England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL
CRIMINAL DIVISION

		Royal Courts of Justice Strand London, WC2A 2LL Wednesday, 26 May 2010
		Wednesday, 26 May 2010

1. LORD JUSTICE AIKENS: This is an appeal against conviction with the leave of the single judge. On 16 December 2009, in the Crown Court at Cardiff before HHJ Richards and a jury, the appellant was convicted of one Count of acquiring criminal property, contrary to section 329(1)a) of the Proceeds of Crime Act 2002, and one Count of removing criminal property from England and Wales, contrary do section 327(1)e) of that Act. Those were Counts 6 and 7 on the indictment.
2. Upon the judge's direction, the jury acquitted the appellant of Counts 1 and 2 on the indictment, which were charges of obtaining a money transfer by deception. The jury also acquitted the appellant of four further charges on the same indictment. Those were two Counts of acquiring criminal property (Counts 3 and 5), one Count of removing criminal property from the jurisdiction (Count 4), and also one Count of possessing criminal property contrary to section 329(1)c) of the 2002 Act.
3. On 26 January 2010 the appellant was sentenced to a community order of 24 months.
4. The appellant and his wife had set up a limited company in 2003 called Mount Elephant Limited, through which to run a Chinese restaurant called the "Golden Gate Takeaway". A third person was also involved with the company and was also a shareholder. Before this, the appellant and his wife had run a partnership called "Flied Lice", which we understand was in the same line of business. The appellant and his wife had taken over that business from the appellant's father. The evidence from one of the principal prosecution witnesses, Mr Kevin Issacs, who was the appellant's accountant and who dealt with his tax affairs during the period 2003 to 2006, was that the partnership had ended in profit of some £57,000 and the money from that passed to the appellant and his wife.
5. The restaurant premises for the new business were taken on a 3 year lease, for which the new company paid a £20,000 bond and £500 rent per week. Mr Issacs gave the appellant and the company advice on how to set up work contracts, salaries and dividend payments to the three shareholders in the company, so that the minimum tax would be paid if any at all.
6. Some time around July or August 2005, the third person involved sold his shareholdings to the appellant and his wife, for which he was paid £7,766. The business was then carried on until the end of 2006. When the business was wound up (we are not quite sure whether the company went into solvent or insolvent liquidation) the appellant and his wife received a payment of £4,825 each.
7. Mr Issacs gave evidence that, in early 2007, the appellant had asked him about whether he should declare investment income for tax purposes if he had any. Mr Issacs advised him that he should. Mr Issacs did not, apparently, continue to act for the appellant much longer after that.
8. The basis for each of the charges was as follows: Counts 1 and 2 related to sums that the appellant had obtained from Egg Banking PLC. The alleged deception was said to be in relation to the figure for annual income that the appellant had declared to Egg Banking PLC. However, the prosecution was unable to prove whether or not the appellant had actually represented to Egg Banking PLC that he had an annual income of, respectively, £25,000 and £40,000 for the two sums obtained. The prosecution had only a written record of the applications of the appellant, and the witness called by the prosecution could not give evidence that the figures on the record constituted statements made by the appellant and thus representations by him as to his annual income.
9. Therefore, at the close of the prosecution case, the judge held, correctly, that the case on these two Counts could not go to the jury. As it was a case that relied wholly on partly on the document rather than oral evidence, and the documents were so unconvincing that a conviction upon it would be unsafe, the judge directed the jury, under section 125 of the Criminal Justice Act 2003, to acquit the appellant of those two charges. That was done in due course at the end of the trial.
10. Counts 3 and 4 relate to a sum of £5,000 that was paid into the appellant's bank account on 24 August 2006. That sum was subsequently transferred to Hong Kong, apparently to an account of the appellant's father. After two failed attempts at transfer, the transfer was achieved in September 2006. The transfer into the defendant's account constituted Count 3, and the transfer out constituted Count 4. The appellant's explanation for receiving that sum was that it had been a loan from his father from ten years ago, which he had kept in cash hidden in his house until he paid it into his bank account with the intention of repaying his father. The money was later repaid to a mortgage account that the appellant had in Midshires Mortgage on 26 October 2006. The Crown's case was that this was all criminal property.
11. Count 5 concerned the sum of £10,000 paid into the appellant's bank account in September 2006. Count 6 concerned the sum of £12,250 which was paid into the appellant's bank account on 30 March 2007. The appellant said that this sum represented money paid to him by his car insurance company for the loss of his Mercedes car which had been bought on 25 June 2004 for the sum of £18,600 cash. The appellant said that this also explained the transfer out of £10,000 from his bank account to an account in Hong Kong on 19 April 2007, which was the subject of Count 7. The Crown said that neither of those explanations was correct. The Crown's case was that the money to buy the car in the first place was the result of criminal conduct.
12. Count 8 concerned cash that the appellant had in his house. He brought £2,442.07 voluntarily to the police station on 4 May 2007 after he had been interviewed. The other £210 was seized at his house during a police search.
13. The Crown relied on various pieces of evidence to prove a case that the appellant had derived sizeable sums of money from what could only have been criminal conduct, because there was no other rational explanation for him having that amount of money available. The Crown relied on purchases on eBay and the purchase and sale of shares in Hong Kong as evidence of the appellant having access to money which the Crown said could only have come from criminal conduct.
14. The Crown also adduced evidence of gambling by the appellant at Croupiers Casino in Cardiff. There is no doubt that the appellant had been a member of the Casino since 2000 and he had made 113 visits between 2002 and 2009. There was evidence which suggested heavy losses and then re-gains by the appellant around the end of April 2007.
15. At the trial, the appellant did not give evidence.
16. There are four grounds of appeal. They are, first, the judge should have accepted the submission of no case to answer in relation to Counts 6 and 7. Secondly, the judge wrongly left open to the jury a basis upon which they could convict on Count 6 and 7 when that was not open to them. That basis was that the property the subject of those Counts was the product of "cheating the revenue". Thirdly, it is said the judge misdirected the jury as to the ingredients of the offence of "cheating the revenue". Lastly, it is said the judge misdirected the jury by telling them that the acquittals on Counts 1 and 2 had no bearing on their verdicts on Counts 6 and 7.
17. Ground 1: The case for the Crown was that, once the appellant's declared salary and admitted outgoings were taken into account, the jury must be left with the "irresistible inference" that the property that was the subject of Counts 6 and 7 represented the proceeds of his or another's criminal conduct. The judge, in his ruling on the submission of no case to answer, did not distinguish between any of the particular Counts. He dealt with Counts 3 to 8 in omnibus terms. He concluded that there was sufficient in the prosecution evidence about the general lifestyle and financial dealings of the appellant for a jury, properly directed, to draw the "irresistible inference" that the source of the sums referred to in the Counts was criminal conduct by the appellant or another.
18. In relation to Counts 6 and 7 in particular, which concern the proceeds of the insurance payment for the loss of the Mercedes, the Crown was effectively saying that the cash used to buy the Mercedes in 2004 constituted the proceeds of crime because an analysis of the appellant's source of funds then could not show that he was able to pay £18,600 in cash to buy the car at that time. It was common ground at the trial at that, if the purchase money was tainted, then the insurance proceeds and the transfer to Hong Kong, ie the sums that were the subject of Counts 6 and 7, must be similarly tainted. The defence case was that sufficient financial resources of the appellant were demonstrated on the evidence to prevent the jury from being able to draw the "irresistible inference" that the Crown invited them to do so.
19. In R v Anwoir [2009] 1WLR 980 at paragraph 21, Latham LJ, Vice President, said, in relation to offences under section 327 and 328 of the Proceeds of Crime Act 2002, that there were two ways in which the Crown could prove that property was derived from "criminal conduct" as defined by section 340(1) of that Act. These ways were, first, by showing that the criminal property was derived from conduct of a specific kind or kinds and that that conduct of that kind or those kinds was unlawful. Secondly, by evidence of the circumstances in which the property was handled which were such as to give rise to the "irresistible inference" that it could only have been derived from crime. The same reasoning must apply to section 329 of the Proceeds of Crime Act 2002.
20. This was undoubtedly a case where the Crown had not sought to allege a specific kind or kinds of conduct by the appellant that was unlawful, other than "cheating the Revenue". So, the question here is whether, at the end of the prosecution case, the position was that no jury properly directed could, on the evidence presented, reach the "irresistible inference" that the purchase money for the Mercedes had to have been derived from crime. We are not satisfied that this is the case. In our view, on the state of the evidence, the judge was right to let that matter go to the jury.
21. Ground 2: It is clear that the Crown's allegation was that the appellant either had other illegitimate sources for income, which must have come from unlawful conduct, and/or that he had income which was not declared to HMRC so was unlawful income because it was the product of "cheating the Revenue". The issue is whether this second basis was open to the Crown. It is clear from the definition in section 340 of the Proceeds of Crime Act 2002 that, first, "criminal conduct" is conduct which constitutes an offence in any part of the United kingdom. Secondly, property is "criminal property" if: a) it constitutes a person's benefit from criminal conduct or it represents such a benefit, in whole or in part, and whether directly or indirectly, and b) the alleged offender knows or suspects that it constitutes or represents such a benefit.
22. It is also clear from the judgment of this court in R v Gabriel [2007] 1WLR 2272 at paragraph 20, that the failure to declare to HMRC income obtained from legitimate trade or from other legitimate means such as buying or selling investments, making capital gains or receiving dividends or interest, is not, by itself, "unlawful conduct" which gives rise to a criminal offence. If the prosecution wished to rely on criminal conduct that relates to a failure to disclose to HMRC income or profits, it must do more than prove a mere failure to declare legitimate income. That is not, by itself, an offence.
23. In our view, if the second basis was to be put to the jury on Counts 6 and 7, there would have had to have been some credible evidence that, in some concrete way, the appellant committed the offence of "cheating the Revenue", ie some specific criminal offence, for that basis to go to the jury. The Crown has failed to convince us that there was any such specific evidence upon which a jury could, properly directed, conclude that the appellant had made one or more false statements to HMRC and had done so with the intention of fooling the Revenue. Therefore, we conclude ground 2 succeeds.
24. Ground 3: The judge's directions on the ingredients on the offence of cheating the Revenue are set out at pages 11F to 12F of his summing up. They are part of a more general direction on what constitutes "criminal conduct" from which "criminal property" could derive. Between 11F and 12F the judge gives several examples of when conduct will not amount to cheating the Revenue. But at no stage, as Mr Elias accepts, does the judge set out the basic elements of the offence. Those are (1) that the defendant must make a false statement to the Revenue, and (2) that he has the intention of defrauding the Revenue (see Archbold, chapter 25 paragraph, 385a). The mental element is particularly important and it is not mentioned by the judge in his direction at all. Therefore, in our view, the jury were not correctly directed on the law in relation to one possible way in which the defendant could have committed criminal conduct, and thereby acquired criminal property, the subject of Counts 4 to 8. We find that ground 3 is made out.
25. Ground 4: The judge had directed the jury to return a not guilty verdict on Counts 1 and 2. The second Count, we recall, was the allegation that the loan of £4,000 was dishonestly obtained from Egg Banking PLC. Before the judge came to sum up he said, he gave his directions on 14 December to return a verdict of not guilty on Counts 1 and 2. He said that the jury was not to read anything into the decision on Counts 1 and 2 in relation to the other Counts ie Counts 3 to 8. The judge said that they were separate Counts and it was for the jury to decide on the evidence whether they found the prosecution case made out on the remaining Counts.
26. When the judge came to sum up the following day he said, at page 5F of his summing up, that his decision on Counts 1 and 2 had no bearing on the jury's verdicts in relation to Counts 3 and 8 inclusive. They were matters for the jury to resolve.
27. There was a further reference to the £4,000 when the jury posed a question after retiring. The judge recalled them to deal with various details. That is at page 29F to 30A of the transcript. There, the judge reminded the jury that, in his interview, the appellant had referred to borrowing money from Egg; £4,000 for the car. It is correct that the appellant had said that the purchase of the Mercedes car had been funded in part by the loan of £4,000 obtained from Egg Banking PLC, which was the subject matter of Count 2. In other words, the appellant had said that there was a legitimate source of at least part of the purchase price of the car (it will be recalled that Counts 6 and 7 related to the insurance proceeds received after the loss of Mercedes car).
28. We accept the submission of Mr Rees on behalf of the appellant that the judge's direction that the verdict of not guilty on Count 2 had no affect on Counts 6 and 7 meant that the jury could have concluded that part of the purchase price for the Mercedes car came from part or all of the £4,000 loan, and that the jury may not have worked out that they could not now regard any part of that £4,000 as criminal property, because the appellant had been acquitted in relation to that sum. The jury may, therefore, because of the lack of a proper direction, have convicted on Counts 6 and 7 on a wrong basis of facts and law.
29. In our view, the judge should have given a clear direction that, in relation to Counts 6 and 7, if they concluded that part of the purchase price of the Mercedes car came from some or all of the £4,000 from the loan from Egg Banking PLC, then such money was not criminal property because the appellant had been acquitted on Count 2. Therefore, the money the subject of that Count 2 could not be criminal property. The judge might have gone on to direct the jury that it was a matter for them to decide, so that they were sure whether there were other sources for the purchase price of the Mercedes car that did constitute criminal property, but that was for them to decide on the evidence.
30. In the absence of a proper direction that the jury should have taken account of the acquittal in Count 2 in the manner we have indicated, the verdicts on Count 6 and 7 must be regarded as unsafe.
31. Looked at overall, for the reasons we have given in relation to Grounds 2, 3 and 4 of the appeal, we have concluded that the verdicts on Counts 6 and 7 were unsafe and must be quashed. The appeal is therefore allowed