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 October 2016

1. LORD JUSTICE DAVIS:

Introduction

2. This appeal, brought on a reference by the Criminal Cases Review Commission, raises a point of principle concerning costs of criminal proceedings. The point comes to this. Where a convicted defendant has been ordered in the Crown Court to pay an amount towards the prosecution costs at a time when it is properly assessed that he has the assets to meet such a liability, can, or at all events should, he thereafter be permitted to appeal to the Court of Appeal (Criminal Division) seeking a quashing or reduction of the costs order on the ground of a subsequent change in financial circumstances? The appellant says that he can and should and seeks to rely on a previous decided case to that effect. The respondent Crown says that he cannot, or at all events should not, and the appropriate application should be made to the Magistrates' Court as the collecting and enforcing court.

Background facts

3. In view of the nature of the present dispute, the background facts can be relatively shortly stated.
4. The appellant has shown himself in the past to be a dishonest man. On 20th January 2003, on the day fixed for trial, he pleaded guilty to three counts of carrying on the business of a company with intent to defraud creditors contrary to section 458 of the companies Act 1985. He and his co-accused had run companies involved in plywood trading by the systematic removal of funds from the companies to their own benefit. In addition, they had obtained credit facilities and purchased goods when they knew the companies would not be in a position to make the due payments. Some of the cash was during this period being funnelled from the companies into offshore bank accounts.
5. The appellant was himself at the time an undischarged bankrupt, not lawfully able to act as a company director. This had not deterred him as he remained in effective control, his then wife being one of the named directors, and had participated in the direction of the companies' activities. Total losses to creditors exceeded £1 million.

The course of the proceedings

6. On 7th July 2003 the appellant was sentenced to a term of three years' imprisonment. The hearing on that date also extended to confiscation proceedings brought under the then applicable provisions of the Criminal Justice Act 1988. The benefit figure was agreed in the sum of £326,412. It was also not disputed at the hearing that the appellant had available assets in excess of that sum. Accordingly, the amount of the confiscation order made by the judge was for £326,412.
7. Leading counsel then appearing for the appellant requested 18 months to pay the amount of the order as the available assets were stated to comprise essentially the appellant's interest in two companies and two hotels which might, it was said, take some 18 months to sell. The judge so directed. He imposed a five year term of imprisonment in default of payment of the amount of the confiscation order. That was subsequently reduced to three years on appeal.
8. The trial judge, having so ruled in the confiscation proceedings, turned to the sentence for the offending. He reviewed the facts and reviewed such personal mitigation as there was. He then imposed the prison term which we have indicated.
9. Having done so, and turning to the question of costs, the judge said this:

"In addition, you will be disqualified from being a director of a company for a period of 12 years and furthermore you must make payment of the Prosecution costs. I make this order because you have not put before me any details of your present assets when you had the opportunity to do so in the confiscation hearings. I can only assume from that that there are means available to pay these costs. The order for costs is in the sum of £16,000 and that also is to be paid within 18 months."

10. That costs order was, of course, part of the sentence by reason of section 50(1) of the Criminal Appeal Act 1968. The costs order was not the subject of any appeal at the time. The subsequent appeal, which was decided on 21st July 2005, related solely to the default term set for payment of the confiscation order.
11. The appellant had not, and has not, discharged the amount of the confiscation order within 18 months or at all; nor has he discharged the amount of the costs he had been ordered to pay within 18 months or at all.
12. On 29th March 2007 the appellant applied to the High Court for a certificate of inadequacy with regard to his confiscation order. It was at that time said that his realisable assets, being interests in the two companies and the hotels, had proved insufficient to pay off secured creditors. At the original hearing the hotels apparently had been said to have had a value of some £1.5 million. By 2007, however, they were valued at half that amount. His interests in the two other companies were also, it was said, now of no value. In the event, the Crown Prosecution Service ultimately, albeit after initial reservations, did not oppose the granting of a certificate of inadequacy. Thus, after an unacceptable period of delay, for which this court has received no real explanation, a certificate of inadequacy was eventually granted by the High Court on 8th July 2013 and on 29th October 2013 the confiscation order was varied, again by consent, to a nominal £1 order.
13. That still left the question of costs, which had not been the subject of appeal or, inevitably, of the variation of the confiscation order.
14. It appears that there had thereafter been the commencement of some enforcement proceedings in the Magistrates' Court by the Crown in 2014. The appellant then, however, sought to appeal against the original costs order and the matter was eventually referred to the Criminal Cases Review Commission in 2015. The Criminal Cases Review Commission then made its decision to refer to this court under section 9 of the Criminal Appeal Act 1995 on 12th November 2015.
15. It is to be gathered that no detailed investigation into the appellant's assets had been made in 2003, as he had then been asserting that he had available assets sufficient to meet, at all events in 18 months' time, the amount of the confiscation order as well as the amount of the costs. It may be noted that in the course of argument counsel then appearing for the prosecution had objected to the appellant not having given full evidence about his assets. Amongst other things, he said this:

"... it is a matter of regret that the defendant did not address it in his statement to the Court for that is part of the purpose of giving that evidence so that you can make an informed decision ...

It seems a long period, I understand my learned friend's reasons for seeking it. Your Honour knows that in 1996 there were very considerable sums of cash available to Mr Coleman and as recently as, I think it was 2000, there was evidence of some of that cash remaining. Likewise, fair to say, that there was evidence that some of the proceeds of some of the mixed funds which went in due course through Monaco to Switzerland were invested ..."

16. At all events, on 29th March 2007 the appellant, for the purposes of seeking a certificate of inadequacy, had made a very lengthy statement explaining how, as he said, his various investments had become worthless and stating that, in effect, he had no assets at all. He was, he said, earning an income at that time of £16,500 per annum as a duty manager with a leisure company. The Crown Prosecution Service were initially highly suspicious of these assertions in view of the complex, often international, nature of the appellant's business dealings; but ultimately, as we have said, this was accepted for the purposes of agreeing a certificate of inadequacy.
17. More recently, for the purposes of this appeal, the appellant has sought, lodging an application under section 23 of the Criminal Appeal Act 1968, to adduce updated evidence of means contained in a witness statement signed by him on 19th May 2016. In it he sets out what he says is his present financial position. He is involved in the company called Reliable Property Maintenance Limited, owned by himself and his wife. She is named as sole director of the company. He says that each earns £11,000 per annum from it. He says that he does not own any property; he says that he and his wife rent the home they currently occupy. He has some £1,300 in a bank account. He also pays £50 a month into savings accounts for his grandchildren. The company, that is to say Reliable Property Maintenance Limited, shows in its 2015 accounts shareholder funds of just some £3,378. He says that the company has never paid any dividends, although, on the face of it, that does not seem to fit with the entry in the company accounts for the year ending July 2014.
18. The Crown Prosecution Service has itself sought under section 23 to put in further evidence in the form of a statement of Maxine Wrigglesworth dated 27th January 2016, she being an accredited police financial investigator. Amongst other things, that statement connects another business called Reliable Locks with the property of the appellant and his wife.
19. Neither side has formally objected to the production of this evidence, although ultimately it is a matter for this court. It was indicated that the deponents were available for oral examination if this court so wished. This court did not so wish.

Decision

20. We turn to our decision. Shortly put, given the circumstances we simply decline to go down this particular road on which the appellant has set himself. In our view, this matter of payment of the outstanding costs as ordered to be paid by the Crown Court as long ago as 2003 should properly be dealt with in the Magistrates' Court. The Court of Appeal Criminal Division simply is not the appropriate forum for entertaining this dispute.
21. We should make one initial point: because it is a point on which the Criminal Cases Review Commission in part seems to have relied and which in our view, with respect, is a false point. As we have said, the Crown had been prepared to agree, no doubt on pragmatic grounds, the certificate of inadequacy in 2013 and the reduction in the confiscation order to £1. It does not follow at all from that that the Crown is precluded from pursuing the amount of the costs. No issue estoppel arises. The question of the costs was never even raised in the certificate of inadequacy proceedings; such proceedings related solely to the amount of the confiscation order. Further, the Crown was in effect accepting that the value of the companies and hotels, which had previously been assessed as £1.5 million in 2003, had in net terms since become worthless. There was no greater acceptance as to any other assets or income of the appellant in 2013. The question of enforcement of the costs order thus remained, and remains, at large since the granting of the certificate of inadequacy.
22. Mr De La Poer, on behalf of the appellant, says that the fact remains that the appellant simply does not now have the means to pay any of the costs. Whether that is indeed a fact remains debatable. For example, even on his own witness statement, the appellant is able to pay out, by his own choice, £50 per month towards his grandchildren's savings account. There seems no reason in principle why those sums should not have been available to be paid towards the costs and no reason why his wishes for his grandchildren should prevail over his obligation to pay the costs. He also has other assets which he has identified, albeit of relatively limited amounts; and, as we have said, the Crown does not in any event accept that the full picture has necessarily been set out.
23. These kinds of considerations point the way to the correct outcome for this case and the correct approach to be adopted both in this case and in other cases hereafter of this particular kind. It is the magistrates who should be deciding this case and dealing with the issues arising. This court is not well equipped, or indeed appropriate, to engage in fact finding concerning the means and assets of particular debtors. Moreover, issues often arise as to the ability to pay by instalments and so on: with regular review thereafter. Again, such matters are entirely appropriate for the Magistrates' Court; entirely inappropriate for the Court of Appeal comprising two or three judges sitting in London.
24. That this is so is, in our view, consistent with a consideration of the statutory provisions. The Crown Court has power to require a defendant to make payment to the prosecutor in respect of costs in such an amount as is "just and reasonable" (see section 18(1) of the Prosecution of Offences Act 1985). It is also empowered to give time to pay or to order payment in instalments (see section 141 of the Powers of the Criminal Courts (Sentencing) Act 2000).
25. Relevant principles in making orders as to costs are set out in a number of cases, most notably perhaps in R v Northallerton Magistrates' Court, ex parte Dove [2001] Cr App R (S) 136. One of those principles, of course, is that a Crown Court should not make an order for costs in an amount which evidence shows that the defendant will be unable to pay or unable to pay within a reasonable period of time. It is to be noted that that principle was not infringed by the Crown Court in this particular case.
26. At the time of sentence the sentencing judge had correctly directed himself, as is evident from his sentencing remarks. The appellant had not sought to contend or adduce evidence at the time that he was unable to pay the costs within 18 months. In fact, he was effectively inviting such an order. The fact that thereafter, as the appellant says, circumstances have changed so that he cannot pay as anticipated does not get away from the fact that the order was properly made in the first place at the time of sentence.
27. Given that the order was properly made at the time, it is difficult to see on what basis this court should, even accepting that in theory it can, now interfere.
28. We accept, as will be gathered, that it is a relevant principle that where a sum such as compensation or a fine is ordered to be paid, the court must assess a defendant's overall ability to pay within a reasonable period of time; and if the defendant's means are insufficient for the purpose, then costs are ordinarily subordinated, as it were, to the amount of compensation or any fine that might be imposed. The same approach applies where a confiscation order is made. If the confiscation order will absorb the entirety of a defendant's available assets, then a costs order in addition ought not to be made. That is borne out by the decision of a constitution of this court in the case of Szrajber [1994] 15 Cr App R (S) 821. At page 823 of the judgment, delivered by Latham LJ, this is said:

"Dealing first therefore with the order which was made in relation to costs, it is plain from the sentencing remarks of the judge that the judge did not make any inquiry as to the ability of the appellant to meet any order for costs ...

It is also apparent from the transcript that we have that nobody referred the judge at that time to the principle which is quite plainly established, namely that a court should not order a defendant to pay costs unless satisfied that the defendant has the means to pay those costs within a reasonable period of time. We do not think it necessary to refer to the individual authorities which establish that proposition; it is trite law. Having, as she had, assessed the assets of this appellant in the sum of £407,188.64 and then ordered their confiscation, it is plain that had she been reminded of that principle, she could and would not have ordered that costs should be awarded in addition."

That, we observe, was said in a case where the available assets of the defendant were much less than the amount of the benefit and so all such assets would be required to pay the amount of the confiscation order. Accordingly that case, and cases such as Ahmed and Choudhury [1997] 2 Cr App R (S) 8, can be contrasted with the present case: for here, at the time of the confiscation order, it was accepted that there were available assets which exceeded the amount of the benefit.

29. It is further provided by statute that, once an order for costs has been made in the Crown Court, the application for payment of such order is to be made and enforcement of such order is to be undertaken for the purposes of collection and enforcement by the Magistrates' Court: see section 41 of the Administration of Justice Act 1970 and paragraph 4 of Part 1 of Schedule 9 to that Act. By the powers conferred on the Magistrates' Court by sections 75 and following of the Magistrates' Courts Act 1980 and Part 30 of the Criminal Procedure Rules 2015, the Magistrates' Court has very wide powers in this regard. These include power to enquire as to means, to dispense with immediate payment, to grant extensions of time for payment by instalments, to issue or to postpone the issue of a warrant of enforcement, to make an attachment of earnings order and so on.
30. In our view, the existence of all those provisions provide a yet further pointer to the correct outcome for this case and other cases hereafter of a comparable kind. The appellant's attempts to reduce or to alter his obligation to pay the costs within the 18 month period should have been directed at the Magistrates' Court. It should not have been and should not be directed at this court in circumstances where, it is to be reiterated, the original costs order was properly made at the time.
31. Mr De La Poer nevertheless objected that the original costs order was made under a misapprehension and that, had the actual value which the assets ultimately realised been known at the time, the costs order would not have been made as it was. He says that to maintain that costs order would be oppressive and would lead to injustice.
32. In our view, that does not fully meet the point. At the time the costs order was made the value of assets, as put forward by the appellant himself, was amply sufficient to meet the order. There is in truth an element of arbitrariness in the appellant's argument. Had those assets been valued at the time of the order at nil, or at all events had they been valued with such a value as to be sufficient to pay the amount of the confiscation order but no more, thereby causing no costs order to be made, there would have been no right for the Crown at a later date to come back to court to seek costs if the assets unexpectedly realised more than had been anticipated, or indeed if the appellant had in the meantime been the recipient of a lottery windfall or something like that. Thus, an element of swings and roundabouts necessarily does come into the scheme of things. Moreover, Mr De La Poer's argument has the further disadvantage that it scarcely provides any incentive for a defendant to get on with complying with the terms of the costs order which has been made against him in the Crown Court.
33. At all events, the fact remains that a Magistrates' Court is empowered to take into account a subsequent change of circumstances in deciding what collection and enforcement measures to take.
34. We should refer to the authority on which Mr De La Poer placed reliance: a decision of a constitution of this court in the case of Richards [2014] EWCA Crim 1302. That case is similar to the present in the sense that a confiscation order was made together with a costs order: although it may be noted that it was a feature of that particular case that the costs order, in a sum of over £27,000, was made when the confiscation order was in the sum of some £41,000, representing available assets of that amount, as compared to benefit assessed at over £208,000. In such circumstances one might, applying the principles of Szrajber, have expected that no costs order would have been made at all. However, it seems that it had been found at the hearing in the Crown Court that the defendant in that case had a significant income over and above his available assets, and it may be that it was that that influenced the making of a costs order in addition to a confiscation order.
35. At all events, the defendant in the case of Richards subsequently claimed to have lost his job and lost his income and so could not pay the costs. The Court of Appeal Criminal Division was dubious as to Mr Richards' veracity. It acknowledged that the question of his alleged poverty could be the subject of evidence before the magistrates. The Court of Appeal in the event nevertheless, and in short order, itself quashed the original costs order and substituted an order of £1,000 with 12 months to pay and indicated that the matter could thereafter be considered by the magistrates court if Mr Richards did not so pay the £1,000. It is not entirely clear whether the court in the case of Richards quashed the original order on the basis that it should not have been made as it was in the first place, or on the basis of the subsequent alleged change in circumstances. The indications are, it has to be said, that it was based on the latter proposition, notwithstanding the court's doubts as to the veracity and honesty of Mr Richards.
36. On no view can the decision in Richards bind the court in this case to entertain substantively the appeal advanced before us. As it seems to us, in fact, the approach adopted in Richards was, with all respect, a wrong one. It did not fully confront the relevant statutory provisions or the relevant principles or indeed practicalities. We consider that, where once a costs order has been properly made in the Crown Court and a subsequent alleged change in the circumstances occurs which allegedly impacts adversely on a defendant's ability to pay the costs, then the proper forum under the statutory scheme is the Magistrates' Court; and it is to that court that such points should be addressed, relying to the extent necessary on any further evidence which has emerged as to change of circumstances.
37. As we have said, this court is simply not well equipped or well suited to assessing such matters. On the other hand, the Magistrates' Court is eminently so well suited: which indeed explains the scheme and structure of the statutory provisions in the Magistrates' Court Act 1980 and Parliament's desire for matters of enforcement and collection of costs ordered in the Crown Court generally to be dealt with in the Magistrates' Court.
38. Moreover, that is precisely the approach which this court has adopted in the case of fines. Where the ability of a defendant to pay a fine properly imposed at the time of sentence is affected by a subsequent alleged change in financial circumstances then the proper procedure is to apply to the Magistrates' Court, not to the Court of Appeal Criminal Division, on the basis of fresh evidence: see Farrell & Hough Green Garage Ltd [2007] EWCA Crim 1896 at paragraph 18; a case incidentally not cited in Richards.
39. It is true, as Mr De La Poer pointed out, that there is an express power conferred on the Magistrates' Court by section 85 of the Magistrates' Courts Act 1980 to remit a fine in whole or in part by reason of a subsequent change in circumstances. There is no such express power with regard to enforcement of an order for costs. However, costs stand on a somewhat different basis from a fine. Amongst other things, costs constitute a debt. At all events, Parliament has chosen to deal with the matter as it has in the Magistrates' Court Act 1980; and the practical reasons for sustaining the jurisdiction of the magistrates' court in this context are self-evident.

Conclusion

40. In conclusion, therefore, we consider that it is not for this court to interfere with the costs order originally made or with its enforcement: it is for the Magistrates' Court. Any further proceedings in this case should continue there and the magistrates can assess the evidence adduced. It can be expected that the magistrates, as well as the prosecution, will realistically appraise the position of the appellant as advanced before that court, subject if necessary to any cross-examination that may be called for.
41. It is in fact a pity that the enforcement proceedings originally commenced in the Magistrates' Court, in what has become so protracted a matter, have been yet further delayed by this appeal.
42. In the result, we refuse to accede to these applications to adduce fresh evidence. We dismiss this appeal. It also follows that for the future parties should proceed on the footing that this court will not, as a matter of settled practice, entertain appeals against orders for costs properly made in the Crown Court at the time of sentence if the sole basis for the proposed appeal is an alleged subsequent change for the worse in the defendant's financial circumstances.
43. LORD JUSTICE DAVIS: Are the proceedings in the Magistrates' Court capable of being resurrected?
44. MR EVANS: My Lord, my understanding is they have been adjourned pending the outcome of this appeal and therefore yes, they can.
45. LORD JUSTICE DAVIS: I suggest the parties crack on with it.
46. MR EVANS: My Lord, in the circumstances I make no application in relation to any costs of these proceedings; I do not think those would help.