England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM THE CROWN COURT AT SOUTHWARK
His Honour Judge Price
T20087772

		Royal Courts of Justice Strand, London, WC2A 2LL
		29 July 2013

Lord Justice Moore-Bick :

1. On 7^th January 2010 in the Crown Court at Southwark before His Honour Judge Beddoe the applicant pleaded guilty to one count of conspiracy to obtain a money transfer by deception. The offence involved a mortgage fraud under which Royal Bank of Scotland was induced to advance €2.6 million on the security of a property in Spain.
2. On 24^th March 2010 she was sentenced by Judge Beddoe to 15 months' imprisonment and proceedings for a confiscation order were set in motion under the provisions of the Proceeds of Crime Act 2002 ("the Act").
3. On 20^th December 2011 His Honour Judge Price made a confiscation order against the applicant in the sum of £152,109 with an order that she serve two years' imprisonment in default of payment.
4. The applicant now renews her application for leave to appeal against sentence following refusal by the single judge.
5. It is unnecessary to describe in any detail the circumstances under which the applicant came to commit the offence because the grounds of appeal relate only to the confiscation order. However, the judge found that the applicant had a criminal lifestyle and had received a benefit from her particular and general criminal conduct of £2,535,360. He found that the total value of her available assets amounted to £152,109 and accordingly made a confiscation order in that amount.

The grounds of appeal

6. In grounds of appeal which she settled on her own behalf the applicant seeks to challenge the judge's finding about the value of her available assets. She does so by reference to 3 items of property:

(i) a BMW motor car, valued at £6,685;

(ii) payments to a friend, Stephen Hinchliffe, totalling £9,890; and

(iii) gifts to her son, Oliver Chapman, valued at £16,766.

She says that her available assets are to be reduced by those amounts and that the correct figure (and therefore the amount of the confiscation order) should be no more than £118,768.

7. In addition the applicant seeks leave to amend her grounds of appeal to rely on the decision of the Supreme Court in R v Waya [2012] UKSC 51, [2013] 1 AC 294, in which judgment was given on 14^th November 2012 while her renewed application for leave was pending. She wishes to argue that the benefit she derived from her criminal conduct was wrongly assessed and should be reduced from something over £2.5 million to a little over £1.5 million. She accepts that a reduction of that order in the amount of her benefit will not lead to a reduction in the value of her available assets or to a reduction in the amount of the confiscation order, but she says that it may become of relevance in the future if the Crown were to apply under section 22 of the Act for the confiscation order to be increased in amount.
8. It is convenient to consider the grounds of appeal settled by the applicant before turning to consider the application to amend.

(a) The BMW motor car

(i) The applicant's case at the hearing was that the car did not belong to her but to her friend, Stephen Hinchliffe. However, the fact that it was registered and insured in her name raised an evidential presumption that she owned it. Although Mr. Hinchliffe had provided a written statement in support of the applicant's case, he did not mention the car and did not attend the hearing to give evidence that it belonged to him. He had previous convictions for fraud and he provided no evidence to support the assertion that he was the owner

(ii) There was plenty of evidence tending to show that the car belonged to the applicant. The burden was on her to displace the evidential presumption that the car was hers and the judge found that she had failed to do so. The evidence given by the applicant and her son about the purchase of the car was contradictory.

(iii) Whether the car belonged to the applicant was a matter of fact and no less so because she bore the burden of proof. Unless no reasonable judge could properly have declined to be satisfied on the material before the court that the burden on the applicant had been discharged, the judge's conclusion cannot be impeached. In other words, in order to succeed on this ground it is necessary for the applicant to persuade the court that the decision of Judge Price was perverse. In our view that is not seriously arguable.

(b) Payments to Stephen Hinchliffe

(i) There was a close relationship between the applicant and Stephen Hinchliffe of a kind which invited a degree of scepticism about any substantial payments made by one to the other.

(ii) The applicant says that the sums in question represented payments for professional services and in his statement Mr. Hinchliffe said that the applicant had asked him for advice on certain financial problems. He said he gave advice and organised and paid for a trip to Spain with her to speak to her lawyers. However, there was no formal agreement between them under which she was to pay him for advice.

(iii) The applicant seeks to rely on s.78(1) of the Act which provides that

"If the defendant transfers property to another person for a consideration whose value is significantly less than the value of the property at the time of the transfer, he is to be treated as making a gift."

She says that the judge should have determined the value of the consideration given by Mr. Hinchliffe and that unless he did so he could not properly be satisfied that full consideration had not been given for the payments, which could not therefore be treated as a gift. However, that is to misunderstand the purpose of the subsection, which is designed to cover the case where goods or services are provided at a price which significantly exceeds their value. In such a case the property is to be treated as a gift. In the present case the judge held that there was no contract for the provision of services; the payments were a simple gift.

(iv) Again, the question was one of fact for the judge. He was not bound to accept evidence that he considered unreliable and in our view it is not arguable that his conclusion that the payments were tainted gifts was perverse.

(c) Gifts to Oliver Chapman

(i) These comprised gifts of cash and a VW Polo car valued at £4,250. The cash was said to represent gifts to Oliver on birthdays and Christmases from various members of his family, all of whom had made statements, but none of whom had been called to give evidence.

(ii) The applicant said that she had invested the cash given to Oliver and had recorded the gifts in a book, which, however, she no longer kept. She said that she had opened an account for him in January 1998 when he was seven years old and had closed it in August 2005 when the remaining credit balance was withdrawn. However, the deposits into the account did not match the alleged gifts and there was no record to support what the applicant said she had done with the money.

(iii) The car had been bought in March 2006, purportedly as a birthday gift for Oliver, but it was still registered and insured in the applicant's name.

(iv) We do not think it arguable that the judge was perverse in declining to be satisfied that the car did not belong to the applicant.

9. For these reasons we do not consider that any of the grounds currently included in the notice of appeal provides an arguable basis for challenging the judge's findings or varying the order which he made.

The application to amend

10. Following the decision of the Supreme Court in R v Waya the Registrar of Criminal Appeals invited the Crown to consider how the decision affected the position of the applicant, whose renewed application for permission to appeal against sentence was then pending before the Full Court. The Crown's position then, as now, was that in accordance with the principle of finality the application should be limited to the grounds set out in the notice of appeal and that the applicant should not be allowed to take advantage of the subsequent decision in R v Waya. Despite that, in order to comply with the Registrar's request, on 27^th November the Crown served an addendum to its respondent's notice setting out the manner in which it said that the benefit should be calculated in accordance with that decision. It contended that the applicant's benefit should be assessed at £1,898,360
11. In the light of that response Mr. Alexander Dos Santos, who had appeared on behalf of the applicant at the hearing of the application for the confiscation order, was instructed by the Registrar to consider on her behalf the implications of that decision. In due course he advised that the decision gave rise to arguable grounds of appeal. An application for leave to amend the grounds of appeal was made in a document dated 30^th May 2013, which also contained further advice on appeal against sentence. In his advice counsel set out in some detail his reasons for advising that the applicant had good grounds for challenging the judge's assessment of the amount of the benefit that she had received from her criminal conduct. As a result of these exchanges the Registrar referred both the renewed application for leave to appeal and the application for leave to amend the grounds of appeal to the Full Court. By the time the matter came on for hearing both parties were well aware of the arguments that would be put forward on either side.
12. Mr. Dos Santos submitted that although the new ground of appeal, if successful, would not lead to a variation of the confiscation order, it would be unjust to allow the judge's assessment of the applicant's benefit to stand, both because it gave a false impression of the extent of her criminality and because, if undisturbed, it might have adverse consequences for her at some time in the future. He accepted that it is quite difficult to foresee circumstances in which the finding might prejudice the applicant, but he submitted that it was appropriate to challenge it at this stage by way of appeal to this court, rather than seek to do so in another forum at some time in the future when the failure to appeal might itself count against her.
13. Mr. Fenhalls for the Crown relied on the principle of finality established through a long line of authorities culminating in the recent case of R v Bestel [2013] EWCA Crim 1305, in which the court has emphasised that in general it will not grant an extension of time to enable an applicant to mount an appeal on the basis of what is often described as a 'change in the law' unless it is necessary to do so in order to avoid substantial injustice. He submitted that the public interest which underpins that rule applies with equal force to the case where, as here, an applicant seeks to amend his grounds of appeal to take advantage of a recent change in the law. In this case there was no risk of causing injustice if leave were refused, because it was accepted that the confiscation order will remain unchanged in any event. He submitted that if the crown were at some future time to apply under section 22 of the Act for an increase in the amount of the confiscation order, the court would have jurisdiction to decline to vary it insofar as that might cause injustice. Mr. Fenhalls might also have referred to the fact that section 9 of the Criminal Appeal Act 1968 provides for an appeal against sentence, not for an appeal against a finding of fact which will have no bearing on the sentence imposed by the court below.
14. It was common ground that an appellant who wishes to raise a ground of appeal not included in his original notice of appeal must obtain leave to do so. As far as we are aware, that has always been the accepted position and it seems to us to be implicit in rules 68.3(b) and 65.3 of the Criminal Procedure Rules. The court's response to an application to amend will depend on many factors, but one that is likely to carry weight is the strength or otherwise of the proposed new ground. We suspect that the court will rarely refuse leave to amend to raise an arguable point (although it may do so in appropriate cases) and it is therefore convenient before going any farther to consider the merits of the argument which the applicant now seeks to raise.
15. Part 2 of the Proceeds of Crime Act 2002 is cast in wide terms. Section 7 provides that the recoverable amount for the purposes of making a confiscation order is an amount equal to the defendant's benefit from his criminal conduct and by virtue of section 76(4) the defendant is to be treated as having obtained a benefit equal in value to that of any property he has obtained as a result of his criminal conduct. In the case of a mortgage fraud, therefore, the whole amount of the loan, on the face of it, falls to be included in the defendant's benefit, regardless of the fact that the whole or part of it has subsequently been recovered by the lender.
16. In a case where the lender had recovered the whole or any part of the loan, that interpretation of the Act, while consistent with its language, resulted in a defendant's benefit including an amount which he had already restored to the victim and thus in the making of a confiscation order which could be satisfied only out of assets that had not been obtained by criminal conduct. In R v Waya the Supreme Court held that, since part of the property had been restored, such an outcome involved a disproportionate interference with the defendant's property contrary to Article 1, Protocol 1 of the European Convention on Human Rights. Accordingly, when assessing the benefit derived by the defendant from a mortgage fraud in a case where the lender has received full repayment it is necessary to have regard to the extent to which the loan has enabled the recipient to benefit from an increase in the value of the equity in the property.
17. In the present case Judge Price found that the applicant had been a party to obtaining €2.6 million (the equivalent of £1,761,240) from Royal Bank of Scotland, the full amount of which represented the benefit she had obtained from that particular criminal conduct. The Spanish property on which the loan was secured was originally said to be worth €4.6 million, but it appears that it was in fact worth much less, less indeed than the amount of the mortgage loan. The bank sold it in a declining market for €1,403,571.62 leaving it with a loss of €1,196,428.38. After taking into account the cost of realising its security the bank lost the equivalent of £1,393,906.85. The present case differs from R v Waya in at least one important respect, namely, that the lender did not recover its money in full.
18. Mr. Dos Santos submitted that in a case like this, in which the lender is not fully secured, the applicant has had the benefit of the amount of the loan less whatever amount the bank has been able to recover by realising its security. Accordingly, the applicant's benefit reflects the loss suffered by the bank. At one point the Crown appeared to contend that, because the bank did not recover the full amount of the loan, the whole advance was to be included in the calculation of the applicant's benefit. However, it resiled from that position, in our view rightly. The principle that emerges from R v Waya is that in cases of this kind it is necessary to identify the extent to which sums wrongfully obtained by the defendant have already been restored to the loser in order to ensure that any confiscation order is not disproportionate. In the present case the value of the applicant's interest in the property when it was sold (all of which was taken by the bank) was a net sum of £367,333.15 after meeting the expenses of sale. The applicant and her co-conspirators obtained €2.6 million (£1,761,240) from the bank and had the benefit of it in cash and property. In this case the court is not concerned with any increase in the value of the equity and the extent to which the applicant benefited from the fraud can therefore be measured by the difference between the gross amount she obtained from the bank (£1,761,240) and the value of the property which she returned to it (£367,333.15), namely £1,393,906.85.
19. The judge also had to take into account the benefit which the applicant had obtained from her general criminal conduct. That included the benefit obtained from mortgage loans used to purchase two properties, Sycamore Farm, Derbyshire and Church View, Norton Lane, Sheffield.
20. Sycamore Farm was bought in 2004 for £650,000 with a loan fraudulently obtained from Standard Life Bank of £487,000 (representing 74.9% of the purchase price). The property was subsequently sold for £848,750, representing a profit of £198,750, and the bank was repaid in full. It follows that the benefit obtained by the applicant from the fraud was that proportion of the profit which had been funded using the loan, which amounts to £148,909.46.
21. Church View was bought for £350,000 in 2006 with a loan of £150,000 fraudulently obtained from Standard Life Bank (representing 42.857% of the purchase price). It was subsequently sold for £385,000, representing a profit of £35,000 and the bank was repaid in full. It follows that the benefit obtained by the applicant was 42.857% of £35,000, namely £14,999.95.
22. By the time of the hearing those calculations were not disputed. It follows that, applying the principles to be derived from R v Waya, the total of the applicant's benefit from these three transactions was £1,557,816.26 as opposed to the sum of £2,535,360 found by the judge.
23. With these conclusions in mind we return to the application for leave to amend the grounds of appeal. It is unnecessary to discuss at length the line of authority relating to the principle of finality, because we accept the proposition advanced by Mr. Fenhalls that the court will not normally extend time in order to enable an appellant to take advantage of a subsequent change in the law. The cases on which he relied, culminating in the recent decision in R v Bestel, are all cases in which the applicant had failed to lodge a notice of appeal within the prescribed time and therefore required an extension of time to enable him to establish an effective appeal. That is not this case, however, because the notice of appeal was filed in time, even though none of the grounds had sufficient merit to justify giving leave to appeal. In R v Jawad [2013] EWCA Crim 644 the court considered a similar application for leave to amend the grounds of appeal to rely on R v Waya, which had been decided after the notice of appeal had been filed and before the renewed application for leave to appeal had been heard by the Full Court. It appears that the single judge had granted the necessary extension of time, but had refused leave to appeal. The applicant renewed his application for leave to the Full Court. Following the decision in R v Waya he sought leave to rely on that decision. The court was clearly alive to the potential relevance of the principle of finality, but did not think that it applied in a case in which, as a result of the extension of time, the appeal had been properly constituted. Sir Anthony Hughes V.-P. giving the judgment of the court said:

"28. It was at first thought that this appellant needed a grant of an extension of time to enable him to appeal. If he had, that would have raised the question whether someone against whom a confiscation order was made entirely in accordance with the law as it was understood to be at the time ought to be granted an extension of time if he seeks to appeal on the basis of a change of law made subsequently – in this case as a result of the Supreme Court decision in Waya. As it turns out, the appellant does not need any extension of time. A very few days' extension was granted by the single judge and we thus have before us a properly constituted appeal which must be determined according to the law as it now stands."

24. In our view a distinction can properly be drawn between cases in which the applicant has filed a notice of appeal within time and subsequently seeks leave to amend and cases in which notice of appeal has not been filed in time. Once the time for appealing has passed, the order made by the court below is final for all purposes, unless the court grants an extension of time in order to enable an appeal to be effectively constituted. There is a public interest in not allowing final decisions to be re-opened, except where necessary to avoid substantial injustice. Once an appeal has been constituted, however, either by filing a notice of appeal in time or by obtaining an extension of time from the court, the order of the court below, although not formally provisional, is subject to review. In practical terms it is not final and there is no comparable public interest refusing to re-open it, since that is the very purpose of the appeal procedure. For the court to refuse to allow an appellant to take advantage of a change in the law occurring between the date of the order below and the filing of the notice of appeal would be inconsistent with the appeal process; but if that is so, it is difficult to see how it could justify refusing to allow him to take advantage of a change in the law occurring between the filing of the notice of appeal and the hearing itself. This approach is borne out by the observations of the court in R v Jawad.
25. The Crown's real complaint in this case is that the inclusion in the notice of appeal of three grounds that had no real prospect of success combined with an unusually long delay between the filing of her notice of appeal and the consideration of her renewed application for leave to appeal has fortuitously allowed her to seek leave to rely on a change in the law which occurred almost a year after the confiscation order had been made. It is for that reason that Mr. Fenhalls urged us, as a matter of discretion, to give effect to the public interest that underlies the principle of finality and refuse leave to amend the grounds of appeal. However, for the reasons we have given, we do not think that the public interest in finality applies in a case of this kind, especially when the argument the applicant seeks to raise has intrinsic merit.
26. We have been rather more troubled by the fact that, since it is accepted that the correct assessment of the applicant's benefit will not result in a variation of the order below, the appeal is in substance against the sentencing judge's finding of fact, rather than against his order. However, his finding depends on the application of the correct principles of law and since those principles have been fully considered and the finding itself may at some point in the future turn out to be of greater significance than can at present be foreseen, we are persuaded that we should give the applicant leave to amend her grounds of appeal and make an order which reflects its merits.
27. Accordingly, for the reasons we have given, we grant the applicant leave to amend her grounds of appeal and we grant her leave to appeal. We quash the judge's finding that her benefit from criminal conduct amounted to £2,535,360 and substitute for it a finding that her benefit amounted to £1,557,816.26. However, since that sum exceeds the value of her available assets, the appeal against the confiscation order itself must be dismissed.