England and Wales Court of Appeal (Criminal Division) Decisions

IN COURT OF APPEAL
(CRIMINAL DIVISION)

		Royal Courts of Justice Strand, London, WC2A 2LL
		Friday 27th July 2001

LORD JUSTICE MANTELL:

1. Frank Adam Moran is a 54 year old market trader. For something like twenty years he understated his income when making tax and self-assessment returns. He was found out. He was charged with cheating Her Majesty the Queen and the Public Revenue and making false statements tending to prejudice Her Majesty the Queen and the Public Revenue with intent to defraud. On 9^th November 2000 he pleaded guilty to both charges before Mr Justice Poole sitting at Chester Crown Court. He was sentenced to nine months imprisonment. Arrangements were made for a confiscation hearing. In due course it was fixed for 18^th January 2001 before His Honour Judge Daniel again sitting at Chester. On that day the judge made a confiscation order in the sum of £190,000, that being the amount of the underpayment of tax plus interest. In so doing the judge rejected a submission made on behalf of the Crown that the whole of the undeclared profits, namely £386,584:00 was available for confiscation. He set a term of two and a half years imprisonment in default of payment.
2. Now the Attorney General seeks leave to refer the question to this Court. Through Mr Perry of counsel he submits that the judge has misconstrued the relevant statutory provisions in consequence of which the confiscation order is unduly lenient.
3. We grant leave and treat the application as the substantive hearing.
4. It is common ground that the relevant statutory provisions are those contained in the Criminal Justice Act 1988 as unamended by any legislation later than the Criminal Justice Act 1993. Accordingly the now familiar statutory assumptions as to benefit did not apply and the judge retained a discretion as to whether to make an order and, if so, in what amount.
5. So far as material section 71 provides:

(1) "The Crown Court …shall…have power, in addition to dealing with an offender in any other way, to make an order under this section requiring him to pay such sum as the court thinks fit.

(2) The Crown Court may make an order against an offender where –

(a) he is found guilty of any offence to which this Part of this Act applies; and

(b) it is satisfied –

(i) that he has benefited from that offence or from that offence taken together with some other offence of which he is convicted in the same proceedings, or which the court takes into consideration in determining his sentence, and which is not a drug trafficking offence; and

(ii) that his benefit is at least the minimum amount.

(4) 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.

(5) Where a person derives a pecuniary advantage as a result of or in connection with the commission of an offence he is treated for the purposes of this Part of this Act as if he had obtained as a result of or in connection with the commission of the offence a sum of money equal to the value of the pecuniary advantage.

(6) The sum which an order made by a court under this section requires an offender 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, which ever is the less.

(7) For the purposes of this Part of this Act the minimum amount is £10,000 or such other amount as the Secretary of State may specify by order made by Statutory Instrument."

6. Section 74 provides:

"(5) References in this Part of this Act to the value at any time (referred to in sub-section (6) below as the "material 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.

(6) if at the material time he holds –

(a) the property which he obtained (not being cash); or

(b) property which in whole or in part, directly or indirectly represents in his hands the property which he obtained,

the value referred to in sub-section 5(b) above is the value to him at the material time of the property mentioned in paragraph (a) above or, as the case may be, of the property mentioned in paragraph (b) above, so far as it so represents the property which he obtained, but disregarding any charging order."

Section 102, the interpretation section, by sub-section (5) provides:

"References in this part of this Part of this Act to property obtained, or to a pecuniary advantage derived, in connection with the commission of an offence include a reference to property obtained or to a pecuniary advantage derived, both in that connection and in some other connection."

7. There is no doubt that as with the procedures available in drug trafficking cases Parliament intended to invest the court with draconian powers calculated, in turn, to deprive wrongdoers of their ill-gotten gains. The Act must, therefore, be given a purposive interpretation. At the same time the power to confiscate is penal in character and the provisions by which it is conferred must be construed no more oppressively than is justified by the language used. Or as Bennion (Statutory Interpretation, 3^rd Edition Section 271) has it

"A person should not be penalised except under clear law."

8. We have little help from authority. What is plain and has been accepted before this court as it was before the Judge is that we are dealing with a pecuniary advantage. On the face of things the pecuniary advantage would seem to be represented by the underpayment of tax which resulted from the failure to fully disclose profits. On the wording of the Act the pecuniary advantage must be taken to include any interest accrued or investment returned upon that sum. Giving the words of Act their ordinary and natural meaning it is hard to see how the balance of the profits which are the product of lawful trading can be said to represent a pecuniary advantage which has resulted from or come about in connection with the commission of an offence. We reject Mr Perry's argument that where there has been systematic and persistent non-disclosure of profits the whole enterprise is to be regarded as fraudulent and the proceeds liable to forfeiture. It seems to us, therefore, that, authority apart, the judge was plainly right.
9. We have said that authority on the point is scant. In truth there is none except perhaps for Dimsey and Allen [2000] 1 Cr. App. R(S) CA 497. There the Court was concerned with a confiscation order made in respect of unpaid tax – not it is to be noted the undeclared profits upon which the taxes had not been paid – and the argument presented was that no pecuniary advantage had accrued because the offender remained liable to the Inland Revenue for the outstanding amount. In the course of rejecting that submission and giving the judgment of the court Laws LJ said at p.p.s. 5/501

"We turn to the first of these arguments. Pecuniary advantage is not defined in the Criminal Justice Act and should, in our judgment, be accorded its ordinary meaning. In United States v. Montgomery [1999] 1 All ER 84 at 96D to E, Stuart-Smith LJ. indicated that there was no reason to accord a restricted meaning to the expression in section 71(5) of the Criminal Justice Act. So much, I think, would not be disputed by Mr Newman. The ordinary and natural meaning of pecuniary advantage must surely include the case where a debt is evaded or deferred. The sense of the expression matches, in our judgment, with that accorded to the same phrase in another statutory setting, namely, s.16(2)(a), now repealed, of the Theft Act 1968 under which a pecuniary advantage arose where:

"Any debt or charge for which he makes himself liable or is or maybe liable(including one not legally enforceable) is reduced or in whole or in part evaded or deferred."

Discussing this subsection Lord Reid said in Turner [1974] A.C. 357 at 365G:

"An obligation is evaded if by some contrivance the debtor avoids or gets out of fulfilling or performing his obligation."

In short, the fact that the tax remains due does not mean that its evasion did not confer a pecuniary advantage, nor indeed that that pecuniary advantage consisted of the whole of the tax withheld, the value of the liability that was evaded . By his crime the appellant evaded payment of £4 million tax. That sum constituted the proceeds of the offence. On the agreed figures, as we have indicated, he had realisable assets of £3.1 million. The fact that he remained in law liable to pay the tax, the fact even, were it so, that the Revenue might later recover it, does not, in our judgment, yield the proposition that the proceeds of his crime were one penny less than the whole of the tax evaded.

It is of interest to note what was also said in Turner's case, to which we have briefly referred. At 365H and following Lord Reid said this:

"An obligation is reduced if the creditor agrees with the debtor that the amount owed shall be reduced. An obligation is deferred if creditor and debtor agree that the date of performance shall be postponed. An obligation is evaded if by some contrivance the debtor avoids or gets out of fulfilling or performing his obligation. In the days when such things happened, a welshing bookmaker not only evaded his pursuers, he also evaded his obligations. Evasion does not necessarily mean permanent escape. If the bookmaker evaded his pursuers on Monday, the fact that he is caught and made to pay up on Tuesday does not alter the fact that he evaded his obligations on Monday. Unlike reducing and deferring an obligation, evading an obligation is a unilateral operation. It leaves the obligation untouched and does not connote any activity on the part of the creditor. When the evasion ceases he can seek to recover the debt in any way open to him."

We bear in mind, as was emphasised by Mr Newman, that section 16(2)(a) of the Theft Act was regarded by the House of Lords as a deeming provision, and it bears no analogue in the Act of 1988. But Lord Reid's remarks about the nature of the evasion of a debt, with great respect, seems to us to be wholly apposite to a case of the present kind. Had these very grave frauds succeeded then, in crude terms, Mr Allen would have been better off to the tune of £4 million. That represents in our judgment, the measure of his pecuniary advantage."

10. We draw comfort from that passage insofar as it is not inconsistent, at any rate, with the conclusion at which we have provisionally arrived.
11. However, before confirming that view we ought to note Mr Perry's argument based on section 102(5).
12. It is submitted that whilst the balance of undeclared profit may not derive from the commission of the offence it nevertheless falls within the terms of the subsection being "a pecuniary advantage derived both in that connection and in some other connection." We confess to having some difficulty with that subsection, as did HHJ Daniel. It would appear that Parliament was contemplating a benefit or pecuniary advantage stemming from connected activities as for example where an offender commits a criminal offence and then sells his story to a newspaper. This was pretty much the position in Re R. and re Criminal Justice Act 1988 [1991] COD 369 where Webster J made a restraint order under the Act in respect of payments received for a book describing the escape of George Blake in which it was alleged the authors had assisted. The short report has this as the holding:

"It was the commission of the offences by the applicants, if they were found guilty of them, that enabled them to write the book, and the payments were the result of writing the book. The payments were obtained partly in connection with the commission of the offences and partly in connection with their skills as authors, and thus qualified under section 71(4)."

As much we can understand, but it is a proposition which falls well short of that contended for by Mr Perry.

13. In our view the judge was right and for the reasons which he gave. Accordingly we decline to interfere. In reaching our decision we have not thought it necessary to refer to a number of authorities cited in argument which do not appear to us to have any bearing upon the question.
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MR McCOUBREY: Have your Lordships received the proposed draft of a question which we would ask your Lordships to consider certifying in this case?PRIVATE 

LORD JUSTICE MANTELL: Yes, we have.

MR McCOUBREY: My Lord, the position is that Mr Holroyde and I are broadly in agreement about the form of the question subject to minor tinkering----

LORD JUSTICE MANTELL: At the moment we are not inclined to certify.

MR McCOUBREY: My Lord, so be it. The instructions I have are that this is a set of circumstances the Revenue are encountering with some regularity and it is on that basis that----

LORD JUSTICE MANTELL: It must occur in every tax evasion case, must it not, where full disclosure of income or profits has not been made?

MR McCOUBREY: My Lord, yes.

LORD JUSTICE MANTELL: The Inland Revenue contend that they are entitled to take the lot?

MR McCOUBREY: Put simply, my Lord, yes. It is on that basis that we would ask you to certify this question.

LORD JUSTICE MANTELL: Yes.

MR McCOUBREY: If your Lordships are not so minded, so be it, I cannot take the case any further.

LORD JUSTICE MANTELL: We will discuss it, Mr McCoubrey. Do you want to say anything, Mr Holroyde?

MR HOLROYDE: My Lord it has the breadth of potential application which your Lordship has indicated, but as to whether it should be certified it is a matter with respect for your Lordships.

LORD JUSTICE MANTELL: We will rise.

We take the view that in the light of the changes to the 1988 Act which have come about since the facts with which we were concerned occurred, it is no longer a matter of public importance. We decline to certify.

MR McCOUBREY: My Lord, so be it.

MR HOLROYDE: My Lord, may I raise two consequential matters, please? The first is this. The statute entitles the offender to have his costs met from central funds, so I simply seek a formal confirmation that such an order be made in this case. Secondly, my Lord, there has been and still in force the restraint order which applied to the whole of the sum from which the lesser sum, the £190,000----

LORD JUSTICE MANTELL: Is that a matter for this court?

MR HOLROYDE: My Lord, the High Court has power to discharge it. My Lord it occurred to me that the most convenient way to deal with it is to invite your Lordships to discharge it today and then the matter is disposed of.

LORD JUSTICE MANTELL: What do you say, Mr McCoubrey, about that?

MR McCOUBREY: My Lords, as Mr Holroyde said the statute, the order is still in force. Since it no longer applies your Lordships having given judgment firstly we take a neutral view, and secondly, with regards to the powers of your Lordships, that is with respect a matter for you. If the High Court has power it may be that that is a most convenient way to deal with it.

LORD JUSTICE MANTELL: I am not sure that we have power. The court could be reconstituted, but not this morning.

MR HOLROYDE: If your Lordships are concerned about that aspect perhaps the simplest matter is to seek a consent order from the High Court and no doubt that can be done expeditiously.

LORD JUSTICE MANTELL: I would think that would be the better course, Mr Holroyde. The other matter is you would like costs from central funds?

MR HOLROYDE: Yes, please.

LORD JUSTICE MANTELL: Yes, you may.