England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM ISLEWORTH CROWN COURT
His Honour Judge Denniss
S20100731

		Royal Courts of Justice Strand, London, WC2A 2LL
		09/10/2012

Lord Justice Moses:

1. This is an appeal against a fine of £120,000 and an order for costs of £100,000, imposed following dismissal of an appeal against conviction at the Isleworth Crown Court on 13 December 2011. The appeal is mostly focussed upon the procedure which the judge adopted in relation to the question whether the appellant could afford to pay a fine and costs of so considerable an amount. But it also raises the question of the appropriate level of fine in respect of an offence under s.9(1) and s.74(1) of the Planning (Listed Buildings in Conservation Areas) Act 1990.
2. The appellant had been originally convicted on 13 December 2010 by the West London Magistrates' Court. In HHJ Denniss's judgment on appeal against conviction the appellant was described as a successful property developer who had developed many substantial residential properties in central London using a company called Peninsula Construction (London) Limited. He was, until this offence, of good character. He lives with his wife and three young children in the Bishop's Park area of Fulham. He wanted to create a family home within that designated conservation area.
3. On 15 June 2007 he bought a three-storey Victorian house at 39 Cloncurry Street, London SW6. He paid £2,005,000 for the property. Before he bought the property he had made three applications for planning permission. He proposed a loft conversion, a new side extension, and a very substantial basement. He wished to extend the property from a three to six-bedroom house. The development involved the removal of the original structure and re-building the original home using modern materials, salvaged features and reconstruction as a replica.
4. Following meetings with a planning officer, it became clear that the appellant's preferred option was for demolition and rebuild: this would save money and ease construction. He was told that if he intended to demolish the house he would need to apply for conservation area consent. He was told that it was very unlikely that he would obtain such consent. The judge and the magistrates sitting on the appeal found, contrary to his evidence, that when he started to prepare his building for development he implemented the preferred scheme for demolition and refurbishment without any application for conservation area demolition consent.
5. Removal of original Victorian walls destabilised the spine wall and reduced lateral stability. Subsequent problems were found to have either exacerbated or even been created by the appellant's radical approach to demolition of the Victorian structure. The principal planning officer took the view that the work amounted to virtual demolition of the property.
6. Following the demolition of the spine and side walls, the Health and Safety Executive advised that the front elevation was dangerous and the authority reluctantly, in 2009, granted the appellant permission to demolish the front elevation which had become unstable. The need to demolish the front elevation was a foreseeable consequence of damage to a spine wall and a side window bay. He was then granted permission to build a new house on the site, almost identical in appearance to the original.
7. The appellate committee rejected the statutory defence advanced pursuant to s.9(3) of the 1990 Act that the demolition was an urgent necessity, or that it was not practical to secure safety and health without it. The committee took the view that the appellant had several strong motives to achieve his scheme with what it described as his "preferred methodology". There was a financial benefit, approximately £100,000, due to zero rating in respect of VAT, with additional costs saved by reason of the building of a replica. That would also make the property more marketable, as the committee found.
8. The course the proceedings took was bedevilled by the desire of the prosecuting planning authority to obtain a confiscation order. When the appellant appeared before HHJ Oliver at Isleworth Crown Court on committal for sentence the appellant claimed to have an income of £110 per week, with no other means, having transferred his only asset, the home in question, 39 Cloncurry Street, to his wife. The judge threatened the appellant with imprisonment at the hearing on 14 July 2011 if he did not disclose all his assets and twice threatened prosecution for perjury. Threatened with those consequences, the appellant's lawyers sought to obtain instructions because his financial affairs were complicated and normally handled by accountants and lawyers. He surmised that his wife would waive the deed of assignment made in her favour and he also identified a Trust of which he was the beneficiary.
9. A few days later, following a holiday which had curtailed the preparation time available for identifying his assets, he served a statement pursuant to s.18 of the Proceeds of Crime Act 2002. This stated that a "Piers Rance 1997 Jersey Settlement Trust" had access to net assets from Longbrook Holdings Limited in the sum of £874,622. He also stated that he had sold £2m worth of shares in 2006.
10. The prosecution, conducting its investigation in the hope of successful confiscation proceedings, pointed out that only £1.2m of those shares had been accounted for. Its financial investigation revealed that the appellant had declared total earnings to HMRC of only approximately £40,000 between 2005 and 2011, and his wife had under-declared her earnings, although she received regular payments in relation to employment with two building companies with which the appellant was connected. The picture, so the prosecution contended, was of the typically complex finances of a wealthy individual whose interests were protected by offshore trusts and deeds of assignment to family members.
11. HHJ Oliver, following the initial sentence hearing of 14 January 2011, recused himself, following a detailed written application. Accordingly, the confiscation application came before HHJ Denniss on 27 June 2011. This application was rejected on 12 December 2011. But it left the question as to the appropriate level of sentence in the context of the appellant's access to funds.
12. The appellant contends that the process of determining how much the appellant could afford was unfair. In reply to the prosecution's assertions in its s.16 POCA 2002 statement, the applicant stated he had been wealthy until the property crash in 2008. But from that point, "I was in effect financially ruined by the collapse of two banks with which I had very substantial loan facilities". He said that his income had earlier derived from directors' loan accounts and more recently from his mother. His wife's income was a series of transfers from his own bank account. His children's school fees were paid by his mother; foreign holidays were largely visits to the family of his Belgian wife. He drove only an old and damaged car. His earlier disclosures of greater wealth were made simply because he was under pressure at the first hearing before HHJ Oliver.
13. Following the rejection of the appellant's appeal against conviction in October 2011, in November 2011 the prosecution served a skeleton argument contending that the benefit the applicant obtained from his more advantageous method of construction following demolition of the original property, and the VAT saving, was at least £500,000.
14. In a detailed statement from the applicant's wife, served on 8 December 2011, she confirmed that her husband had lost very substantial sums in the property crash. She said that he had received all that he was entitled to by way of inheritance from his mother during her lifetime or on her death, and that there was no more to be forthcoming. Further, his mother-in-law had provided the funding and rebuilding costs of the house at Cloncurry Street which were, as she put it, secured on the building. She had also financed the cost of legal fees. The total was just over £1.3m.
15. On 12 December 2011 the Court considered the appropriate sentence. At the outset, the prosecution applied for costs in the sum of £130,000 and asserted that "we are confident that he has the means to meet any order the Court may make". The appellant contends that it was at that point that the judge embarked on a procedure which was not only unfair but did not amount to an appropriate means enquiry. In light of the judge's dismissal of the confiscation proceedings, the appellant contends that the "highly contentious issue" of the appellant's means was never addressed by oral evidence from himself, his wife, his mother or his accountant. Indeed, apart from the appellant, none of the others were available to give evidence at the sentence hearing.
16. For the purposes of showing his impecuniosity, counsel on behalf of the appellant handed up a number of documents which showed a schedule of net liabilities in the total of £2,707,328.50, omitting the second of two personal guarantees to Landsbanki Heritable, showing a total debt of £3,457,328.50. Further, he sought to show that the benefit from the development was £54,502.26. The judge asked counsel a number of questions but gave, according to his counsel, Mr Owen QC, no indication that he did not accept the matters set out or require oral evidence to confirm the written statements.
17. During the course of the hearing the judge expressed surprise that he had received no statement from the appellant's mother and asked specific questions about particular aspects of his financial situation. At one stage the judge said "we had better revisit then the issue of liabilities and capital, because you say it stands as it is on the papers but let us look at that". He made it clear that he wished to look at available assets once he had been told that the appellant was not in a position to pay.
18. There is both statutory and other authority for the proposition that the Court is required to enquire into an offender's financial circumstances before fixing a fine (s.164(1) Criminal Justice Act 2003). Further, the Court is required to take into account the financial circumstances of the offender so far as they are known or appear to the Court before imposing the fine (s.164(3) of the 2003 Act). The primary submission advanced on behalf of this appellant is that no proper enquiry took place. It was, submits Mr Owen, quite unfair for the judge to reject the written statements and written evidence of the parlous state of the appellant's finances without a proper enquiry which afforded the appellant the opportunity of giving oral evidence himself, and calling witnesses who were not, on the day of the sentence, available to be called.
19. In our view, it must have been obvious to the appellant and his legal advisers that any account he gave of his means would be subject to close scrutiny by the judge. Although it is true that the confiscation proceedings had been concluded without any determination of the extent of the appellant's available assets, his assertions as to his means had been challenged by the prosecution throughout. It can have come as no surprise that the judge, His Honour Judge Denniss, would not be prepared to accept those assertions, or written statements of his evidence, without substantial questioning. That questioning took place. It was up to the appellant and his legal advisers to decide whether he should give oral evidence and whether he should call witnesses. No application was made to call the appellant. No request for an adjournment was made in order to call witnesses. At one stage, towards the end of the discussion between him and the judge counsel said:-

"I am sorry I am giving these answers because I had not quite anticipated the kind of detail that the Court went into."

It is not clear to us why counsel had not "quite anticipated the kind of detail" which formed the subject matter of the judge's questioning. But whether he was caught by surprise or not, ultimately, is not the real question. The real question is whether, in the context of highly complicated financial circumstances and what his own counsel described as the appellant's trappings of wealth, the judge was entitled to reject his account of his impecuniosity and make orders as to fines and costs on the basis that he had adequate means to meet them. The process whereby the judge sought to identify the extent of the appellant's means was, in our view, fair and appropriate.

20. The next question, however, is whether the judge misdirected himself as to the approach he took in relation to the assets which, he thought, were available to meet the fine and costs he ordered. The appellant contends that the judge, without any legal justification, failed to focus on the appellant's lack of assets and debts but rather took into account the financial support he had received from his mother and ignored the fact that he had assigned his share of the home at 39 Cloncurry Street to his wife by deed of assignment.
21. The principle on which the appellant relies is beyond dispute. The Court must not impose a fine on the basis that some other person will satisfy it. The principle includes a spouse or partner. The authorities present a striking contrast with the instant appeal. In R v Curtis [1984] 6 Cr App R (s.250) a lorry driver was fined £10,000 for fraudulent evasion of the payment of duty on tobacco. The sentencer had indicated that he had imposed the fine to see "if those who had put the appellant up to the offence" would pay. He had been a driver of heavy goods vehicles for about 17 years with an income of between £100 and £190 per week. The Court accepted, understandably, that he was in a very serious financial plight. In R v Charalambous [1984] 6 Cr App R (s.389) in a single sentence the Court remarked that it was unjust that "a family should be fined".
22. In his sentencing remarks the judge made clear that he did not accept the appellant's account of his own impecuniosity. This was a conclusion which the judge was entitled to reach. The judge remarked that the financial affairs of the appellant were extremely difficult to analyse with any clarity. He said, "every time that one touches a figure in this case it seems to change. As I have said to Mr Owen in submissions, it was very similar to looking at an old-fashioned divorce case".
23. The judge then looked at the defendant's lifestyle and his standard of living over the previous two to three years, and financial circumstances. He referred to his previous income of £47,000 per annum, reduced "possibly" to £32,000 per annum. He spoke of an income from the former matrimonial home.
24. But the essential reason on which the judge relied was the statements the defendant had made in his earliest s.18 statement. In that statement he told the Court that his wife had expressly approved and was prepared to disregard and waive the assignment to her of the appellant's share in the home. The judge found that declaration to be "highly significant and no doubt given on the basis of legal advice".
25. There was no reason why the judge should not rely on what the appellant had first told the Court, even though he later resiled from it. The complicated nature of the appellant's transactions and financial affairs, coupled with his assertions to the Court, even though he was under threat of prison from the original judge, provided a basis upon which the judge was entitled to reject his later statements. True, the appellant had never given evidence on the basis of which he could be cross-examined. But for the reasons we have given before, there was no error in the procedure adopted before the judge reached that view. In reality, this was a case where the judge was not prepared to accept that he was being given an honest picture of the funds and assets available to the appellant. In the light of what the appellant had originally told the court and the evidence of under-declaration to the Revenue, that was a tenable view. In those circumstances, we are not prepared to conclude that the amount of fine and the order for costs were more than the appellant could afford to pay. There was no breach of the principle that the fine and costs were ordered on the assumption that some other person would pay. The real basis upon which the judge made his orders was that he did not believe what he was being told as to the impecuniosity of the appellant.
26. The final question, however, is whether the fine and the costs ordered were excessive. Pursuant to s.9(5) of the Planning (Listed Buildings and Conservation Areas) Act 1990, the Court is required to have regard to any financial benefit which has accrued or is likely to accrue to a defendant as a consequence of the offence. The judge took the view that the fine should include £100,000 as representing the benefit obtained from the property. Whilst that was not an excessive sum to represent profits made out of the appellant's unlawful demolition of the house, it does not follow that it was an appropriate sum to order. The Court's obligation is to "have regard" to the financial benefit; there is no obligation to order the full amount or even a large proportion of it.
27. Added to that figure of £100,000 was the figure of £20,000. The judge was entitled to take a severe view of this case. He was entitled to take the view that this was a cynical breach of provisions designed to protect the community from unlawful development. The recent decision of R v Johnson [2012] EWCA Crim 580 contains an analysis of the "database of the Historic Buildings Conservation Trust". All but 19 of the 150 fines recorded on that database are below £15,000. The highest fine in relation to an unlisted building in a conservation area is £15,000, imposed in 2005, for a demolition acknowledged to be in good faith of two adjoining properties by a very substantial developer. In respect of the demolition of an unlisted building in the curtilage of a listed building a developer was fined £21,000. In 1998 a major developer was fined £200,000 for the demolition of a Grade II listed building and in 2007 a developer was fined £95,000 on 21 counts of unauthorised alteration to two Grade II starred listed buildings in Windsor. In 2007 an architectural practice was fined £25,000 and a contractor £20,000 for the substantial demolition of two Grade II lodges by John Nash. In Duckworth [1995] 1 Criminal Appeal Reports (Sentencing) 529 the Court of Appeal reduced a fine of £15,000 in respect of the demolition and reconstruction of the ground floor of a fire-damaged Grade II Elizabethan mansion from £15,000 to £7,500, and the costs from £10,000 to £5,000.
28. We do not think that the level of fine should be assessed according to aesthetic considerations. The suggestion was made that the replacement building was of at least as great architectural quality as the original which it replaced. The real offence lay in the deliberate attempt to achieve the appellant's aim by disregard of planning procedures.
29. In the light of the history of fines for this type of offence we think the appropriate fine would have been £50,000 which would include a proportion of the benefit it appears the appellant received.
30. Since the appeal, the appellant, at the invitation of the single judge, has put forward further figures by way of a statement of means to show that his assets are zero and his total net liabilities are £2,742,862.67, as at 26 April 2012, and documents to show that he has signed a proposal for an individual voluntary arrangement dated 2 July 2012, with an estimate of his affairs at 30 June 2012 showing a deficit of £2.7m. Since we have concluded that the judge was entitled to take the view that the appellant's account of the assets to which he had access was not to be relied upon, we see no basis for substituting our view of his reliability for that of the judge.
31. We take the view that the order for costs is excessive in the light of the substantial work entailed in bringing confiscation proceedings which were fruitless. We agree with the submission that only £60,000 was attributable to the trial and appeal. We think therefore that the order for costs should be £40,000 to ensure that the total of the fine and costs is not excessive. The order which we shall therefore substitute for the fine and orders already made is one of £50,000 as a fine and £40,000 for the costs. To that extent, this appeal is allowed.