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 GOYMER
T2008-7708

		Royal Courts of Justice Strand, London, WC2A 2LL
		17/10/2014

Lord Justice Elias :

1. This is a renewed application for permission to appeal against sentence, but only with respect to a confiscation order that was made following the conviction of these two applicants on two counts of conspiracy to defraud contrary to section 1 of the Criminal Law Act 1977 (counts 14 and 15 on the indictment) and one count of attempting to convert criminal property, contrary to section 1(1) of the Criminal Attempts Act 1981 (count 16).
2. Each of the applicants received a sentence of 12 months' imprisonment suspended for 12 months, together with certain restrictions which are not relevant to this application. They were sentenced on 28 February 2011 and confiscation proceedings pursuant to the Proceeds of Crime Act were heard by His Honour Judge Goymer on 19 April 2013. The delay was because it was thought appropriate to defer the hearing until after the decision of the Supreme Court in Waya [2012] UKSC 51 a case which considered the proper application of the relevant legal principles in this area and dealt specifically with mortgage frauds. The judge held that each of the applicants had benefited in the sum of £375,000. This was in fact an agreed figure reached in the light of certain findings made by the judge. Their realisable assets were deemed to exceed that amount and thus confiscation orders were made in that sum, to be paid within 3 months or with 2 years imprisonment to be served in default.
3. The background to this application lies in a series of fraudulent mortgage applications from late 2000 until 2006, as a result of which mortgage companies were induced to grant loans they might otherwise have refused. In all some 19 people were tried in relation to the whole series of transactions, The applicants were convicted in the third of a series of five trials.
4. There were three transactions in particular in which these applicants were involved. The first involved the purchase of Canister Hall by Julie Clark on 23 June 2003. A mortgage had been obtained from Kensington Mortgage Limited. The application contained false personal details relating to Mrs Clark and the seller, Kelly Mitchell. Kelly had in fact contributed to the purchase price. This gave rise to Count 10 on the Indictment, which was a charge of obtaining a money transfer by deception. Julie Clark, however, was acquitted; the jury could not have been sure that she was a party to the making of the false representations. Stephen Clark was never charged on that Count.
5. The second transaction concerned the sale of the property in October 2005 by Julie Clark. Birmingham Midshires ('BMS') advanced £611,951 towards the purchase of the property. The prosecution said that the mortgage application was made in a false name by one Michael Sadler, acting on instructions from Warren Mitchell, who was a leading figure in these deceptions. It was represented to BMS that the purchase price was £715,000 but there was, in fact, an undisclosed private allowance of £27,093, so that sum had to be deducted to find the true price, which was £687,907. Furthermore, BMS was not informed that the difference between the mortgage advance and the purchase monies was not, in fact, paid by the purchaser as it was asserted would be the case, but by a payment of £110,000 from another co-accused, Danny Downs. Those monies in turn had come from a dishonest re-mortgage of Downs' own property. Julie Clark received £608,907 on 21 October 2005 and shortly thereafter transferred £110,000 from her solicitors' client account to Danny Downs. Later, on 23 November 2005 Downs paid £110,000 back into Julie Clark's Halifax account.
6. The original mortgage from Kensington Mortgage Limited was redeemed and the remaining sum of £189,500 was paid into Julie Clark's Halifax bank account. Her husband was a party to the dishonesty. The deception in relation to this sale gave rise to the conviction on count 14.
7. The third transaction was the purchase by Julie Clark in January 2006 of Mitchell Hall from Kelly Mitchell, the party who had originally sold her Canister Hall. The sale of Canister Hall and the purchase of Mitchell Hall were, as the judge found, back to back transactions; the money from the sale of Canister Hall being used to purchase Mitchell Hall. BMS advanced £549,951 in respect of a mortgage application by Julie Clark. Again, there were false particulars, in this case involving details of Julie Clark's income and employment. In this case too, there was an undisclosed private allowance of £28,000 so although the price was represented at being £900,000 it was, in fact, £872,000. The difference between the mortgage advanced and the purchase price was £362,475, which was paid into Julie Clark's Halifax bank account. As with the sale of Canister Hall, this was not an open market transaction but a private agreement. The deceptions involved here were the subject of count 15.
8. In June 2007 the applicants tried to sell Mitchell Hall by advertising the property for sale on the open market, but they were restrained by legal proceedings before they were able to do that. This was the subject of the money laundering count - attempting to convert criminal property - in count 16. It is accepted that in fact no benefit was obtained from this transaction.

The relevant law

9. The issue before the court was whether, and to what extent, the defendants had benefited from their general criminal conduct or the particular transactions. It is not disputed that by virtue of their conviction on count 16 they fell within the definition of criminal lifestyle offences as defined in section 75(2) of POCA. The significance of the offences falling under those provisions is that certain assumptions automatically come into play in accordance with section 10, subsections (2) to (5) of POCA. The important assumption in play here was the first assumption in subsection (2):

"The first assumption is that any property transferred to the defendants at any time after the relevant day was obtained by him –

as a result of general criminal conduct; and

at the earliest time he appears to have held it."

Subsection 10(6) then provides as follows:

"But the court must not make a required assumption in relation to a particular property or expenditure if –

(a) the assumption is shown to be incorrect, or

(b) there would be a risk of serious injustice if the assumption were made."

10. Section 76(4) provides:

"A person benefits from conduct if he obtains property as a result of or in connection with the conduct."

11. The first assumption, namely that any property transferred to a defendant at any time after the relevant day was obtained as a result of his general criminal conduct, is highly relevant here.

The confiscation hearing

12. There was a single hearing in relation to 5 defendants – the Clarks, Warren Mitchell, Kelly Mitchell and Danny Downs. The hearing was over some 5 days in April 2013. The issues before the judge involved disputed findings of fact, and one matter of law with regards to Mr and Mrs Clark. The legal issue was not in the event disputed. It was accepted that so far as count 15 was concerned, the benefit was the increased value in the property resulting from the use of unlawful funds to be calculated in accordance with the principles enunciated in Waya.
13. The three factual disputes were these:

First, what should be the calculation of benefit in respect of count 14; that is the sale of Canister Hall?

Second, should payments made to Mrs Clark from a company called Parasolar be considered as a benefit?

Third, should a payment from Kelly Mitchell to Mrs Clark of £16,000 be considered as a benefit?

14. The judge found in the applicants' favour in relation to the second two points and we need say no more about them. In relation to the calculation of benefit in respect of Canister Hall, the judge was faced with a situation where Julie Clark as the seller of Canister Hall was involved in a conspiracy to defraud a lender, that is Birmingham Midshires, but their contractual relationship was not with her but was with the purchaser. The approach adopted to calculate the benefit in count 15 would not therefore appear to be apposite here.
15. Applying the first assumption with respect to count 14, the judge had to have regard to property transferred to Julie Clark after the relevant day. Neither of these two applicants gave evidence before the judge to assist him in relation to solving these factual issues. The judge considered that he had to look at the documents relating to the sale of Canister Hall, which gave rise to count 14, and those relating to the purchase of Mitchell Hall, which gave rise to count 15, together because they were in effect back to back transactions.
16. He was satisfied that the payments of £187,000 paid into the account of Mrs Clarke, which represented the outstanding sum after the mortgage and other payments had been met and the £110,000 paid into the account by Danny Downes, both constituted criminal benefit. He rejected a submission that the assumption should not apply because, it was alleged, count 16 had been included solely to trigger the criminal lifestyle provisions. He also rejected a contention that it could not be her benefit, or at least not wholly hers, because Mitchell also derived a benefit from the deception. The case of May [2008] AC 1028 in the Supreme Court shows that this is not a legitimate objection. And he rejected a submission that this was in effect her own money because she had equity of some £304,000 in the property which had not been obtained unlawfully as her acquittal on count 10 showed.
17. The judge considered, as the case of Waya requires him to do, whether it was disproportionate to treat these sums as part of the proceeds of crime and concluded that it was not.
18. As to count 15, he concluded that again following Waya, where property has been obtained in a mortgage fraud of this kind, the benefit is the increased value in the property that has resulted from the defendant's dishonesty. This was left to the parties to determine and they agreed the figure of £750,000 as the relevant benefit. In order to avoid double counting, the £297,500 benefit derived from the sale which was paid towards the purchase of Mitchell Hall was treated as tainted money when calculating the benefit obtained under count 15. It was not included again as a benefit gained from the offence committed under count 14.

The grounds of appeal

19. The applicants' principal argument repeats one of the submissions advanced and rejected below. They contend that the judge erred in his approach to the calculation of benefit. Mrs Clark had used legitimate funds to purchase Canister Hall. Consequently she had a beneficial interest in the proceeds of sale after paying off the mortgage and other matters. At the point of sale she retained that interest. The sale was for the market price and therefore the sum of £189,500 which remained after the repayment of the mortgage, stamp duty and so forth was her own money. The judge was wrong to treat it as a benefit derived from criminal activity. She would have made precisely the same profit even had she sold the property to a third party since the house was sold for market value.
20. Counsel for the applicants conceded, as of course he had to in the light of the convictions on count 14, that these applicants, had been involved in a criminal conspiracy in relation to the sale of the property. The submission was that they had not in fact benefited from it.
21. Counsel submitted that a careful analysis of the relevant statutory provisions did not justify the judge treating these funds as tainted. As we understood the argument, it was this. The assumptions do not say that any money transferred to a defendant after the relevant day is a benefit; they merely provide that such moneys must be treated as having been obtained by the defendant as a result of his criminal conduct. They are only relevant when the source of the funds is unknown. Here the source was known and the only issue was whether it was properly to be considered a benefit. When asking that question the court should adopt an analysis similar to that adopted in Waya and ask what proportion of the increase in value resulted from illegality. Here the sums which the judge found to be benefit ought not to have been so treated because Mrs Clark would have obtained them even had the sale been legal. The point is at least arguable, submits counsel, and therefore we should give permission to appeal.
22. We reject that submission. In our view it fails to give effect to the statutory principles. The concept of benefit is a very specific one and has to be determined by applying the language which Parliament has adopted. It is not determined by looking at benefit in the ordinary way, as Lord Walker pointed out in Waya (para 26). The applicants had been involved in this conspiracy and but for the conspiracy, they would not necessarily have received the mortgage they did. The profits made by the sale of the house were the direct consequence of the criminal activity. The fact that the applicants would have no doubt made a substantial (perhaps even the same) profit on the sale even had there been no criminal conduct is not to the point. Once it is established that property has been obtained from criminal conduct – and section 76(4) shows that this includes property obtained "in connection with" that conduct – then it is a relevant benefit. The assumptions must not be applied where it is shown to be incorrect or where it would be unjust (section 10(6)). And as Waya shows, the confiscation must be proportionate.
23. In this case it is clear without in fact needing to resort to the first assumption that the two sums identified by the judge as criminal benefit were obtained as a result of, and certainly in connection with, criminal activity. In any event, the applicants were not able to gainsay that.
24. A subsidiary argument was that the applicants were not involved in Danny Downs' separate conspiracy. But that is irrelevant. That money was still obtained in connection with criminal activity. This would have been so even had the £110,000 obtained from Danny Downs not been unlawfully obtained by him. Thereafter section 76(4) requires the sum to be treated as a benefit. The fact, if it be a fact, that the same benefit or something like it might have been legally obtained had the applicants chosen not to involve themselves in criminal activity is nothing to the point. The fact is that these sums were gained from criminal activities.
25. The only issue was whether it was disproportionate and an infringement of the rights in A1P1 for the confiscation order to be assessed by reference to these sums. The judge held that it was not and he was manifestly right so to conclude. Waya (para 21) emphasises that it will be unusual for orders giving effect to the severe regime to be disproportionate. The legitimate aim is to remove the pecuniary proceeds of crime. That is what was done here.
26. It follows that, in our view the applications have no real prospect of success and we refuse permission.