England and Wales Court of Appeal (Criminal Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM LEEDS CROWN COURT
His Honour Judge Ibbotson

		Royal Courts of Justice Strand, London, WC2A 2LL
		11/12/2008

Lord Justice Stanley Burnton:

1. This is an appeal, brought with leave of the full court, from a confiscation order made by His Honour Judge Ibbotson in Leeds Crown Court on 16 October 2007. The Appellant had previously pleaded guilty to offences of possessing criminal property, concealing criminal property and converting criminal property. He had also pleaded guilty to obtaining a passport by a false statement, and it was evident that, following his arrest on the other offences, he had applied for that passport with a view to absconding to Spain where he had purchased a property. He had been sentenced to a total of 3 years imprisonment. The amount of the confiscation order was £287,398.42, and a period of 3 years' imprisonment was fixed to be served in default of payment within 6 months.
2. The detailed facts of the offences which led to the confiscation order that is the subject of this appeal are largely irrelevant to the issues before us. They included the obtaining by the Appellant of the sum of some £94,000 in cash, retrieved by the police from the boot of his car, and some £47,640 retrieved from bags under the bed of a co-defendant. All the money had higher than average traces of drugs, and the obvious inference was that they were the proceeds of dealing in illegal drugs.
3. It was common ground on the hearing of the application for a confiscation order that for the purposes of the Proceeds of Crime Act 2002 the Appellant had a criminal lifestyle. In consequence, the presumptions in section 10 applied. It is as follows:

"10 Assumptions to be made in case 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 day 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 or more of the required assumptions it must state its reasons.

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

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

(b) if there are two or more offences and proceedings for them were started on different days, the earliest of those days.

(9) But if a confiscation order mentioned in section 8(3)(c) has been made against the defendant at any time during the period mentioned in subsection (8)–

(a) the relevant day is the day when the defendant´s benefit was calculated for the purposes of the last such confiscation order;

(b) the second assumption does not apply to any property which was held by him on or before the relevant day.

(10) The date of conviction is–

(a) the date on which the defendant was convicted of the offence concerned, or

(b) if there are two or more offences and the convictions were on different dates, the date of the latest."

4. In 1999 the appellant had been convicted of importation of Class A drugs; he had been sentenced to 7 years' imprisonment and a confiscation order made on 3 May 2000. In consequence, the relevant day, for the purposes of section 10, was 3 May 2000, the date of that first confiscation order.
5. In his judgment, His Honour Judge Ibbotson comprehensively rejected the credibility of the appellant. He gave cogent, indeed unanswerable, reasons for doing so. That part of his judgment is not challenged. His finding on credibility is an important factor in considering the issues in this appeal.
6. There are three grounds of appeal for which leave has been given: grounds 1, 2 and 4.

Ground 1: Tamworth Road

7. This ground relates to the appellant's remortgage in 2002 of a property at 31 Tamworth Road, York. The mortgagee was Manchester Building Society, and the amount of the loan was £57,000. The property itself had been purchased by the appellant before the relevant date, and so did not fall to be taken into account under section 10. The moneys obtained on remortgage, however, were eligible. There was no oral or written witness evidence from the Building Society, but on its file was a set of accounts purporting to show that the Appellant had a net income of £31,000 in the year ended 28 February 2002 when in fact he was in prison. In other words, the accounts were false. There was no specific evidence that the false accounts had been produced by or at the instigation of the Appellant or that he had submitted them to the Building Society. The judge held that the remortgage amount of £57,000, subject to a deduction of £22,000 paid by the Appellant as a deposit on his purchase of another property, 40 Pullman Court, was to be included in the amount of his benefit from his criminal conduct.
8. The Appellant's case was that the mortgage moneys were not obtained by any criminal conduct, but from a legitimate and lawful source, namely the Building Society, and their obtaining was supported by the mortgage and the rent paid by a tenant or tenants in relation to that property. The judge said:

"The starting point is that the transfer of that £57,000 is assumed to be a benefit from the Defendant's general criminal conduct. The Defendant says that the loan was supported by an asset, that is the house itself, brought before the relevant date and by rental income from the property.

In closing, Mr Krolick boldly asserted that once it was established that the moneys came from a legitimate source, in this case the Manchester Building Society, that was conclusive evidence of the legitimacy of the benefit. Leaving aside the matters which in all probability induced the Manchester Building Society to lend £57,000 to this Defendant, the entire background is consistent with the Defendant, a convicted drugs importer and money launderer, supporting this transaction by means of a criminal lifestyle. Mr Krolick's submission does not, with respect, bear scrutiny. There is no evidence on which I can find that the assumption in respect of this £57,000, which is a transfer for the purpose of the first assumption, is incorrect or that it would be unjust to make it.

The Prosecution gives credit for £22,000 to be claimed in respect of 40 Pullman Court. I therefore assess the benefit in respect of 31 Tamworth Road at £35,000."

9. As we read the judge's reasons, he was saying that, by reason of the assumption in section 10(2), it was to be assumed that the Appellant obtained the mortgage moneys as a result of his general criminal conduct, and that the evidence of the mortgage was insufficient to rebut the assumption.
10. Mr Krolick's skeleton argument reiterates the contention that the remortgage moneys should not have been included in the benefit from the Appellant's general criminal conduct because they came from a legitimate source. However, the legitimacy of the source of moneys is not sufficient to displace the assumption. What must be shown in addition is that the property in question, here the remortgage money, was obtained lawfully, and that the Appellant's criminal lifestyle was irrelevant to its obtaining. Because of his general lack of credibility, the Appellant failed to show that the moneys had been obtained lawfully. We see no fault in the judge's reasoning.
11. Moreover, the false accounts made it virtually impossible for the Appellant to displace the statutory assumption. The judge was entitled to infer in the circumstances that the accounts had been submitted by the Appellant or on his behalf. The suggestion that they were made up and submitted to the Building Society without his participation, at a time when, because of his detention in prison, he had no earnings, is simply incredible. In these circumstances, it is clear that these moneys were obtained by his criminal conduct. We do not think this conclusion is affected by the absence of evidence that the Building Society relied on these accounts: it is evident that they would have done so. They were submitted to the Building Society for a reason, namely to induce it to make the remortgage advance. On an application for a confiscation order under the Proceeds of Crime Act 2002, the court is not required to set aside its common sense or to assume that financial bodies act uncommercially. The judge took this into account in deciding that the Appellant had failed to show that the proceeds of the remortgage were not a benefit from his general criminal conduct. He was entitled to do so.
12. Mr Krolick submitted that the judge had wrongly reversed the onus of proof, placing a burden on the Appellant to establish that he had lawfully obtained the mortgage moneys, instead of requiring the prosecution to establish that the moneys were unlawfully obtained. However, the clear effect of the assumptions under section 10 is to place the onus of proof on the defendant. In effect, the assumptions are presumptions which may be displaced if the defendant satisfies the requirements of subsection (6)(a) or if subsection (6)(b) applies.
13. Mr Krolick also submitted that the Appellant did not in fact obtain any of the remortgage moneys. Out of the remortgage advance of £57,000, £35,000 was used to redeem an existing mortgage and £22,000 used as part payment for the acquisition of a second property, Pullman Court. In accordance with normal conveyancing practice, the moneys would have been paid to the Building Society's solicitors who would have paid it on to the mortgagee whose mortgage was redeemed and to the vendor of Pullman Court. Accordingly, none of the remortgage moneys came into the hands of the Appellant. Secondly, he submitted that, on the basis that the remortgage was obtained by fraud, the remortgage moneys had been obtained as a result of a specific criminal offence and not from the Appellant's general criminal conduct.
14. The first of these issues was not raised in the confiscation hearing, and was therefore not the subject of evidence or a relevant finding by the judge. We do not consider it right to permit it to be raised now. In any event, it is bad in law. The remortgage moneys were used, at the direction of the Appellant, to discharge his indebtedness under the original mortgage of Tamworth Road. The fact that the Building Society's solicitors were under an obligation to their principal so to pay the moneys is irrelevant: they were obtained by the Appellant to satisfy his existing debt, and he thereby received a benefit.
15. The second point is equally bad. "General criminal conduct of a defendant" is defined by section 76 as "all his criminal conduct". It therefore includes any specific offence committed by him.
16. The judge reduced the benefit figure under this head by the sum that was used to acquire Pullman Court in order to avoid double counting. It is immaterial to the determination of benefit whether this deduction was appropriately made under this head or made when considering the benefit from the Appellant's acquisition of Pullman Court, and we do not comment on that. Clearly, the deduction had to be made at some stage, and was justified by section 10(6).
17. It follows that this ground of appeal fails.

Pullman Court

18. This property was purchased by the Appellant using the sum of £22,000 derived from the remortgage of Tamworth Road. In addition, the Appellant obtained a mortgage advance of £85,000, also from Manchester Building Society, secured on Pullman Court, which went in part payment of the purchase price.
19. It is accepted that the property was rightly taken into account. The issue on this appeal is as to the value of the benefit. The market value of the property at the date of the hearing before the judge was £125,000. There remained the mortgage securing the debt of £85,000. The Appellant submits that the value of the benefit should have been assessed as £40,000, that is, the value of the equity of redemption. The judge valued the benefit obtained at the market value of the property without any deduction on account of the mortgage.
20. Both the remortgage of the Tamworth Road property and the mortgage on Pullman Court had been obtained after the submission to the Building Society of the false accounts to which we have already referred. It is clear from the judge's judgement that he rejected the Appellant's case that he was not party to any deception in relation to the submission of those accounts. It follows that the Appellant failed to displace the assumption required by section 10 in relation to the mortgage moneys as a whole. It similarly follows that the entirety of the value of Tamworth Road was rightly treated as benefit. Thus this case differs from cases, such as Walls [2002] EWCA Crim 2456, [2003] Cr App R (S) 31, in which it is shown that a property has been obtained using mortgage moneys that have been lawfully secured.
21. As he did in relation to Tamworth Road, Mr Krolick submitted that the Appellant had not benefited from the mortgage moneys, which had been paid direct to the vendor. That ignores the fact that the mortgage moneys were used, at his direction, to satisfy his indebtedness to the vendor. They were obtained by him and were a benefit received by him.
22. Our conclusion that the judge correctly assessed the benefit arising from the Appellant's purchase of Pullman Court is consistent with the statement by this Court in Nadarajah [[2007] EWCA Crim 2688:

"21. We reject the submission that mortgage money, if on investigation there was a mortgage, was not obtained by the appellant because, at his request and following usual practice, it was probably paid by the mortgage company direct to the vendor. Moreover, on the statutory procedure, there is no need to prove a mortgage fraud. The appellant obtained, on his own evidence, a substantial sum of £540,000 and, unless shown to be incorrect, the assumption that it was obtained as a result of his general criminal conduct applied."

Ground 4: inadequate reasons for assessing the available amount as exceeding the value of the Appellant's identified assets

23. Under this ground of appeal, the Appellant submits that the reasons given by the judge for finding that the available amount was no less than the benefit were inadequate. The total benefit was assessed at £287,398.42. The value of the property of the Appellant identified by the prosecution was only £165,165.90. The calculation of the latter amount took into account the outstanding mortgages on 31 Tamworth Road and Pullman Court. Hence it is argued that the amount of the confiscation order should have been only 165,165.90.
24. Section 7 of the Act, so far as is relevant, is as follows:

"(1) The recoverable amount for the purposes of section 6 is an amount equal to the defendant's benefit from the conduct concerned.

(2) But if the defendant shows that the available amount is nil than that benefit the recoverable amount is --

(a) the available amount, or

(b) a nominal amount, if the available amount is nil."

Thus it is for the defendant to show that the available amount is less than his benefit.

25. Undoubtedly, it was for the judge to give adequate reasons for his conclusion. The reasons he gave were brief in the extreme. He said:

"The evidence produced by the defendant does not satisfy me that the available amount is less than the certified benefit and it seems to me therefore that there must be a confiscation order in the amount of the benefit as already certified by me."

26. Looked at alone, these reasons would be inadequate. However, looking at the judgement as a whole, it is clear, as we have said, that the appellant's credibility was comprehensively rejected, with the result that he failed to displace the assumption required by the Act. The judge gave adequate, indeed cogent, reasons for rejecting the Appellant's entire credibility. His criminality was found to be pervasive. On a fair reading of the judgement, the reasons for the judge's finding are adequate and clear.
27. In those cases in which the defendant satisfies the onus under section 7(2) by showing that the available amount is less than his benefit, the inclusion of the proceeds of a mortgage in his benefit will cause no injustice, since the concomitant debt to the mortgagee will be taken into account in assessing the available amount. This is either because it is the equity of redemption that is considered to be the free property of the defendant (see section 9(1)(a)) or, if the unencumbered interest of the defendant is regarded as his free property, because the market value of the mortgagee's interest (see section 79(3)) will normally be the amount due on the mortgage. In the present case, the Appellant did not satisfy that onus. There is no injustice in this: essentially, the judge was not satisfied that the assets of the Appellant that he had disclosed or the prosecution had identified were in fact the entirety of his available assets.

Conclusion

28. None of the grounds of appeal for which leaves has been given has been established. For the reasons given above, the appeal is dismissed.