19. Section 74(3) defines the amount that might be realised at the time a confiscation order is made as:-

"(a)the total of the values at that time of all the realisable property held by the defendant, less

(b)where there are obligations having priority at that time, the total amounts payable in pursuance of such obligations,

together with the total of the values at that time of all gifts caught by this part of this Act."

20. Section 74(1) defines 'realisable property' as meaning, subject to sub-section (2):

"(a)any property held by the defendant; and

(b)any property held by a person to whom the defendant has directly or indirectly made a gift caught by this Part of this Act."

21. The provisions of section 74(2) are not relevant to this case, nor the provisions as to gifts. So in this case (as in many cases) 'the amount that might be realised at the time the order is made' is synonymous with the 'realisable property' less any obligations falling within section 74(3)(b) of which, in this case, there was no evidence.
22. Section 71(6) provides that:-

"The sum which an order made by a court under this section requires a defendant to pay must be at least the minimum amount, but must not exceed –

(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."

23. So the policy of the Act and the effect of section 71(6) is that the confiscation order must not exceed the amount that might be realised, for a court cannot confiscate more than exists. And it must not exceed the benefit, for the underlying policy is to confiscate the proceeds of the crime, but not more.
24. The purpose of determining the benefit is to determine (a) whether the offender has indeed benefited, (b) that the benefit exceeds the prescribed minimum, and (c) what the amount of benefit is, so as to establish the ceiling of any order. Once that has been done, the focus of the enquiry switches, as it did in this case, to determining the amount that might be realised at the time the order is made.
25. The effect of section 71(7A) is that the standard of proof to determine all these issues is the civil standard.
26. Section 73(6) provides as follows:-

"If the court is satisfied as to any matter relevant for determining the amount that might be realised at the time the confiscation order is made(.the court may issue a certificate giving the court's opinion as to the matters concerned and shall do so if satisfied that the amount that might be realised at the time the confiscation order is made is less than the amount the court assesses to be the value of the defendant's benefit from the offence."

27. We emphasise the underlined words.
28. Provision for adjustments to take account of changes in the value of money is made by section 74(5) which provides as follows:-

"References in this part of this Act to the value at any time(..of any property obtained by a person as a result of or in connection with the commission of an offence are references to –

(a) the value of the property to him when he obtained it adjusted to take account of subsequent changes in the value of money; or

(b) where sub-section (6) below applies, the value there mentioned, whichever is the greater."

29. Sub-section (6) effectively provides for situations where the value of the property obtained, or of other property which directly or indirectly represents the property obtained, has increased more than the rate of inflation – e.g. a stolen painting, or where the proceeds have been well invested in real property. It does not apply to this case.
30. The 'value of...property obtained as a result of or in connection with the commission of an offence' is, of course, the benefit. So the effect of section 74(5) is that for the purpose of assessing the benefit, subsequent changes in the value of money must be taken into account.
31. We now consider the two grounds of appeal.
32. THE ONUS OF PROOF
33. Clearly the onus of proving or establishing the benefit is on the prosecution. In our view, certain provisions of the Act, principle and decided authority all clearly indicate that if the defendant then wishes to contend that the amount that might be realised is less, the burden is then on him to do so.
34. In our view, the words '...shall do so if satisfied that the amount that might be realised...is less than...the benefit...' within section 73(6) clearly indicate that the burden is on the defendant to satisfy the court that the amount that might be realised is less, his being the interest in doing so. This view is fortified by comparing section 73(1) and section 73(4). In relation to determining the benefit, section 73(1) provides for the prosecutor to tender a statement which the court may treat as conclusive to the extent that the defendant accepts it. In contrast, in relation to determining the amount that might be realised, section 73(4) provides for the defendant to tender a statement which the court may treat as conclusive to the extent that the prosecutor accepts it.
35. Turning to principle, it is likely that an offender may take steps to make the proceeds of crime difficult to trace. Once it is proved that he has received the benefit, it is pragmatic, and entirely fair to the defendant, to place upon him the onus of showing (to the civil standard) that he no longer has the proceeds or that their extent or value has diminished.
36. In R v Rees, 19 July 1990, unreported, Auld J. sitting at Plymouth specifically considered this very issue as to the onus of proof in relation to the amount that might be realised. He, too, relied upon section 73(6) and said:-

"The scheme of section 73(6) of the 1988 Act appears to me to require a defendant to satisfy the court that the amount realisable is less than the amount it has assessed to be the benefit."

37. Later he continued:-

"I have in mind that the confiscation proceedings of the 1988 Act are penal and expose a defendant to a sentence of imprisonment in default and that clear words are required before the statute can be construed against the interest of a defendant. However, the 1988 Act, like the Drug Trafficking Offences Act 1986, was intended to be severe in its effect, and it would be incapable of effective application by the courts if it were to impose a burden of proof upon the Crown whenever the defendant raises an issue as to the existence or extent of his realisable property, matters which are essentially within his personal knowledge... I conclude, therefore, that in confiscation proceedings under the 1988 Act, once the prosecution has proved to the [civil] standard that a defendant has benefited as defined by the Act, and that the amount of the benefit exceeds the prescribed minimum, it is for the defendant to raise the issue of realisability and to satisfy the court that the 'amount that might be realised' is less than the amount which it has assessed as the amount of the benefit."

38. In R v Layode, 12 March 1993, unreported, the judge, when making a confiscation order, had assumed that the onus of proving the amount that might be realised was upon the prosecution. On the defendant's appeal, MacPherson J., giving the judgment of this court, said:-

"The judge furthermore resolved to decide this case upon the assumption that the onus of proving that the assets of the appellant (namely the extraordinarily large sums going into his accounts) were still available to him lay upon the Crown. He had no difficulty in concluding that the onus of proof was discharged. It may well be that this approach was more favourable to the appellant than it should have been (see the helpful decision of Auld J. in R v Rees)."

39. A little later he said:-

"Auld J.'s decision is an important one in this developing field. It appears to us to show that this appellant was favourably treated by the trial judge rather than the reverse. This view is, in our judgment, confirmed by reference to the decision of R v Ilsemann..."

40. R v Ilsemann (1990) 12 Cr.App. R.(S) 398 concerned the confiscation provisions of the Drug Trafficking Offences Act 1986, but section 4(3) of that Act was in very similar terms to section 73(6) of the 1988 Act, viz:-

"If the court is satisfied that the amount that might be realised at the time the confiscation order is made is less than the amount the court assesses to be the value of his proceeds of drug trafficking, the amount to be recovered in the defendant's case under the confiscation order shall be the amount appearing to the court to be the amount that might be so realised."

41. After quoting that sub-section, Taylor L.J., giving the judgment of this court, said:-

"It is accepted that that sub-section puts the burden upon the defence to satisfy the court that the amount that can be realised is less than the amount of the value of the proceeds."

42. In that particular case the benefit had been £396,000-odd and the Crown had been able positively to prove realisable assets worth £214,000-odd in the hands of the defendant. Taylor L.J. continued:-

"[Counsel for the defendant](..has submitted that as the figure of £214,000 odd is agreed to be that amount which the Crown can prove, the court ought to have accepted, on a balance of probabilities, that that amount was the amount it should regard as being the amount capable to be realised under section 4(3) and ought therefore to have made the confiscation order in that amount. He put it on this basis, that if the Crown put that figure forward and the defence agree it, then why should the court not accept it?

In our judgment that is a misconception. The Crown were not putting this figure forward for agreement as the amount realisable; all they were doing was putting it forward as the amount that they were able actually to prove without conceding that it was all that was realisable. If the appellant wished to say that that was all that was realisable, then it was for him to satisfy the court to that effect. He did not do so, either by seeking to call evidence or by putting in any statement which the Crown might or might not have agreed. Accordingly the court was left without anything to put against the figure of £396,000. Accordingly the learned judge made an order in that amount. In our judgment he acted perfectly properly and no criticism can be made of the confiscation order that he made."

43. We respectfully agree with the view of Auld J. expressed in R v Rees, that there are no material reasons for distinguishing the effect of the 1986 and the 1988 Acts for this particular purpose.
44. We stress that the scheme of the Act requires the court to perform two distinct and discrete tasks. First, to determine the benefit. Secondly, to determine the amount that might be realised at the time the order is made, which may be very different. Further, the amount that might be realised may be quite unrelated to the identifiable proceeds of the offence, e.g. a lottery win, inheritance, or other lawfully acquired property. In the end, the task of the court at the second stage is to determine the amount 'appearing to the court' to be the amount that might be realised. But once the benefit has been proved, it is permissible and ought normally to be the approach of the court, to conclude that the benefit remains available until the defendant proves otherwise; subject to the issue of changes in the value of money to which we now turn.
45. CHANGES IN THE VALUE OF MONEY
46. The effect of section 74(5) and (6) of the Act is that for the purpose of calculating or assessing the benefit, the value of the property when obtained must be adjusted to take account of subsequent changes in the value of money (section 74(5)(a)) or its actual value if greater (sections 74(5)(b) and 74(6)). In short, for the purpose of assessing the benefit, and accordingly the ceiling of any confiscation order, the Act assumes that the value of the property obtained will have at least kept pace with any inflation. In this case, D.C. Sutton was correct to adjust for inflation in the relevant part of his statement.
47. However, when the court moves to the second stage, there is no statutory adjustment for changes in the value of money. The task of the court is to determine the amount that might actually be realised, and the court cannot necessarily assume that the property obtained as a result of the commission of the offence has changed in value in line with changes in the value of money. A thief who steals cash may keep the proceeds hidden as cash. Whilst there is, as we have held, an onus on the defendant to show that the benefit has diminished, we do not think that it can necessarily be assumed against a defendant, that he has invested the proceeds so as to keep pace with changes in the value of money. It is, however, open to the court to make a judgment that the defendant has done so if the evidence and facts of the case as a whole support such a judgment.
48. CONCLUSIONS
49. For the reasons which we have given, we have no doubt that the judge was correct and fully justified in his approach that the onus was on the defendant to show that the proceeds of his offences had been diminished.
50. The actual proceeds were £502,595. In taking, as he did, a starting figure of £600,000 (from which he then deducted £150,000 "to acknowledge the fact that some of the money had gone"), the judge effectively inferred in this case that the proceeds had been invested so as at least to keep pace with changes in the value of money.
51. Although the judge gave no express reason for drawing this inference, we are satisfied, reading his judgment as a whole, that he was entitled on the facts of this case to conclude that this defendant had not merely kept the proceeds as cash but had invested them in property or in some other way so as at least to keep pace with inflation. This did not involve the application of section 74(5) but depended upon the facts of the case. The defendant was a professional and practised con man. Large sums of money were involved over a substantial number of years. The defendant consistently indicated that it was his intention to purchase property in Spain, as reported by D.C. Sutton. It is so inherently unlikely that this defendant kept the money in the form of cash or in non-interest earning accounts that the judge could properly conclude that the starting figure for the realisable property was of the order of £600,000 rather than £500,000.
52. In the result, although it would perhaps have been better if the judge had explained the reason for drawing the inference which we believe he did, we do not think that he was wrong on either of the grounds argued by Mr Webster. We accordingly dismiss this appeal.
53. LORD JUSTICE JUDGE: Miss Jackson and Mr. Weeks have joined us today, both from Manchester. Thank you very much.