QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
|- and -
|HM CUSTOMS AND EXCISE
Mr J Dennison (instructed by HM Customs & Excise) for the Respondent
Hearing date: 26 April 2005
Crown Copyright ©
Mr Justice Beatson :
"If, on an application by the defendant in respect of a confiscation order, the High Court is satisfied that the realisable property is inadequate for the payment of any amount remaining to be recovered under the order the court shall issue a certificate to that effect, giving the court's reasons."
Where the Court is so satisfied, subject to section 83(2), it must grant a certificate: see Re May Yoong Forwell, paragraph 20. Section 83(2)(a) concerns the realisable property of a person who is bankrupt and is not relevant in the present case. By section 83(2)(b), for the purposes of section 83(1):
"the court may disregard any inadequacy in the realisable property which appears to the court to be attributable wholly or partly to anything done by the defendant for the purpose of preserving any property held by a person to whom the defendant had directly or indirectly made a gift caught by this part of the Act from any risk of realisation under this part of the Act."
At issue in this application is whether the "realisable property" is indeed inadequate and, if so, whether the Court should disregard any of such inadequacy pursuant to its power under section 83(2)(b).
"5. In so far as the sum of £18,933.50 is concerned, it should be noted that the Court declared this to have been a gift by me to Ms IM and comprises part of the monies invested in 60 Queens Road. That property is registered in the sole name of Ms IM and is the home of her and our 11 year old child. As such I am unable to realise whatever financial interest I may have in that property.
6. By February 2004 I had paid various monies to Hinckley Magistrates Court thereby reducing the balance then to £8,664.83.
7. In the course of the application for a confiscation order it had been identified that I had previously taken out a life insurance policy with Abbey Life and at that time the policy had a fund value of £7,769.40. That figure had, I believe, been taken into account when fixing the amount of the confiscation order. When I surrendered the policy it only had a surrender value of £2,208.06 and on 2 June 2004 I paid that sum to Hinckley Magistrates Court thereby reducing the balance to £6,456.77 at that time (i.e. £8,664.83 minus £2,208.06).
8. Had the surrender value (rather than the fund value) been taken into account in the calculation for the confiscation order, then the amount specified would have reduced by £5,561.34 (i.e. £7,769.40 minus £2,208.06) to £21,403.49."
9. To date I have paid the sum of £20,508.06 towards the confiscation order leaving a balance outstanding of £6,456.77 (i.e. £26,964.83 minus £20,508.06). This balance would reduce to £895.43 if the figure were to be recalculated using the actual value of the Abbey Life Policy as referred to above (i.e. £21,403.49 minus £20,508.06).
12. I do not have the means to pay the outstanding balance of £6,456.77 or the interest.
13. My financial circumstances are that I have no capital (apart from my interest if any in 60 Queens Road), assets or resources of any kind, other than my personal clothing or adornments and other personal items which, if sold, would not realise any significant value."
"I assume from your letter that you are referring to the cash free lump sum of £2,165.69 when you suggest the payment of the 'entire benefit of the Abbey Life policy' by your client towards payment of his confiscation order.
Please note that these funds have to be paid to the Leicester Magistrates' Court and not to HM Customs & Excise ("HMCE"). HMCE does not have the necessary authority to accept this offer in full and final settlement of the confiscation order. In terms of the Drug Trafficking Act 1994 any shortfall in terms of the confiscation order can only be rectified by applying to the High Court for a Certificate of Inadequacy and thereafter by referring the matter to the Crown Court to arrange for the amendment of the original order."
After stating that she had asked for an adjournment of an enforcement hearing scheduled for the next day Ms Maritz stated that she looked forward to hearing from the applicant's solicitors regarding the issues raised in the fax as a matter of urgency. The letter dated 12 May 2004 states:
"I refer to my telephone conversation of 31 March 2004 with your Mr Black, during which conversation the possibility of your client utilising the cash lump sum from his Abbey Life policy (approximately £2,000) for payment of his confiscation order and applying for a certificate of inadequacy in respect of the outstanding balance.
I note that to date this office has not received any firm proposals from your client regarding payment of his outstanding confiscation order.
In the circumstances I should be grateful if you would revert to me in this regard as a matter of urgency."
"It is plain that Parliament was prepared to contemplate that money might be and continue to be realisable even if it had been the subject of gift or gifts by the defendant. And so it is, that a fact that gifts have been made will not save a defendant from the making of a confiscation order. That demonstrates, in our judgment, that the recovery of money in these circumstances is only one factor which the Court must take into account in exercising its discretion."
I have referred to R v Liverpool Magistrates Court, ex p. Ansen which concerned the identically worded provisions in the Drug Trafficking Offences Act 1986. May J stated ( 1 All ER 692, at p. 701) that the inclusion of gifts as realisable property caught by that Act:
"necessarily means that circumstances may arise where gifts which an applicant has made may be practically, even legally, irrecoverable, but they are nevertheless still regarded as realisable property under this draconian Act."
In the present case the Recorder, after due consideration, concluded that it was appropriate to treat the equity in the Queens Road house as a gift caught by Part VI of the 1988 Act. The effect of Mitchell J's order was that only a proportion of the equity was to be so treated. There was no appeal from either decision.
"a factual inquiry into the value of the realisable property at the time the matter comes before the court…. The realisable property either is or is not adequate. If it is inadequate, the court is required to issue a certificate and give its reasons."
Accordingly I accept Mr Dennison's argument that the power in section 83(2)(b) and the principles as to its exercise it contained in Re May Yoong Forwell are only relevant if section 83(1) is engaged.