England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL
CRIMINAL DIVISION

		Royal Courts of Justice Strand London, WC2A 2LL
		Tuesday, 11th March 2008

1. MR JUSTICE GROSS: On 23rd March 2007 before the West Dorset Magistrates' Court the appellant, Ian Farquhar, now aged 60, pleaded guilty to three charges of making a false statement to obtain benefit. On 7th June 2007 in the Crown Court at Weymouth and Dorchester, before His Honour Judge Boothman, the appellant was sentenced to 9 months' imprisonment suspended for 12 months, together with various other requirements and ancillary orders. On 20th September 2007 before His Honour Judge Beashel a confiscation order was imposed in the sum of £26,644.33 with a period of 15 months' imprisonment in default of payment. The appellant appeals against the confiscation order only following the grant of a certificate by His Honour Judge Beashel.
2. The facts are briefly these. The appellant had been claiming social security benefits since 1996. Between 27th July 1997 and 10th October 2005 the appellant received benefits totalling the sum to which reference has already been made, namely £26,644.33 composed of Job Seekers' allowance in the sum of £20,355.77, Income Support in the sum of £843.17 and council tax benefit in the sum of £5,445.39.
3. In the course of doing so the appellant completed four claim forms for Job Seekers allowance and Income Support and in each case confirmed his capital assets were less than £3,000. Assets over £3,000 had the effect of reducing entitlement to benefit and, if the assets were over £8,000 the entitlement to benefit ceased. The appellant also completed 11 claim forms for council tax benefit and on each confirmed his savings were under £3,000. In due course benefit fraud investigators obtained evidence to show that from 27th July 1997 to 10th October 2005 the appellant had assets of a substantially greater value then the permitted amounts.
4. The appellant was interviewed on 12th October 2005. He admitted not fully declaring his capital assets and stated he did not want to do so as he knew he would have lost his entitlement to benefit.
5. The essence of the concern in this case has arisen because the applicant, prior to being sentenced, repaid, voluntarily, the minimum sum of benefit which he had received, namely £26,644.33. Against that background the question was raised: was it unjust to go on to make a confiscation order?
6. On the basis of the skeleton arguments from counsel now before this Court, there would seem to have been some doubt about what happened when the appellant made his voluntary payment before the initial sentencing hearing. For the appellant, it is now said that the prosecutor's request for a compensation order was withdrawn. Mr Hinton, who represented the appellant today and on the confiscation hearing, however, has fairly said that the appellant was aware that confiscation proceedings were pending. For the Crown, it is said that the sum voluntarily repaid was to be treated as compensation and that it would pursue the application for confiscation regardless of the voluntary payment. At all events it would appear that prior thereto the parties or departments out of pocket had not instituted civil proceedings and there was thereafter no question of them doing so. Nor manifestly was there any agreement that the appellant's voluntary payment was to be taken into account, and again, fairly, Mr Hinton does not contend otherwise.

In his judgment of 20th September 2007 His Honour Judge Beashel said this. Prior to being sentenced, the appellant had repaid the sum of £26,000-odd, the minimum benefit which had accrued to him. The Crown applied for a confiscation order in that sum. The Crown submitted that the court had no discretion on the matter and was obliged to make the orders sought. The learned judge recorded the defence assertion that section 71 of the Criminal Justice Act 1988 was incompatible with Article 6(1) of the European Convention on Human Rights, as the court was unable to exercise any independent discretion, and therefore the appellant's rights were not being determined by an independent court. Money paid voluntarily by way of repayment should be excluded when determining benefit. The learned judge concluded that the Crown's argument was soundly based in law and that the court indeed had no discretion and was bound to make the orders sought. The confiscation procedures set out in Part 4 of the Criminal Justice Act 1988 were compliant with the Human Rights Act 1998 and this had been made clear in various authorities, including R v Rezvi [2003] AC 1099. The learned judge could however understand the sense of grievance from the defence: had the appellant not repaid the money and civil proceedings had been issued, then the appellant would have been able to take advantage of section 71(1C) of the Criminal Justice Act 1988 which gave the court the power to make a confiscation order rather than a duty to do so. The appellant was also unable to take advantage of another provision of the same Act, as the value of his assets was such that he had sufficient means to repay the order. The judge concluded that the appellant had repaid the money prior to sentence to present a better case to the sentencing judge and avoid an immediate custodial sentence.

Had the appellant waited until civil proceedings were issued or had the sentencing court been informed that proceedings were to be issued, it was unlikely he would have had to repay double the money he had dishonestly obtained. The learned judge noted the tax cases R v Dimsey & Allen [2000] 1 Cr App R(S) 497, BAILII: [1999] EWCA Crim 2261, together with another authority of which he had been properly informed by counsel for the Crown, in which Revenue & Customs made it clear that they did not seek double recovery in their cases. At the request of both counsel the learned judge granted a certificate for fitness to appeal, in order that the difficult principles relating to applications for compensation orders, where the money had already been paid by the offender, could be determined. A certificate was duly granted by the judge.

So far as concerns the factual background, it is convenient at this point to take note of the second additional prosecutor's statement. In that statement the prosecuting authority contended that it was not unfair to proceed; though matters were difficult to quantify, the appellant had lived off the proceeds of his fraud, so freeing his savings for investment. The £26,000-odd was the minimum likely gain he made and no injustice would be sustained by a confiscation order in that amount, in addition to the £26,000 paid as compensation. As it was tersely but attractively put: he could not, by paying off the principal sum, turn the fraud into an interest-free loan. In any event, the repayment amounted to compensation, whereas the sum sought by way of confiscation would go to the Treasury rather than the parties who were out of pocket.

The matters contained in this prosecutor's statement were addressed in the court below in the skeleton argument prepared by the appellant's solicitor. In particular, it was argued in accordance with an affidavit sworn by the appellant that, had the appellant not been wrongfully in receipt of benefits, he would not have sold his house but would have lived off the interest and capital of his savings. In short, the receipt of £26,000-odd did not enable the appellant to keep his house and profit from the increase in its value over time.

The relevant legislation is that contained in the Criminal Justice Act 1988 (as amended). Taking it as briefly as we can, section 71(1) provides as follows:

"Where an offender is convicted, in any proceedings before the Crown Court or magistrates' court, of an offence of relevant description, it shall be the duty of the court-

(a) if the prosecutor has given written notice to the court that he considers it appropriate for the court to proceed under this section...

(b) if the court considers, even though it has not been given such notice, it would be appropriate for it so to proceed.

to act as follows before sentencing, or otherwise dealing with the offender in respect of that offence or any other relevant criminal conduct."

Section 71 continues as follows:

"(1A) The court shall first determine whether the offender has benefited from any relevant criminal conduct.

(1B) Subject to subsection (1C) below, if the court determines that the offender has benefited from any relevant criminal conduct, it shall then-

(a) determine in accordance with subsection (6) below the amount to be recovered in his case by virtue of the section, and.

(b) make an order under this section ordering the offender to pay that amount.

(1C) If, in a case falling within subsection (1B) above, the court is satisfied a victim of any relevant criminal conduct has instituted, or intends to institute, civil proceedings against the defendant in respect of loss, injury or damage sustained in connection with that conduct-

(a) the court shall have a power, instead of a duty, to make an order under this section;

(b) subsection (6) below shall not apply for determing the amount to be recovered in that case by virtue of this section..."

"(4) For the purposes of this Part of this Act a person benefits from an offence if he obtains property as a result of or in connection with its commission and his benefit is the value of the property so obtained.

....

(6) Subject to subsection (1C) above, the sum which an order made by a court under this section requires an offender to pay shall be equal to-

(a) the benefit in respect of which it is made; or (b) the amount appearing to the court be the amount might be realised at the time the order is made,

(7A) The standard of proof required to determine any question arising under this Part of this Act as to- (a) whether a person has benefited from any offence; or....

(c) the amount to be recovered in his case... shall be that applicable in civil proceedings."

Section 72(5):

"Where a court makes a confiscation order against a defendant in any proceedings, it shall be its duty, in respect of any offence of which he is convicted in those proceedings, to take account of the order before...

(b) making any order involving any payment by him, other than an order under section 130 of the Powers of Criminal Courts (Sentencing) 2000 Compensation Orders...

(7) Where (a) a court makes both a confiscation order and an order for the payment of compensation ... against the same person in the same proceedings; and.

(b) it appears to the court that he will not have sufficient means to satisfy both the orders in full.

it shall direct that so much of the compensation as will not in its opinion be recoverable because of the insufficiency of his means shall be paid out of any sums recovered under the confiscation order."

It may be noted that section 73A legislated for the provision of information by the defendant and for drawing inferences from his failure to do so.

7. In his submissions for the appellant today, Mr Hinton submitted that provisions of section 71 of the Criminal Justice Act 1988 were incompatible with Article 6 of the European Convention on Human Rights because the court did not have an independent discretion to deal with their application. Such a discretion must therefore be read into those provisions. Mr Hinton also pointed to the discretion under section 71(1C). He said that sub-section was Human Rights compliant but the balance of the provisions of section 71 were not. He also briefly made reference to what he said was the initial inconsistent stance of the prosecution.
8. For the Crown, we did not in the event call upon Mr Bartlett, but with reference to his skeleton argument it may be seen that its case proceeded as follows. First, there was no discretion in the making of the confiscation order if the requirements of section 71 of the Criminal Justice Act 1988 were satisfied. Secondly, on the basis of decisions of the highest authority, it was submitted that the Human Rights complaint was misconceived. Thirdly, Mr Bartlett relied on the authority of this court for the submission that if a defendant's assets were sufficient, then both compensation and confiscation could be ordered, so contemplating that a defendant might pay more than the amount of the benefit (see for instance R v Williams [2001] 1 Cr App R(S) 140, BAILII: [1999] EWHC Admin 202 ). Fourthly, section 71(4) bit at the moment the property was obtained; subsequent events were irrelevant, including a subsequent voluntary payment.
9. Mr Bartlett properly drew this Court's attention, as he had drawn His Honour Judge Beashel to the Customs & Revenue practice of not seeking double recovery in their cases; but he said that was in no way determinative of this case. The confiscation order should be upheld.
10. We turn at once to what might be termed the appellant's Human Rights challenge. This argument is, with respect, doomed to fail. In R v Benjafield & Ors [2003] 1 AC 1099 the House of Lords held that the scheme of the Criminal Justice Act 1988 confiscation provisions was compatible with the European Convention on Humans Rights, and hence the Human Rights Act 1999. Confiscation proceedings were part of the sentencing process and did not involve fresh criminal charges. Moreover the legislation did not go wider than necessary to achieve the legitimate aim in the public interest of depriving criminals of the proceeds of their criminal conduct; the provisions of the legislation were not disproportionate to their objective.
11. So far as Mr Hinton focused specifically on the absence of discretion rendering the legislation non-compliant with the requirements of the ECHR, that point too is ill-founded. As explained in R v Mahmood & Shahin [2006] 1 Cr App R(S) 570, [2005] EWCA Crim 2168, there is and remains a judicial discretion to stay the proceedings if what the prosecution are doing amounts to an abuse of process. It is not right to say that there is no discretion, but of course, for this discretion to be exercised, an abuse of process must be shown. In our judgment therefore the human rights complaint fails.
12. Pulling the threads together:

1. As is clear from the terms of the legislation and subject only to the exception if an abuse of process is established, section 71 of the Criminal Justice Act 1988 does not permit any discretion in the making of a confiscation order if the requirements of the section are satisfied.

2. Section 71(4) bites at the time the property is obtained and regardless of subsequent events (see for instance R v Wilkes [2003] 2 Cr App R(S) 105, applying R v Smith [2002] 2 Cr App R(S) 37; see too R v Richards [2005] 2 Cr App R(S) 97). So, by way of examples, subsequent destruction of the property, transfer to a third party, dissipation or police intervention are all irrelevant to the question of whether the defendant has benefited from an offence. If the legislation in this regard is draconian, it is intentionally and justifiably so, given the statutory objective. Against this background, the appellant's submission that his voluntary payment should be deducted from the amount which he is otherwise liable to pay by way of confiscation, requires some cogent justification.

3. The mere fact that the Crown are seeking recovery of a sum greater than that which has been lost is not a ground for bringing a defendant's voluntary payment into account and so reducing the amount for which he would otherwise be liable to pay by way of confiscation order. In particular, such a situation could arise where a defendant, with the resources to do so, is required to satisfy the distinct requirements of compensation and confiscation orders. That a defendant might in such circumstances have to pay twice over, is not an abuse; it is instead a consequence of the fact that "confiscation is not about compensating the loser but penalising the offender" (see [2006] Crim LR 75, page 78 (a penetrating case note by Dr Thomas)); see too R v Williams (supra) and Mahmood and Shahin (supra).

4. In a nutshell, that is what happened here. The appellant's voluntary payment has gone to satisfy the various claims to compensation. That, however, left untouched the appellant's liability to an order for confiscation. As already underlined, the two have distinct objectives.

5. The position might have been different (all would depend on the precise facts) had there been an agreement as to how the appellant's voluntary payment was to be dealt with and had the Crown sought to go behind that agreement: Mahmood and Shahin (supra). It is in such circumstances that questions of abuse may arise; but that is not this case.

6. The practice of Revenue & Customs of not seeking double recovery relates to a different situation and does not assist here.

7. As to section 71(1C) of the Criminal Justice Act 1988, the short answer is that it is simply inapplicable on the present facts. It should not however be assumed that had a discretion such as that found in section 71(1C) been applicable, it would have been exercised as the appellant contends. In this regard the appellant, on the facts, may consider himself lucky that the confiscation order was limited to the sum of £26,000-odd. For our part, given the fact that the receipt of the benefits comprised the receipt of an income producing asset, and given the standard of proof in the legislation, an order in a greater amount could well have been sought - as indeed might have been suggested by the profitability of at least some of the appellant's investments which must have been facilitated by the receipt of the ill-gotten benefits. As was rightly remarked in this case, a fraud cannot be converted into an interest-free loan.

13. We add this: we say nothing to discourage early and voluntary payments to make full restitution in such cases. On the contrary, we echo the observations of the Court in Mahmood and Shahin in encouraging them. In this area there is scope for good sense on the part of all parties, including the prosecution and, in the give and take of compromise, there will be ample benefits in the shape of early payment. But if such payments are to have the effect of reducing sums otherwise due from a defendant in confiscation proceedings, it is essential to give proper attention at the time to the true nature and ramifications of any proposed agreement or bargain. The Crown of course has its own discretion not to proceed, if to do so, in truth involve double recovery and so would be unjust. As it is, there was no such agreement or bargain here.
14. It follows that this appeal must fail and is dismissed. The confiscation order was correctly and justly made. The apparent anomaly which gave rise to unease and prompted the appeal is more apparent than real. There is indeed less to this particular case than first meets the eye.