England and Wales Court of Appeal (Criminal Division) Decisions

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

		Royal Courts of Justice Strand, London, WC2A 2LL
		06/11/2009

Mr Justice Mackay:

1. This case concerns the making of a confiscation order under the Criminal Justice Act 1988 in circumstances where the victim of the offending has pursued and recovered a civil judgment.
2. The Appellant worked as a bank manager for Lloyds TSB plc ("the Bank") and gave advice to customers on investment and finance. Between May 2000 and June 2004 he stole from three elderly customers of the Bank, aged 87, 64 and 94, sums totalling £166,000. On the 12 May 2006 he pleaded guilty to an indictment containing 22 counts of theft and deception and he was later sentenced to three years imprisonment.
3. The question of confiscation was raised at his sentencing hearing and was postponed for the usual investigations to take place. The Bank having repaid the immediate victims of the Appellant's offences, the prosecutor's statement dated 1 June, 2006 calculated that the benefits received by the Appellant from his crimes, when adjusted for inflation by reference to the Retail Price Index was £182,996.66. It then set out the amounts that might be realised, consisting of a number of building society and bank accounts, shares and savings accounts and a matrimonial home in the joint names of the Appellant and his wife. The total value of his known realisable assets was said to be £312,591.39.
4. The statement also said that the Bank was seeking compensation of £164,971.32. On the 10 July, 2006, when the confiscation proceedings came before the court, there was no dispute about either the benefit figure or the amount of realisable assets. The judge noted that compensation was being sought by the Bank, and prosecuting counsel replied -

"Your Honour, I don't seek an order as to compensation".

5. He then proceeded to invite the judge to declare that benefit and realisable assets were at the figures set out, and he therefore invited him to make a confiscation order in the amount of £182,996.66. This the judge did, allowing 3 months to pay, and he also ordered the Appellant to pay £9,500 costs. An issue has arisen as to whether prosecuting counsel was right or wrong to say he was not making an application for a compensation order. At all events that is what he told the judge, and he did not tell either the judge or the Appellant's then counsel that, as he had been told and as was the case, the Bank intended to take civil proceedings against the Appellant. This meant, as will be seen from the legislation, the relevant parts of which have been set out below, that the sentencing judge was being told that he had no option other than to make the order he did make.
6. The essential grounds of this appeal are that it is wrong in principle that this should have happened. Had he been told what he should have been told, the judge would have had a power to make that order but not an obligation or duty to do so. The order made was therefore made by a judge who was not put in possession of the true factual position.
7. Before setting out the legislation we should record what happened after the hearing. The Appellant paid the amount of the confiscation order and costs in December 2006. The Bank took proceedings in the High Court which concluded with consent orders on the 16 March and 3 April, 2009; the effect of these was to give judgment in favour of the Bank for £202,066.82 with £59,079.79 interest and costs agreed at £27,000, a total figure therefore of £288,146.79. Interest continues to accrue on that sum, which remains unpaid and Miss Robinson, who now appears for the Appellant, tells us that amounts to some £10,000, making the total cost of satisfying the claim today very nearly £300,000.
8. The other relevant event is that since he paid the confiscation order in full the Appellant has been through a divorce and ancillary financial orders have been made in favour of his former wife. The result of those is that he now has, we are told, no realisable assets and the former matrimonial home has been sold. He is 50 years old.
9. The other new development, which is of considerable importance, indeed without it much of the argument in this appeal would be entirely arid, is an assertion by the Bank that there exists a pension fund in favour of the Appellant. They have told the solicitors acting for the Appellant in the civil proceedings that "the value of the fund is £195,825.09". They have been asked by those solicitors and by the Respondent to give more details about this fund but have declined to co-operate. At first sight it seems unlikely that a pension fund, managed presumably by trustees for the benefit of former employees of the bank, is from the point of view of someone in the position of the Appellant a realisable asset, in the sense that he could before reaching pensionable age require the trustees to pay out to him the full value of the fund in cash. It may be the case, though this is pure surmise, that the Bank itself can in certain circumstances have recourse to that fund. This court has no more information about it than that it is asserted by the Bank to be available to it towards satisfaction of its civil judgment.

THE LEGISLATION

10. The relevant sections of the Criminal Justice Act 1988, as amended ("the Act") are as follows:-

71 – Confiscation Orders

…..

(1B) Subject to subsection (1C) below, if the court determines 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 this 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 that the 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) sub-section (6) below shall not apply for determining the amount to be recovered in that case by virtue of this section, and

(c). where the court makes an order in exercise of that power the sum required to be paid under that order shall be of such amount, not exceeding the amount which (but for paragraph (b) above) would apply by virtue of sub-section (6) below, as the court thinks fit.

….

(6) Subject to section (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 to be the amount might be realised at the time the order is made,

whichever is the less.

72 – Making of Confiscation Orders

…

(7) Where –

(a) a court makes both a confiscation order and an order for the payment of compensation under section 130 of the Powers of Criminal Courts (Sentencing) Act 2000 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.

11. If the order below is set aside as being wrong in principle for the reasons stated above, as we believe it must be, this court would have to re-sentence the Appellant, albeit within the constraints imposed by Section 11 of the Criminal Appeal Act 1988, in a way in which the judge could have sentenced him had he known the full facts.
12. The case confronting the judge did not include an application for a compensation order because counsel said as much to him. Mr Hays (who did not appear below) argues that the judge could have made such an order of his own motion despite what the prosecutor said and that this Court is free to exercise its discretion to make one now. We will return to this point later. In the absence of any application for a compensation order and of any indication that the victim intended to institute civil proceedings by virtue of Section 71(6) the judge was bound to make the order he made.
13. Had he been told of the intention to institute of civil proceedings he had a discretion as to whether to make any compensation order and if so in what amount. It would have been apparent to him in those circumstances, albeit that S 72 (7) did not apply, that the assets were unlikely to be sufficient, if a full confiscation order was made, to enable full recovery by the victim.

THE RELEVANT AUTHORITIES

14. The policy underlying this legislation, at least where compensation of the victim is not in play, is clear. The court has no discretion. It must strip the offender of the entire proceeds of his crimes, but no more than that, and, if his realisable assets are less than the benefits, it must take all that he has.
15. In Glatt [2006] EWCA Crim 605 Tugendhat J, after a review of the authorities, distilled these four principles. A confiscation order :-

i) is a penalty, and is a measure to which Article 1 of Protocol No. 1 [of the European Convention on Human Rights] is applicable;

ii) is designed to deter those who consider embarking on criminal conduct;

iii) 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 future use in criminal conduct;

iv) is designed essentially to impoverish defendants not to enrich the Crown.

16. In Mitchell and Mitchell [2001] 2 Cr App R(S) 29 S 71(1C) was in issue. Kennedy LJ said (at 20):-

"When it is clear that the victim can be properly compensated and that what remains in the hands of the defendant is a relatively modest sum, the residue of a lifetime's legitimate savings, the court may wish to take that factor into account. But it cannot sensibly be taken into account if the effect of doing so will be to reduce the amount which the victim is entitled to recover by means of civil proceedings".

17. Later he continued (at 24):-

"If it is possible both to confiscate and to compensate then that course may indeed be followed. But where as here it appears at the end of the day and in the light of the judgment which was obtained in the civil proceedings after the confiscation order has been made that it is not possible to achieve both ends then the problem does arise as to how the matter should be properly disposed of."

18. On the particular facts of the case he held that the judge, if given the information he should have been given, would have exercised his power not to make any confiscation order in respect of either offender and would simply have made a compensation order in respect of each offender in an amount adding up to the total of the benefits received. He stressed that the judgment did not mean it was not appropriate "in the normal run of cases" to consider making a confiscation order even where there are civil proceedings, particularly where there are positive benefits to the victims in so doing.
19. Mr Hays also relied on Rose [2008] 1WR 2113, a decision under S 6(6) of the Proceeds of Crime Act 2002, the equivalent to S 71 (1C), where it was held that the discretion the section conferred may be important where funds are insufficient, in which case "the interests of the victim should take precedence".
20. We were also assisted by the review of this legislation by the appeals of Nelson and Others [2009] EWCA Crim 1573. The legislation did not operate by way of fine, but, said Lord Judge CJ, that proposition was best appreciated by considering what the House of Lords had said in Jennings v CPS [2008] 1 AC 1046 at paragraph 13 which read -

"There is a real danger in judicial exegesis of an expression with a plain English meaning, since the exegesis may be substituted for the language of the legislation. It is however relevant to remember that the object of the legislation is to deprive the defendant of the product of his crime or its equivalent, not to operate by way of fine. The rationale of the confiscation regime is that the defendant is deprived of what he has gained or its equivalent. He cannot and should not be deprived of what he has never obtained or its equivalent because that is a fine."

21. The Court continued, in the context of a review of the application of the abuse of process jurisdiction to these cases, that it would not be enough to establish oppression merely to point out that the effect of confiscation would be to extract from the defendant a sum greater than his net profit from his crimes. We are not concerned with abuse of process in this appeal.
22. How should this Court now re-sentence the Appellant? His argument is that the confiscation order should be quashed and the sum "returned" to him, albeit Miss Robinson pragmatically accepts that it could be subject to some restriction, such as that it be held by a suitable stakeholder so as to be available to the Bank in part satisfaction of the judgment it has obtained. If the Bank believes it is right as to the value and availability of the pension it should then be left to make up the short fall from that source.
23. For his part Mr Hays in his written submissions proposed two forms of fresh order and added a third in his oral argument. In essence the object of each of these was to bring section 72(7) into play, which he said would accord with the principles discernible in the authorities he cited to us.
24. Option 1 was to dismiss the appeal, and say that had the Judge been told of the intended civil action then in the exercise of his discretion he would have concluded that it was appropriate to make the confiscation order he did, and also to make a compensation order of £92,321.70 (representing the shortfall between the confiscation order and the judgment obtained – this figure would now need to be adjusted to allow for interest accrued on the judgment since March). That compensation order should be "carved out" of the confiscation order under s. 72 (7) because the Judge would in the exercise of his discretion have had regard to the purpose of the legislation and the need to preserve the pool of assets for the benefit of the civil claim. By this route the Bank would recover its full loss by adding the carved out compensation order to the Bank's estimate of the value of the pension fund.
25. Option 2 was that if a compensation order could not have been made below or should not now be made by this court, the appeal should be allowed and a reduced confiscation order made of £90,674.96 which is the value of the benefits less the shortfall figure (again recalculation would be necessary) and the Bank left to recover the balance from the pension fund.
26. Option 3, a variation on Option 1, was to dismiss the appeal, leave the confiscation order as ordered and make a full compensation order under Section 72(7).
27. The objection to the Respondent's approach, as it seems to this Court, is that it assumes that if he had been properly informed the judge would necessarily have exercised his discretion in such a way as to result in double recovery, or more precisely recovery exceeding the benefit received from the offending. That can, we accept, be an inevitable or just result depending on the facts of the particular case. But Mr Hays went so far as to submit that the court should have exercised its discretion to take as much as it could, and it would not have been a proper exercise of its discretion not to have done so. We disagree. It would have been an unobjectionable exercise of the discretion of the court below, had it been told of the Bank's intended claim, and even if it had the power to make a compensation order of its own motion despite what the prosecutor had said, to leave the victim to pursue his chosen course, the Appellant then having apparently available assets which could be frozen to secure the fruits of those proceedings, and added to the value if any of the pension fund.
28. There were three features of this case that seem to this court to be highly relevant to the exercise of discretion in these circumstances. Firstly the benefits figure was known to be the entire value of all the Appellants offending. It was not a "criminal lifestyle case" to which the statutory assumptions applied. Secondly there was a single loser, the Bank now standing in the shoes of the three victims. Thirdly that loser was intending to and was capable of extracting recovery by way of civil proceedings.
29. There are also two problems now facing this court when re-sentencing. We do not have to decide whether or not counsel below was right to abandon the compensation proceedings in the way he did (Mr Hays would submit if he had to that he was wrong, notwithstanding two apparently contrary decisions of this court). But were this court now to make a compensation order it would surely be dealing more severely with the Appellant within the meaning of the Criminal Appeal Act 1968 s.11 (3). Furthermore, all Mr Hays's options depend on him satisfying us that there is today a realisable asset worth £195,825.09, as to which we have no evidence and which is not accepted by the Appellant.
30. In practice there is little or no difference, in terms of their overall effect on the Appellant's financial position, between any of the orders contended for by the parties to this appeal. All will leave him without any residual assets. All will also leave the Bank with a probable shortfall unless it is right about its assertion as to of the availability and amount of the pension. But we consider that the apparent discretion in S.71 (1C) is not to be fettered in the way the Respondent contends for, reminding ourselves of the House of Lords' guidance in May [2008] UKHL 28 at 48 (4), that in addressing questions raised by this legislation the court should –

"… focus very closely on the language of the statutory provision in question in the context of the statute… The language used is not arcane or obscure, and any judicial gloss or exegesis should be viewed with caution. Guidance should ordinarily be sought in the language rather than in the proliferating case law".

31. For these reasons we allow this appeal, quash the confiscation order made, and direct it should not be returned to the Appellant for 42 days after the date on which this judgment is handed down. This will permit the Bank to take any step it is advised to take to secure its judgment in the interim. The Respondent must notify the Bank forthwith of the making of this order. We are persuaded by Mr Hays's argument based on S.89 of the Act that we have no power to order any interest or other indexation of the sum to reflect the loss in its value since it was paid over. There shall be liberty to apply.