England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM THE CROWN COURT AT NOTTINGHAM
HH Judge Rafferty QC

		Royal Courts of Justice Strand, London, WC2A 2LL
		01/05/2018

Lord Justice Simon:

Introduction

1. This appeal raises the question whether, if the prosecution are discontented with the terms of a default order in confiscation proceedings, the Court of Appeal (Criminal Division) has jurisdiction to determine a challenge to that order.
2. On 26 September 2013, at Nottingham Crown Court (before HHJ Hamilton), the respondent pleaded guilty to offences of conspiracy to defraud (count 1), conspiracy to convert criminal property (count 2) and concealing criminal property (count 3). He was sentenced to a term of 7 years imprisonment on each count, to be served concurrently.
3. On 23 May 2017, in confiscation proceedings under the Proceeds of Crime Act 2002 ('POCA 2002'), before HHJ Rafferty QC ('the Judge'), a confiscation order was made against the respondent. The Court decided that he had a criminal lifestyle as a result of his general criminal conduct and assessed the benefit figure at £8,922,378. The recoverable amount was assessed as £657,197.33. This included £500,000.00 of hidden assets. The confiscation order was to be paid by 22 August 2017 and, in default of payment, the respondent was ordered to serve a term of 18 months imprisonment.
4. On 6 July 2017, at a hearing pursuant to Section 155 of the Powers of Criminal Courts (Sentencing) Act, the Judge amended the recoverable amount to a sum of £661,027, but declined to reconsider the length of the default term.
5. The prosecution applied for leave to appeal against the terms of the default order. Its case was that the default period should have been for a considerably longer period: of the order of 5 to 7 years.
6. The application has been referred to the full court by the Registrar of Criminal Appeals.
7. Since the issues are confined, the background facts can be set out in outline.
8. The crimes constituted sophisticated 'boiler room' frauds between 27 November 2007 and 26 September 2013. They were organised in and conducted from Thailand where the respondent was resident at the time. The fraud involved cold callers contacting investors in a variety of countries to persuade them to invest in shares and commodities. Investors were directed to websites which appeared genuine. They could log-in to view their apparent trading accounts which showed false figures which were used to persuade them to increase their investment. In fact, none of their money was either invested or reinvested.
9. On 23 October 2012, prior to his plea, a restraining order was made against the respondent prohibiting him from dealing with his assets, and requiring the repatriation of any assets held outside the jurisdiction within 21 days. On or around 25 January 2013 he served a witness statement detailing bank accounts held abroad which he claimed he was unable to access. In fact, he had both online access to bank accounts and the capacity to repatriate assets. As such, he was held to be in contempt of court on 15 July 2013 for failing to comply with the restraining order. As the respondent claimed he was making attempts to comply with the restraining order, the contempt application was adjourned.
10. On 10 September 2013, the prosecution became aware that the respondent had withdrawn approximately £14,350 from an account held at HSBC in Hong Kong in breach of the restraint order. The hearing of a second contempt application was postponed until after the conclusion of the confiscation proceedings.
11. A further discovery was made shortly before the confiscation hearing on 8 May 2017. A company in which the respondent held 587 shares, Dragon Oil, had been taken over by Emirates Oil Company. The shareholders, including the respondent, had been offered £8 per share. He had accepted that offer and been sent a cheque for £4,696. He failed to notify the police at the time, although the money was paid into a restrained account after the issue was raised by the prosecution.
12. At the confiscation hearing in May 2017, the respondent resiled from an earlier basis of plea. First, he said that he had not played a leading role in the fraud but simply acted in an administrative role for which he was paid around £200,000. Secondly, he said that he had only been involved from late 2005 or early 2006 until 2010 or 2011. Thirdly, he denied using the names Robin Jacob and Gary Miller.
13. Following submissions from counsel on each side, as well as evidence from DC Christopher Parker and the respondent, the Judge made a number of findings adverse to the respondent. First, he found him to be a demonstrably untruthful and unreliable witness who gave evidence that was inconsistent, incomplete, intentionally misleading and replete with bare assertions. Secondly, the prosecution had proved that the respondent, jointly with the other conspirators, had obtained all the monies that had been paid into accounts set up in furtherance of the fraud. Thirdly, the respondent was a major participant, and his involvement in the conspiracy was far greater and more wide-ranging than his basis of plea acknowledged. His role was central and significant to the operation of the conspiracy and he had used the names of both Robin Jacob and Gary Miller as aliases. Without his technical expertise, the highly sophisticated and persistent fraud would have been far less successful.
14. The Judge concluded that it was a reasonable inference that he had a fund of hidden assets of not less than £500,000.
15. Turning to the breaches of the restraining orders, the Judge ruled that the respondent should have been dealt with in 2013 when he was sentenced. Any sentence that he would have received for obtaining £14,000 by deception would have been a concurrent term, and accordingly no further order would be made in respect of that breach. The funds obtained from dealing with the Dragon Oil shares was available for confiscation, and accordingly no further order was made in respect of that breach either.

The Judge's decision on the default order

16. Counsel for the prosecution referred the Judge to the case of R v. German Castillo [2012] 2 Cr App R (S) 36 and reminded him that the maximum term was one a period of 7 years. Although the Judge dealt fully with the substance of the confiscation order, when it came to the default term he gave abbreviated reasons for his decision:

In all the circumstances, taking into account the fact that this falls right at the bottom of the relevant scale, given the elapse of time, given the sentence that the defendant originally received, 18 months in default of payment.

The submissions

17. Mr Sutton QC submitted that the Judge's decision to fix a default period of imprisonment of only 18 months in default of payment of a confiscation order of £657,197.33 amounted to an error which this Court should correct. He referred to the passages in German Castillo (referred to above) which dealt with the statutory default regime.

12. The administration of this regime has been considered in a number of decisions of this court: Szrajber (1994) 15 Cr.App.R (S) 821; French (1995) 16 Cr.App.R (S) 841; Smith [2009] EWCA Crim 344; Piggott [2009] EWCA Crim 2292; Price [2009] EWCA Crim 2198; Whiteway-Wilkinson [2010] EWCA Crim. 35; Pettitt [2010] EWCA Crim. 1884 and Young [2011] EWCA Crim 1176. These following principles emerge for the guidance of courts fixing a period of imprisonment to be served in default of payment of a confiscation order:

1. All the circumstances of the case have to be considered.

2. It is of the first importance to have in mind that the purpose of the default term is to secure payment of the confiscation order.

3. It is not the court's function to find an arithmetical match between the amount of the order and the length of the term, such that for any given band or bracket prescribed in the statute an order at the bottom of the band should attract a default term likewise at the bottom of the band, an order in the middle of the band should attract a term in the middle or an order at the top should attract a term at the top.

4. The court is not to be influenced by the overall totality of the sentence passed for the crime plus the default term.

5. But for any given band the court should have regard to the maxima: the maximum amount of a confiscation order within the band and the maximum default term within the band.

6. Given principle 5, and especially in a case such as this falling within the top band where there is no maximum confiscation order but only a maximum default term, regard must be had to the requirement of proportionality. Thus, in Whiteway-Wilkinson the court accepted (paragraph 19 of the judgment) counsel's submission that for a confiscation order of £2 million to £3 million a default term of seven to eight years would have been appropriate.

13. Those are the principles which with respect emerged from the cases. We would add this. Although the court has insisted that the requirement of proportionality has to be respected, that does not imply what in sentencing parlance may be called a "tariff". The purpose of the default term is not punishment for the achievement of retributive justice. It is rather to secure satisfaction of the confiscation order and so deprive the criminal of the fruits of his crime. In that endeavour, the demands of proportionality are much weaker than where the court is punishing the offender. Although retributive justice is by no means the only aim of sentencing, it remains a first condition of criminal punishment that the offender should get no more than his just deserts. Proportionality is thus at the centre of the process. By contrast, the ancillary regime of asset recovery is established on an altogether different footing. Its first condition is effectiveness.

14. However, in this context too proportionality, as we have shown, commands some attention especially in the top bracket where there is no maximum amount for the confiscation order …

18. Mr Sutton submitted that in terms of the table set out at s.35(2A) of POCA 2002, the confiscation order fell within the bracket of £500,000 to £1 million, with a maximum default term of 7 years. The bracket below this was £100,000 to £500,000, with a maximum default term of 5 years. It followed that the Judge should have made a default order of between 5 and 7 years; and a default term of 18 months was plainly wrong.
19. Mr Tehrani QC submitted in answer that the Court of Appeal did not have jurisdiction to determine a prosecution appeal against the setting of a default term. Furthermore, if it had jurisdiction, the setting of a default term involved the exercise of discretion with which this Court should not interfere unless it was plainly outside the range of appropriate default terms. He referred to R v. Ikram [2018] EWCA Crim 440 at [51]. Finally, he argued that if the Court were inclined to substitute a different default term, since the respondent was on the point of release from the 18 months' default term, it should confirm the order rather than increase the default term.

The jurisdiction issue

20. The first issue is whether this court has jurisdiction to hear a prosecution application in relation to a default term set in the Crown Court in confiscation proceedings.
21. The general right of the prosecution to appeal against the making of a confiscation order arises under s.31 of POCA 2002:

Appeal by prosecutor, etc -

(1) If the Crown Court makes a confiscation order the prosecutor may appeal to the Court of Appeal in respect of the order.

(2) If the Crown Court decides not to make a confiscation order the prosecutor may appeal to the Court of Appeal against the decision.

22. Section 32(1) provides that on an appeal under s.31(1) the Court of Appeal may confirm, quash or vary the confiscation order.
23. Mr Sutton submitted that a default sentence for non-payment of a confiscation order is part of the confiscation order and is therefore amenable to an appeal by the Prosecution. Even if it were not part of the confiscation order itself, s.31(1) is worded so as to include matters 'in respect' of the order. Since the setting of a default term of imprisonment is a matter in respect of that order, it is amenable to appeal by the prosecution. He recognised, however, that this second way of putting the argument would raise difficulties when it came to any order that this Court made under s.32(1).
24. For the respondent, Mr Tehrani submitted that the prosecution had no right of appeal against a default term. Section 31 of the POCA 2002 does not expressly include a right of appeal against an order made under s.35 of POCA 2002, which sets out the power to impose a default term to confiscation orders. The only provision for varying the default term is contained within s.39 of POCA 2002: the power in the Crown Court to reconsider variation of the prison term, as occurred in the present case. He submitted that a default sentence was separate and distinct from a confiscation order, see R v. Gary Ellis [1992] 2 Cr App R (S) 403, and observed that serving the default term does not remove the liability to pay the confiscation order.

The statutory scheme

25. A 'confiscation order' is defined in s. 6(5)(b) POCA 2002 as '… an order requiring (the defendant) to pay the (recoverable) amount'.
26. Section 11 (1) provides that the amount ordered to be paid under a confiscation order must be paid on the making of the order; and s.11(2) provides:

If the court making the confiscation order is satisfied that the defendant is unable to pay the full amount on that day, it may make an order requiring whatever cannot be paid on that day to be paid –

(a) in a specified period …

27. POCA 2002 creates no specific sanction for non-payment of a confiscation order, but introduces the sanction regime created by section 139 of the Powers of Criminal Courts (Sentencing) Act 2000 ('the Sentencing Act').
28. Section 35 of POCA is in these terms:

(1) This section applies if a court -

(a) makes a confiscation order …

(2) Sections 139(2), (3) and (9) and 140(1) to 4 of the Sentencing Act 2000 apply as if the amount ordered to be paid were a fine imposed on the defendant by the court making the confiscation order.

(2A) Where a court is fixing a term of imprisonment or detention under section 139(2) of the Sentencing Act (as applied by subsection (2) above) in respect of an amount ordered to be paid under a confiscation order, the maximum terms are those specified in the second column of the Table for amounts described in the corresponding entry in the first column.

TABLE

Amount Maximum Term

£10,000 or less 6 months

More than £10,000 but no more than £500,000 5 years

More than £500,000 but no more than £1 million 7 years

More than £1 million 14 years

29. Section 139(1) of the Sentencing Act provides that if the Crown Court imposes a fine on any person, 'the court may make an order … allowing time for payment.' Section 139(2) provides, so far as material:

… if the Crown Court imposes a fine on any person … the court shall make an order fixing a term of imprisonment … which he is to undergo if any sum which he is liable to pay is not duly paid or recovered.

30. If follows that the statutory scheme adopts a somewhat roundabout route by which a judge must fix a term of imprisonment to be served in default of payment within the permitted maximum, so as to ensure that the offender has nothing to gain by failing to comply with the confiscation order, see the cases summarised in R v. Pigott [2010] 2 Cr App R 16 (S) [40]-[42], referred to in German Castillo, above.
31. If the matter were free from authority, one might assume that since the Court is determining a default term designed to ensure compliance with the confiscation order it could properly be characterised as part of the order in respect of which a prosecutor can appeal under s.31(1).
32. However, the matter is not free of authority.
33. In Gary Ellis (see above) the Crown Court made a confiscation order but failed to observe the mandatory requirement to order a term of imprisonment in default of payment. Ellis's counsel submitted that this omission rendered the confiscation order defective and that consequently it should be quashed. Unsurprisingly the Court was not attracted by the submission. Having referred to the case of R v. Popple and others (1993) 14 Cr. App R (S) 841, the Court said this:

Although the point presently under consideration was not considered by the court in Popple, what does emerge very clearly from the passages in the judgment to which we have referred is that if the provisions of the 1986 Act and the 1973 Act are to be fully complied with the sentencing court makes two orders and not one. There is the confiscation order itself and there is the order in default which in effect is an enforcement order which is penal in character. Must the failure to make the second taint the legality or validity of the first?

In our judgment unless any decided case compels us to reach a different conclusion the answer to that question must be 'No'.

34. The Court then went on to consider the case of R v. Onwuku (1991) 12 Cr App R (S) 486 and added:

We find nothing in the judgment which inhibits our conclusion that where the sole failure is a failure to make the second and consequential order (namely, the order in default of payment) that cannot itself taint the legality or the validity of the confiscation order.

35. Mr Sutton submitted that in Popple, the Court identified two separate orders in the confiscation process but did not rule that the mandatory default order was additional to the confiscation order. He argued that the effect of the judgment was that, having made a 'decision' to make a confiscation order, and before doing so, the Court is required to determine the default sentence and order that it be included as part of the confiscation order. The Court in Gary Ellis read more into the judgment in Popple than was necessary for its decision which was that the omission of a provision for what was to happen in default of payment did not invalidate 'the rest of the confiscation order'. Neither Popple nor Gary Ellis precluded this court from determining that a default order forms part of a confiscation order.
36. Although the question that was decided in Gary Ellis was whether the failure to make a default order invalidated the confiscation order itself, in our view it was an essential part of the reasoning that where there is a confiscation order and a default provision there are two orders. The default order is distinct from the confiscation order.
37. We accept that there may be good reasons for treating the default term as part of a confiscation order since it does not stand alone and is closely linked to the confiscation order. However, the analysis of this Court in Gary Ellis is clear, the confiscation order and the default term are distinct orders. It must be assumed therefore (and in relation to a jurisdiction issue, this Court must proceed on the basis that) s.31 of POCA was drafted in the light of the law as decided in Gary Ellis. It follows that the prosecutor may not appeal against a default order.
38. We do not regard this as satisfactory. Although, the setting of default terms does not appear to give rise to serious difficulty, in the present case something appears to have gone wrong, and in such cases it may be thought desirable that the prosecution should be able to challenge the default term.

The Judge's decision

39. In our judgment the Judge was in error in his assessment of the default term. First, and contrary to the principle 4 in German Castillo, he was plainly influenced by the overall totality of the sentence passed for the crime plus the default term, since he said, 'given the sentence that the defendant originally received'. Second, Principle 5 in German Castillo indicates that for any given band the court should 'have regard to the maxima: the maximum amount of a confiscation order within the band and the maximum default term within the band,' while having regard to issues of proportionality. The Judge also erred in saying that, 'this falls right at the bottom of the relevant scale.' Even if he were referring to the bracket of £500,000 to £1million, and it is not clear that he was, he appears to have overlooked the fact that the maximum term for the bracket between £10,000 to £500,000 was 5 years.

Conclusion

40. Nevertheless, for the reasons set out above, we grant leave to apply to the Court of Appeal, but dismiss the Prosecution appeal since we have concluded that the Court does not have jurisdiction to hear an appeal in respect of a default order.