England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL
CRIMINAL DIVISION

		Royal Courts of Justice Strand London, WC2A 2LL
		9 February 2010

1. LORD JUSTICE TOULSON: These are appeals by the prosecution from a decision of the Recorder of Hull, Judge Mettyear, on 23 January 2009 in confiscation proceedings brought by the prosecution under Part 2 of the Proceeds of Crime Act 2002 against the two respondents, Charles Berry and David Crisp.
2. On 5 April 2005, both respondents pleaded guilty to offences of being knowingly concerned in the fraudulent evasion of excise duty on tobacco. The offences were committed in the case of Berry on 3 April 2004 and Crisp on 28 April 2004.
3. Judge Mettyear first heard argument against the respondents and another defendant on the prosecution's confiscation applications on 28-30 June 2006, at the conclusion of which he ruled that section 6(6) of the Act gave him power to adjust the amount of any confiscation order to take amount of monies which had been forfeited under section 295 of the Act, and that, in the exercise of his discretion, he proposed to do. He adjourned the proceedings because there was an issue whether any benefit obtained by an offender should be apportioned between co-defendants, and the House of Lords was due to consider this point.
4. Following the decisions of the House of Lords in R v May, Green and Jennings [2008] UKHL 28, 29 and 30, where the point was answered in the negative, the applications were restored before Judge Mettyear on 29 January 2009. In the case of Berry, he certified the amount of the benefit as £26,309.18, and made a confiscation order in the sum of £5,224.18. In arriving at that figure, he deducted the sum of £21,085, representing the amount of cash which had been seized from Berry and forfeited.
5. In the case of Crisp, he assessed the benefit at £53,101.22, but made no confiscation order because he took into account that £82,000 in cash had been seized from Crisp and forfeited. The prosecution appeals against those orders. They submit that the judge was wrong in law to take into account the sums in cash which had been seized and forfeited. Since there was no dispute that the respondents' available assets exceeded the benefit assessed by the judge, he ought, in the submission of the prosecution, to have made confiscation orders against each of them in the amount of the benefit certified by the judge: that is, £26,301.18 in the case of Berry, and £53,101.22 in the case of Crisp.
6. Before coming to the legal arguments, some further explanation of the facts is needed. On 3 April 2004, officers followed a van being driven by Berry. Berry was arrested. The van was searched. It contained 104,800 L&M cigarettes of Russian origin and 50 kilograms of hand-rolling tobacco. Berry's home was searched, and £21,089 in cash was detained under section 294 of the Act. Also discovered at his home were keys to two containers, which were found to contain a further 6,400 L&M cigarettes. Berry pleaded guilty to being knowingly concerned in the evasion of duty on the cigarettes and tobacco seized.
7. On 28 April 2004, Customs officers followed a car driven by Crisp, a van driven by a co-defendant Burns and a third vehicle. The vehicles drove in convoy along narrow country lanes, but the van drove off while Crisp's car continued to proceed slowly, so stopping Customs officers from keeping up with the van. Later on the same day, the van was found and searched, and Crisp was arrested. The van contained 293,400 Superking cigarettes. Crisp's home was searched and £82,000 in cash was detained under section 294. Crisp pleaded guilty to being knowingly concerned in the fraudulent evasion of the duty on the cigarettes.
8. In the confiscation proceedings there was no allegation that either respondent had a criminal lifestyle. So the issue was what benefit he obtained from his "particular criminal conduct", and what available assets he had.
9. The question of the proper approach to assessing benefit obtained by a smuggler of cigarettes intercepted and seized by Customs officers was considered by the House of Lords in R v David Smith [2001] UKHL 68; [2002] 1 Cr App R 35. Smith was caught trying to smuggle 1.25 million cigarettes in a motor vessel. The vessel sailed into the Humber Estuary past Customs Houses and upriver to Goole, where it was stopped and searched. The cigarettes were seized and forfeited. The duty and tax payable on the goods would have been approximately £130,000. The argument for Smith was that he obtained no benefit from the evasion of the duty and tax because the goods were seized. The House of Lords rejected that argument and their reasoning is important.
10. The Court of Appeal had held that Smith obtained no benefit because he remained legally liable to pay the duty, and he had not been able to retain or sell on the cigarettes. If he had been able to sell the goods, the avoided tax would have been part of his profit from the transaction.
11. As Lord Rodger observed, on this reasoning the question whether Smith obtained a benefit from his crime depended on the fate of the cigarettes. He rejected that approach. He held that, on the ordinary meaning of the words "pecuniary advantage", Smith obtain a pecuniary advantage at the moment of evading the duty, and the value of his benefit from doing so was the amount evaded.
12. Lord Rodger said at paragraphs 26 to 27:

"26 ... Under section 74(5) for the purposes of making a confiscation order the value of the property is its value to the offender when he obtained it. In this case the respondent derived a pecuniary advantage by evading the duty at the moment when he imported the cigarettes. The sum equalling that pecuniary advantage is treated as property obtained by the respondent at that moment. In terms of section 74(5), its value must therefore be determined at that moment, disregarding the fact that, soon after, the customs officers seized the cigarettes at Goole.

27. That being so, the fact that the respondent and his co-accused were unable to realise the value of the contraband cigarettes is irrelevant to the question of whether they derived a pecuniary advantage from fraudulently evading the excise duty on them. If the cigarettes had not been seized and the respondent and his co-accused had been able to sell them, then the money which they received from selling them would have been "property" in terms of section 71(4). In that situation, they would not only have derived a pecuniary advantage in terms of section 71(5) from evading the duty but would also have obtained property in terms of section 71(4) in the form of the sales receipts. Their benefit from the commission of the offence would have been made up of these two elements."

13. In the case of Berry, the prosecutor's statement under section 16 put the benefit at £26,309.18 as representing the avoided excise duty and VAT. This figure was admitted. His available assets were said to be (1) the value of his home at 107 Abbey Street, Hull, which he owned outright, and which the prosecution estimated to be worth £42,500; (2) a Lloyds TSB account which had a credit balance of £26,000; and (3) an Audi motor car valued at £5,175. In response, Berry accepted the valuations of his home and the Audi, but he asserted that the money in the account (which was a joint account in the name of himself and his wife) belonged to his wife.
14. Berry's response also stated:

"It is submitted that the Prosecution assessment of the Defendant's assets for fulfilment of any obligation or debt found by the court to be owned by Berry is flawed and incomplete.

The following assets are available which the court ought to take into account as available to the defendant to meet any liability due:-

1. £21,085.00 as seized by HM Customs & Excise on 3 April 2004 from the Defendant's home address, 107 Abbey Street, Hull ...

That money currently held by Custom is subject to proceedings in the Magistrates' Court.

The magistrates have adjourned all enquiries into this monies until the conclusion of the Crown Court case. That money has not been forfeited and the Defendant makes no concessions that it may be properly forfeited within those proceedings so as to prevent that money from being available to the Defendant as asset with which to meet any liability found by the Crown Court to be due.

Accordingly it is submitted that this sum is available to the defendant to meet any liability found by the court to be due."

15. This was an odd submission for a defendant, on its face, because it meant that he was asserting that he had greater funds available to meet a confiscation order than the prosecution was alleging.
16. In response to Berry's statement, the prosecution stated:

"With regard to monies held by HMRC seized from Charles Berry's home on the day of his arrest, since the submission of the first prosecutor's statement ... at a hearing at Hull Magistrates' Court during the week commencing 7th November 2005, the full amount of £21,085 was forfeited. This means that the money can no longer be said to be an available amount for confiscation, although it was never included in the available amount due to the forfeiture procedure not being finalised."

17. In the case of Crisp, the prosecutor's section 16 statement put the benefit at £53,101.22, which similarly represented the avoided excise duty and VAT. Crisp's available assets were put by the prosecution initially at £613,770, which included a suggested equity of £461,901 in his home.
18. In Crisp's response, it was contended that the benefit figure from his offending should be split jointly with Burns, and that the true value of his home was £350,000.
19. In January 2006, the prosecution served an amended statement of its case as to the value of Crisp's available assets. This stated that Crisp's home had been sold for £335,000, and the revised valuation of his total assets was put at £486,869. As to the cash seized from Crisp's house, the updated statement said:

"With regard to monies held by HMRC seized from David Crisp's home on the day of his arrest, since the submission of the first prosecutor's statement ... at a hearing at Hull Magistrates' Court on 24th January 2006, the full amount of £82,000 was forfeited.

This means that the money can no longer be said to be an available amount for confiscation, although it was never included in the available amount due to the forfeiture procedure not being finalised."

20. The cash seized from each respondent's home had been forfeited under section 298 of the Act, which empowers a Magistrates' Court to order forfeiture of cash which has been seized by, among others, a Customs officer, if satisfied that the cash is recoverable property. Property is defined as "recoverable property" under section 304 if it has been obtained through unlawful conduct. In the case of Berry, the forfeiture order was made by consent. In the case of Crisp, it was opposed, but he gave no evidence himself, although evidence was called on his behalf, to explain how he came to have the sum of £82,000 in cash at his home. Logically, the cash seized from each respondent could have come from three possible sources, or a mixture of them: (1) a lawful source; (2), the importation of the tobacco which was the subject of the indictment, ie because the cash was money paid for the goods or part of them, or was payment for the respondent's services; or (3) previous unlawful conduct.
21. The first possibility, ie that the source of the money was lawful, was excluded in the case of Berry by his consent to the order made, and excluded in the case of Crisp by the findings of the District Judge. He concluded that the £82,000 was the proceeds of unlawful conduct. The District Judge did not find, nor was it necessary for him to find, whether it was the proceeds of the smuggling offence to which he pleaded guilty or other unlawful conduct.
22. Mr Perkins, on behalf of Berry, submitted that, in his case, it must be taken to have been the proceeds of the smuggling offence to which he pleaded guilty because of the form of the Customs and Excise notice of application for a forfeiture order. In a box marked "State grounds", the information provided was:

"Cash recovered from Mr Berry's premises following his arrest on suspicion of being involved in the evasion of excise duty on 03/04/04. Mr Berry has been charged with the aforementioned offence, and on 5 April 2005 at Hull Crown Court ... pleaded guilty to the above offence."

23. Barry's plea of guilty had obvious evidential significance. Discovery of large sum of cash in the possession of a person involved in cigarette smuggling gives ground for suspicion that it is not lawful money. We are not persuaded that the Customs and Excise, by the use of that form, pinned themselves to asserting that the cash was the direct product of that offence, and it was unnecessary for them to do so. However, we do not think that it matters whether the money came from that specific transaction or from other unlawful dealing, for reasons to which we will come.
24. At the time of the hearing before Judge Mettyear in June 2006, the prosecution's case should have been straightforward. The benefit figures were agreed, subject to the point raised by Crisp about whether the benefit should be apportioned between the defendants, which led to the proceedings being adjourned pending the cases before the House of Lords, who in due course rejected the respondent's argument. Each respondent's available assets exceeded the amount of his benefit. The cash seized from the defendants and subsequently forfeited was not relevant to the benefit which formed the basis of the confiscation application, nor was it part of his available assets. However, a few days before the matter was due to come before Judge Mettyear, counsel then acting for Berry (not counsel who has represented him on this appeal) lodged a skeleton argument, which read as follows:

"1. No issue is taken with the benefit figure of 26,309.18 as per para 8 of prosecution statement.

2. As to para 6 of the Prosecution statement, £21,085 was seized from the defendant on 3 April 2004. That has been subject to civil proceedings for forfeiture in the Magistrates' Court. That money has now been forfeited (date 11/11/05).

3. The Crown now seek to confiscate a further £26,309.18 from this defendant, taking no account whatsoever of the fact that the defendant has already forfeited £21,085 to HM Customs arising out of money seized during this investigation.

4. It is submitted that the Crown ought not be permitted to gain a windfall double recovery against this defendant.

5. The Crown proceeds under POCA 2002, ss(3)(a) & (4)(c), ie this is not a "lifestyle" case. It follows that the Crown case against Berry is not that he has generally profited from criminal conduct other than the specific one off offence in this case and the specific benefit figure arising out of that conduct. No substantial other unexplained assets have been found consistent with general criminal lifestyle.

6. POCA 2002 s6(5): Court must determine the recoverable amount & order the defendant to pay that amount.

7. The Defence rely on POCA 2002 s6(6). Court must treat the duty in subsection (5) as a power if it believes that any victim of the conduct has at any time started or intends to start proceedings against the defendant in respect of loss, injury or damage sustained in connection with the conduct. It is submitted that this subsection can have no other purpose than to prevent the possibility of double recovery.

8. As a matter of fact, as disclosed in the Prosecutor's statement para 6, HM Customs as agent for the victim of this offending (the Crown) has commenced and successfully concluded civil proceedings "in connection with the conduct" and recovered £21,085. In is submitted that in these circumstances the s6(5) duty becomes a power and must be so treated ..."

25. Section 6 of the Act provides, so far as material, as follows:

"(1) The Crown Court must proceed under this section if the following two conditions are satisfied.

(2) The first condition is that a defendant falls within any of the following paragraphs—

(a) he is convicted of an offence or offences in proceedings before the Crown Court ...

(3) The second condition is that—

(a) the prosecutor ... asks the court to proceed under this section ...

(4) The court must proceed as follows—

...

(c) if it decides that he does not have a criminal lifestyle it must decide whether he has benefited from his particular criminal conduct.

(5) If the court decides under subsection (4) ... (c) that the defendant has benefited from the conduct referred to it must—

(a) decide the recoverable amount, and

(b) make an order (a confiscation order) requiring him to pay that amount.

(6) But the court must treat the duty in subsection (5) as a power if it believes that any victim of the conduct has at any time started or intends to start proceedings against the defendant in respect of loss, injury or damage sustained in connection with the conduct."

26. The short answer to the point raised by counsel for Berry was that the forfeiture proceedings were not "proceedings in respect of loss sustained in connection with the conduct". The loss sustained by Customs and Excise was the evasion of excise duty and VAT on the contraband cigarettes. By applying to forfeit the cash found at each respondent's home, the Customs and Excise were not seeking to recoup any part of that loss. Either that money had nothing to do with the smuggling offences to which they pleaded guilty, or, if it did, then the money was an additional benefit from that offending. Either way, recovery of the cash did not diminish the loss from the evasion of the duty. So the forfeiture proceedings were not proceedings to recover that loss, and section 6(6) was irrelevant.
27. Nor was there any double counting in the state pursuing both a confiscation claim made under Part 2 of the Act in respect of the avoidance of duty, and forfeiture proceedings under Part 5 of the Act in respect of the cash found in each respondent's home. Any argument about abuse of process was similarly unfounded. If the cash was directly connected with the offences to which the respondents pleaded guilty, then the situation would be analogous to the example given by Lord Rodger of the smuggler who succeeds in selling the smuggled goods. His benefit will consist both a pecuniary advantage equal to the value of the duty evaded, and also property in the form of sales receipts.
28. If this short point had been put to the highly experienced judge and he had been taken to the salient parts of the prosecutor's section 16 statement and the respondents' responses, we have no doubt that he would have disposed of the point in a matter of minutes. Unfortunately, the point was buried in argument beneath other more complex arguments about double recovery and the interpretation of sections of the Act which in truth it was unnecessary to explore.
29. After the oral argument on 29 June 2006, counsel for the prosecution produced overnight a summary of arguments which began:

"1. There has been no so-called 'double recovery' in any of these cases, because the seized monies have not been treated as a benefit from criminal conduct under section 76(4) of the Proceeds of Crime Act 2002. Had they been so treated then the 'benefit' figure set by the prosecution would have been increased by a sum equal to the seized cash. Consequently there is no hardship or unfairness in the actions being taken by HMRC."

30. This was directly to the point, but unfortunately this document did not reach the judge until after he had embarked upon giving his ruling. He was interrupted by counsel, who drew his attention to the document, but when the judge ascertained that this was a point not raised in the oral argument on the previous day, he declined to entertain it, and continued with the ruling which he had begun. In his ruling, he said:

"In the revised summary of issues submitted [by counsel for the prosecution], he defines the present issue between the parties as follows. Again I will take the Berry case, although the same considerations apply to Crisp.

'Does the seized and forfeited cash ... form part of the defendant's 'available amount' ... in respect of which a confiscation order can now be made by the court, ie is it 'free or realisable property'?'

The document goes on to state the Crown's case on this as follows:

'Property is not 'free property' within the meaning of the Act if it is already the subject of one of the orders detailed in section 82 of the Proceeds of Crime Act.'

So far as the orders detailed in section 82 are concerned, [counsel] says that the relevant one is that referred to in subsection (f) namely, 'section 298(2) of the Proceeds of Crime Act."

31. None of this was necessary to reach the correct resolution of the case, but for this the judge is not to be blamed. He went on to consider arguments which had been presented to him on double recovery and abuse, but which did not, in our judgment, properly arise on the facts.
32. On the way in which the case was presented to him, we have considerable sympathy with the judge for coming to the decision that he did, but we are satisfied that the case did not fall within section 6(6). The forfeited assets were not part of the loss which the state was seeking to recoup by the forfeiture proceedings. Mr Perkins objected to this point being raised at this stage, but the question whether the case fell within section 6(6) is an issue on the appeal. We are satisfied that it did not, and it would not be right to dismiss the appeal simply because at an earlier stage the wood had been lost sight of for trees.
33. It was submitted by the respondents that the appeal is out of time because the prosecution ought to have appealed against Judge Mettyear's ruling on 30 June 2006 by way of case stated under section 28 of the Senior Courts Act 1981. We are doubtful whether that would have been an available remedy, but it is unnecessary for us to consider that question further because the appellant has been given leave to appeal under section 31 of the 2002 Act against the order made on 23 January 2009, and we are satisfied that we have jurisdiction to entertain it.
34. As we have indicated, it has been submitted that there has been an abuse of process. We can see no abuse of process in the state pursuing both the confiscation proceedings and the forfeiture proceedings.
35. It was also submitted on behalf of Crisp that there was an abuse of process in the prosecution pursuing an appeal against Judge Mettyear's order after Crisp had withdrawn an appeal which he had lodged against the forfeiture order made by the District Judge. That appeal was withdrawn following the ruling of Judge Mettyear on 30 June 2006. We see no merit in that argument. If Crisp wanted to argue on appeal that the cash seized was lawful money, he should have done so. If it was unlawful money, then the order was right and unappealable.
36. Accordingly, the appeals must be allowed and we will hear counsel as to the appropriate orders.