England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL
CRIMINAL DIVISION

		Royal Courts of Justice Strand London, WC2A 2LL
		19 February 2014

LORD JUSTICE TREACY:

1. This is an appeal against a confiscation order made on 26 June 2013 in the Newcastle upon Tyne Crown Court. In confiscation proceedings under the Proceeds of Crime Act 2002 the appellant was found to have benefited in the sum of £4,915.99. His available amount was deemed to be in the same sum and so a confiscation order was made in that sum. Previously the appellant had been convicted of making false representations, contrary to section 2 of the Fraud Act 2006. He had been sentenced to 9 months' imprisonment.
2. The offence, under section 2 of the Fraud Act, was what is known as a 'crash for cash' type of insurance fraud. The appellant had been involved in a road traffic collision. He had exaggerated the damage to his car and made a fraudulent insurance claim relating to the damage to his vehicle, personal injury, hire costs for replacement vehicles and storage and recovery of the damaged vehicle. The insurers had paid out £2,006.67 for repairs and the personal injury claim. They contested the car hire and the storage claims as suspicious and never paid them out. The offence under section 2 of the Fraud Act was complete once the false claim was made to the insurance company. It did not require any monies or property to have been obtained as a result of the false representations made.
3. In the confiscation proceedings the appellant conceded that the cost of car repairs and the personal injury claim, totalling £2,006.67, would constitute benefit from criminal conduct for the purposes of the confiscation order. However, the prosecution also sought a further £2,258, which was paid to solicitors acting for the appellant as their costs for processing the insurance claim on behalf of the appellant. The appellant disputed that this was part of his benefit and argued that the solicitors had provided services that did not constitute a pecuniary advantage within the meaning of the Proceeds of Crime Act 2002. Reliance was placed on R v James and Blackburn [2011] EWCA (Crim) 2291.
4. In a short judgment the judge below rejected the appellant's argument. He distinguished the decision in James and Blackburn and stated that it was beyond argument that once the fraudulent claims had been submitted, then the solicitors, acting as agents of the appellant, gave him a pecuniary advantage by acting for him and extracting their legal costs from the insurers. Such costs were clearly benefits from the appellant's conduct, which he obtained as a result of, or in connection with, his criminal conduct in submitting the bogus claim. Accordingly the solicitors' costs represented a pecuniary advantage gained in the circumstances of criminal conduct and were to be included as part of the total benefit figure.
5. We do not consider that James and Blackburn is of material assistance to us.
6. The relevant section of the Proceeds of Crime Act provides as follows in section 76:

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

(5)If a person obtains a pecuniary advantage as a result of or in connection with conduct, he is to be taken to obtain as a result of or in connection with the conduct a sum of money equal to the value of the pecuniary advantage."

7. Still within the interpretation sections of the Act, section 84(2) provides that the following rules apply in relation to property:

"(a)property is held by a person if he holds an interest in it;

(b)property is obtained by a person if he obtains an interest in it;"

8. We have been referred to the well-known decision of the House of Lords in R v May [2009] 1 Cr App R (S) 31. Lord Bingham expressed some broad principles at paragraph 48.
9. They include:

"(1) The legislation is intended to deprive defendants of the benefit they have gained from relevant criminal conduct, whether or not they have retained such benefit, within the limits of their available means.

...

(3) ... the court must first establish the facts as best it can on the material available... In very many cases the factual findings made will be decisive.

...

(4) In addressing the questions the court should focus very closely on the language of the statutory provision in question in the context of the statute and in the light of any statutory definition...

...

(6) [The defendant] ordinarily obtains... a pecuniary advantage if (among other things) he evades a liability to which he is personally subject."

10. There have been attempts, on behalf of the appellant, to persuade us to approach the matter by reference to the definition of pecuniary advantage in the now repealed section 16 of the Theft Act 1968. That section defines pecuniary advantage in terms of evasion or deferment of a debt, borrowing by way of overdraft or taking out an insurance policy, or by obtaining the opportunity to obtain remuneration or greater remuneration in employment. The term "pecuniary advantage" is not defined in the Proceeds of Crime Act.
11. We do not think that we should import those definitions from the Theft Act into the 2002 Act. Firstly, Lord Bingham in May speaks of the need to scrutinise the terms of the 2002 Act. Secondly, section 16(2) refers to "pecuniary advantage within the meaning of this section".
12. We bear in mind that the purpose of the statutory scheme is to strip an offender of benefit derived from an offence, not to compensate loss. We think it right to return to section 76(4) and (5) where the language of the Act is clearly focused on the obtaining of property, or a pecuniary advantage as a result of, or in connection with, conduct.
13. The Crown's case is that since the appellant completed a questionnaire for his solicitors in order to give them instructions, this led to their handling his false claim, incurring fees and negotiating a settlement of his case with the insurers. We have been told that the form did not indicate that this appellant had legal expenses insurance. Those fees were incurred on the appellant's behalf as the solicitors secured for him a cash payout based on his false claim.
14. The Crown, therefore, argues that the appellant obtained the services of the solicitors in connection with the fraud. Although no money ever went through the appellant's hands, he nevertheless benefited from the services provided and the cost of those services should be included within the confiscation claim.
15. The appellant argued that whilst there is a connection between the false claim advanced by the appellant and the payouts to his solicitors, the appellant himself has not obtained any property, nor has he obtained a pecuniary advantage. His conduct may have enabled the solicitors to obtain their fees for services rendered, but what they obtained cannot be treated as the appellant's obtaining. In the submission of Mr Rasiah, all that was acquired here by the fraudulent conduct of the appellant was the services of his solicitors.
16. Mr Rasiah made some submissions based on the assertion that the judge had made insufficient factual findings in his ruling upon which a confiscation order could properly be based. We have read the transcript of what transpired below. It is clear that there was a certain degree of informality in the proceedings which took place, but in the course of these there appears to have been an acceptance of a commonly understood background to the facts underlying the claim made.
17. One of the submissions being made was that the solicitors were not acting as agents for this appellant in relation to the fees which they were incurring. That was a matter which the judge clearly indicated to counsel in the course of the discussion preceding the final ruling, that the judge strongly disagreed with. He said in terms:

"...I simply have to disagree with the submission that the Solicitors were not acting as the agents in relation to fees, consequent upon which I think this submission must fail."

18. It is clear to us from the transcript that the judge was indicating a clear view to counsel, then appearing below, that there was an ordinary client/solicitor relationship between this appellant and his solicitor, and that ultimately Mr Del Fabbro, counsel acting below, acknowledged as much.
19. When the judge gave his final brief ruling he said that it was beyond argument that the solicitors in, as he put it, extracting the costs from the insurers had, by that means, resulted in this appellant acquiring a pecuniary advantage. The judge's analysis might have gone further and considered the position, which might have arisen if the solicitors had not succeeded in obtaining their costs from the insurers, but did not do so. We will return to that point in considering whether it vitiates the ruling which was made.
20. We accept that this appellant did not obtain any property. The fees paid had been incurred by the solicitors for work which they had done. There was never any question that they were receiving those fees for onward transmission to the appellant, or that he held or obtained any interest in them. "Obtaining" in this context means obtaining by the defendant (see CPS v Jennings [2008] UKHL 29 at paragraph 14). The position might have been different had the solicitors been a knowing party to the appellant's criminal conduct (see paragraphs 16 and 28 of May), but there was no suggestion in this case that they were.
21. It is established that within the phrase "as a result of or in connection with the conduct", which appears in both section 76(4) and section 76(5) of POCA, the words "in connection with" have a wider connotation than the words "as a result of". There is probably no meaningful distinction between the two phrases in this case, since what occurred arose both as a result of, and in connection with, the false claim. In consequence of that claim, a chain of events was created leading to the payment to the solicitors. The solicitors were paid their fees because the insurers believed that the bogus claim was a genuine one. In ordinary litigation the appellant as client would have been liable for the solicitor's fees had the insurers not paid them. Thus it seems to us that by being relieved of that liability in consequence of his fraudulent conduct, the appellant has, subject to one further point, obtained a pecuniary advantage within the meaning of the Act. He has avoided what would otherwise have been his liability to pay the solicitors' fees himself. The outstanding point relates to the terms upon which the appellant instructed his solicitor.
22. It is clear that the judge in the course of his ruling accepted that there was, contrary to the submissions made below, a solicitor/client relationship between this appellant and the solicitors. We have considered, in the event that there had been some arrangement between the solicitor and the appellants involving a 'no win, no fee' arrangement, or some other arrangement between them, which did not expose the appellant to liability to pay the solicitors' costs in the event of non-recovery from the insurers, whether that makes any difference to the situation.
23. The reality is that the solicitors would never have entered into any arrangement of the sort we have mentioned had they known that the claim was fraudulent from the outset. The fact is that they were used by this appellant as part of the fraud which he was perpetuating on the insurers. In those circumstances, having performed work, they would have been entitled to seek their costs for work done, on behalf of the appellant, from him. The appellant, as a direct result of this fraud, avoided what would otherwise have been his liability to the solicitors for their costs in relation to the work done and expenses which they incurred, in connection with innocently advancing his false claim. Accordingly, we are satisfied that the order made below was correct in that the appellant did benefit, to the extent found by the judge, from his criminal conduct pursuant to section 76(5) of the Act.
24. The point which has been made to us by Mr Rasiah as to the judge's failure to enunciate in detail an analysis of the situation in which liability of the costs fell upon the appellant, is, in our judgment, not something which can avail him. Underlying this claim was fraud on the part of this appellant, which embroiled these solicitors as much as the insurers. In those circumstances, considerations of whether there was some particular arrangement as to fees, which might have subsisted in a case of genuine instruction of solicitors, simply becomes irrelevant and the matter can be analysed by reference to the underlying fraud. For those reasons, the appeal is dismissed.

LORD JUSTICE TREACY:

25. Mr Rasiah, thank you very much for your assistance to the court. There is one further matter I need to raise. It is the question of recovery of defence costs order. Your client had the benefit of legal aid.

MR RASIAH:

26. Yes.

LORD JUSTICE TREACY:

27. He has submitted a document to the court, which shows that he has available savings totalling £6,000. The first £3,000 is exempt under the regulations. I am going to ask you two things: first, for an estimate of what the costs incurred will be, which is likely simply to be your fee, is it not, that you would be anticipating receiving for the work you have done on this appeal?

MR RASIAH:

28. Yes.

LORD JUSTICE TREACY:

29. We would want to know that. Secondly, we would want to know if there is anything you have to say against the principle of making an order for recovery of defence costs order.

MR RASIAH:

30. Is that something that I could address your Lordships on in writing?

LORD JUSTICE TREACY:

31. No. I am afraid that is not going to be practical. You are expected to come to court ready to deal with this. It is set out, if you need to look at it, in Archbold 6-152. The default position is that the court must make an order, but have a discretion not to do so if the circumstances either show, exceptionally, undue financial hardship, which I do not think can apply because your client does have savings, or alternatively that it would not be reasonable to make an order on the basis of the information and evidence available.

MR RASIAH:

32. I am grateful, my Lords.

LORD JUSTICE TREACY:

33. It looks as though the order will ordinarily follow the event of the dismissal of the application for the appeal, unless there are exceptional circumstances, undue financial hardship or something which makes it unreasonable for us to make an order. I paraphrase. I do not know if there is anything you can submit as to that?

MR RASIAH:

34. The court has the appellant's financial circumstances. I do not think there is anything further that I can address the court on.

LORD JUSTICE TREACY:

35. The other thing is the estimate of costs. What do you anticipate you would receive by way of remuneration for conducting this appeal?

MR RASIAH:

36. For costs taxed it would be approximately between 6 and 8 hours preparation at a rate, I think, of between £60 and £75 an hour.

LORD JUSTICE TREACY:

37. We are talking about around £400 maybe. We will consider. Thank you.
Adjourned Ruling on costs

LORD JUSTICE TREACY:

38. The unsuccessful appellant's statement of means indicates that he does have savings available to him in excess of the minimum indicated in the relevant Statutory Instrument. We have taken account of counsel's estimate of the likely expenses in terms of costs incurred in the representation of Mr Wright, and we think it fair, proper and reasonable to adopt the lower end of the range. In those circumstances we make a recovery of defence costs order against the appellant in the sum of £300.
39. That, we should say, in fairness to Mr Rasiah to whom we are indebted, is not our estimate of the fee that will be due to him on taxation, it is a sum designed for a different purpose. I hope that is of assistance to you. Thank you very much both of you for your help.