England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL
CRIMINAL DIVISION

		Royal Courts of Justice The Strand London WC2A 2LL
		14th February 2018

Wednesday 14^th February 2018

LORD JUSTICE DAVIS:

Introduction

1. As long ago as 26^th November 2013, in the Crown Court at St Albans, the applicant pleaded guilty on re-arraignment to two counts of what may be styled mortgage fraud. He was sentenced to 18 months' imprisonment.
2. Confiscation proceedings were instituted against him. The applicant was throughout represented by experienced counsel, as was the prosecution. Detailed statements were put in. At the confiscation hearing on 17^th October 2014, it was agreed by counsel that the applicant had obtained benefit to the value of £125,000. It was further agreed between counsel that his available assets amounted to £116,985. The judge, understandably, acted on the basis of those figures as agreed. What, however, was argued by counsel for the applicant at that time, by reference to the Supreme Court decision in R v Waya [2013] 1 AC 294 and by reference to considerations of Article 1, Protocol 1, was that to make a confiscation order in the amount of the realisable assets would be disproportionate and unjustified. The judge, in a fully reasoned ruling, rejected that argument and accordingly made an order in the sum of £116,985. That sum has duly been paid.
3. The applicant sought leave to appeal against the amount of that confiscation order. His grounds were settled on his behalf by counsel who had appeared for him in the Crown Court. On 21^st April 2015, Cooke J refused that application on the papers. He endorsed the reasoning of the trial judge.
4. The applicant, with fresh counsel, Mr Kovalevsky QC (who had not appeared below), now seeks to renew his application by grounds lodged on 2^nd June 2017: that is, some two years out of time. We have been provided with no explanation as to why so lengthy a lapse of time had occurred. It is not suggested, for example, that the applicant suffered illness or anything like that. Mr Kovalevsky has told us – and of course we accept – that he was instructed very shortly before the renewed grounds were lodged. What, however, prompted the applicant, after such a lengthy period of time, to seek fresh legal advice or why he could not have sought such advice much earlier is not explained.
5. At all events, the grounds now sought to be advanced depart entirely from the grounds previously advanced before the trial judge and pursued before Cooke J. The grounds now advanced include a challenge to the previously agreed figure for benefit of £125,000. Accordingly, consideration must be given to whether so lengthy an extension should be granted to renew this application and whether it is appropriate to permit the applicant at this stage to advance a wholly new ground which, moreover, departs from the position which had been expressly agreed below.

The Background Facts

6. The background facts may be relatively shortly stated. The applicant had pleaded guilty to two counts of conspiracy to commit fraud by misrepresentation (counts 3 and 5 on the indictment). Although the applicant was charged with two conspiracies, the overall reality was that they involved a course of conduct organised by the applicant and involving others in relation to one property in Luton, 14 Shingle Close. On both occasions the applications for mortgages which were made had been processed by a co-accused, a mortgage broker called Rothschild.
7. So far as count 3 was concerned, the position was this. On 3^rd February 2009, a mortgage application in the name of Steven Voles (the applicant's brother-in-law) was received by the Abbey National (now part of the Santander Group). On the face of it, Voles sought a loan by way of mortgage in the sum of £60,000 to purchase 14 Shingle Close, Luton. It appears that that property had been the subject of repossession proceedings and was on the market for £80,000. It was represented to the Abbey that £20,000 by way of deposit was to come from his savings. The application disclosed that Voles was employed as a plumber in a partnership run by the applicant and his stepfather. It has since been shown that financial information provided to the Abbey as to Voles' income and as to the source of the deposit were false. It is unnecessary to give the details. That was accepted to be the case. The deposit money was in fact provided by the applicant, not by Voles. The applicant transferred a total of £22,000 into Voles' account. Prior to those payments, Voles himself had little more than £1,000 in his account. In the result, the Abbey advanced the total sum of £61,495 to Voles (it appears that the £1,495 represented costs). The Shingle Close property was then registered in Voles' sole name. It was common ground that had these false representations not been made, the Abbey would not have advanced any sum to Voles and the property therefore could not have been purchased in his name.
8. The offending which was the subject of count 5 involved this. In June 2009 (by which time Voles had owned 14 Shingle Close for a period of only about two months) a woman named Lisa Moore began the process of obtaining a mortgage from the Halifax with a view to purchasing the property for £120,000. It is not in dispute that that figure was a significant overvalue; it did not represent the true value of the property at the time. At the time the application was made, Moore had neither the capital for the deposit nor the income to justify the loan sought by way of mortgage from the Halifax. At all events, Moore provided details in support of her application for a mortgage which included entirely false representations as to her true income and the nature of her true work. Further, it was the applicant who provided money (£20,000) towards the purchase price, of which £18,000 was used as a deposit. It emerged that he had made four separate payments into Moore's account for this purpose. In the result, the Halifax advanced the sum of £102,000 to Moore. She subsequently let out the property before she ultimately sold it to a bona fide third-party purchaser on 26^th September 2014 for the sum of £125,000: on which occasion the Halifax loan was discharged. It was the prosecution case that Moore and Voles had been part of the overall conspiracy, along with the applicant and Rothschild. It may well be – we do not know – that Voles and Moore were simply stooges or nominees for the applicant.

The Confiscation Proceedings in the Crown Court

9. As we have said, confiscation proceedings were initiated against the applicant in the light of his conviction on his guilty pleas. For the purposes of the subsequent confiscation hearing, detailed written as well as oral arguments were presented by counsel for the applicant and counsel for the prosecution. This court has seen the full and thorough written arguments presented at the time to the Crown Court by both counsel. It was specifically explained in the written arguments of both counsel why the benefit figure had been agreed at £125,000. Putting it shortly, that had been the agreed figure because that was the sale price (that is to say the value) of 14 Shingle Close when it was sold on 26^th September 2014. In effect, it was mutually accepted by counsel that the real benefit to the conspirators had been the obtaining of that property and its ultimate proceeds of sale, which could not otherwise have been obtained without the making of the fraudulent misrepresentations. Further, as we have said, the realisable assets available to the applicant were also agreed.
10. The argument then advanced by counsel who then appeared on behalf of the applicant – an argument which, in our view, was by no means to be regarded as negligible – was that a proportionate confiscation order should be the amount that the applicant had derived from the fraudulently obtained loans, being in effect the increase in value from the original purchase prices, and in particular taking into account the fact (and it was a fact) that each of the secured lenders – that is, the Abbey and the Halifax – had been repaid in full: see, for example, Waya at [35] and [65] to [68]. On that basis, counsel who then appeared for the applicant put forward a figure of £45,000 as the appropriate figure: representing the increase in value of £40,000 between the first sale and the second sale, and £5,000 between the second sale and the ultimate sale in 2014.
11. The prosecution, on the other hand, argued that that was too narrow an approach in the light of the reasoning in Waya. The prosecution argued that the approach then being adopted on behalf of the applicant was more focused on the conspirators' profits rather than, as it should have been, on the proceeds which had been obtained.
12. At all events, the judge preferred the arguments of the prosecution. His decision was upheld by the single judge, Cooke J, on the application for leave to appeal. Those arguments are no longer pursued.

Submissions

13. Mr Kovalevsky, in order to explain and justify the lengthy extension of time now needed to renew this application, submits that the applicant should not be held to counsel's agreement as to benefit made below on his behalf. He says that that approach had, unfortunately, involved a fundamentally mistaken approach in law. Further, he argues that the fact that the benefit figure had been agreed was not of itself to be taken as a complete and conclusive bar to the renewal of this application now: cf. the decision of the Supreme Court in R v Mackle [2014] AC 678. Mr Kovalevsky's fundamental point is that if an extension of time is not granted, and if the applicant is not free to pursue the ground which he now seeks to advance, then a substantial injustice will arise. It should nevertheless be recorded in this respect that Mr Kovalevsky commendably has accepted a number of points, without any shilly-shallying. These include the following. First, he accepts that the actual deposit sums paid by the applicant both on the first and on the second purchase can be taken to represent criminal property. Second, he accepts, in view of the nature of the conspiracies, that the applicant can properly be held liable for the entirety of the proceeds wrongfully obtained without apportionment between the other conspirators, subject to the inclusion in the confiscation order of an Ahmad and Fields proviso, which indeed the judge had very properly included. Third, he has not seriously disputed that the sale costs of the transactions are to be excluded as being part of the costs of committing the crimes: see Waya at [26(c)] of the lead judgment.
14. The present proposed argument is based on the provisions of sections 79 and 80 of the Proceeds of Crime Act 2002. In this regard it is also emphasised that the benefit here is not to be calculated on a cumulative basis: per Toulson LJ in R v Pattison [2008] 1 Cr App R(S) 287 at [21] and Waya at [59] to [61]. That proposition is obviously right. Indeed, it was plainly, as the written arguments show, borne in mind at the hearing before the judge in 2014.
15. The evidence showed that after the first "sale" to Moore by Voles, Voles received a net sum of £50,307 after the Abbey mortgage and related expenses were discharged. When Moore herself eventually sold the house to the third party for £125,000 in 2014, her receipts after discharge of the Halifax mortgage of £102,000 and other items could be taken to be £5,000. Thus, as put in the initial written argument of Mr Kovalevsky, the applicant had benefited by, it was said, no more than £55,307.
16. For his part, Mr Martin Evans QC, who also had not appeared at any stage below, was prepared to agree that the correct approach as to benefit had not been adopted in the court below. He observed that, leaving aside expenses, when the property was "sold" in 2009 by Voles to Moore for £120,000, the applicant, as joint conspirator, ostensibly obtained the proceeds of sale, but less the Abbey mortgage of £60,000: that is to say, on the face of it, he obtained £60,000. However, updated figures, as agreed between Mr Evans and Mr Kovalevsky, have been put before us today which indicate (for detailed reasons which we need not replicate here) that the appropriate figure may in fact have been £52,000.
17. So far as the sale by Moore in 2014 is concerned, the gross proceeds obtained were £125,000. But from that there had to be deducted the value of the Halifax mortgage of £102,000, which left (in round terms) £23,000. Further, as stated in R v Moulden [2005] 1 Cr App R(S) 691, as approved in Waya at [72] to [73], in circumstances such as this there is no apportionment of the equity of redemption between the purchaser on the one hand and the secured lender on the other hand in this regard. On the currently agreed figures, as presented to us this morning, the total benefit obtained would thus, on what is now agreed between counsel to be the appropriate approach to calculating the value of benefit, would be £75,000: that is, the product of £52,000 and £23,000. That, under section 80(2) of the Proceeds of Crime Act 2002, potentially would then require an index-linked adjustment, yielding a figure, as we were told for today's purposes, of £85,505 and a few pence. Thus, it can be seen that Mr Evans, in common with Mr Kovalevsky, was not adopting the approach taken to the calculation of the value of benefit which was taken in the court below.
18. Mr Evans nevertheless submits that it is simply not appropriate for this court, given the circumstances of this case, to grant the lengthy extension of time needed to renew this application. He further emphasises that, quite apart from the lengthy period of time involved, what had occurred below had been the subject of agreement between counsel. He also makes observations distinguishing this case from Waya, not least in that the first sale was, on the face of it, a sham and that the deposit monies, unlike in Waya, themselves derived from criminality. He yet further made the point that, at the time of the second mortgage, there was ample reason to think that the property had been dishonestly valued, thereby in itself potentially yielding a real benefit to the conspirators – a point discussed in Waya at [53] of the lead judgment.
19. Mr Kovalevsky's point remained that there would be a substantial injustice if the applicant were left with a benefit figure which was an incorrect figure and which would be out of line to the tune of some £30,000.

Disposal

20. In our view, it would be contrary to the good administration of justice to grant so lengthy an extension of time as now sought – an extension for which no real reason has been given, aside from the very late instruction of fresh counsel long after the single judge's refusal of leave. This is not a case where there has been any intervening change in the law. This is not a case where there has been a subsequent development in the facts. This is a case where, on a considered basis, the amount of benefit had been expressly agreed by counsel below. That may not of itself necessarily be conclusive. But, in our view, it is a very important factor. This court will not speedily or readily depart from agreements as to benefit and realisable assets made in confiscation proceedings by properly instructed and experienced counsel on an advised basis.
21. Moreover, we think that we should record that counsel then appearing was clearly alive, in broad terms, to the point which is at the heart of Mr Kovalevsky's present submissions: namely, that the mortgagees had been paid off in full. The means by which counsel then instructed sought to address that point may not have ultimately been legally correct; but at least in spirit, as it were, they sought to confront the reality of the position as it then appeared. In many ways the arguments then sought to be advanced correspond to that being advanced now, albeit dressed up in different legal clothing; even though we are prepared, for present purposes, to accept that the present formulation is one that is (as now agreed) strictly legally correct.
22. It seems to us that all these points militate strongly against the grant of the extension of time now sought. In our view, as a matter of exercise of discretion, it would be wrong to permit the applicant to pursue these arguments now in the light of the course of events below and in the light of the lapse of time which has occurred. In order to retain legal certainty, it is important that time limits be observed; and ordinarily a good reason will be required for the grant of a lengthy extension of time. None has been given in the present case.
23. Moreover, whilst no doubt a differential of £30,000 can be described as a significant sum, it remains the case that, on any view, the applicant was liable to pay a very significant sum by way of just dues under the confiscation order. We do not accept, in this case, that substantial injustice will be caused by refusing to grant the extension of time and by refusing to permit the applicant to advance this wholly new ground, as he now seeks to do. Substantial injustice is not to be calculated simply by reference to the amount of money at stake from the point of view of an applicant. Substantial injustice has to be calculated by reference to all the circumstances of the particular case.
24. There is one other point which we would briefly mention. As we have said, the evidence was that Moore in fact rented out, at least for some period of time, the property after she acquired it. If that is right, then on the face of it the rents which she received would also potentially be tainted money obtained by the conspirators: see, for example, R v Oyebola [2014] 1 Cr App R(S) 259. This point seems not to have been raised at all in the court below. Nor, indeed, was it raised in the written arguments presented to us: although both Mr Kovalevsky and Mr Evans accepted, when the point was put to them in argument, that that may well be the correct position given the circumstances. We simply allude to the point because it only reinforces our view that no substantial injustice results from leaving the original confiscation order to lie where it stands.
25. In the result, we refuse to grant the extension of time sought and we refuse this application.
26. In the circumstances, we will give leave for this decision to be cited in other cases, notwithstanding that it is a decision on an application. Although no point of law or principle arises, this case can be taken as illustrative of this court's reluctance to interfere (and all the more so out of time) with an express agreement as to the amount of a confiscation order, whether in terms of benefit or of realisable assets or both.