England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL
CRIMINAL DIVISION

		Royal Courts of Justice Strand London, WC2A 2LL
		18th July 2014

MR JUSTICE HAMBLEN: On 29th July 2013, at Reading Crown Court, the appellant pleaded guilty to two counts of fraud. On 6th September 2013 she was sentenced by His Honour Judge Grainger to 14 months' imprisonment suspended for 18 months, with a three month curfew requirement and 200 hours unpaid work on each count concurrently. On 24th January 2014 the same judge imposed a confiscation order against the appellant in the sum of £17,675.57 to be paid within six months with a period in default of nine months' imprisonment. The judge also imposed a compensation order against the appellant in addition to the confiscation order in the sum of £17,675.57 to be paid to Insite Managed Services Ltd within 18 months. Her co-accused were Jarrod Spence and his partner, Christina Rowland. Jarrod Spence pleaded guilty to two counts of fraud and was sentenced to three years' imprisonment on each count concurrently. Christina Rowland pleaded guilty to two counts of fraud and was sentenced to three years' imprisonment on each count concurrently.

1. The appellant appeals against her compensation order by leave of the single judge.
2. The essential facts may be briefly stated. Insite Managed Services Ltd was a commercial company owned and run by Neil Webb. The appellant's co-accused Spence worked at the company as the operations manager. The co-accused Rowlands' role in the company was to carry out administrative duties in connection to the payroll and non-salaried employees. This involved collating the time sheets from contract managers and informing the payroll company of who to pay.
3. From 30th June 2009 to 2nd March 2012 Spence and Rowland fraudulently claimed payments for employees which were not owed. They received a total of £269,000. The appellant became involved in January 2011 until the discovery of the fraud in March 2012. Her role was to assist in concealing the fraud. She received a total of £17,675.57 paid to her by Spence and Rowland. Eventually suspicions were aroused and Spence and Rowland were suspended pending investigations on 2nd March 2012. On 17th April 2012 the appellant confessed her role to Webb. She was arrested on 19th April 2012.
4. The confiscation order was agreed in the amount of the appellant's benefit, £17,675.57. In addition to that order, the Crown also sought a compensation order in the same amount. The appellant's available assets were £54,000, representing 50 per cent of the equity in her home jointly owned with her long-term partner, and the then sum of £12,040.20 in a joint bank account.
5. The Crown submitted that the judge was precluded from directing that the compensation order be paid out of the confiscation order monies pursuant to section 13(6) of the Proceeds of Crime Act 2002("POCA") because the appellant had sufficient means to satisfy both orders. The judge accepted this submission and accordingly made the two separate orders.
6. The appellant challenges this finding. It is contended that her means for the purpose of the compensation order are very limited because she no longer has any income from her employment, that it would be practically impossible for her to pay both a confiscation order and a compensation order in the same amount, that the judge therefore did have the power to make a section 13(6) order and that the justice of the case is that such an order ought to be made.
7. Sections 13(5) and (6) of POCA provide that:

"(5) Subsection (6) applies if -

(a) the Crown Court makes both a confiscation order and an order for the payment of compensation under section 130 of the Sentencing Act against the same person in the same proceedings, and

(b) the court believes he will not have sufficient means to satisfy both the orders in full.

(6) In such a case the court must direct that so much of the compensation as it specifies is to be paid out of any sums recovered under the confiscation order; and the amount it specifies must be the amount it believes will not be recoverable because of the insufficiency of the person's means."

8. This is a case in which, though the period over which the offences had been committed engaged the lifestyle provisions of POCA, the Crown did not allege that the appellant had profited from crime to any greater extent than the gain from the offences on indictment and put the total benefit figure at the sum that she admitted was transferred to her by Spence and Rowland, namely £17,675.57.
9. In such a case the Court of Appeal decision in R v Morgan and Bygrave [2009] 1 Cr App R (S) 60 is of relevance. In that case the second appellant, Rosemary Bygrave, was an accounts clerk who had, over a period of some 18 months, stolen a total of £12,768 from her employers. By the time of the sentencing hearing she had borrowed sufficient money against her home to be able to repay the sum. The Crown applied for confiscation and compensation orders and did not tell the judge that he had the power to make the latter payable out of sums recovered under the former. The judge declined to make both orders because he was concerned not to order the defendant to pay twice the sum she had stolen and so he made the confiscation order only. In their judgment the Court of Appeal stated as follows:

"What the Judge wanted to do, we are satisfied, was to achieve a result in which the defendant was not required to pay more than the sum she had stolen. That was the correct approach because there was here, unlike many other cases, no hint of a suggestion that the defendant's benefit, for the purposes of POCA 2002, exceeded what she had stolen from her employers. In particular, although this was, by statute, a criminal lifestyle case, because the defendant had been convicted of three or more offences from which she had benefited (section 75(2)(b) & 75(3)), there was no suggestion that any of the statutory assumptions available under section 10 ought to be applied in her case to show a benefit greater than the total of the thefts to which she pleaded guilty. Given that, we consider that if the judge had been afforded the opportunity to think about it, he would have regarded this as a clear case in which the interests of the losing employers should prevail over those of the taxpayer generally, so that, if legally possible, the defendant's ill-gotten gains should be disgorged in the direction of the losers rather than into the public purse. This was entirely possible legally. The route is signposted by subsections 13(5) and (6). What justice required in this case was an order under section 13(6) for the losers to be paid their compensation out of the confiscation order. That was open to the Judge, since on the evidence, Miss Bygrave did not have the means to pay both confiscation and compensation."

10. On this appeal the position of the Crown is that their priority is to ensure that the victim in the case receives the maximum amount of compensation in satisfaction of the order made. Since the basis of the relief sought in the appeal is limited to a section 13(6) order, which does not seek to disturb either confiscation or compensation orders, their position in relation to the appeal is essentially neutral.
11. For reasons similar to those outlined in the Bygrave case, we consider that the justice of the case supports the desirability of an order under section 13(6). However, for such an order to be made the court needs to believe that the appellant will not have sufficient means to satisfy both orders in full.
12. In the present case the appellant did not have the means to satisfy both orders out of income and savings. Her only savings at the time of the confiscation hearing was a joint bank account which then held £12,000. She had not been employed since April 2012 and, having lost her good character through the commission of the offence, the prospects of her obtaining significant income in the future were slight. She did, however, have a £50,000 equity share in the family home jointly owned by her. It was this which led the judge to conclude that she had sufficient means to satisfy both orders.
13. The judge did not, however, have drawn to his attention a line of cases concerning compensation orders in which it has been held that it is not generally appropriate to make a confiscation order which can be satisfied only by the selling of the family or matrimonial home.
14. Although it predated POCA, the case of Hackett [1988] 10 Cr App R (S) 388 concerned an appellant who defrauded a company of which he was a manager of around £15,000. He and his wife owned jointly a house worth around £80,000, of which there was an outstanding mortgage of about £32,000. He had no other significant assets. The judge who sentenced him ordered him to pay £15,000 in compensation. Henry J, giving the judgment of the Court of Appeal, said:

"The learned judge was not referred to the line of decisions in this Court where the Court has dealt with the question of when a compensation order will or may require a matrimonial home to be sold. In the case of Harrison (1980) 2 Cr App R (S) 313 (CA) this Court said that because of the complications involved with the matrimonial home, particularly when it was in joint names, as a general rule the matter should be left to the civil remedies of the injured party. In the case of Blackmore (1984) 6 Cr App R (S) 244 (CA) the Court said it was unreasonable to make a compensation order that would necessitate the sale of the matrimonial home where there was a large family involved that would have to be found accommodation. It again said that civil remedies were appropriate. In the case of Butt (1986) 8 Cr App R (S) 216 (CA) it was said that such an order was generally inappropriate, especially when it resulted in homelessness."

15. In Holah [1989] 11 Cr App R (S) 282, Farquharson J, giving the judgment of the Court of Appeal, noted that section 134 of the Powers of Criminal Courts (Sentencing) Act 2000 "enjoins the court to have regard to a defendant's means" when contemplating a compensation order. He outlined the defendant's financial position and then had regard to the line of cases concerning compensation orders and the matrimonial or family home. He said this:

"In that kind of situation the courts have said on a number of occasions that it is inappropriate by way of compensation order to order the sale of a family house in this way. There may of course be exceptional circumstances where money obtained by fraud can be traced to an investment in the purchase of a house. Then it may be that different considerations would apply. But in ordinary circumstances this course should not be taken. There have been a series of decisions including that of Harrison ... Blackmore ... and Butt .... There is also a discussion of this court, Hackett ... decided on October 13, 1988, where Henry J giving the judgment of the court repeated the reasons that have always been emphasised by this Court why that kind of order should not be made."

16. This line of authority provides support for the proposition that where a compensation order is likely to require the matrimonial or family home to be sold, it will not generally be appropriate to take into account the value of that home when assessing a defendant's means under section 130 of the 2000 Act. We consider that, in general, a similar approach is justified where the court is considering the defendant's means for the purpose of section 13(5) and (6) of POCA.
17. In the present case it can be inferred on the evidence that the compensation order is likely to require the sale of the family home. At the time of the confiscation hearing the appellant had no present earned income and had no real prospect of future income. We have been provided with updated information relating to her financial situation by her counsel today. It appears that the sums in the joint account are now only approximately £4,500. It also appears that the limited income earned by her partner is not, by some considerable amount, sufficient to meet the household outgoings. The home, which has been a joint home since it was purchased in 1987, is the home not only to the appellant and her partner, but also to her two adult sons and, from time to time, their grandchildren.
18. On the basis of what is currently in her joint account, in order to meet the confiscation order a further sum of £12,000 will need to be found. To require the appellant to find that further £12,000 and a further £17,000 from the equity in her home is, for a person with no income and considerable household outgoings, likely to require the sale of the family home. On the facts of this case it can accordingly be concluded that the value of the family home should not be taken into account when assessing the appellant's means for the purpose of section 13(5) and (6). If so, then there is good reason to believe that the appellant will not have sufficient means to satisfy both orders in full and that a section 13(6) order can and should be made, and we consider that it should be made for the full amount of the confiscation order sum.
19. We accordingly vary the confiscation order pursuant to section 36 so that monies paid under the confiscation order in the same amount are used to satisfy the compensation order. To that extent, this appeal is allowed.