England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL
CRIMINAL DIVISION

		Royal Courts of Justice Strand London, WC2A 2LL
		Friday, 11 December 2009

1. LORD JUSTICE ELIAS: This is the appeal against the imposition of a confiscation order. Its imposition was unquestionably harsh, as the judge recognised. The question is whether it was lawful. The basic principles relating to the imposition of these orders are well-known. A confiscation order may be imposed where a criminal defendant has obtained property "as a result of or in connection with criminal conduct".
2. The amount to be recovered will be the value of the property so acquired, unless the defendant can show, the onus being on him, that the value of the assets available to him is less than the benefit acquired, in which case the amount recovered will be that lower sum.
3. The circumstances of this case are somewhat unusual. On 15 February 2006, the appellant was observed by police officers getting into a BMW motorcar. Unknown to the appellant, it had been stolen in 2005. A man who wanted to sell it had dropped it at his house so that he could test drive it. The man told the defendant that the car was cheap because it had been "bumped", although there was no evidence of that. He had been in possession of the car for approximately an hour when he was arrested. He had by then suspected that it was stolen. He intended to return it as soon as possible, and he formed the intention not to buy it.
4. These facts constituted the basis of his plea to possession of criminal property, contrary to section 329 of the Proceeds of Crime Act 2002. The prosecution did not dispute them.
5. Surprisingly, perhaps, the Crown made an application under the Proceeds of Crime Act for a confiscation order to be imposed. It sought a ruling that the appellant had benefited from his offending and that the value of that benefit was the market value of the car. The learned judge, with considerable reluctance, concluded on the authorities that the argument was correct, and he made an order in the sum of £15,558.84, the market value of the car. The judge made this order before determining the appropriate sentence for the substantive offence. He then turned to the question of sentence and said this:

"... it is inexpedient to punish you further and so what I am going to do is to impose a sentence of conditional discharge for six months."

6. The appellant's only asset is his home, and the sum will have to be realised by raising money either by way of sale of by an additional mortgage. The appellant appeals against the imposition of the confiscation order on three grounds.
7. Ground 1. It is submitted that the appellant, on the agreed facts, had not obtained property and therefore had not benefited at all from his offence. Accordingly, no confiscation order ought to have been made.
8. Ground 2. The prosecution's decision to pursue the confiscation application was, on the facts of this case, oppressive and the court ought to stay the proceedings as an abuse of process.
9. Ground 3. Given that the appellant was conditionally discharged, the Crown Court had no power to make a confiscation order. Reliance is placed on the decision in Clarke [2009] EWCA Crim 1074.
10. Only the first argument was run unsuccessfully before the judge. The Crown initially chose not to contest ground 4 and they still did not do so. However, they were invited to attend the appeal in order to assist in analysing the full effect of the Clarke decision. We turn to the grounds.
11. First, ground 1, obtaining property. The submission here is this. Section 76(4) of the Proceeds of Crime Act provides that a person benefits from conduct if he obtains property as a result of or in connection with criminal conduct. Section 84 defines "property" as all property wherever situated, and includes any property in which the defendant has an interest. It is submitted that this defendant never did obtain property at all within the meaning of the Act.
12. Reliance is placed upon certain cases which were not available to the judge below. These are, in particular, May [2008] UKHL 28; Jennings [2008] UKHL 29; and Green [2008] UKHL 30. May, Jennings and Green were three cases considered by the House of Lords last year, all of which raised legal issues relating to the confiscation of criminal assets. In May, their Lordships, in a single judgment delivered by Lord Bingham of Cornhill, traced the history of the legislation and analysed its essential structure. The principles enunciated in that case were applied, and to some extent further explained in Jennings and Green. In May their Lordships considered a number of authorities relating to the question how to determine whether or not the defendant has obtained a benefit within the meaning of section 76(4). Their Lordships summarised certain broad principles in what was termed an end note. The relevant one for the purposes of this appeal are follows:

"(1) The legislation is intended to deprive defendants of the benefit they have gained from relevant criminal conduct, whether or not they have retained such benefit, within the limits of their available means. It does not provide for confiscation in the sense understood by schoolchildren and others, but nor does it operate by way of fine. The benefit gained is the total value of the property or advantage obtained, not the defendant's net profit after deduction of expenses or any amounts payable to co-conspirators.

...

(4) In addressing the questions the court should focus very closely on the language of the statutory provision in question in the context of the statute and in the light of any statutory definition. 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 statutory language rather than in the proliferating case law.

(5) In determining, under the 2002 Act, whether D has obtained property or a pecuniary advantage and, if so, the value of any property or advantage so obtained, the court should (subject to any relevant statutory definition) apply ordinary common law principles to the facts as found. The exercise of this jurisdiction involves no departure from familiar rules governing entitlement and ownership ...

(6) D ordinarily obtains property if in law he owns it, whether alone or jointly, which will ordinarily connote a power of disposition or control, as where a person directs a payment or conveyance of property to someone else. He ordinarily obtains a pecuniary advantage if (among other things) he evades a liability to which he is personally subject. Mere couriers or custodians or other very minor contributors to an offence, rewarded by a specific fee and having no interest in the property or the proceeds of sale, are unlikely to be found to have obtained that property. It may be otherwise with money launderers."

13. The appellant submits in this case there was plainly no power of disposition or control by him with respect to the car. He had even less control over the property than a courier or custodian might have, but, as their Lordships found in principle (6), was unlikely to have obtained that property. The significance of the defendant having the power of disposition or control is reiterated by their Lordships in Jennings. They expressly rejected the Court of Appeal's analysis in that case of what constitutes obtaining a benefit: see for the Court of Appeal decision [2005] EWCA Civ 764; [2006] 1 WLR 182.
14. Laws LJ, giving the judgment of this court, had concluded that a defendant would obtain a benefit within the meaning of section 71(4) if he had been instrumental in getting the property out of the crime; that is, if his acts were a cause of that being done, then he would be at risk of a confiscation order. He did not believe that there was a separate requirement that the defendant should be shown to have control over the property. Their Lordships disagreed, and held that the rationale of the regime was that the defendant should be deprived of what he has gained or its equivalent. He could not be deprived of what he has never obtained, because that would be a fine and would contradict one of the guiding principles.
15. The prosecution contend that the defendant did obtain property in the car. The fact that he later returned it is immaterial since it is well established that the court is merely concerned with assessing the value of property which has been obtained. What later happens to it is irrelevant, see for example the observations of Lord Rodger in R v Cadman Smith [2002] 1 WLR 54.
16. We accept that once a defendant acquires property, it is irrelevant what the defendant does with it thereafter. But the key question in this case was whether the property was obtained in the first place.
17. In our judgment, the appellant's submissions on this ground are correct. In the light of the authorities to which we have referred, and in particular following May, the confiscation order in this case cannot stand. It seems to us unreal to say that the defendant obtained property in the sense in which their Lordships used that term. He never had any right to possess it; he obtained the property for a limited time and a limited purpose, just as a courier does. He had no more control over the property than a courier or custodian will have. Unless and until he chose to buy the car, he was obliged to return it.
18. We accept that the situation may well be different if a defendant in these circumstances was to seek to exercise the rights of the owner, such as by selling the car, albeit contrary to the terms in which it was given to him. But that is not the situation here. He did not stray from the limited purpose for which the car had been given to him.
19. We are confirmed in this conclusion by the decision of this court in Allpress [2009] EWCA Crim 8 (a five man court including Latham LJ, Hughes LJ, Toulson LJ, Rafferty J and Maddison J). A number of appeals were heard together. The court applied the principles established by the House of Lords in the trilogy of cases which we have mentioned -- the situations, amongst others, where the defendants acted as couriers smuggling drugs into the country and to money launderers. In addition, one of the appeals concerned a situation which, in our view, is analogous to that here, where a defendant named Martin pleaded guilty to possessing criminal property, namely cash, which was the proceeds of drug dealing and which he had been asked to look after for his brother. A confiscation order was made against him for the full value of the money he had received.
20. Toulson LJ, giving the judgment of the court, held that the question whether somebody has obtained an interest in property is not determined merely by the fact of temporary possession. What is required is a right of possession. Applying this principle, the court held that the couriers did not have a right to possess the property (in that case drugs) which they were carrying into the United Kingdom. Similarly, the defendant, Martin, was a mere custodian of cash for another. He had no right to possess that cash, and therefore the confiscation order with respect to him was also quashed in its entirety because he had received no benefit from his criminal conduct.
21. The appellant submits that if there were to be any basis for imposing this order, it would have to be that the appellant had obtained a pecuniary advantage in having the benefit of the car. Section 76(5) of the Act deals with such benefits. But the case was not put in that way. We have heard no argument as to whether the benefit obtained in this case is properly described as a pecuniary advantage.
22. It follows that, in our view, this appeal must be allowed. However, we have heard argument on the other two grounds and we will briefly discuss them. The second ground relies upon a case in this court, Shabir [2008] EWCA Crim 1809, in which the court confirmed, as had been accepted in some earlier authorities, that there is in principle a power to stay confiscation proceedings, as there is for any other criminal process where it amounts to an abuse of process. The court may in an appropriate case conclude that the prosecution is acting oppressively in seeking an order of confiscation, or in seeking such an order on a particular basis.
23. Hughes LJ, giving the judgment of the court, indicated the circumstances where this jurisdiction may be exercised as follows:

"24. This jurisdiction must be exercised with considerable caution, indeed sparingly. It must be confined to cases of true oppression. In particular, it cannot be exercised simply on the grounds that the Judge disagrees with the decision of the Crown to pursue confiscation, or with the way it puts its case on that topic. A specific example of that principle is that it is clearly not sufficient to establish oppression, and thus abuse of process, that the effect of confiscation will be to extract from a defendant a sum greater than his net profit from his crime(s). That is inherent in the statutory scheme. The well known general observations of Lord Salmon in DPP v Humphrys [1977] AC 1 at 46 apply to a confiscation case as they do to any other application to stay on grounds of abuse of process ..."

24. Hughes LJ pointed out that if, as is arguably the case, a confiscation order is capable in exceptional circumstances of infringing Article 1 of the First Protocol of the European Convention on Human Rights as an unlawful dispossession of property, then the court's power to stay proceedings for oppression constitutes a remedy. In Shabir the confiscation order was made with respect to a defendant, a pharmacist, who had dishonestly inflated several of his monthly claims to the health service for the cost of the prescriptions he had dispensed. The confiscation order made by the judge was in the region of £180,000, although the actual benefit which he derived was less than £500. The court found that, applying the appropriate legal principles, the judge had not erred in fixing the sum that he did, but they were wholly satisfied that this was a case of oppression. It was an abuse of process for the prosecution to seek confiscation at this draconian level.
25. Is that principle applicable here? There is no doubt that the court must exercise this power with the utmost care. That was emphasised by Hughes LJ, and it has been repeated more recently by the Lord Chief Justice, Lord Judge, in the case of Paulet [2009] EWCA Crim 1573. The Lord Chief Justice said this at paragraph 35:

"... to conclude that proceedings properly taken in accordance with statutory provisions constitute an abuse of process is tantamount to asserting a power in the court to dispense with the statute."

26. He emphasised that a successful abuse of process argument must be based upon traditional abuse of process principles.
27. We bear in mind those observations. Our surprise that the Crown thought it fit to pursue this application, particularly against someone of previous good character, does not justify a conclusion that it was oppressive and an abuse of process. We also bear in mind that the sums involved here were nowhere near as extreme as in the Shabir case.
28. Accordingly, in our judgment, even if Shabir can apply to stay confiscation proceedings merely on the ground that the sum to be recovered under the order seems wholly disproportionate to the true benefit received, it would not be appropriate to apply it here. These are not sufficiently exceptional circumstances to warrant a stay of proceedings.
29. We turn to the final ground: could the confiscation order be made given that the appellant was conditionally discharged? This matter was considered in the case of Clarke [2009] EWCA Crim 1074. The court (Hooper LJ, Cox J and the Recorder of Nottingham) held that where somebody has been conditionally discharged, it is not possible to impose a confiscation at all. The court analysed in some detail the history of the legislation relating to absolute and conditional discharges. In the light of that history and having regard in particular to the statutory language in section 12 of the Powers of Criminal Courts (Sentencing) Act 2000, which empowers a court to make absolute or conditional discharges, the court was satisfied that, at least in circumstances where the sentence is imposed before the confiscation order is made, there is no power to impose the confiscation order. Emphasis was placed in particular on section 12(7) of the 2000 Act, which specifically provides that certain orders can be combined with an absolute or conditional discharge, such as cost orders or restitutionary orders, but does not include confiscation orders. As the court noted, however, for other technical reasons it is possible for a court to impose the confiscation order first and then impose a further sentence. This is because section 14(1)(a) of the Proceeds of Crime Act provides in terms with respect to confiscation orders that:

"(1) The court may—

(a) proceed under section 6 [that is imposing a confiscation order] before it sentences the defendant for the offence (or any of the offences) concerned ..."

30. It is therefore expressly envisaged that the confiscation order can precede the imposition of the sentence. In paragraph 78 of the judgment in Clarke, Latham LJ said this:

"Given that a confiscation order can, at least in theory, be made before passing sentence, it would obviously be prudent in those very rare cases where an absolute or conditional discharge is a possibility, to decide upon sentence first."

That advice was not followed here. As we have said, the confiscation order was made first, and the judge made it clear that he was imposing the sentence of conditional discharge because it was inexpedient to punish the appellant further. The prosecution can see that it was wrong for the judge, when determining the sentence, to have regard to the fact that a confiscation order had been made. That is not relevant to sentence, save in limited circumstances such as where a fine is being considered (see section 12(4) of the 2002 Act). However, counsel for the appellant submits that, in fact, the judge would have imposed this sentence in any event. We cannot speculate about that, but we simply observe that it is not consistent with the judge's comments.

The immediate question is this: what is the effect of quashing the confiscation order? In our judgment, it simply leaves the sentence in place. In the light of the judge's comments, he may well have imposed a different sentence had he not made the confiscation order. He plainly took the view that that order was punishment enough. But he did not impose a different sentence, and the sentence he passed must stand.

The more difficult question, which does not in the event arise, is whether, if we had concluded that the confiscation order was otherwise valid when made, it would have been rendered invalid by the subsequent imposition of the conditional discharge. Both counsel submitted that it would, principally on the basis of section 12(7) of the PCCA 2000. They submit that, in effect, it is necessary to focus on the sentence first, whether imposed before or after the confiscation order is made. Once that sentence is an absolute or conditional discharge, it follows that no confiscation order can stand, even if the judge is purported to make one.

However, there seems to us to be a respectable argument to the contrary, that a confiscation order stands, and that it is in principle the sentence that is unlawful, even if that that in turn has to stand in accordance with the principle that this court cannot impose a more severe sentence than that imposed by the judge below (see Reynolds and others [2007] EWCA Crim 538). Given that this contrary argument has not properly been explored before us, and in particular since we do not need to decide this question, we do not do so. It remains an issue for another day.

However, for the reasons we have given, the appeal succeeds and we quash the confiscation order. The case does, however, demonstrate the importance of the court bearing in mind the advice given by Latham LJ in Clarke that they should sentence independently of a confiscation order, and if an absolute or conditional discharge is envisaged as a possibility, then the sentence should be passed before considering the issue of confiscation.