England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL
CRIMINAL DIVISION

		Sitting at Manchester Crown Court Crown Square Manchester M3 3FL
		29 March 2007

1. MR JUSTICE DAVID CLARKE: On 9th February 2006 the appellant, Paul Anthony Nield, pleaded guilty to five offences of false accounting and other offences of dishonesty and was committed to the Crown Court for sentence. On 7th April 2006 in the Crown Court at Manchester, Minshull Street, before Mr Recorder Wright, the appellant was sentenced to intermittent custody. Confiscation proceedings ensued and on 17th July 2006 at the Crown Court before His Honour Judge Thomas QC a confiscation order was made under the Proceeds of Crime Act 2002 in the sum of £9,500 to be paid within six months or in default to serve six months' imprisonment consecutive. The appellant appeals against the confiscation order by leave of the single judge.
2. The facts of the underlying prosecution were that as company accountant for a company based in Hyde, in a position of trust therefore which gave him access to the company bank account, the appellant abused his position by using company funds to pay for personal expenses. The total sum involved amounted to £10,066.73.
3. The matter which causes the case to come on appeal is that by the date of sentence he had repaid the total sum lost by the company.
4. The course of the confiscation proceedings was as follows. On the date of sentence the Crown invited the judge to postpone determination and to order the appellant to serve a statement of his assets and means. There was a suggestion at that time by the Crown that once such information was provided if such a hearing was unnecessary an application could be made to have the case removed. But counsel made it quite clear that despite the repayment the court could order confiscation and he did not wish to give the court or the appellant any impression to the contrary.
5. The matter came before His Honour Judge Thomas on 16th June. On that occasion the Crown indicated that they intended to pursue the confiscation order because of the mandatory provisions of the Proceeds of Crime Act 2002, section 6. Counsel for the defence told the court that a Crown Prosecution Service lawyer had told him the previous day that such an application would not be pursued. The judge had some sympathy with the appellant's position and granted an adjournment to allow the defence to consider the position further. He directed a skeleton argument be served by 30th June.
6. On 17th July the case came back before the learned judge. Mr Maguire, then as now appearing for the appellant, had not served a skeleton argument. He said that that was because the Crown had not served upon him copies of the authorities upon which they intended to rely. The learned judge understandably found that an explanation which was unsatisfactory, having made the order. However, the proceedings continued.
7. The submission was made that because the losses had been recovered there was, by analogy with section 6(6) of the Proceeds of Crime Act, a power rather than a duty to make a confiscation order. The learned judge rejected that argument by reference to the precise terminology of the Act and indicated that the Crown were entitled to pursue the application and that there was no discretion in the court not to act upon it. Accordingly, the confiscation order was made and no issue arose about its amount.
8. It is submitted before us by the Crown in a skeleton argument that the order was made by consent, the judge having rejected the appellant's submission, but having considered the full transcript that does not seem to be so. What is clear, however, as we have indicated is that there was no issue about the amount of the order to be made.
9. It is not necessary for the purpose of this judgment to set out the full terms of section 6 of the Proceeds of Crime Act 2002, but it is right to comment that this section sets out a mandatory framework once the confiscation proceedings are triggered by an application by the prosecutor to proceed under this section. The only modification of the strict terms of the duty arises under subsection 6 of the Act which reads:

"But the court must treat the duty in subsection (5) as a power if it believes that any victim of the conduct has at any time started or intends to start proceedings against the defendant in respect of loss, injury or damage sustained in connection with the conduct."

10. The appellant seeks to persuade us as a matter of principle that since he has fully repaid the victim of his offences and did so before the date of sentence and before the confiscation proceedings were instituted, the confiscation proceedings should be stayed as being an abuse of the process of the court. No such argument was advanced before the judge. Reliance, however, is placed on a passage in the judgment of Thomas LJ in R v Mahmood and Shahin [2005] EWCA Crim 2168, a case which concerned section 71 of the Criminal Justice Act 1998 but which for present purposes was in similar terms.
11. The passage relied on in that judgment is in paragraph 26 which refers to the discretion in principle to stay proceedings if what the Crown are proceeding to do amounts to an abuse of process. The learned Lord Justice went on:

"A hypothetical example illustrates the point. If, prior to the institution of confiscation proceedings, a defendant and the Crown had agreed, after full disclosure, that restitution would be made in a particular way and, pursuant to that agreement, restitution had been made, a judge would in the event of confiscation proceedings have power to stay proceedings that unjustly or without proper cause sought to go behind such an agreement."

12. The difficulty with that submission in the present case, as Mr Maguire recognises once the difficulty is pointed out to him, is that in the present case the learned judge did not make and was not asked to make any finding as to the existence or otherwise of any such agreement. The highest that it can be put, so far as we can see on the information before us, is that the police facilitated the repayment and further that the sentence date was deferred by consent to enable that full repayment to be completed before the appellant returned to court to be sentenced. The Crown's stance before the court, as was apparent at the sentencing hearing, was that they expressly did not concede and never conceded that no confiscation proceedings would be brought. It was never conceded that any undertaking or assurance had been given the day before the hearing on 16th June.
13. At the hearing on that day, and indeed on 17th July, their contention was that confiscation and compensation are separate processes and separate concepts and that in an appropriate case both may be ordered. In this case compensation was not pursued because full repayment had been made. Confiscation however as a freestanding application under section 6 of the Proceeds of Crime Act 2002 was. The Crown's argument in essence was that compensation is what it says it is, payable to the victim. Confiscation is a separate punitive process, often described as draconian, whereby a criminal forfeits the proceeds of his crime not to the victim but to the State.
14. It seems to us that this general approach is in accordance with the Act. The power to award compensation on conviction for a criminal offence arises under entirely separate legislation, namely section 130 of the Powers of Criminal Courts (Sentencing) Act 2000. Though Mr Maguire relies on the passage in Mahmood which we have cited, that case is of no other help to the appellant. It confirms at paragraph 29 of the judgment that it is not automatically an abuse of process to pursue confiscation proceedings where such proceedings will result in a recovery of more than has been stolen.
15. In Forte [2004] EWCA Crim. 3188, giving the judgment of this court in relation to the provisions of section 71 of the Criminal Justice Act 1988, which as we have indicated is in similar terms in the present context, Newman J said this:

" ... the statutory process to have in mind is that it is based upon the commission of the offence. It is provided by section 74 and, in particular, subsections (5) and (6), that the value of the property is calculated by reference to the moment when the person obtains it, adjusted to take account of subsequent changes in the value of money and so forth. As a result the critical time at which the court looks to ascertain whether a benefit has been obtained is the date when the offence is committed. It is not for the court, as the House of Lords have said, to have regard to the subsequent consequences of the crime or events which may befall the property. Thus the value of the defendant's benefit is the value of all the property obtained as a result of or in connection with the offences of which the defendant is convicted, calculated at the date he obtained the 'benefit'.

In this case he obtained the benefit of the use of the various motor vehicles and he obtained the benefit of the use of the money or the credit which was obtained by use of the credit cards. The fact that at a later date he discharged the civil obligations in relation to those liabilities, and therefore in terms of the money can be said to have obtained no profit is not in point. So far as the law is concerned he obtained something fraudulently at a date when he was not entitled to it and the value of his benefit is that which he has obtained by virtue of the fraudulent activity.

It has been argued, in this Court and in the House of Lords, that the legislation operates unfairly. The House of Lords has emphasised, in particular in the recent case of Cadman-Smith [2002] 2 Cr App R (S) 37, that the legislation has to be considered as having a dual purpose. It is aimed at depriving offenders of the proceeds of their criminal conduct, and it is also an Act which has the purpose of punishing convicted offenders in order to deter the commission of further offences and to reduce the profits available to fund further criminal enterprises. In that respect it is therefore described as penal, or indeed draconian in its operation.

The use of such words as 'profits' or 'the proceeds of crime' should not misled the applicant into believing that their Lordships, or indeed any of the cases, support his argument as it is presented in this case. The purpose of these provisions is to create a form of penalty, calculated by reference to 'benefit', in the special case which we have shortly endeavoured to describe."

16. The argument before the judge, however, was based on section 6(6) of the 2002 Act, which we have read. This is the only point in the process at which the court's function in applying the literal provisions of the Act becomes a power rather than a duty. In such a case the assessment of the recoverable amount pursuant to section 7 is modified by section 7(3) so that the court assesses not necessarily the full amount of the benefit but the amount which it believes to be just.
17. Mr Maguire argued before the judge that this case in which the full sum had been reimbursed was analogous to that, so that the repayment could be taken into account in assessing the recoverable amount at nil. We understand the underlying merits to that submission. The appellant's position, it is said, having repaid the money, should be no less favourable than that of an offender against whom proceedings have been started by the victim; it should if anything be more favourable. The difficulty with that submission, as the judge held, is that in this complex and tightly drawn legislation the appellant's position is not within the terms of section 6(6) and that no discretion exists to widen its scope. The judge considered himself bound to make the confiscation order. In the absence of any material which might have justified a finding that there was an abuse of process, this court cannot interfere with the decision at which he arrived. It seems to us that the simple facts of this case raise an important issue as to the relationship between the separate powers of the court to order confiscation under section 6 of the Proceeds of Crime Act and to order compensation under section 130 of the Powers of Criminal Courts (Sentencing) Act.
18. We therefore look at those provisions of the Proceeds of Crime Act which make reference to compensation orders. Section 13 of the Act of 2002 requires the court to leave the confiscation order out of account in deciding the appropriate sentence for the defendant, except when imposing a fine or certain other monetary penalties but not compensation orders - section 13(2). Furthermore the question of confiscation order may be postponed to a date subsequent to the date of sentence, as was done here. However, specific provision is made in section 13(5) and (6) for cases in which both a confiscation order and a compensation order are made. If the offender's means are insufficient to satisfy both orders then the compensation order or part of it may be satisfied from the sums recovered under the confiscation order. Thus, in principle, confiscation is assessed without regard to the issue of the compensation of the victim, but specific provision is made in favour of the victim for the situation in which both cannot be satisfied in full. It is not suggested that such is the case here. The judge assessed the recoverable amount under section 7 as the amount of the benefit, there being no argument that the available amount fell short of that figure.
19. So far so good, but as we indicated to counsel in the course of argument, we did remain troubled by subsection (6) and its importation of a discretion to assess the sum which the court believes to be just, but only in the specific circumstance that the victim has started or intends to start proceedings against the defendant for his loss. The existence of that discretion, in that specific circumstance only, implies a relationship between the concepts of confiscation and compensation which the remainder of the legislation does not appear to recognise. The question therefore is, if confiscation is to be tempered by the existence or expectation of recovery proceedings taken by the victim, why should it not likewise be tempered by the more favourable fact that the victim has already been compensated by the time the confiscation proceedings are taken?
20. We have strained to find an answer to this conundrum. The discretion which is imported by section 6(6) giving rise to the power to make a just order is very strictly limited. It does not appear to us, assisted as we have been by Mr Friesner who has considerable experience in the area of confiscation proceedings, that there is any simple answer to the question. It seems to us on further reflection that the answer must be this. Where at the time of making the confiscation order there are proceedings or anticipated proceedings for the compensation of the victim, the court does have the power to temper the confiscation order to ensure that the victim receives his compensation, the amount of which at the time of those proceedings or intended proceedings may still be uncertain. Where, however, at the time of the consideration of the confiscation order there is no remaining issue as to compensation, there is accordingly no need for any such tempering and the court is then required to examine in the conventional way, under the strictly drawn provisions of the Act, the amount of the benefit and the amount of the available assets which in many cases, though not this case, will by then have already been reduced by the payment of compensation so as to bring the available assets below the amount of the benefit so assessed. That not being the case here, there is, in our judgment, no reason to conflate the issues of confiscation and compensation. Confiscation is an independent freestanding application. It is punitive in nature. That is clearly recognised by the authorities. It bites in this case and whereas we have expressed some sympathy for the position in which the appellant finds himself, we find no escape from the legal consequence. Accordingly this appeal must be dismissed.