England and Wales Court of Appeal (Criminal Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CRIMINAL DIVISION)

		Royal Courts of Justice Strand, London, WC2A 2LL
		17/07/2008

Recorder of Nottingham :

1. On the 27^th October 2005, in the Crown Court sitting at Bradford, the respondent Parvinder Singh Panesar, pleaded guilty to count 2 on an indictment which charged him with conspiracy to supply drugs of class A. He was sentenced to 3½ years imprisonment, the judge first postponing the confiscation proceedings and setting a timetable that was agreed by the parties but subsequently varied. On the 20^th September 2007, HH Judge Benson made a confiscation order against the respondent in the sum of £30.687.00, £4,280.00 to be paid within 28 days and the balance to be paid within 6 months. This order was substantially below the sum sought by the Crown. The prosecutor now appeals under section 31 of POCA with the leave of the single judge.
2. It is accepted that the offence to which the respondent pleaded guilty triggers the confiscation provisions of the Proceeds of Crime Act 2002. The Crown asked the court to proceed to confiscation under section 6 (3) (a) of the Act and it was therefore incumbent on the court to hear a confiscation application.
3. The Crown also considered it appropriate for the court to proceed under section 6(4) of the Act as it was believed that the respondent had a criminal lifestyle. No issue was taken with this. The offence to which he had pleaded guilty is defined in Schedule 2 of the Act as a "lifestyle offence". The court had to decide therefore whether he had benefited from his general criminal conduct whether occurring before or after the passing of the Act or whether property constituting a benefit from conduct was obtained before or after the passing of the Act (s. 76 (2))
4. It therefore fell to the judge to determine the answer to three questions: (1) Has the offender benefited from criminal conduct? (2) If so, what is the value of the benefit he has so obtained. (3) What sum is recoverable from him?
5. As the House of Lords has recently underlined, May [2008] UKHL 28 these are separate questions calling for separate answers and the questions must not be elided. In answering these questions the court must first establish the facts as best it can on the material available, relying as appropriate on the statutory assumptions and, of course, in many cases the factual findings will be decisive.
6. The statutory assumptions are to be found in section 10 of the Act. Section 10 provides:-

"10. Assumptions to be made in cases of criminal lifestyle.

(1) If the court decides under section 6 that the defendant has a criminal lifestyle it must make the following four assumptions for the purpose of –

(a) deciding whether he has benefited from his general criminal conduct, and

(b) deciding his benefit from the conduct.

(2) The first assumption is that any property transferred to the defendant at any time after the relevant date was obtained by him –

(a) as a result of his general criminal conduct, and

(b) at the earliest time he appears to have held it.

(3) The second assumption is that any property held by the defendant at any time after the date of conviction was obtained by him –

(a) as a result of his general criminal conduct, and

(b) at the earliest time he appears to have held it.

(4) The third assumption is that any expenditure incurred by the defendant at any time after the relevant day was met from property obtained by him as a result of his general criminal conduct.

(5) The fourth assumption is that for the purpose of valuing any property obtained (or assumed to have been obtained) by the defendant, he obtained it free of any other interests in it.

(6) But the court must not make a required assumption in relation to particular property or expenditure if –

(a) the assumption is shown to be incorrect, or

(b) there would be a serious risk of injustice if the assumption were made.

(7) If the court does not make one of more of the required assumptions it must state its reasons.

(8) The relevant date is the first day of the period of six years ending with –

(a) the date when proceedings for the offence concerned were started against the defendant, or

(b)…"

It was agreed that the relevant date in this case is the 11^th November 1998.

7. The respondent had pleaded guilty on a basis. He accepted that he had driven one of his co-accused from Leeds to Bradford on a few occasions in order for his co-accused to deal in class A drugs. He also accepted that he had stored about 1 kilogram of heroin in his home on behalf of his co-accused for which he was paid. He was also engaged in driving his co-accused to a meeting with third person where drugs were supplied to his co-accused. He then assisted in bagging them up. The Crown suggested that he was minimising his role but there was no substantial challenge to it. The respondent was previously a man of good character whom the judge described as having a hard working lifestyle. Unfortunately for the respondent, the offence to which he had pleaded guilty meant that he also had a criminal lifestyle (section 75 (2) (a)) and the judge was therefore bound to consider making a confiscation order in accordance with the Proceeds of Crime Act 2002.
8. The legislative policy of the 2002 Act and its predecessors is now very clear. Many decisions of this court have spoken of the draconian nature of the legislation. In Glatt [2006] EWCA Crim 605, Tugendhat, J, giving the judgment of the court, said of the Criminal Justice Act 1988

"A confiscation order:

(1) is a penalty, and is a measure to which Article 1 of Protocol 1 is applicable;

(2) is designed to deter those who consider embarking upon criminal conduct;

(3) is designed to deprive a person of profits received from criminal conduct and to remove the value of the proceeds received from criminal conduct from possible use in criminal conduct;

(4) is designed essentially to impoverish defendants, not to enrich the Crown"

These sentiments apply equally to the 2002 legislation. see, for example, Nottingham CPS v. Rose [2008] EWCA Crim 239 at paragraph 67 per Richards LJ"

9. The Crown, in its section 16 statement, sought to establish that the respondent had benefited in the sum of £230,850.91, amended from the original £294,399.02. It was conceded that the respondent had assets, valued at the time at approximately £200,000. There was no issue concerning the value of the those assets, although given that a considerable proportion of the same were made up of the equity in his home and shares, there may well have been a diminution of value since the judge had the matter before him. The contest before the judge related to the benefit figure, the respondent seeking to persuade him that his assets did not owe their origin or maintenance to criminal conduct. He sought to explain that his declared earnings as a taxi driver did not represent his sole earnings from that trade and he said that certain cash deposits evidenced in his bank accounts came from either a committee saving fund, the sale of his wife's jewellery or insurance payments. As to his earnings as a self employed taxi driver, those he declared to the revenue were very small. In the 6 years in question his declared income ranged between £5,730 and £8,230. In addition he was in receipt of working tax credit. He told the judge that his earnings as a taxi driver were in fact higher, although he produced no documentary evidence to support what he said. He did, however, call as a witness, a director of the taxi firm for whom he worked in a self employed capacity. This witness, Mr Ghazan Iqbal, told the judge that the respondent worked 6 or 7 days every week and had done so since December 1997 and that in addition to "cash" work he would have been expected to undertake a number of contracts with local schools and social services, for which he would have been paid by cheque one or two months in arrears. Mr. Iqbal was unable to produce any documentary evidence in support (it was at the accountants). He also lent some support to the respondent's evidence that he earned more than he declared to the revenue.
10. The Crown also pointed to a number of transactions in the respondent's accounts suggestive of transfers that could not have come from his legitimate earnings. In relation to these specific sums the judge made the following findings.

i) £3,500 deposited on the 21st January 2000. The respondent's evidence that this represented the accumulation of cash from his general legitimate activities that he paid into his account as a lump sum was not accepted. Accordingly, as he had failed to displace the assumption, this sum formed part of his benefit from criminal conduct.

ii) £5,100 deposited on 31st May 2000. Again, the judge was not satisfied with the respondent's explanation that this represented the proceeds of a successful insurance claim following a car accident. The respondent was unable to produce any documentation or any evidence in support.

iii) £4000 informal savings scheme - 11th August 2001. The respondent asserted that this was the proceeds of a payment out of an informal savings scheme into which he had paid a weekly sum. Again, no cogent evidence was produced in support and the judge found the respondent's evidence unconvincing.

iv) £4,000 payment for jewellery. This payment was stated by the respondent to be the proceeds of sale of his wife's jewellery but no evidence of any kind was produced in support and the judge found that the respondent had failed to displace the assumption that this sum was the proceeds of crime. It is noteworthy that both sums of £4,000 were paid into different accounts on the same date, in the circumstances, a very telling point against the respondent.

v) The judge accepted that the respondent had discharged the burden in respect of his motor car and accepted that its purchase may well have come from the generality of his legitimate income and its value was therefore excluded from the calculation.

11. Certain other matters were not disputed. The value of the drugs found (£9,807) and the cash, tainted by trading in heroin, (£4,280) went towards the benefit as found by the judge. The total benefit figure found was the aggregate of these amounts, namely £30,687. The Crown accepted that some shares belonging to his wife fell outside the period in question and that others had been purchased from legitimate sources.
12. We must now turn to consider those matters which the judge found should not be included in the benefit figure because the Crown's appeal essentially relates to these findings. These fall under two headings which we shall consider separately.

General earnings

13. The judge found that his declared earnings were to be read in the light of the evidence from Mr Iqbal. He also said that he took "judicial notice" of the fact that the sums declared to the Revenue probably did not reflect the totality of the income received. The judge said,

" Taxi driving is a cash business and realistically one must take account, it seems to me, of the fact that people operating cash businesses, reprehensibly, do not always declare their full income for the purpose of taxation."

He went on to fix a "notional" figure of £3,000 per annum over and above his declared income as a taxi driver.

14. This finding is attacked by the Crown. It is submitted that there was no evidential basis for such a finding. Counsel for the Crown referred us to the well known principle enunciated by this court in Walbrook and Glasgow (1994) 15 Cr. App. R. (S) 783 to the effect that an offender can only discharge the burden on him by producing clear and cogent evidence. Vague and generalised assertions, unsupported by evidence will rarely, if ever, be sufficient to discharge the burden on him. The Crown also referred us to the case of Croft (unreported) 1999/06731/Y3 in further support of its submission that the judge had erred in accepting the evidence of the respondent as supported to some degree by Mr Iqbal, that his legitimate earnings were as high as he claimed. Counsel further submits that given the judge's refusal to accept the respondent's evidence in respect of certain specific transactions, he should have looked for supporting evidence in relation to this matter too. Counsel for the respondent submits that the judge was entitled to find as he did and that his finding is not based upon vague and generalised assertions. The judge was entitled to find that the respondent had a hardworking lifestyle, it was appropriate and right to take into account his previous good character and the evidence of Mr Iqbal. There was a proper evidential basis for the judge's finding.
15. We regard the finding of the judge in this respect as generous to the respondent. On the other hand, had he expressed himself differently, it may have been impossible for the Crown to seek to undermine his conclusion. We have decided, with some little trepidation, that the judge was entitled to make the finding that he did in relation to the respondent's general legitimate income. There was, just, an evidential base and his reference to taking judicial notice of the presumed practices of cash businesses should really be regarded as something which renders plausible the evidence of the respondent and Mr.Iqbal. Accordingly, we are not minded to interfere with this aspect of the judge's decision, although each of us might well have reached a different conclusion from him. His findings were within his discretion on the available evidence. We dismiss this aspect of the Crown's appeal.

The Respondent's home

16. We turn now to the issue of the respondent's home. It is necessary to describe something of its history. The respondent and his wife purchased in 1985 their home at 120 Sherburn Road, Leeds for £21,300 with the assistance of a mortgage advance of £20,250 from Halifax plc. On the relevant day (11th November 1998) there was approximately £16,000 still outstanding on the mortgage. Very little had been paid off in the 13 years since the mortgage was taken out. Between the 12th January 1999 and the 6th June 2002, mortgage repayments totalling some £19,374.75 were made. It is the Crown's case that some of these repayments directly or indirectly represent the proceeds of the respondent's general criminal conduct.
17. The judge found that two payments made to the mortgage account did represent the proceeds of the respondent's general criminal conduct. These were sums of (1) £3,500 paid on the 27th January 2000 and (2) £5,100 paid on the 31st May 2000. The judge specifically rejected the respondent's evidence that these sums came from legitimate sources. These sums, it is accepted, were used to reduce the mortgage on 120, Sherburn Road, Leeds. The respondent then purchased, with his wife, his present property at 104, Montagu Avenue, Leeds. This property was purchased on the 31st May 2002 for £99,950.00. A mortgage advance was obtained from the same bank for £40,000 and the balance was provided by the proceeds of sale of the Sherburn Road property (about £60,000). Although the judge had found that the payments totalling £8,600 were from the proceeds of crime (the respondent having failed to displace the assumption) he nevertheless held that the respondent's equity in his present property should not be taken into account. He said (on page 10 of the transcript):

"when one looks at the reality of this, the proportion of contribution of these sums to the purchase price of the house, when one looks at it in a historical context, are not significant, and that to reflect, as I am invited to do by the Crown, that contribution in saying that the defendant has benefited to the tune of the entirety of the existing equity would be disproportionate and unjust, and I bear in mind not just the requirement of the statute that I act justly in coming to these conclusions, but also I bear in mind the Human Rights Act and the requirement to act proportionately, and in those circumstances, I prefer the argument of [counsel for the respondent] that to follow that line of reasoning would be unjust and disproportionate and that the case here can be distinguished very significantly from the circumstances that applied in the case of Mouldon."

18. The Crown submits that the judge fell into serious error at this point. It is first submitted that the judge, having found that the £8,600 was the proceeds of criminal conduct, was bound to apply that finding when coming to his decision on this aspect of the case. There is no discretion in the matter. Subsection 10 (6) enables the court not to make a required assumption in relation to particular property or expenditure if the assumption is shown to be incorrect or there would be a serious risk of injustice if the assumption were made. Here the judge, in making the assumption that he did, must have concluded that the assumption had not been shown to be incorrect, neither would there be a serious risk of injustice if the assumption were made. In any event, the Crown submits there would be no injustice in regarding the equity in the respondent's present home as the proceeds of crime. The sum found by the judge to be tainted (£8,600) was approximately half of the amount used to pay off the mortgage on the original property. It therefore follows that this payment was a significant payment at the time it was made. Without that payment, there would have been no realistic prospect of the respondent purchasing his present property at the time he bought it. The judge was wrong to conclude that, "in a historical context" the payment was not significant. It was significant, very significant, at the time the payment was made. The significance of proceeds of crime in relation to the value of appreciated property is not to be assessed by expressing the former as a proportion of the latter but by determining whether the proceeds of crime were significant in enabling the criminal to come by the appreciated property. It is also submitted that the judge was wrong in seeking to distinguish Mouldon [2004] EWCA Crim 2715. While the facts are different, in that in Mouldon, the tainted funds were used as the deposit to purchase the property in question, the underlying principle applies equally to this respondent's case. As Stanley Burnton, J. (as he then was) stated:

"In circumstances where the value of the property in the hands of the defendant exceeds the cash investment he made in it, because the value of that property has risen, we see nothing unjust or even arguably unjust in the value of the property being taken to be the payment or reward of the defendant made in connection with drug trafficking. It has frequently been said that the legislation is draconian. Its object is to deprive those involved in drug trafficking of the benefit of drug trafficking and in a case such as that we are considering, where a deposit has been made of cash monies in order to buy a property, we see nothing unjust or arguably unjust and no risk of injustice if the property which is acquired, which we remember is not the deposit but the equity in the property if there is a mortgage, is taken to be the reward of drug trafficking. It is accepted that the assumptions do apply and the property is assumed and therefore taken to be a payment or reward in connection with drug trafficking, the property is to be valued as at the date of the proceedings resulting in the confiscation order...In our judgment it is neither unjust nor surprising that where a property increases in value, the benefit to the defendant is a sum that may be a multiple of the original deposit."

19. Counsel for the respondent sought to repeat the arguments he put before the judge in the court below. He also submitted that on the judge's findings as to the respondent's general level of legitimate income and the assets he held which were not tainted, he could have paid off the mortgage without using tainted funds. But the fact, as found by the judge, is that he did use tainted funds. In our judgment, it is fallacious to seek to argue that because on the judge's findings that there was sufficient available to make payments towards the mortgage from untainted funds, the provisions of the Act should not bite. The legislative policy is plain. This respondent used tainted funds to pay off a substantial portion of his mortgage on his previous home. He then used the proceeds of sale of that property to purchase his present home. In our judgment, it was not open to the judge to make the assumptions that he did and then fail to apply them in making his decision. It was not open to him to avoid the finding contended for by the Crown by declaring that it would be disproportionate and unjust to do so. He was right to make the assumptions that he did in relation to this sum of £8,600 but wrong to fail to apply that finding to the equity in the respondent's present property.
20. Counsel's fall back position was to invite us to apply the decision in Ginwalla [2005] EWCA Crim 3553 where the judge at first instance took equitable interests rather than market price in order to avoid the risk of injustice, and he took into account only a proportion of the benefit as being attributable to the criminal conduct. This court did not interfere with that finding on the defendant's appeal (which was dismissed). There was no appeal by the Crown in relation to that particular finding or, indeed, any finding. We do not feel it appropriate to depart from the principle enunciated in Mouldon. The judge having made the assumptions that he did should have applied them to the whole of the equity in the property.
21. We allow the Crown's appeal in relation to the equity in 104, Montague Avenue, Leeds which we were told during argument was, at the relevant time, about £150,000. If that is correct, the benefit must be increased from £30,687 to £180,867.00 or to whatever sum the precise calculation establishes. To that extent, the Crown's appeal is allowed. We shall deal with any consequential orders when this judgment is handed down.
22. Appeal allowed.
23. The substituted figures for the purposes of confiscation are:

(1) Benefit : £174,087;

(2) Available amount : £174,087;

(3) Confiscation Order : £174,087.

24. The sum of £174,087 is to be paid by 31 July 2009, failing which the term of imprisonment is 18 months.

Lord Justice Maurice Kay

17 July 2008