England and Wales Court of Appeal (Criminal Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM SOUTHWARK CROWN COURT
HH JUDGE MOTA SINGH Q.C.

		Royal Courts of Justice Strand, London, WC2A 2LL
		7th November 2003

Lord Justice May:

1. On 25^th February 2002 in the Crown Court at Southwark, before H.H. Judge Mota Singh Q.C. and a jury, the appellant was convicted of conspiracy to defraud. On 29^th May 2002, he was sentenced to 18 months imprisonment. On 27^th September 2002, the judge made a confiscation order against the appellant under section 71 of the Criminal Justice Act 1988 in the sum of £88,199.53 with a consecutive term of 18 months imprisonment in default of payment. The appellant appeals against the confiscation order by leave of the single judge.
2. There were two co-accused, one of whom was acquitted. The other, Joseph Osadolor, was convicted of conspiracy to defraud and sentenced to two years imprisonment. A confiscation order was made against him in the sum of £8,000.
3. In the autumn of 2000, a company called Silverbrook Limited was used as a vehicle for defrauding continental companies of mobile phones and computer equipment. Orders were placed by fax from a newsagent in East London. The victim companies sent replies to the same fax number. They made contact with a representative of Silverbrook who called himself Alan. A mobile telephone was used which was traced to the co-accused Osadolor. For the two consignments of goods where the fraud was successful, payment was purportedly made by forged bank documents.
4. In October 2000, the fraud was successfully perpetrated on a German computer parts company called Sellingpoint. They delivered computer parts to the value of $202,620 to 61 Stopford Road, London E13 on 11^th October 2000. Forged Barclays Bank documents were used in purported payment for these goods.
5. In November 2000, the same essential fraud was perpetrated on an organisation called Milcom. They despatched 1400 Acatel mobile telephones to the value of £106,800 to 61 Stopford Road. The goods were delivered to this address on 29^th November 2000. Milcom received forged Barclays Bank payment documents.
6. On 1^st December 2000 a similar fraud was attempted on a Danish organisation called Blutel. They received an order for 2000 Nokia telephones to the value of £388,000. They did not however despatch these goods when they discovered that Silverbrook did not have an account with Barclays Bank.
7. At around the same time, Milcom received a further order from a man calling himself Alan Thomas. By this time Milcom were aware that the earlier order had been fraudulent and it was arranged that they would deliver a dummy consignment to be tracked by the police. On 5^th December 2000, a police officer observed a man calling himself Alan Thomas collecting a fax from Milcom addressed to Silverbrook from the newsagent in East London. That man was Osadolor. The dummy consignment of telephones from Milcom arrived at Heathrow on 7^th December 2000. Freight forwarders were asked by Alan on Osadolor's telephone to redirect the consignment to 174 Green Lane, Ilford. The police tracked the consignment to this address where the goods were loaded onto a hired van and taken to a mobile phone shop in Leytonstone High Road. Here awaiting the delivery of the goods were Osadolor and the appellant. Both were arrested while the van was being unloaded. The dummy consignment was thus intercepted.
8. By their verdict in convicting the appellant, the jury are to be taken to have found that he knowingly joined an existing conspiracy on 7^th December 2000. The judge had directed them to the effect that that was the prosecution case and that was what they had to be sure of before they might convict. The judge sentenced the appellant accepting that his involvement was limited to what happened on the 7^th December 2000. The confiscation proceedings proceeded on the same factual basis.
9. In the confiscation proceedings, the judge accepted that the conspirators as a whole had benefited to an amount of £246,021. This was the sum of the value of the computer parts obtained from Sellingpoint in October 2000 and the mobile telephones obtained from Milcom on 29^th November 2000. Both these consignments were received before the appellant was involved. The only consignment with which he was involved was the dummy consignment which was intercepted and from which the conspirators received no benefit.
10. Agreement was reached between the prosecution and Osadolor that he had benefited from his part in the conspiracy to the extent of half the £246,021 and that the amount that might be realised in his case was £8,000. The judge decided that the amount by which the appellant had benefited was £123,010.50 – the other half of the £246,021. He concluded that the amount which might be realised was £88,199.33 and made a confiscation order in that amount. There is no appeal against the judge's assessment of the realisable amount. The appellant contends however that on the facts of the case as found by the judge his benefit should have been determined as nil. That is his contention on this appeal.
11. The appeal turns on the proper construction of section 71 of the Criminal Justice Act 1988 which provides for confiscation orders. The following parts of the section are relevant:

"(1A) The court shall first determine whether the offender has benefited from any relevant criminal conduct.

(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 to be 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) Subject to sub-section (1C) above 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."

12. By sub-section (7A) the standard of proof required to determine matters relevant to this appeal is that applicable in civil proceedings.
13. Before the judge, it was conceded by the prosecution that the appellant was not involved in the conspiracy before 7^th December 2000. It was submitted on his behalf that he was only involved in the dummy delivery of goods and that since no goods were obtained, he obtained no benefit. The judge was persuaded that this was a fallacious argument. This was a charge of conspiracy and, although the appellant may have joined the conspiracy after it started, "he became and remained liable for all the consequences that flowed from it." The judge said that a person benefits from an offence if he obtains property, not necessarily for himself, as a result of or in connection with its commission and his benefit is the value of the property so obtained. These are draconian provisions. He found that the appellant had benefited from the conspiracy and in the absence of other evidence he found that his share of the benefit was one half of the total.
14. In our judgment, on the special facts of this case, there was no evidence on which the judge could properly be satisfied on a balance of probabilities that the appellant had benefited at all from his relevant criminal conduct. He had not been involved before 7^th December 2000. He was arrested on that day. The dummy consignment, which was the only consignment with which he was involved was intercepted. There was no evidence that he obtained any property as a result of or in connection with the conspiracy which he joined on 7^th December 2000 nor any evidence that he derived a pecuniary advantage. It would have been pure speculation to suppose that he might have benefited by some form of payment in advance of the anticipated proceeds of the dummy delivery. The probability was that he had not. There was no proper evidential basis for supposing that he had benefited from earlier consignments received when he was not part of the conspiracy. Mr Bennetts, who appeared for the Crown, submitted that this was not an impossible inference. Even if, taken literally, that were correct, it was not an inference which a proper evaluation of the evidence enabled the judge to make. Nor, as we read his ruling did he in fact base his decision on such a finding In the context of confiscation proceedings, the judge was wrong to say that the appellant, by joining the conspiracy, became and remained liable for all its consequences. This was only correct to the extent that by knowingly joining an existing conspiracy he was, as the jury found, guilty of the offence charged in count 1 of the indictment. For these reasons, we would allow this appeal unless authority constrains us not to do so.
15. The main authority relied on by Mr Bennetts, in support of the judge's findings was R v. McKechnie [2002] EWCA Crim 3161, a decision of this court. In that case, the four appellants were convicted of conspiracy to defraud banks and credit card companies. The prosecution alleged a sophisticated and well organised conspiracy involving the four appellants and at least seven other unnamed people. Forms were submitted to the Post Office redirecting mail to addresses to which the conspirators had access. Credit cards so received would be used until the credit card limit had been reached. Fingerprint and handwriting evidence revealed the links between the conspirators. The appellant Jayne Gibbons in interview had said that she had filled out redirection applications and credit card applications. The appellants' appeals against conviction were dismissed, the court observing that the evidence against each of them was overwhelming and the verdicts of the jury were no surprise to the court.
16. Jayne Gibbons appealed against the confiscation order made against her. She was the only appellant who had not received a sentence of imprisonment, the judge taking what the court described as a merciful course solely because she was pregnant at the time of sentence. There could be no doubt that she played her part in the conspiracy and she had admitted her involvement to a certain extent in interview.
17. The trial judge, in assessing the benefit obtained as a result of the criminal conduct, looked first at the total amount obtained as a result of the conspiracy, which was just over £225,000. The prosecution said that it was impossible to calculate the full amount by which each individual had benefited personally. They suggested that the total should be divided between the four conspirators who had been convicted. The trial judge had rejected a submission that the starting point for individual defendants should be the personal gain to each individual conspirator.
18. Hallet J, giving the judgment of the court, considered two first instance decisions. In R. v. Rees, the defendant was the only person before the court but a number of people had been involved in the criminal enterprise of obtaining mortgage funds by deception contrary to section 15 of the Theft Act 1968. Auld J, as he then was, held that the defendant's benefit was the whole amount obtained even though the defendant insisted that he personally did not receive all the money. The decision turned in part on the provisions of section 15(2) of the Theft Act 1968.
19. In R. v. Gokal, the defendant was convicted of an offence to which section 15 of the Theft Act did not apply. It involved a deception of the auditors of BCCI in concealing a number of substantial loans made to a group of companies run by the defendant. Buxton J, as he then was, considered that Rees was confined to its own facts and to an offence under section 15 of the Theft Act. He held that the phrase "if he obtains" in section 71(4) of the 1988 Act imports an obtaining by the defendant himself.
20. There is a further first instance decision, to which the court did not refer in its judgment in McKechnie. That was a decision of Langley J at Bristol on 20^th April 1999 in the case of R. v. Martens, Tuegel and Saia. The judge was required to rule on the extent to which the defendant Saia had benefited. He referred to Rees and Gokal. He was unable to read the decision in Rees as depending wholly on the fact that the relevant offence was that of obtaining property by deception under section 15(2) of the Theft Act. He agreed with Buxton J in Gokal that in normal language a person does not obtain property which he causes to be received by someone else. Nor did he consider that section 71 of the 1988 Act operated, as the prosecution had submitted, by obliging the court to attribute to each conspirator the gross proceeds of the particular conspiracy regardless of which of them on the facts had received those proceeds. There might be circumstances where that could arise, but in the case before him, where separate payments were made to the defendants or one alone was paid, he considered that section 71(4) was looking to the extent of obtaining by the defendant personally.
21. In R. v. Patel [2000] 2 Cr. App. R(S) 10 the appellant pleaded guilty to conspiring to obtain property by deception. He admitted receiving a total of £51,920. This court held that this amount represented his benefit from his relevant criminal conduct for the purpose of the Act. The fact that he had subsequently given some of the money to his fellow conspirator was irrelevant. The court considered Rees and Gokal. Douglas Brown J, giving the judgment of the court, noted that Buxton J's decision as to the meaning of benefit had understandably not been the subject of criticism on behalf of Gokal in the Court of Appeal. The court had to consider a challenge to the quantum of benefit and, in coming to a decision on that, gave no indication that it disagreed with the judge's view as to the meaning of benefit. The court in Patel shared Buxton J's view that section 15(2) of the Theft Act 1968 cannot assist in the construction of the 1988 Act where the offender is not charged with obtaining property by deception under section 15 or conspiracy to do so. In Rees, the defendant had pleaded guilty to three counts of obtaining money by deception, the money in each case being mortgage funds from a building society. He received three loans. The argument on his behalf to restrict the benefit to one of these loans only relied on the fact that the building society did not suffer a loss from the other two loans because there was adequate security for repayment of them under the mortgage. The decision was that, irrespective of any net loss to the building society, Rees had with others actually obtained the total amount of the three loans.
22. In McKechnie, the trial judge had followed the reasoning in Rees and had distinguished Gokal on its facts. The submission to this court on behalf of Jayne Gibbons was described by Hallet J as a stark one. Counsel submitted that if the Crown could not prove either receipt of the proceeds of crime by a particular defendant or how the proceeds of a criminal offence had been divided up between the defendants, then the court is unable to make a confiscation order. The court could not in those circumstances determine the amount of benefit that had been obtained.
23. Hallet J said that it was plain that Parliament intended this legislation to bite hard on criminals and to remove from them, where possible, their ill gotten gains. The words of section 71(4) have a deliberately wide ambit. Parliament has not laid down any rules governing the way in which the court should approach its task in determining the benefit obtained as a result of or in connection with an offence. The court declined to follow counsels' reasoning because, if they did, it would plainly thwart the clear intention of Parliament. In the case before the court, there was an undoubted loss of £220,000. The judge had before him just four identified conspirators. He had no information as to how the proceeds of the conspiracy had been divided between them and between anybody else involved. Hallet J then said at paragraph 62:

"62. In our judgment, where there is clear evidence of movement of money to conspirators as in this case and in the absence of any evidence as to how the benefit of the conspiracy has been divided between individuals, dividing the total amount between those identified is as good a starting point as any. But it does not stop there and the learned judge in this case rightly did not stop there. He stated, in terms, that in fairness and in the interest of justice he was bound to take into account the fact that other people were involved and would benefit to some extent. …

63. Mr Forbes however complains that this approach failed sufficiently to take into account the fact that the evidence indicated this appellant had made only one application for a credit card which had been successful.

64. In our judgment, this argument ignores the reality of the situation. Jayne Gibbons was convicted of playing her part in a large and sophisticated conspiracy, which netted her and her conspirators substantial ill gotten gains. There can be no doubt that between them they received a very substantial sum.

65. … Neither this appellant nor her co-accused provided any assistance to the court as to how the sums they had received had been divided between them or how much had passed over to any one of them."

24. The court's view was that the judge was forced and entitled to take a broad brush approach provided he did so reasonably and fairly.
25. The court's reasoning and decision in McKechnie illustrates difficulties which the prosecution may frequently face in confiscation proceedings when two or more defendants are convicted of conspiracy and there may be additional conspirators who are not before the court. We reject Mr Bennetts' extreme submission that section 71 of the 1988 Act is to be construed so that, where there is a conspiracy, anyone who joins the conspiracy as a matter of law becomes liable for his proportion of the total amount by which the conspirators as a whole may have benefited. Subsections (1A) and (5) require findings of fact. The statutory standard of proof is that applicable in civil proceedings. In applying that standard, McKechnie illustrates that the court may often be entitled to make robust inferences if convicted defendants remain unhelpful as to which of them obtained what benefit as defined by the Act. In many cases, an equal division of the benefit which the conspirators as a whole obtained between the defendants before the court may constitute a fair and reasonable inference. But in our judgment, the section is not to be construed so that a person may be held to have obtained property or derived a pecuniary advantage when a proper view of the evidence demonstrates that he has not in fact done so. This is not in our judgment the effect of this court's decision in McKechnie, which held that the judge's factual findings were justified on the evidence. As we have indicated, in the present case the proper finding of fact on the evidence was that the appellant had obtained nothing from his participation in this conspiracy. We consider the judge was wrong to rule otherwise. For these reasons, the appeal against the confiscation order is allowed and the order is quashed.