England and Wales Court of Appeal (Criminal Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CRIMINAL DIVISIONS
ON APPEAL FROM 10th JANUARY 2005
HER HONOUR JUDGE DAVIES
200500621A0*1.

		Royal Courts of Justice Strand, London, WC2A 2LL
		3/11/2006

Mr. Justice Lloyd Jones:

1. On 18^th June 2004 in the Crown Court at Doncaster (Her Honour Judge Davies) the Appellant pleaded guilty to two counts of handling stolen goods. On 10^th January 2005 he was sentenced by Her Honour Judge Davies to 12 months imprisonment concurrent on each count. On the same occasion, a confiscation order was made in the sum of £95,520 to be paid within 9 months, with a term of 2 years imprisonment consecutive to the sentence for the substantive offences in default of payment.
2. The Appellant now appeals against the confiscation order by leave of the Full Court granted on the 25^th May 2006.
3. On the 7^th May 2003 the Appellant was stopped while driving a BMW X5 motor car registration Y662 PLD by police on mobile patrol on the Ml8 motorway near Junction 1 at Bramley, Rotherham. He had been exceeding the speed limit. He was issued with a fixed penalty and required to produce a driving licence and insurance certificate within 7 days at Doncaster police station. He failed to do so. As a result the police visited his home. Upon inspection of the vehicle they established that the chassis number identified the vehicle as a stolen BMW X5 registration number Y867 TGO. The vehicle was seized and the police undertook further investigations.
4. The Appellant was questioned by the police on a number of occasions. Initially he stated that he had bought the BMW following an advert on the Auto Trader website and had paid £35,000 cash. He stated that the money came from various sources including the proceeds of sale of a Mercedes CLK which he had owned for three weeks, money borrowed from his father, gambling winnings and money in his own bank account. In subsequent interviews he gave differing accounts of how much he had paid for the car and how he had financed its purchase. He had insured a Mercedes CLK registration number X643 JNE. However, that vehicle had been in the possession of its legal owner during the time that the Appellant had insured it. It had never been in the Appellant's possession.
5. In a prepared statement produced to the police in interview the Appellant stated that some time in 2002 he had bought the Mercedes car from a man in a public house. He did not obtain his name or contact details. He had paid £4,000 cash for the car. He suspected it was stolen due to the price. He paid cash for the car. Although he could not remember the source of the cash, it was possible that it had come from gambling winnings. He had insured the car and had used it openly for a few months. In September 2002 he was contacted by the same man and bought the BMW from him. He gave the man the Mercedes plus £1,000 in cash in return for the BMW. He realised that the car must have been stolen because of the amount paid and the circumstances of the purchase. He had owned a number of vehicles over a relatively short period of time and had paid significant insurance premiums. He had sought insurance quotes for other vehicles but had been refused insurance.

The Confiscation Proceedings

6. By virtue of the fact that the Appellant had pleaded guilty to two counts of handling stolen goods, the provisions of the Criminal Justice Act 1988 (as amended) relating to confiscation orders applied in his case. The prosecution served a notice under section 71 of that Act in order to commence confiscation proceedings. The prosecution indicated that it considered that in this case it was appropriate for the court to proceed by applying the assumptions in accordance with section 72 AA (4) of the Act. By virtue of section 72 AA (3) the court, when proceeding under Section 71, may, if it thinks fit, determine that the assumptions specified in subsection (4) are to be made for the purpose of determining whether a person has benefited from relevant criminal conduct and, if he has, of assessing the value of his benefit from such conduct. Section 72 AA (4) provides:

"Those assumptions are -

(a) that any property appearing to the court -

(i) to be held by the defendant at the date of conviction or at any time in the period between that date and the determination in question, or

(ii) to have been transferred to him at any time since the beginning of the relevant period,

was received by him, at the earliest time when he appears to the Court to

have held it, as a result of or in connection with the commission of

offences to which this Part of this Act applies.;

(b) that any expenditure of his since the beginning of the relevant period was met out of payments received by him as a result of or in connection with the commission of offences to which this Part of this Act applies; and

(c) that, for the purposes of valuing any benefit which he had or which he is assumed to have had at any time, he received the benefit free of any other interests in it."

Section 72 AA (5) provides:

"Where the court has determined that the assumptions specified in subsection (4) above are to be made in any case it shall not in that case make any such assumption in relation to any particular property or expenditure if-

(a) that assumption, so far as it relates to that property or expenditure, is shown to be incorrect in the defendant's case;

(b) that assumption, so far as it so relates, is shown to be correct in relation to an offence the defendant's benefit from which has been the subject of a previous confiscation order; or

(c) the court is satisfied that there would (for any other reason) be a "serious risk of injustice in the defendant's case if the assumption were to be made in relation to that property or expenditure."

7. In the confiscation proceedings in the Crown Court the prosecution produced a statement pursuant to section 73, Criminal Justice Act 1988. That statement calculated direct benefit in the sum of £69,000 and assumed benefit in the sum of £190,121.63. However, the figure claimed in respect of assumed benefit was amended at the hearing.
8. In the confiscation proceedings the prosecution invited the judge to make assumptions that the large volume of cheques passing through the various bank accounts held by the Appellant and various other investments must have been the proceeds of criminal conduct. The judge heard evidence from Detective Constable David McConnell who had prepared the prosecution statement. He gave evidence that the Appellant had benefited in the sum of £109,865.97. The total identified benefits from an unidentified source were said to be £88,480.42. To this would be added assumed benefit of £5,000 representing the monies the Appellant had paid for the two vehicles. In respect of the value of the Appellant's freehold property, 91 Oakhill Road, the sum of £16,385.55 was said to have been from an unidentified source.
9. The realisable amount was claimed in the prosecutor's statement to be £101,503.19, made up from equity in the freehold property and various bank and investment accounts. This figure was modified at the hearing to £103,020.62.
10. The Appellant filed an affidavit of his financial circumstances which disclosed a number of bank and investment accounts. He did not file a statement in response to the prosecutor's statement. However, he did file a forensic accountant's report very shortly prior to the hearing. He gave evidence that he acquired his assets by lawful means in his capacity as a bookmaker's clerk and from personal winnings from gambling, having been a "professional" gambler for some time. Copies of cheques representing payments to his accounts had been requested in good time for the hearing but the banks in question had been slow to co-operate and the copies were not available.
11. The Appellant conceded that a confiscation order under the Criminal Justice Act 1988 be made and accepted a direct benefit in the sum of £69,000, the agreed value of the two motorcars (£37,000 for the BMW and £32,000 for the Mercedes). He disputed the Crown's evidence as to the value of his freehold property and contended that it should be reduced by £15,000-£17,500. His income from earnings was £6,000. He had not declared his income to the Inland Revenue for some time but had not been in receipt of state benefits. He had no debts and had maintained his lifestyle with gambling winnings.
12. On behalf of the Appellant it was submitted that he had no convictions for any relevant offence other than the two offences for which he was being sentenced. His only other previous conviction was for threatening behaviour in 1999.
13. The judge found the Appellant to be an unimpressive witness whose evidence she had no hesitation in rejecting. She referred to the fact that he had given inconsistent accounts at different times in relation to a number of matters. As to his income, he had told the police in interview that he had no idea what he earned. In his affidavit he had stated that he earned between £4,250 and £6,250 per annum. In court he stated that his annual income was £6,000. In his mortgage application he had stated that his annual income was £35,000. He had not declared his income to the Inland Revenue since 2001 when he had said that his income was £1,665. Despite his account of his income, he had maintained mortgage repayments of £600 per month and had maintained his girlfriend and daughter as well as making payments to his mother with whom he lived. The judge accepted the submission on behalf of the prosecution that the amounts that the Appellant asserted were generated from his earnings were not sufficient to maintain the lifestyle he had maintained.
14. The judge also referred to the fact that the Appellant had paid substantial insurance premiums on a number of other motor vehicles during the relevant period.
15. The judge referred to specific lies to the police which assisted the court in finding that he was untruthful. She was satisfied that he had lied repeatedly about two matters

(1) the circumstance in which he had come into possession of the motor vehicles;

(2) the varied accounts he had given as to how much he had paid for the vehicles, how he had financed the purchases and how he had borrowed sums from his father.

He had also given different accounts as to whether the monies were paid back and why he needed to borrow money when he plainly had sufficient resources available to him.

16. The judge was satisfied that the statutory assumptions were properly made and that the Appellant had not rebutted them. The judge calculated the benefits received as follows.

Actual Benefits Value of the two Cars	£69,000
Assumed Benefit Benefits from Unidentified Sources Assumed Benefit Expenditure (payment for the cars) Property Held from an unknown source (91 Oakhill Road)	£88,480 £5,000 £16,385
Accordingly the total benefit was calculated as follows,
Total Calculated Benefit Deduct Direct Benefit Resulting Benefit	£178,865 £69,000 £109,865

17. In calculating the realisable amount the judge reduced the amount alleged by the Crown by £7,500 to take account of different valuations of the freehold property. Accordingly, the sum of £103,020 was reduced by £7,500 to £95,520.
18. In the result, therefore, the judge made a confiscation order in the sum of £95,520 of which the Appellant was ordered to pay compensation in the sum £19, 480.64 to Direct Line.

The Appeal

19. The Appellant sought leave to appeal against the order. The grounds of appeal were as follows:

(1) The judge erred in accepting the validity of the prosecutor's statement where no enquiry had been made as to the source of the monies said to be the proceeds of crime.

(2) The judge placed undue weight on the lies told by the Appellant in the police interview.

(3) The judge failed to give any or sufficient weight to the Appellant's character and the lack of police information that he had committed other offences.

(4) The benefit figure should have been limited to £69,000.

20. On the 25^th May 2006 the application for leave to appeal came before the Full Court (Gage L.J., Forbes and Cox JJ.). On that occasion the prosecution was not in a position to proceed with the hearing of the appeal. Accordingly the Court granted leave to appeal and made further directions in relation to the appeal.

21. It was in these circumstances that the appeal came before us. On the hearing of the appeal the Appellant sought to rely on further evidence. Notwithstanding the submissions of counsel, it is not clear to us that this court did, on the 25^th May 2006, give leave to produce further evidence. However, the prosecution did not object to the production of the further evidence. We considered that it was necessary and expedient in the interests of justice to receive this further evidence in accordance with section 23 (1) Criminal Appeal Act 1968. The evidence fell into the following categories:

(1) A statement by the Appellant setting out his case as to the source of the sums of money credited to his various accounts.

(2) Copies of the cheques paid into two of the Appellant's accounts, bank statements and schedules of cheques.

(3) Letters from Mr. T. Ashwell, Mr. R. Walton, Mr. S. Cowan and Mr. J. Picken, associates of the Appellant, stating how they came to pay certain sums of money to the Appellant.

In addition, at the hearing on the 3^rd October 2006, we heard the Appellant give oral evidence on which he was cross examined.

21. At the hearing of the appeal the prosecution made the following admissions:

(1) On Monday the 10^th January 2005 Her Honour Judge Davies, sitting at Doncaster Crown Court, made a confiscation order pursuant to section 71 Criminal Justice Act 1988.

(2) The learned judge made an order in the sum of £95,520 being the "amount that might be realised" within section 71 (6) (b) Criminal Justice Act 1988.

(3) The judge found that the defendant benefited from relevant criminal conduct in the sum of £171,365.97.

(4) The benefit comprised as follows

(a) Benefit from the Offences (section 71 (4)	£69,000
(b) Assumed Benefit section 72 AA (3)
1. Freehold Property	£16,385.55
2. Expenditure	£5,000
3. Transfers (Income Credit)
Nationwide Building Society
A/C 331438065	£62,475
A/C 280366560	£5,189.29
A/C 331438057	£6,011.33
Lloyds TSB
A/C 10503268	£942.79
Halifax
A/C 00604101	£862.31
CIS Insurance
A/C 16788119	£12,000
A/C 74254038	£1,000
TOTAL TRANSFERS	£88.480.42

It should be noted that the arithmetic actually totals £88,480.72

(5) Halifax Account D 39453189-3 was taken into account as account 00604101 by the judge when assessing the Appellant's assumed benefit.

(6) Copy bank statements and cheques produced in this appeal are true copies of original and authentic documents and instruments.

In addition, it was accepted that the letters from Messrs. Ashwell, Walton, Cowen and Picken were authentic and admissible as proof of their contents.

22. At the commencement of the hearing, Mr. Webster on behalf of the Crown made two further concessions. He accepted on the basis of an examination of the cheques paid into the Appellant's Nationwide account 280366560 and the Appellant's Halifax account 00604101 that the assumptions made by the judge as to assumed benefit in respect of sums credited to those accounts were rebutted. Accordingly, the assumed benefit fell to be reduced by the sums of £5,189.20 (account 280366560) and £862.31 (account 00604101). Thus the figure of £88,480.42 in respect of the Appellant's assumed benefit fell to be reduced by £6,051.60 to the sum of £82,428.82. Nevertheless, it remained the Crown's position that the evidence adduced by the Appellant did not rebut the assumptions made by the judge to any greater extent. Before us, the Crown, while accepting that the sums credited to the Appellant's various accounts were payments by bookmakers in respect of winnings at gambling, maintained that this was merely the laundering of huge profits earned by the Appellant from dealings in stolen motorcars. We note that this is very different from the case maintained by the Crown in the Crown Court where it had maintained that the sums credited to the Appellant's accounts were not the proceeds of gambling.
23. Accordingly, the single issue for decision in the appeal was whether the Appellant had been able to demonstrate on the basis of the further evidence that the assumptions made were incorrect on the balance of probabilities, or whether there would be a serious risk of injustice in the Appellant's case if the assumptions were to be made in relation to the property concerned. The starting point is the prosecution acceptance that the sums credited to the accounts are the proceeds of gambling transactions. It is clear that the Appellant could have maintained his lifestyle on the basis of this income. The question is whether these substantial sums were in fact generated by gambling only or whether they are the fruits of dealing in stolen cars which have simply been laundered by the placing of bets.
24. The Appellant gave evidence before us that he had been involved in gambling at racecourses since his childhood. When he was 18 he was offered a job with John Webster Limited as a bookmaker's clerk. At the same time he had also been working for Next and had opened an account with Abbey National into which he had paid his wages. He also paid into that account his winnings from gambling. As he acquired more knowledge about horse racing he gambled more on his own account. He started placing small bets. He was successful and as larger amounts accumulated he could place larger bets, and bet more regularly and could therefore win more.
25. He told us that most of his big wins had come from placing relatively small stakes on each way accumulators. He told us that he had followed a system devised by a Mr. Timmins, an associate of his and his father, which involved placing relatively small stakes backing second favourites on each way accumulators. The stake would usually be £50 each way. If the horses backed in all of the races got a place he would make a reasonable profit. This happened on a number of occasions. If all of the horses won he would make a very substantial win. This happened on three occasions. For example, it was the source of the sum of £7,375 credited to his Halifax account on the 20^th July 2003. The Appellant explained that in the early stages of his gambling this was how he obtained the large sums which were paid into his Nationwide account.
26. The Appellant also gave evidence that at the time when internet betting was starting he became one of the first people to use the betting exchange "Betfair". While his main source of income remained conventional betting he followed a practice known as "harbing", which we understand to be a system of arbitrage. It involved checking the odds issued between bookmakers and seeing whether there was any difference. When there were differences between the odds he could bet on a horse to lose and bet on the same horse to win. In this way he would effectively take the middle from the bet and although the profit margins for each bet could be relatively small the risk was very low. He had opened further accounts in order to carry on these activities because he needed a direct debit facility on the accounts. He had used the Halifax account and the Lloyds TSB account for these activities. Using these accounts he placed a large number of bets in one day while sitting at a computer terminal. The majority of bets were placed by direct debit.
27. An analysis of the Halifax account and the Lloyds TBS account carried out by the Crown confirms this picture of the Appellant's harbing activities. So far as the Halifax account is concerned, between the 26^th November 2002 and the 10^th September 2003, employing 21 different methods of placing bets, the Appellant invested £82,893.50. He received back £90,091.12 making a profit of £7,197.62. This equates to a profit of 8.7% over a period 10 months. Similarly so far as the Lloyds TSB account is concerned between the 21^st June 2002 and 12^th August 2003, using 6 different, methods of placing bets, the Appellant invested £17,671.89. He received in return £19,258.31 making a profit of £1,586.42. This equates to a profit of 8.9% over a period of 14 months. In his evidence the Appellant accepted that this analysis gave a fair view of the profitability of these activities.
28. Having heard him give his evidence, and considering his evidence in the light of the documentary evidence now produced, we have come to the conclusion that the Appellant has rebutted the assumptions made in respect of the source of these payments to his various accounts. We are persuaded on the balance of probabilities that the substantial sums credited to his accounts were the genuine product of gambling in the ways he has described in his evidence and were not the proceeds of criminal activities in relation to stolen motor vehicles.
29. We are fortified in this conclusion by three particular matters. First, if gambling were used solely as a means for laundering the proceeds of crime, we would expect records to be kept which showed the apparent legitimacy of the transactions. In particular, we would expect the Appellant to have kept copies of the cheques so that the monies could be shown to come from bookmakers. In the present case, there were no such records. In the Crown Court the Appellant failed to rebut the assumptions made against him because he was unable to produce documentary evidence of the source of the payments. Secondly, if gambling were to be used as a means of laundering proceeds of crime, we would not expect this to be achieved by a method as sophisticated and as labour intensive as the system of spread betting which has been employed by the Appellant. Thirdly, we bear in mind that the provisions of the Criminal Justice Act 1988 which permit these assumptions to be drawn against the Appellant apply only because of his plea of guilty to the two index offences. He has no conviction for any other relevant offence. Moreover there is no evidence or information before the court of his involvement in any other criminal activities.
30. On behalf of the Crown, it is submitted that the stakes required to gamble on such a scale must have come from somewhere and that the Appellant has not provided a satisfactory explanation as to their source. However, we are satisfied, on the balance of probabilities, that the gambling activities described by the Appellant could have been carried out by making relatively small stakes. We accept the Appellant's explanation that the stakes were derived at first from his income from employment and, subsequently, from the winnings generated by successful bets.
31. On behalf of the Crown it was accepted by Mr. Webster that if the assumptions were rebutted then all three elements of the assumed benefit would be defeated. Moreover it was common ground between the prosecution and the defence that in these circumstances it would not be necessary to recalculate the realisable assets. Accordingly we substitute for the order made by the judge a confiscation order in the sum of £69,000. This sum represents the actual benefits received by the Appellant calculated by reference to the value of the two motor vehicles. The Appellant's realisable assets exceed that amount. That order will take effect from the 3^rd October 2006, the date on which we announced our decision. We further order that the Appellant serve 2 years imprisonment consecutive to the sentence for the substantive offences in default of payment. We allow six months for the payment of the full amount. To that extent the appeal is allowed.