England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL
CRIMINAL DIVISION

		Royal Courts of Justice Strand London, WC2A 2LL
		17 April 2008

1. LORD JUSTICE MOSES: This is an appeal against a decision of His Honour Judge Bursell of 13th December 2007 at Bristol in which he refused to vary or discharge a restraint order made by His Honour Judge Foley on 20th November 2007 pursuant to section 41 of the Proceeds of Crime Act 2002 ("the 2002 Act").
2. The appellant was the majority shareholder and managing director of a company incorporated in 1995, "the company". The company mainly deals in the supply of parts of aircraft although from time to time it is undisputed that it also sold aircraft. The circumstances in which the restraint order was made rest upon transactions undertaken by the company through the appellant between September and November 2006. In order to make the restraint order, the judge, His Honour Judge Foley, had to be satisfied that a criminal investigation had been started in regard to an offence and that there was reasonable cause to believe that the alleged offender had benefited from criminal conduct - see section 40(2) of the 2002 Act. Criminal conduct is defined in section 76(1) of the 2002 Act and means "conduct which constitutes an offence in England and Wales". The conduct alleged is identified in section 327 of the 2002 Act and, in short, concerned an allegation that this appellant had concealed or disguised criminal property. Criminal property is defined in section 340(3) and was alleged in the instant proceedings to be property probably from the proceeds of drug trafficking which it was said this appellant knew or suspected constituted a benefit from that conduct.
3. The circumstances in which it was alleged that there was reasonable cause to believe that this appellant had benefited from his criminal conduct were set out in a witness statement from a Judith Ansell dated 2nd November 2007. She is a financial investigator with the Serious Organised Crime Agency. She said in that statement that there had been an arrangement between Mr B in Madrid to sell three aircraft to a company which he had heard was a Venezuelan mining company. The important feature of her statement relates to the manner in which those three aircraft were paid for by the company from South America. The total sale price was US$7,000 but in order to secure the purchase the company was required to pay a deposit of US$310,000.
4. The account of the financial investigator sets out not only the fact that there was going to be a cash deposit of US$310,000, but also the circumstances in which the deal was concluded.
5. The appellant had booked a flight to Madrid early in November 2006. There he met a man (now deceased) who from time to time acted as an agent for his company. There was also present a third man, Jose Armegual, who was acting on behalf of the purchasers. Two unknown males were present. In interview Mr B was asked who he thought these people were; he did not identify them.
6. The sale was concluded for the total figure of US$700,000 as we have said. US$300,000 was paid in cash and carried back by this appellant not by air but rather by train into France and then via France across the ferry. Apparently this appellant had met a member of his family (an uncle) somewhere in Northern Europe (we think Paris) before they travelled back across to England by ferry.
7. The cash was not banked but was placed in a wardrobe at the appellant's address. It was left there until March 2007. He then bought a safe and kept it there. It was discovered on his arrest on 17th May 2007.
8. The financial investigator asserted not only that those facts gave rise to a reasonable cause to believe that he had benefited from the offence we have already identified, but also that there was a risk of dissipation of assets. It was pointed out that he had now been interviewed on four occasions, would have become aware of the seriousness and depth of the investigation and, having regard to the fact that he is financially astute, would have an opportunity to dissipate his assets.
9. The judge making the ex parte order obviously accepted not only that there was reasonable cause to believe that this appellant had benefited from his criminal conduct, but also that there was a real as opposed to a fanciful risk of his dissipating the assets. We emphasise that second feature of the grounds which it is necessary for the prosecution to establish before such an order may be made. It is beyond dispute that any order made against someone in the shoes of this appellant is an order which interferes with his rights of property enshrined in Article 1 of the First Protocol to the European Convention on Human Rights. There can be no justification for such a restraint unless the prosecution establish that there is a real risk that assets will be dissipated which might otherwise meet a confiscation order should there be a conviction. If any further authority is needed for such a proposition it can be found within the very terms of the 2002 Act in section 69(2) which requires that the powers to make a restraint order must be exercised with a view to the value for the time being of realisable property being made available for satisfying any confiscation order which may be made - see section 69(2)(a).
10. The judge considering the application to vary or remove the restraint order on 13th December 2007 considered the facts on which it was said there was reasonable cause to believe that the appellant had benefited from his criminal conduct. He related the circumstances of the cash payment of the deposit, the journey of this appellant back to the United Kingdom and the keeping of the money in the wardrobe without any possibility of it earning interest. He also referred to another feature of the evidence, namely an email that this appellant had sent afterwards which suggested that the aircraft might be used in the future for drug dealing. The email read:

"I'm sure there's plenty of use for a four-tonne cargo GI down in that part of the world. Know what I mean."

Whether that was intended as a joke or not, it clearly shows that he did associate those with whom he was dealing with nefarious activities in South America.

11. Today, Mr Clegg QC on behalf of the appellant has sought to suggest that there was an insufficient basis for saying that there was reasonable cause to believe that the appellant had benefited from his criminal conduct. He points out that the contract of sale of these three aircraft was to be found on the hard drive of the business computer and accurately recorded the sale of these three aircraft by the company to World Turbo Prop Support Corp (the buyer) in the correct figure of US$700,000. Moreover, there was in existence, although we were only shown it this afternoon for reasons that escape us, a hard copy of that agreement for sale with the correct date on it and signed on behalf of both seller and purchaser. There were other documents that suggested a sale of the self-same aircraft at a much lower figure, US$390,000, to an intermediate company, Gulf Wings FZE. There is an agreement for the sale of the aircraft to that company in the sum of US$390,000 and a sale on for US$700,000 by Gulf Wings FZE to the purchaser. There was a document dated 8th November 2006 confirming that US$310,000 had been received by Gulf Wings as settlement of monies due in respect of the sale of the self-same three aircraft.
12. We do not have to reach any concluded view as to whether the appellant's explanation of these documents removes other inferences which might be drawn from the circumstances of the sale and in particular the carrying back of that very substantial amount of cash once this appellant had met what must have appeared to him to be rather shady purchasers of these three aircraft. Suffice it to say that the judge was on those grounds entitled to conclude, in our view, that there was reasonable cause to believe that the appellant had benefited from his criminal conduct.
13. The next and to our mind important feature of this case was whether the prosecution could establish that there was a real risk that this appellant would dissipate his assets so that there would not be sufficient to meet a confiscation order. Any such confiscation order would not of course be limited to the value of the aircraft, but might be in respect of all his assets if they represented a lifestyle coming within section 10 of the 2002 Act. But the logically prior question is not as to the amount in which the restraint order should be made, but whether there was established a real risk of dissipation. The prosecution were entitled to rely as a feature tending towards proof of a risk of dissipation the very fact of dishonesty which founded the reasonable cause to believe that he had benefited from his criminal conduct. Clearly where there are grounds for suspecting dishonesty those self-same grounds might afford the basis of a real risk of dissipation. If authority is needed for so self-evident a proposition it can be found in the decision of the Court of Appeal, Civil Division, in Jennings v CPS [2005] EWCA Civ 746. In that case, Laws LJ said that where there were accusations of dishonesty the risk of dissipation will generally speak for itself - see paragraph 55. With greater precision, Longmore LJ pointed out that in a case where dishonesty is charged there will usually be reason to fear that assets will be dissipated but, he pointed out, if no dissipation has occurred over a long period, particularly after a defendant has been charged, the prosecutor should explain why dissipation is now feared - (see paragraph 61). If there has been a delay between charge and the date of an application then it will be incumbent on the Crown to explain why dissipation was initially not seen as a major risk - (see paragraph 65). The case therefore is important not only in establishing that an inference may be drawn from the very allegation of dishonesty, but also the importance of not overlooking the need for the Crown to establish a real risk of dissipation. We repeat that absent such a risk being established there can be no justification for any interference with property which belongs to a citizen whose rights are protected by article 1 of the first protocol.
14. In the instant appeal the appellant points out that from the date of arrest in May 2007 until the application was made ex parte and was granted in October 2007, no attempt whatever was made to remove the assets from the reach of the prosecution. There is no basis for any suggestion of an attempt to dissipate them. Thereafter there was further delay following a second series of interviews in November 2007 of six weeks before the application was made and even thereafter a further delay of two weeks from the swearing of Miss Ansell's statement.
15. Thus there was a clear opportunity from the time when the appellant was aware of the interest of the prosecuting authorities for him to dissipate his assets. That opportunity was not taken. But the matter does not stop there. Once the order was made and he was aware of it, he was required to disclose the full extent of the assets. He did so and complied with it by disclosing the existence of a donor account in which the company had a credit balance in excess of US$1 million. Not only had he not sought to dissipate any of the finances within that account, but he had disclosed its existence, it being previously unknown to the prosecuting authorities. Furthermore, once the order was granted it was discovered that it had been made wholly without justification, also in respect of the assets of the company of which this appellant was the managing director, a majority shareholder. Once that mistake was discovered the restraint order was varied by consent on 26th November 2007 so that the company's assets were removed from the order. Since he was the managing director and majority shareholder of that company it would have been all too easy for him to take the opportunity of removing at least a proportion of the credit balance in excess of US$2 million which the company held. On the contrary, he did nothing of the sort. This is consistent with the fact that the company had traded honestly so far as one knows, with full disclosure both of company accounts and accounts to the appropriate Revenue authorities successfully for a period of some 14 years.
16. There might be explanations as to why this appellant had not taken advantage of that opportunity to dissipate his assets had there been a real risk that he would do so, but at least that explanation ought to have been carefully set out and considered. The most that was said on behalf of the prosecution was that by the time of the third or fourth interview this appellant might have appreciated that the investigation was more serious than he had hitherto suspected, although it is difficult to see why. The main source of information was an interview and confession of a Mr Armegual in the United States. At no stage has that man, despite his having given evidence to the prosecution, implicated this appellant.
17. Whatever the strength or otherwise of this feature, it called for rebuttal or resistance by the prosecution to explain why there was a real risk of dissipation notwithstanding the opportunity that had clearly been presented to this appellant to dissipate his assets. The judge dealt with the matter in his judgment by finding as a fact that the appellant had indeed had an opportunity to dissipate his assets of which he had not attempted to avail himself. He found that as a fact at page 6F. Nevertheless, having regard to the evidence of dishonesty and one other feature to which we shall return, he took the view that there was a reasonable fear that the assets would be dissipated.
18. The feature on which he relied was, he said, a lack of candour in the first interview. It was said that the appellant had not revealed that he knew that the deposit was going to be paid in cash and further that the "officers had gained intelligence" that the appellant had purchased a cash counting machine to take with him to Spain. It now emerges, and has never been gainsaid by the prosecution, that the appellant himself at the first interview disclosed the fact that he knew that part of the payment for the aircraft was to be in cash, although he said that it often turns out that that would not be the case when a purchaser appears to conclude the deal. Secondly he revealed in interview that once he appreciated that it was correct that part of the purchase price would be paid in cash he had required his company to purchase and send by courier a cash counting machine to Madrid where the deal was to be concluded. It was therefore quite wrong to suggest he had been guilty of a lack of candour in the interview and misleading to suggest that it was the police who had discovered by intelligence that a cash counting machine had been purchased. It was the appellant himself who had revealed that. That is no criticism of the judge who did not have the interviews before him and certainly no criticism of Mr Bird, who was not counsel before the judge and certainly did not have the opportunity to go through the interviews. Indeed it appears neither the appellant nor the prosecution before His Honour Judge Bursell QC had had that opportunity. So part at least of the basis upon which the judge appears to have founded his conclusion that there was a real risk that the assets would be dissipated goes, on analysis of the facts as they are now revealed to us. Furthermore, in the light of the facts that we have identified of this appellant not taking the opportunity with which he was presented to dissipate his assets, it was incumbent both on the prosecution and the judge by way of reasoning to explain how it could be said that there was a real risk that he would dissipate the assets in the future when he had had every opportunity to do so in the past. In our view no such explanation has ever been forthcoming; no reasoning has been advanced upon which such a conclusion could be based.
19. The powers of this court on appeal have been helpfully explained by Mr Bird. We have power to make the order that we believe appropriate pursuant to sections 43(2) and (3). The Criminal Procedure Rules 73.7.3 are based upon our jurisdiction to allow an appeal where we take the view that the decision of the Crown Court was wrong. Of course in many cases a Crown Court Judge will have a better opportunity than this court to evaluate evidence, but it should be noted that in a case such as this the only proper safeguard of the rights of one whose property is to be interfered with by a restraint order is careful scrutiny by the judge both on the ex parte hearing and on any application to vary or discharge not only of the issue as to whether there is reasonable cause to believe that the alleged offender has benefited from his criminal conduct, but whether there is a real risk that the assets will be dissipated. It should be noted that in the case on which the prosecution founded its argument, Jennings, the application was made after the subject of the restraint order had been prosecuted and indeed during the trial. Here, where a citizen has not even been charged and still has not been charged, it is particularly important to see that there is a proper basis for such a serious order.
20. In the instant appeal Mr Clegg has relied upon the disastrous consequences not just to the appellant personally but also to his business as a result of the order being made. The company depends upon, as one would expect, credit and financial facilities from banks which are no longer available whilst such a restraint order is in place. That of itself is not and should not be a ground for allowing this appeal if the conditions and basis upon which such an order may properly be made have been established. But those facts do serve to demonstrate how serious it is to make an order such as this and therefore the obligation upon any judge either considering it ex parte or on an application to vary or discharge to see that those bases are not only established but that there are goods reasons for making and reaching the conclusion that they have been established. After all, the giving of reasons for making such a decision not only tells the subject of such an order why they have been made, but afford a powerful discipline to the judge who is obliged to consider whether the grounds have been established. We note that pursuant to the Criminal Procedure Rules 16.61.3 such applications are to be dealt with without a hearing unless the Crown Court orders otherwise. But we wish to stress that the fact that they are to be dealt with without a hearing does not in any way obviate the need for careful scrutiny by the court on an ex parte application, lest rights enshrined in the European Convention of Human Rights should be infringed. In the instant case it is by no means clear why it was that the judge on the ex parte application made this order notwithstanding the fact that there had been an opportunity to dissipate the assets which had not been taken.
21. There was no justification for the conclusion that there was a risk that this appellant would dissipate his assets, having regard to the history of his failure to take advantage of the previous opportunity. In those circumstances we will allow this appeal.
22. So far as the cash recovered, that is already protected under a Magistrates Court order, as we understand it, and the rest of the order will therefore be discharged.
23. MR CLEGG: My Lord, I apply for costs in this court and the court below.
24. LORD JUSTICE MOSES: Do they get sent off for taxation?
25. MR CLEGG: Yes.
26. LORD JUSTICE MOSES: Who do they come from?
27. MR CLEGG: From or to?
28. LORD JUSTICE MOSES: From. Is it central funds?
29. MR CLEGG: The parties, as I understand it.
30. LORD JUSTICE MOSES: Yes, Mr Bird?
31. MR BIRD: My Lord, there were, I think, three grounds of appeal upon which only one succeeded. So in my submission my learned friend if he is to have costs of the appeal they should only be one-third and should not include the costs of the witness statement which form no feature of your Lordships' judgment. As far as the overall costs are concerned, there will be of course the costs below as well so I would ask they go off for taxation.
32. LORD JUSTICE MOSES: Who is the order made against?
33. MR BIRD: The order will be made against the prosecutors, so the Revenue and Customs Prosecution Service.
34. LORD JUSTICE MOSES: Yes.
35. MR CLEGG: Does my Lord want to hear me about whether the order ought to exclude the witness statement, or not? I think my learned friend suggested that you should order costs against the Revenue and Customs except for the costs of the witness statement.
36. LORD JUSTICE MOSES: One moment. (Pause) What do you want to say about the witness statement?
37. MR CLEGG: My Lords allowed me to refer to the witness statement. It included largely material that was before the judge at first instance and therefore was part of the material that he had before him. It is in our submission an important part of the background of the case. I anticipate my Lords looking rather surprised if I had come along here and not told you what the impact the order had.
38. MR JUSTICE DAVID CLARKE: If you are getting your costs of the court below as well then if this court did not cover it that would, but in fact it was only done after.
39. MR CLEGG: It was in fact only done after, my Lord yes, because we were short of time before.
40. LORD JUSTICE MOSES: You can have all your costs, to be taxed if not agreed.
41. MR BIRD: Your Lordship should say the appeal and the proceedings below.
42. LORD JUSTICE MOSES: Of the appeal and the proceedings below.