England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
DIVISIONAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		06/03/2008

Mr Justice Walker :

Introduction

1. Mrs Escobar appeals by way of case stated from a decision of His Honour Judge Robbins sitting at the Crown Court at Southwark. That decision concerns a matter originally committed for sentence by the Bow Street Magistrates' Court. His Honour Judge Robbins dealt with it on a number of occasions. In 2001 he sentenced Mrs Escobar on the original committal, and made a confiscation order against Mrs Escobar under the Criminal Justice Act 1988 in the sum of £170,495.58, to be paid by 18 October 2003. In March 2007, following a certificate of inadequacy granted by the High Court, the matter came back before His Honour Judge Robbins. Under section 83 of the Act the judge made an order ("the March 2007 Order") reducing the amount of the confiscation order to £99,078.62 and requiring that it be paid by 30 March 2008. A few weeks later, in April 2007, the judge modified the March 2007 Order by removing the provision identifying 30 March 2008 as the date for payment. He concluded that he had not had power, when varying a confiscation order under section 83 of the Act, to fix a time for payment. Accordingly the judge's order as varied in April 2007 ("the April 2007 Order") contained a note stating that the date for payment remained 18 October 2003 in accordance with the original order. It is in respect of this varied order that Mrs Escobar appeals.
2. The question stated for the opinion of the High Court is whether the judge was correct in law in holding, on 23 April 2007, that when making an order under section 83 of the Criminal Justice Act 1988 for the reduction of the sum payable under a confiscation order, the Crown Court has no power to fix a time for payment. On that question we have had helpful and succinct written and oral submissions from Mr Peter Jennings for Mrs Escobar and from Mr Adam Norris for the respondent. The directly relevant statutory provisions are found in Part VI of the 1988 Act. The main arguments involved a close examination of s 83 itself, along with detailed submissions as to the operation of s 75. Subsidiary arguments referred to ss 74B and 74C, and at the court's request supplemental submissions were lodged as to the way in which confiscation is dealt with in the Drug Trafficking Act 1994. In this judgment I deal first with the factual history and main statutory provisions before analysing the main arguments, and I shall turn thereafter to deal with the subsidiary matters.

The original confiscation order and Part VI of the 1988 Act

3. The confiscation order arose in proceedings in which Mrs Escobar had pleaded guilty to offences of controlling prostitution. The process for making the original order under Part VI of the 1988 Act involved three tasks for the court. The first and main task was laid down by s 71 of the Act. This provides for a statutory computation of benefit and a statutory computation of realisable assets. The court is then to make an order for payment of the lesser of these two amounts – which in the present case was the amount of realisable assets. In fixing that amount at £170,495.58 the court included £71,275 as the realisable value of a banqueting suite and night club business owned by Mrs Escobar.
4. The second and third tasks of the court when making the original order were consequential. They arose under s 75 of the Act, which brought into play certain powers and duties of the Crown Court – at that stage set out in s 31(1) to (3C) and s 32(1) and (2) of the Powers of Criminal Courts Act 1973 - in relation to fines and enforcement. Among them was a power to grant time to pay, either as a whole or by instalments, along with a duty to fix a custodial term in default of payment. Thus the second task was to consider whether and how to exercise the power to grant time to pay. When making the original order in the present case the judge concluded that he should do so, and that the appropriate course was to allow until 18 October 2003 for payment. The third task was to fix a default term. Under s 31(2) of the 1973 Act the judge fixed a term of 2 years imprisonment.
5. Liability to serve a default term was not the only potential consequence of failure to pay the original confiscation order on the date when it was required to be paid. Under s 75A of the 1988 Act interest would be charged from that date on any sum unpaid for the period that it remained unpaid.

The March 2007 Order

6. The figure of £71,275 for the realisable value of the banqueting suite and night club business was not borne out by events. The business was little more than a front for prostitution, and it proved to be worthless. At the hearing in March 2007 the judge recorded that Mrs Escobar suffered from depression. She had not taken steps to put her assets beyond the reach of the court, nor had she dissipated them in riotous living. Her inability to pay the balance was largely because of the collapse of the business. Her son had to cease his studies at university as he was unable to pay the fees. The judge found that he had done everything in his power to assist his mother to realise her assets. However the problems with the business and difficulties in relation to other assets led the judge to reduce the amount to be recovered under the confiscation order to £99,078.62. Of this, £90,758.33 had been paid in stages up to 6 October 2005. Accordingly the unvaried March 2007 Order would have had two consequences. First, it was effectively in relation to a balance of just over £8,000 that a further period of 12 months was given to pay. Second, even though the £90,758.33 had been paid in instalments on dates after 18 October 2003 (when payment should have been made under the original order), interest would no longer be chargeable in relation to the period from that date until the dates of payment.

Section 83 of the 1988 Act

7. Section 83 has been amended since the original confiscation order was made. As originally enacted it made reference to s 31(2) of the 1973 Act. That has now been repealed and replaced by s 139(2) of the Powers of Criminal Courts (Sentencing) Act 2000. Accordingly s 83 of the 1988 Act, as amended, includes the following:

83(1) If, on an application made in respect of a confiscation order -

(a) by the defendant, or

(b) by a receiver appointed under section 77 or 80 above, in pursuance of a charging 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.

(2) For the purposes of subsection (1) above—

(a) in the case of realisable property held by a person who has been adjudged bankrupt or whose estate has been sequestrated the court shall take into account the extent to which any property held by him may be distributed among creditors; and

(b) 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 this Act from any risk of realisation under this Part of this Act.

(3) Where a certificate has been issued under subsection (1) above, the defendant may apply—

(a) where the confiscation order was made by the Crown Court, to that court; and

(b) where the confiscation order was made by a magistrates' court, to a magistrates' court for the same area,

for the amount to be recovered under the order to be reduced.

(4) The Crown Court shall, on an application under

subsection (3) above—

(a) substitute for the amount to be recovered under the order such lesser amount as the court thinks just in all the circumstances of the case; and

(b) substitute for the term of imprisonment or of detention fixed under section 139 of the Powers of Criminal Courts (Sentencing) Act 2000 in respect of the amount to be recovered under the order a shorter term determined in accordance with that section in respect of the lesser amount.

(5) …

8. In his skeleton argument Mr Norris has summarised the express provisions in s 83 as follows:

5. Section 83(1) and (2) address the granting of the certificate by the High Court.

6. Section 83(3) allows the defendant to make a subsequent application to the court that granted the confiscation order to reduce the amount to be recovered.

7. Section 83(4) directs the Crown Court as to how any amendments to a confiscation order should be effected. It is broken down into two parts: Section 83(4)(a) and Section 83(4)(b).

8. Section 83(4)(a) deals with the substitution of the amount to be recovered.

9. Section 83(4)(b) deals with the substitution of the default sentence, making specific reference to Section 139 of the Powers of Criminal Courts (Sentencing) Act 2000.

10. There is no reference to amending the time to pay before the default sentence comes into operation.

9. I am content to accept that summary. It means that in order to find an express power to extend time one must look outside the words of s 83.

Section 75 of the 1988 Act

10. Mr Jennings contends that a power to grant further time is conferred on the Crown Court by the combined effect of s 75(1) of the 1988 Act and section 139 of the Powers of Criminal Courts (Sentencing) Act 2000. Section 75, like s 83, has been amended to substitute relevant provisions of the 2000 Act for those they supersede. As amended, so far as material, it is in the following terms:

75.—(1) Where the Crown Court orders the defendant to pay an amount under this Part of this Act, sections 139(1) to (4) and section 140(1) to (3) of the Powers of Criminal Courts (Sentencing) Act 2000 (powers of Crown Court in relation to fines and enforcement of Crown Court fines) shall have effect as if that amount were a fine imposed on him by the Crown Court.
    (2) Where a magistrates' court orders the defendant to pay an amount under this Part of this Act, that amount shall be treated as a fine for the purposes of section 78(4) of that Act of 2000 (general limit on the power of a magistrates' court to impose imprisonment not to apply in the case of imprisonment in default).
    (3) Where—

(a) a warrant of commitment is issued for a default in payment of an amount ordered to be paid under this Part of this Act in respect of an offence; and

(b) at the time the warrant is issued, the defendant is liable to serve a term of custody in respect of the offence;

the term of imprisonment or of detention under section 108 of that Act of 2000 (detention of persons aged 17 to 20 for default) to be served in default of payment of the amount shall not begin to run until after the term mentioned in paragraph (b) above.

11. Section 139 of the Powers of Criminal Courts (Sentencing) Act 2000 reads, so far as material:

"139. -(1) Subject to the provisions of this section, if the Crown Court imposes a fine on any person or forfeits his recognizance, the court may make an order-

(a) allowing time for the payment of the amount of the fine or the amount due under the recognizance;

(b) directing payment of that amount by instalments of such amounts and on such dates as may be specified in the order;

(c) in the case of a recognizance, discharging the recognizance or reducing the amount due under it.

(2) Subject to the provisions of this section, if the Crown Court imposes a fine on any person or forfeits his recognizance, the court shall make an order fixing a term of imprisonment or of detention under section 108 above (detention of persons aged 18 to 20 for default) which he is to undergo if any sum which he is liable to pay is not duly paid or recovered.

…"

12. The proposition advanced for Mrs Escobar is that the incorporation, by section 75 of the 1988 Act, of the powers in section 139 of the 2000 Act, gives the court power to fix a time for payment when it substitutes a lesser sum under section 83 in the same way as it gives the court that power when it makes a confiscation order in the first place under section 71.
13. In support of this proposition Mr Jennings's skeleton argument included the following:

i) It is the natural reading of the section.

ii) The contrary argument appears to be that section 75(1) does not apply because the court does not "order the defendant to pay an amount due under this Part of this Act", but only varies an existing order. That is not a natural reading.

iii) It is also the grammatical meaning. The Crown Court acting under sections 83(4) … is making an order. The effect of that order is that the defendant has to pay an amount due under the Part VI of the Act. That an order is a variation to an existing order, and that it is an order to pay an amount, are not mutually exclusive.

iv) A purposive construction suggests the same meaning. Interest on the amount due under a confiscation order runs - under the 1988 Act - from the expiry of the time for payment. The purpose of interest is, in broad terms, to be a compensating payment for not paying something when one ought to have paid it. In the light of that a different reading has peculiar results.

v) Under section 83(4) the court is not concerned only with whether the assets originally taken into account have shown a shortfall on what was expected: it can also have regard to any other assets acquired since. If, for example, the original assets - valued at £50,000 - realised nothing, but shortly before the hearing under section 83(4) the defendant inherited £20,000, the court could properly substitute an order that he pay £20,000. If the court cannot allow time for payment, interest on the £20,000 will run from a date before he acquired it. That would not be fair.

vi) It would also not be rational. The sum fixed under section 83(4) is assessed on the basis of current assets, under a provision whose purpose is specifically to provide for changes of circumstance. For interest on that sum to run from a date decided in different circumstances as an appropriate date for the realisation of different assets does not make much sense.

14. In oral submissions Mr Jennings addressed what would happen in cases where an order was made under s 83 in respect of assets which at the date of the order had not yet been realised. If no further time to pay were granted then the defendant would be liable – subject to any order of suspension made by the Magistrates' Court – to immediate imprisonment. He added that the provisions of s 75(2) and (3) assisted his argument. Like s 75(1), s 75 (2) comes into play when the Crown Court "orders the defendant to pay an amount under this Part of this Act". It cannot have been Parliament's intention that while an order under s 71 would be exempted from the general limit on the power of magistrates' courts to impose imprisonment, an order under s 83 should not benefit from that exemption. Accordingly Parliament must have intended that the words "orders the defendant to pay an amount under this Part of this Act" should encompass an order under s 83.
15. Turning to s 75(3), this contemplates that there has been default in payment of "an amount ordered to be paid under this Part of this Act". Here, too, Parliament cannot have intended that while a term in default for failure to pay an amount ordered under s 71 should be consecutive nevertheless this should not be the case for a term in default for failure to pay an amount ordered under s 83. This suggested that s 75 was generally concerned to make provision for orders made under s 83 as well as those under other provisions in Part VI.
16. The rival contention advanced by Mr Norris was that in s 75(1) the expression "orders the defendant to pay" has application to the occasion when a confiscation order is originally made, but does not apply to an occasion when the court "substitutes for the amount to be recovered under the order" a lesser amount under Section 83(4). Mr Norris drew attention to s 83(4)(b), which expressly required the court to substitute a new default term under s 139 of the 2000 Act. If Mrs Escobar's argument were right, this would have been otiose, for under her construction of s 75(1) it would have been automatically read into s 83(4)(a). Conversely, submitted Mr Norris, if Parliament had intended to allow a variation of the time to pay, this would have been specifically included as Section 83(4)(c).
17. The rationale for this construction was that time to pay is intended as an incentive to realise assets and make payment before the deadline. Failure to do so has the two possible consequences of incurring interest and being imprisoned. The onus is on the defendant to complete transactions before the deadline and there is provision to allow the defendant to return the matter to court for an adjustment of the figures, having regard to the actual (rather than estimated) value of the assets that have been realised. But this must be done before expiry of the time to pay. Confiscation orders and measures to ensure compliance are necessarily draconian.
18. In this context reference was made to the decision of this court in Revenue and Customs Prosecution Office v Kearney [2007] EWHC 640 (Admin). The court in that case was not concerned with s 83. A confiscation order was made requiring the defendant to pay some £143,000 within 12 months. After the 12 months had expired the judge, on the defendant's application, extended the time for payment by a further 4 months. This Court held that the judge did not have power to do that. In effect the Crown Court in that case had assumed that there was an inherent free-standing power to vary the time to pay under an existing confiscation order. That assumption was wrong. The judgment of Gross J, with whom Smith LJ agreed, included the following:

15 … The reality of the confiscation order is that it is to pay a given amount within a given period or face a sentence of imprisonment in default. The given period of time to pay is an integral part of the order. … The right answer was for the respondent to seek to persuade the Magistrates in the exercise of their discretion, not then to activate the default sentence so that any injustice, if such there was, could have been addressed. Here that course was not followed. The learned judge had, with respect, no jurisdiction to make the order which he did.

19. It is clear from R v Greenacre [2007] EWHC 1193 (Admin) that the discretion which Gross J had in mind is a discretion exercisable under s 77 of the Magistrates' Courts Act 1980. Mr Norris submitted that the correct course of action to avoid imprisonment (although it will not avoid liability for interest) is as suggested in paragraph 15 of the judgment in Kearney: to seek to persuade the Magistrates, in the exercise of their discretion, not then to activate the default sentence. The subtle difference identified by Mr Norris is that the time to pay is not extended; rather, the activation of the default sentence is delayed.

Analysis

20. I am persuaded by Mr Jennings that s 75(1) has effect in relation to an order under s 83, and that in consequence the judge ought not to have varied the March 2007 Order. The foremost consideration to my mind is that s 75, when read as a whole, is generally concerned to make provision for orders made under s 83 as well as those under other provisions in Part VI. It would in my view be absurd if s 75(2) and (3) were read as excluding orders made under s 83. The words used in those subsections identifying when they come into play are identical or almost identical to those used in s 75(1).
21. The conclusion that s 75(1) operates in relation to an order under s 83 is fortified by two further considerations. First, it appears to me consistent with the natural and grammatical meaning of the relevant provisions: see points (i) to (iii) quoted above from Mr Jennings's skeleton argument. The words "orders the defendant to pay" are in my view addressed to the practical effect of the order made by the court. It is common ground that an order under s 71 is an order to pay. There is just as much an order to pay when the court "substitutes for the amount to be recovered under the order" a lesser amount under Section 83(4). In that regard I am not greatly troubled by the possibility that s 83(4)(b) might be otiose. Read literally it is not otiose, as it appears to impose a requirement that the new default term be shorter than the old, something which s 139(2) of the 2000 Act would not necessarily require. In any event, however, as Mr Jennings observed in reply, the provision in s 83(4)(b) can be explained by a desire on the part of the draftsman to emphasise that the duty to impose a default term arose for consideration.
22. Second, for the reasons given at points (iv) to (vi) also quoted above, this conclusion removes a potential for injustice if the contrary position advanced by the respondent were to apply. Mr Norris accepts that on his construction of the statutory provisions the course suggested in paragraph 15 of the judgement of Gross J in Kearney will not assist as regards interest, for the respondent's contention is that an order under s 83 cannot alter the date from which interest will be payable. It is clear that an order under s 83 must seek to identify realisable assets of the defendant at the date of the order, and some of these may not yet be realised. Of course it may be that the judge concludes that a failure or inability to realise those assets does not call for any extension of the time to pay. Where, however, realisable assets are identified which a defendant acquired after the original order was made or could not reasonably be expected to have realised earlier, and even so the defendant does not have sufficient realisable assets to pay the amount of the original order, it would be manifestly unjust if the statute were to require, without any scope for judicial discretion, that interest must be paid from the date for payment fixed under the original order. I accept that time to pay is intended as an incentive to realise assets and make payment before the deadline. It seems to me that the construction advanced by Mr Jennings does not in any sense reduce that incentive. I recognize that the legislative provisions for confiscation orders and measures to ensure compliance can be draconian, but it is no part of Mr Norris's submissions that a draconian construction must be imposed where a less draconian construction would meet the legislative purpose equally well.

Subsidiary matters

23. I have not found it necessary to examine ss 74B and 74C of the Criminal Justice Act 1988 or analogous provisions in the Drug Trafficking Act 1994. They are not in identical terms to s 83 of the 1988 Act, and do not in my view shed any obvious light on the applicability of s 75(1) to orders made under s 83. I consider it preferable that the construction of ss 74B and 74C of the Criminal Justice Act 1988 and analogous provisions in the Drug Trafficking Act 1994 should await cases where they arise for determination on the facts.

Conclusion

24. The judge granted time to pay when making the March 2007 Order. No doubt he took this course because he thought it appropriate in the interests of justice. The April 2007 Order was made only because he was persuaded that he had not had jurisdiction to grant time to pay. For the reasons I have given I think he did indeed have that jurisdiction. In these circumstances I would allow this appeal and quash the April 2007 Order. This will leave the March 2007 Order in full force and effect.

Lord Justice Maurice Kay :

25. I agree.