England and Wales Court of Appeal (Criminal Division) Decisions

IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM THE CROWN COURT AT CANTERBURY
HH JUDGE WILLIAMS

		Royal Courts of Justice Strand, London, WC2A 2LL
		09/11/2009

LORD JUSTICE STANLEY BURNTON :

Introduction

1. This is the appeal, with leave of the single judge, of Stephen Piggott against the confiscation order in the sum of £1,498,887.60 made under the provisions of the Criminal Justice Act 1988 by HH Judge Williams at the Crown Court at Canterbury on 30 November 2007. He was given until 31 January 2008, i.e., 2 months, to pay. The judge ordered that he serve a period of 10 years' imprisonment in default.
2. On 3 May 2005 at the Crown Court at Canterbury, before the same judge, the appellant had pleaded guilty to one count of cheating the public revenue contrary to common law and to one count of assisting another to retain the benefit of criminal conduct contrary to section 93A(1)(a) of the Criminal Justice Act 1988. Following the conviction of three of his co-accused (and the acquittal of one) on 9 September 2005 he had been sentenced to 9 years' imprisonment on each count concurrently and disqualified under section 1 of the Company Directors Disqualification Act 1986 from being a company director for 15 years. On 16 September 2005 the period of imprisonment was amended to 8 years. On 10 October 2006 the Court of Appeal dismissed his appeal.
3. The primary ground of appeal is that the judge should have recused herself from determining the confiscation proceedings against the appellant, and by reason of her bias or the appearance of bias he was deprived of a fair hearing. If that contention were to be upheld, the confiscation order would be set aside, and the question would arise whether the application for the order should be heard afresh, by this Court in the absence of any power to remit to the Crown Court. In the alternative, the appellant challenges certain findings made by the judge, of which the most important is the finding that he had hidden assets to the value of £1 million. Lastly, he submits that the period of imprisonment in default is excessive and the time allowed for payment insufficient.

The facts in summary

4. Between October 2001 and February 2004 the appellant was involved in a fraud of the type referred to as a missing trader intra community (MTIC) or carousel fraud. The loss to Revenue totalling in excess of £40 million was caused by the input tax deductions of those being dishonestly invoiced. The proceeds of the fraud were sent to the Hong Kong bank accounts of a number of companies created for the purpose. These companies were, in fact, clones of existing British registered companies dealing mostly in mobile phones. The funds were then electronically dispersed via the Hexagon computer operated banking system for use by the dishonest beneficiaries. Invoices were issued in the names of existing British companies and VAT was charged on these invoices under their true VAT registration numbers; the invoices having been manufactured to resemble those used by the real companies.
5. The dispersal of the funds was exceedingly complex, involving a multiplicity of bank accounts. Nine of the twelve false identity companies had accommodation addresses for receiving mail. Most of these companies traded for about six months, usually with no more than two companies being active at any one time.
6. The Crown's case was that the appellant did not devise or organise the fraud and he was not a main beneficiary. He and his co-accused were a team operating in the execution of the fraud. The appellant was closer to the organisers than his co-accused and he recruited the others to establish the necessary network of companies and bank accounts. The appellant had been a musician and music producer. He spent much of his time in Hong Kong and Dubai. He recruited the co-accused Hofberg who was a lawyer specialising in music and entertainment. She opened a company registration business in Hong Kong and arranged for the registration of numerous companies in Hong Kong and for the opening of bank accounts for them.
7. The appellant recruited a girlfriend, the co-accused Bennett, to open and deal with accommodation addresses for the false companies and to act as his personal assistant when he was in London. She later set up a company in Spain (with a loan arranged by the appellant) dealing with electronic equipment which furthered the fraudulent activity. The appellant recruited the co-accused Igbanugo and Harris to run a company, Qualinorld, set up in the United Kingdom. The name Daniel Clifford was used for some purposes in relation to that company.
8. The appellant was arrested on 26 February 2004. He had been living in Dubai where he had been playing his part in the fraud using a lap top computer.
9. The appellant used the identity of David Roy Chapman which he obtained from a gravestone near his place of birth. He had an offshore Jersey account with Lloyds TSB in the name of Chapman and he also used that name to open bank accounts in Hong Kong. He had a passport in that name which he used extensively to travel. He also used the name TJ Power to open an account with HSBC Bank. He had a driving licence, birth certificate and medical card in that name. It was alleged that he also used the identity of Daniel Anthony Clifford in connection with Qualinorld (a company used in the fraud). The appellant submitted that the identity of Clifford was used by John Shaw who he said was the man who recruited him to the fraud. The appellant had a number of documents which related to the use of false identities including a list of names with dates of birth and death, blank diploma certificates, books on identity changes and setting up untraceable bank accounts.
10. The benefit figure for the appellant was agreed at £27,377,192. Accordingly, the principal issue in the confiscation proceedings was the value of his realisable assets, which the judge found to be £1,498,887.60.

Recusal

11. The contention that the judge should have recused herself was based on her comments during the proceedings and on her decisions on sentence and in the confiscation proceedings, which, it is submitted, demonstrated a closed mind adverse to the appellant. Applications for her recusal were made to her; she rejected them.
12. The first incident relied upon was on 9 September 2005, when there was a hearing before the judge in chambers in order to put before her intelligence information that had been provided to the prosecution by the appellant. The judge said:

"Well, the problem with this information, and the question of any credit that might attach to it, is twofold. One, I have no means of knowing or determining whether it is true, nor whether he is showing genuine remorse and a genuine attempt to help the authorities or, given all I know about him, whether it is part of his extremely manipulative and dishonest frolics of his own."

Mr Carter-Stephenson told the judge that she would be assisted as to the reliability of the information, because the prosecution would be able to inform her. The judge said:

"Oh, right, that is a different matter."

There followed a discussion about the information. Miss Hardy, the officer in charge of the prosecution informed the judge that some of the information provided by the appellant had been previously unknown to Customs and Excise. She said:

"It will be difficult to verify this information, but it is something that we were not aware of."

13. Mr Carter-Stephenson submitted that the information provided was vital because of the interest in tracing the monies obtained by the carousel frauds. The judge said:

"Yes, at the moment I only regard this as a very small proportion of information in the context of the whole case."

14. Subsequently, counsel for Customs and Excise said:

"… the information is really of such a nature as to be incapable of being acted upon. There is simply insufficient material. Investigations so far as they were possible have been made, unsurprisingly without any result so in practical terms whatever the intentions behind it, it has not been of any practical use. "

15. The judge said:

"…. I have to say that, for the reasons that I gave when we began this hearing, it is quite difficult to assess whether Piggott's intentions are genuine. He has provided this information. It has not been possible for it to bear fruit. Unless you have any other submissions to make my initial reaction, subject to reading this document very carefully, is that there is a very, very limited amount of credit to be given for this at all."

16. We appreciate that in assessing whether the judge displayed bias, it is necessary to consider not simply what she said on each occasion when it is said she demonstrated bias, but also the cumulative effect of her remarks throughout the proceedings. It is nonetheless necessary to consider what she said on this occasion. In our judgment, it demonstrated scepticism, which turned out to be justified, but not bias. Her reference to her initial reaction, which was "subject to reading this document very carefully", i.e. the mitigation document prepared on behalf of the appellant, is inconsistent with bias. The judge was entitled to view the information in the light of what she had learnt of the appellant during the trial of his co-accused, which was that he was, as she said, extremely manipulative and dishonest. His recruitment of his co-accused, and his part in the frauds, justified her description.
17. The second incident relied upon occurred during mitigation before sentence. Mr Carter-Stephenson on his behalf addressed the gravity of the appellant's offending. The following exchange took place:

Mr Carter-Stephenson: "… Your Honour will know that a written basis of plea was prepared for the earlier occasion.

The judge: "Having sat through three months, I do not agree with the written basis of plea as to his involvement in the matter.

Mr Carter-Stephenson: "May I ask, your Honour, on what basis?

The judge: "I consider his involvement was considerably more than set out in the written basis of plea. I accept that he is nowhere near the top of this application but, as outlined by the Crown, he was in charge of a team. He could make decisions about the execution of the fraud. He received, in my judgement, on the whole of the evidence available to me, much more money than the mere £600,000 which is on the face of the documents in front of me."

Mr Carter-Stephenson: "… It is not conceded by Mr Pigott that he made any other money apart from that."

The judge: "No. That is a judgement I make on hearing the evidence."

18. Later, during his mitigation on behalf of the appellant, Mr Carter-Stephenson told the judge that the appellant was using his time in prison advantageously, by taking an Open University course in marketing. There ensued the following exchange:

The judge: "I am not sure that I necessarily find the assertion that he is studying for a degree in marketing with the Open University a positive aspect of the mitigation."

Mr Carter-Stephenson: "It seems really then as if he cannot win."

The judge: "No. Any form of study of course is beneficial, but given his position the choice of subjects is somewhat remarkable."

Mr Carter-Stephenson: "It is a choice of subject where he thinks he may be able on his release to actually find some employment. With a prison record background, it is not easy."

The judge: "No, of course not."

Mr Carter Stephenson: "I do not think that your Honour should find against him on the fact that he has chosen a marketing course."

The judge: "As I said, any course of study is to be highly commended but it is the choice of subject which I find surprising, if not alarming."

19. The second exchange was in our judgment not indicative of bias. It was simply indicative of the impression that the judge had obtained from the evidence in the case. There is more substance to the complaint concerning the first of these exchanges. However, it was appropriate for the judge to alert counsel to the factual basis on which she was minded to sentence the appellant, so that he could make such submissions as were open to him with a view to satisfying her that her proposed basis was unfounded. In the present case, it is not surprising that that involved consideration of his receipts from the frauds. In this connection, it is significant that his benefit was subsequently agreed at a much greater figure than £600,000. The position might have been different if there had been no evidential basis for the judge's conclusion; but there was. It follows that the judge was entitled, and indeed obliged, to say, in her sentencing remarks, that she was satisfied that he had received far more than that sum.
20. It is also noteworthy that despite her remarks during the PII hearing, the judge ultimately gave the appellant a discount of 5 per cent on account of the information he had provided.
21. The above allegations of bias were put before the Court of Appeal on the appellant's appeal against sentence. It is apparent that they were rejected by the Court, since his appeal against sentence was dismissed.
22. The appellant also relies on the judge's refusals, in September 2007, to postpone the confiscation hearing. The postponement was sought on the ground that his leading counsel, Mr Carter-Stephenson QC, who had represented him throughout, could not be available on the dates fixed. There had already been considerable delay in the proceedings: as mentioned above, the appellant had been sentenced two years earlier; and the confiscation hearing had originally been fixed for 15 September 2006. If the judge formed the view that other counsel could properly represent the appellant, she was justified in refusing the postponement. In the event, it is accepted that he was competently represented at the confiscation hearing by Kim Hollis QC.
23. Lastly, reliance is placed on the decisions of the judge on the substantive issues in the confiscation hearing, including her decisions on the time for payment and the default sentence. We shall address those below; for present purposes, it is sufficient to state that none of her decisions gave rise to an appearance of bias or of a closed mind.
24. For these reasons, the appeal is dismissed in so far as it is based on the assertion that the judge was biased, or that there was an appearance of bias.

Disputed realisable property

The value of 39 Buck Lane

25. The judge ascribed a value of £165,000 to the appellant's interest in this property. She arrived at this figure by accepting the valuation evidence called by the prosecution. Their valuer, Mr Farnsworth, had made a walk-by valuation of £550,000. The appellant had purchased the property in 2003 for £465,000, which was good evidence of its market value at that time. The appellant called no valuation evidence, but produced a report of a structural engineer stating that underpinning and other repairs costing some £49,000 were required.
26. It was common ground that the property was in a bad condition. The structural engineer's report was put to Mr Farnsworth, who accepted that the cost of underpinning should be deducted from his valuation, but otherwise adhered to his valuation. His valuation took into account the benefits that would accrue from enlarging the property with planning permission, but did not discount the value on account of what might be real difficulties in obtaining planning permission in what was a conservation area.
27. The judge found Mr Farnsworth to be an impressive witness. He explained why he had adhered to his valuation, subject to the deduction in relation to the cost of underpinning. His valuation was considerably lower than his figure for the property in good condition and with the possible extension.
28. We see no error of law in the judge's decision.

The ownership of 2A Belgrade Road

29. This property was in the name of Stephen Lamb. The judge found that in fact it belonged to the appellant: either Lamb was a pseudonym that the appellant had used or he, agreed to be a fraud, was a nominee owner for the appellant. She gave substantial reasons for her finding. Among other reasons, she said:

"What is inescapable is this, that Stephen Pigott had a flat in these premises. He attempted to conceal the key to those premises on his arrest. A safe in these premises contained part of the material in relation to the false identities (of the appellant) and concealing money. He applied for planning permission to change the use of the premises. He commissioned building work on the premises. Money for the purchase came from Zoorn Technologies (a company involved in the MTIC fraud). And it came through a bank account which includes transactions in all three of Mr. Pigott's main names (S.M. Pigott, T.J. Power and D. Chapman)."

T.J. Power and D. Chapman were pseudonyms of the appellant, used by him when dealing with the proceeds of the frauds.

30. Again, the judge gave substantial reasons for her finding, and no error of law on her part has been shown.

2 watches

31. The judge dealt with the issue as to the ownership of these watches summarily in her judgment. She had heard considerable evidence during trial about them. Zannthie Bennett, a co-defendant, said that she had collected the watches from a repairer in Dalston. She had received them from the appellant. The watches had been paid for by one of the appellant's cloned missing traders. There was a document indicating that one of the watches was owned by one Steve Williams, but given the appellant's use of pseudonyms, the judge was entitled to find that the watches belonged to the appellant.

Hidden assets

32. The judge dealt with the issue as to hidden assets at length in her judgment. She summarised her conclusions as follows:

"I find that (Pigott) is minimising his role. He was responsible for recruiting his own team, creating the false identity companies then recruiting people as nominee directors who would open bank accounts in Hong Kong. Pigott's IT skills were considerable. Of the £19 million diverted to Dubai I find that Shaw, Riderhoff, Cargill and his two assistants would have been entitled to percentages of that amount, but that Pigott would also have been entitled to a percentage of that money. £7 million had come from Qualinorld, Eso / Mic Tech and Artistcom/Altatec. Three of these companies were effectively being run by Miss Harris, Miss Igbanugo and Miss Bennett.

It is inconceivable that Pigott was not receiving a share of this money which was being diverted to Dubai. He has indicated that he has very small amounts of money in the two bank accounts at the Mashrek Bank. I ignore these sums of money, because I find from all of the evidence before me so that I am sure that the defendant has hidden assets in Dubai. I find these assets to be £1 million as this defendant's percentage of the £7 million from Qualinorld, Eso/Mic Tech, Artistcom/Altatec. I apportion one seventh of that fund to this defendant.

Mr. Pigott has not given evidence in these proceedings. That is of course his right. It means that there is no evidence to counter any of the Crown's evidence, which I accept. I do have the defendant's written statements, his interview on arrest, his written basis of pleas and the submission made on his behalf. All of these matters I have considered very carefully indeed."

33. In our judgment, the judge made no error of law or of principle in finding that the appellant had the hidden assets to a value of £1 million, a significant sum but only a relatively small part of the moneys that he had handled. She was entitled to find that he would not have played the part he did in the frauds without substantial reward, and that he had the means and ability to conceal his part of the proceeds. Indeed, one of his co-defendants testified that the appellant was a rich man with two bars abroad – neither of which was disclosed. Her decision was not Wednesbury unreasonable or marred by any legal error.

Conclusion on the confiscation order

34. For the reasons set out above, the appeal against the amount of the confiscation order against the appellant will be dismissed.

Time to pay

35. The judge gave the appellant some two months, i.e. until 31 January 2008, to satisfy the confiscation order. That was insufficient time for him to sell the houses that had been included in his realisable property. It appears from the transcript of the hearing on 30 November 2007 when this issue, and the length of the default sentence, were discussed, that the judge was influenced by the forthcoming release of the appellant from his sentence, which she was told would be in February 2008. She considered it crucial that his time to pay the confiscation amount should expire before his release, implicitly because of the risk that he would then abscond abroad to a place where he could enjoy his hidden assets. She emphasised, however, that the defence could return to court and seek additional periods of time, particularly if some money was paid.
36. We are concerned whether the risk of his absconding was a relevant consideration to be taken into account in determining time to pay. Normally, time to pay is determined by an assessment of the time required by the defendant to satisfy the order. Where the defendant has to realise or transfer assets, the time required for him to do so is a highly material consideration, if not the only consideration. However, it is unnecessary for us to decide this point. The appellant has not used any of his hidden assets to make any payment on account of the order. Indeed, he has paid nothing in satisfaction of the order. His original instructions to his counsel were to seek 12 months to satisfy the order. That period, and any reasonable period for payment of the order, expired long ago. Any period that we might have considered as appropriate for payment of the order has expired. It follows that the question whether the period ordered by the judge was inadequate and should be enlarged to a longer, more reasonable, period, is entirely academic. We therefore decline to interfere with the judge's order.
37. As it happens, we were informed that no steps have been taken by HMRC to enforce the confiscation order against the appellant, who has been discharged from prison having served half of his sentence, and who remains at liberty in this country. Those facts are however irrelevant to our decision.

The sentence of imprisonment in default of payment

38. In fixing the period of imprisonment in default, the judge gave no reasons but simply said simply said, "… I consider the correct default period to be one of 10 years' imprisonment." It was however evident from her sentencing remarks and the sentence imposed on the counts of the indictment that she considered the appellant to be a seriously dishonest fraudster.
39. Section 139(4) of the Powers of Criminal Courts (Sentencing) Act 2000 prescribes maximum default periods of imprisonment applicable to confiscation orders. If the amount of the order is between £250,000 and £1 million, the maximum is 5 years; if the amount of the order exceeds £1 million, by whatever amount, the maximum is 10 years, the period imposed in this case.
40. In Szrajber (1994) 15 Cr App R (S) 821, Latham J said:

The use of the words "the maximum period" [in the statute] makes it quite plain that it was intended that these should indeed be maximum periods, in other words that the court when imposing a period of imprisonment in default was to have a discretion below that maximum period. Normally the court is likely to determine that the appropriate period in default will fall between the maximum for the band immediately below that which was being considered, and the band itself. In the present case the sum in question is the band of £250,000 to £1 million for which the appropriate maximum is five years' imprisonment. The band next below it, which is £100,000 to £250,000 has a maximum of three years, so one would normally expect that the sentence would be between three and five years and would of course be determined in the exercise of the court's discretion by reference to the amount which was in fact in question in the particular case.

….

In determining the right figure in default, we have to consider the circumstances of the case, the overall seriousness of the matter; but in particular we bear in mind that the purpose of the imposition of a period of imprisonment in default is to secure payment of the amount which the court has ordered to be confiscated. We consider that it is not necessarily appropriate to approach the case on a simple arithmetical basis, in other words providing a sort of ladder up the scale from three years to five years dependent on where within the band the confiscation order lies, otherwise Parliament would presumably have indicated that that was the way to do it by rather clearer definition in the scaling process.

41. In French (1996) 16 Cr.App.R (S) 841, Hobhouse J said:

It is to be borne in mind that there is a scheme under the Act whereby orders may be reviewed and whereby the period in default falls to be reduced if the order has been partially complied with. However, the hypothesis on which the order in default has to be made is that there is a wilful and total refusal to comply with the order. It postulates that the relevant person may be preferring to serve an additional period of imprisonment rather than comply with the financial order. It is not the role of the courts to encourage a defendant in any way in his non-compliance with the order. The period of imprisonment in default which is imposed should be such, within the maxima permitted, as to make it completely clear to the defendant that he has nothing to gain by failing to comply with the order.

42. A similar issue to that in the present case arose in Smith [2009] EWCA Crim 344. Thomas LJ said:

6 We turn therefore to the authorities which have been put before us in relation to the short issue. They are R v Szrajber (1994) 15 Cr.App.R (S) 821 , R v French (1996) 16 Cr.App.R (S) 841 , R v Qema [2006] EWCA Crim 2806 , R v Howard [2007] EWCA Crim 1489 and R v Liscott [2007] EWCA Crim 1706 It is clear from those authorities that the court has a discretion up to the maximum period in the band. It would, taking as an example the band we are concerned with, namely the band of between £250,000 and £1 million, at a sentence between the maximum amount and the top of the previous band, namely three years. In fixing the precise length of the sentence, the court has to consider all the circumstances and is not bound to follow an arithmetical approach. In this case, as the sum is within a few thousand of the midway point, that clearly indicates that it is not right to fix the sentence merely in the midway point, namely as four years. The court must have particular regard to the purpose of the imposition of a period of imprisonment in default, that is to say to secure payment of the amount that the court has ordered to be paid. This is because the overriding purpose of the legislation is to ensure that those who benefit from such crimes do not retain those benefits. The power to imprison in default is given to ensuring or obtaining as far as possible the co-operation of the defendant in complying with the order. It is to make clear to him that he has nothing to gain by non-compliance. It is particularly important to have regard to the judgment of Hobhouse LJ in French to that effect at page 844 of the report. Although a court must take into account intransigence, it seems to us the court must also take into account, in a case where the order is not for the maximum, what that maximum is.

43. The Court also commented on the relationship between the sentence imposed for the substantive offence and the sentence in default of payment:

8 We would add one further point. There is some suggestion that the judge should have had regard to the overall totality of the sentence of 13 years imposed for the substantive offence and the period to be imposed in default. That argument was not pursued before us as it was accepted that it was wrong in principle to take into account in fixing the default term the previous sentence. We consider that that concession was rightly made, as the purpose of the sentence of imprisonment was to punish him for his drug dealing; the purpose of the sentence for confiscation was the purpose we have set out, namely to ensure compliance with the order of confiscation. The sentences have completely different purposes and therefore it was right in principle to concede that an argument on totality could not properly be advanced.

44. In determining the default sentence, the judge was entitled to take into account what she had learned of the appellant and his offending during the course of the trial of his co-defendants, and the purpose of that sentence, as explained in the above authorities. But she also had to bear in mind that the period of 10 years' imprisonment that she ordered would also have been applicable in the case of a defendant whose benefit and disposable property greatly exceeded the appellant's. In our judgment, it follows that the default sentence should have been less than the maximum.
45. In our judgment, the appropriate default sentence is 8 years' imprisonment. Accordingly, the judge's order will be quashed and the period of 8 years' imprisonment substituted for the period in default determined by the judge.
46. To that limited extent, this appeal succeeds.
47. Finally, we mention two matters. First, certain of the appellant's contentions were not pursued because they were appropriate to an application for a certificate of inadequacy rather than an appeal against the confiscation order itself. Secondly, we wish to record our appreciation of the cogency of the submissions of counsel before us and the efficiency with which they conducted this appeal.