England and Wales High Court (Administrative Court) Decisions

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

		Royal Courts of Justice Strand, London, WC2A 2LL
		25/07/2011

Mr Justice Cranston:

INTRODUCTION

1. This is an application by the Revenue and Customs Prosecutions Office ("the applicant") pursuant to an enforcement receivership order made by Munby J on 18 June 2009. That order appointed Nigel Sinclair of Mazars LLP as enforcement receiver, to take possession and to deal with the assets of the defendant, pursuant to a confiscation order made against him under Part VI of the Criminal Justice Act 1988 ("the 1988 Act"). There had previously been a restraint and management receivership order over those assets imposed by Moses J on 23 September 2002, under which Mr Sinclair had previously acted. Specifically excluded from the list of assets which Mr Sinclair may sell as enforcement receiver is a Cessna Citation II 550 aircraft msn 0154, registration mark G-Jet-J ("the aircraft"). The respondent is the beneficial owner of the aircraft. In effect the applicant contends that in relation to the aircraft the respondent has assets to which Mr Sinclair as receiver is entitled for satisfaction of the confiscation order against the defendant. The application raises some difficult issues as to realisable property under Part VI of the 1988 Act.

BACKGROUND

The parties

2. The respondent, John Backhouse, is a businessman with interests in the United Kingdom and elsewhere, including certain jurisdictions where off-shore trust business is conducted. One of the companies he controlled was Citation Flying Services Ltd ("CFS"), which was incorporated in Alderney, in the Channel Islands, but was subsequently re-domiciled, in his description, to Gibraltar. There is an undated document (probably early 2003) called a company secretary's certificate from Form-A-Co (Gibraltar) Ltd, which certifies that the board of directors of CFS in Gibraltar was a company, FAC Sub Nom (No.1) Ltd and that it had an authorised share capital of 100 ordinary shares of £1 each, of which 112 had been issued. The legal and beneficial owners of the shares were: FAC Sub Nom (No.2) Ltd, 100 shares; Helix Aviation Ltd, 6 shares and the "Admin Centre", 6 shares. In Ireland Mr Backhouse has conducted business as a sole trader, but under the registered business name Dublin Aero Services ("DAS"), that name having been registered in March 2003. Thirdly, there is a company G-Jet J Ltd ("G-Jet J"), a private company limited by shares incorporated in this country. It currently owns the aircraft. The annual companies house return for G-Jet J for the year ended June 2009 showed that at that point 100 ordinary shares had been issued, of which Mr Backhouse held all. However, it also showed that at some point prior to 14 May 2009 50 shares each had been held by Beetham Holdings Ltd and Mr Backhouse. Beetham Holdings Ltd is part of a well known property developer in the United Kingdom.
3. The defendant, Craig Johnson, is a businessman. He had been arrested initially on 15 April 2001, was charged in September 2002, and was finally convicted on 12 June 2006 of one count of cheating the Revenue and one count of conspiracy to contravene section 17(1)(b) of the Theft Act 1968. The counts on the indictment covered the period from mid 2000 to September 2002. The count of cheating the Revenue involved a VAT carousel fraud where the VAT lost on mobile telephones was estimated to be around £20 million over a three month period in 2000. The count of conspiracy to contravene section 17(1)(b) related to furnishing false accounting information. Later that year, on 27 October 2006, Mr Johnson pleaded guilty to a single count of laundering £6.25 million, being the proceeds of another's criminal conduct, over the period from 2002 to the end of 2003. That laundered money was the proceeds of another's VAT fraud involving mobile telephones. Mr Johnson was sentenced to 10 ½ years imprisonment in respect of the June 2006 convictions and two years consecutive for the money laundering. As a result of confiscation proceedings, in November 2008, HH Judge Warner made a confiscation order for over £26 million, the benefit from Mr Johnson's offending being held to amount to over £167 million.
4. A Gibraltar company, Helix Aviation Ltd ("Helix"), was controlled by Mr Johnson. An undated company secretary's certificate (probably early 2003), from Form-A-Co (Gibraltar) Ltd, certified that the board of directors was the same nominee company constituting the board of directors of CFS, namely, FAC Sub Nom (No.1) Ltd. The certificate continued that the authorised share capital of Helix was 2000 ordinary shares of £1 each, all of which had been issued and fully paid up to the shareholder, FAC Sub Nom (No.2) Ltd.

CFS Hire Purchase Agreement with Finova

5. On 24 April 1998 CFS entered a hire purchase agreement with Finova Capital Ltd, part of the Finova group, in relation to the aircraft. It was part of a refinancing whereby CFS sold the aircraft to Finova, with Finova then hiring it back to CFS for 84 months (i.e. until April 2005) with an option to purchase. The original principal was $1,350,000. Clause 5 of the agreement contained the conditions precedent, one of which was that the aircraft should be registered in the United Kingdom, another that there should be a certified copy of a current air operator's certificate in relation to it. Covenants in respect of title were contained in clause 12, one of which was that the hirer would make it clear to third parties that the title to the aircraft was held by Finova. Among the termination events in clause 14 was if the operating agreement should end without an alternative being in place approved by Finova. The operating agreement was defined as the agreement of 23 October 1996 with Gamma Aviation Ltd. (In fact that operating agreement ended some time in 1998.) Clause 16 of the agreement dealt with assignment. Clause 16.1 provided that no assignment of rights or obligations should occur without the prior written consent of Finova. Clause 16.2 prevented CFS entering a lease or other operating agreement without the written consent of Finova, such consent not to be unreasonably withheld.
6. In a letter of 5 October 2001 Finova waived the requirement for an operating agreement to be in place, no operating agreement having been in effect since December 2000. That waiver of a terminating event was subject to certain conditions being satisfied. On 22 February 2002 Finova issued a formal notice of default because of (i) CFS' failure to provide adequate evidence of insurance and satisfaction of the obligations in the agreement relating to maintenance and repair of the aircraft; (ii) the occurrence of a termination event, i.e. the absence of an operator; and (iii) the failure to provide certain statements to Finova required under the agreement.
7. Meanwhile, CFS had notified Finova that a third party was to make a cash injection so as to reduce the balance on the principal to be repaid under the agreement. A sum of $354,003.60 was credited to Finova's bank account on 22 February 2002 to reduce the balance of the amount outstanding to approximately $650,000, and to cover fees on outstanding engine reserves. While Finova credited part of that to reduce the principal, it made clear in a letter of 27 February 2002, and a memorandum of 1 March 2002, that it would not waive the requirement for CFS to appoint an operator until the events of default were rectified. One of the key conditions (as Finova put it) was that, in relation to the "proposed third party investment" in CFS, CFS had to provide all documentation, including that concerning re-registration of CFS itself from Alderney to Gibraltar. Moreover, CFS' solicitors had to write to Finova's solicitors setting out the basis on which the funds were to be injected or loaned.
8. On 8 March 2002 Finova confirmed that the events of default in relation to the insurance and to maintenance and repair had been satisfied. There is a certificate of insurance for the aircraft dated 27 March 2002, for an agreed value of $2,350,000. The terminating event as to the absence of an operator continued. As Finova recorded in a letter of 5 October 2002, sometime after March 2002 CFS had named the third party as Helix which

"appears to have made an unsecured loan to CFS in return for certain rights to use the aircraft. However, you have not provided any other information about Helix or the nature of their informal agreement with CFS".

However, Finova credited $350,445 to the amount of outstanding principal and instalment payments were reduced with effect from March 2002 from over $18,000 per month to $9,500 per month.

9. As well as the information about Helix, Finova's letter of 5 October 2002 also required details of who exactly was operating the aircraft and how often and when it was used by Helix. The information previously given to Finova suggested that it was in fact Helix, and if Helix was the real user of the aircraft, then it might be more appropriate to document this by way of a formal operating lease, the terms of which had under the hire purchase agreement to be approved by Finova. The 5 October 2002 letter also recorded that Finova had made repeated requests of CFS to explain why Helix required CFS to be re-domiciled from Alderney to Gibraltar, and whether that change of domicile had taken place, as well as an explanation as to why Finova's consent was not obtained, especially since the point had been specifically and recently raised a number of times. Finova was concerned that it was not aware of the use that was being made of the aircraft and who exactly was operating it.
10. It seems that as a result of Finova's 5 October 2002 letter the company secretary certificates relating to both CFS and Helix, mentioned earlier, were obtained. There was also a letter of 18 December 2002 from Helix to Finova, signed by FAC Sub Nom (No.1) Ltd, that it had entered an agreement with CFS and had paid $354,003.60 in return for certain rights to use the aircraft and to receive a percentage of the proceeds of any sale. In addition, to address a further point in the Finova letter about the authority of Mr Backhouse to act on behalf of CFS, a power of attorney was obtained from the company appointing both him and his wife, Sarah Backhouse. Finally, on 10 April 2003 a formal waiver and amendment agreement was completed between Finova and CFS in relation to the latter's breaches of the hire purchase agreement. One of the agreement's recitals read as follows:

"By an agreement dated 21 December 2001 and made between CFS and Helix Aviation Ltd ("Helix"), Helix agreed to make a loan to CFS in return for CFS granting to Helix rights to use the aircraft on a cost-sharing basis and rights to a share in any proceeds realised upon a sale of the aircraft ("the Helix Agreement")."

11. The hire purchase agreement with Finova came to an end on 26 April 2004, formalised in an aircraft sale and purchase agreement. Under that agreement CFS purchased the aircraft from Finova for a price of $540,206.13. That agreement was drafted by the law firm, Norton Rose. Earlier in April there had been 2 payments of £250,000 each into a CFS NatWest account in Gibraltar, which appear to have funded the transfer of £305,750.82 from CFS to Finova on 20 April 2004 in satisfaction of the sale and purchase agreement. In evidence Mr Backhouse stated that the two payments were from his trust services business.
12. Shortly after CFS bought the aircraft from Finova, on 30 April 2004, the aircraft was sold by CFS to Mr Backhouse, trading as DAS. The purchase price was $1,370,000 with VAT of $239,750, bringing the total transaction to $1,609,750. The same day the aircraft was on-sold by DAS to G-Jet J, the purchase price being $1,600,000, no VAT being charged. There is no evidence at this point of ownership of G-Jet, but it was owned jointly by Mr Backhouse and Beetham Holdings Ltd at some point. On 17 June 2004 Lombard North Central plc ("Lombard") took an aircraft mortgage over the aircraft, having advanced some $1 million to G-Jet J by way of loan.

The Helix/Johnson - CFS operating agreement

13. The Finova-CFS waiver and amendment agreement of March 2003 referred to what was described as the "Helix agreement". As indicated, for the purposes of signing the waiver and amendment agreement, CFS had produced two company secretary certificates from Form-A-Co (Gibraltar) Ltd. Both of these confirmed that CFS and Helix had entered an agreement under which Helix agreed to pay $350,455, in return for CFS granting to Helix rights to use the aircraft on a cost-sharing basis, and rights to a 50 percent share in any proceeds realised on its sale. The company secretary certificates for CFS confirmed that CFS had used the monies received from Helix as pre-payment to Finova to reduce the balance on the outstanding principal due under the hire purchase agreement. The certificate for Helix confirmed that Helix had not entered into any other agreement or arrangement with CFS or any other party in relation to the aircraft, and that it had no other rights and would acquire no other rights or interest in the aircraft.
14. Mr Backhouse has produced no agreement with Helix. What he has produced is, first, a letter dated 29 November 2001, which he wrote to Mr Johnson. The letter stated that Mr Backhouse believed that there was now a basis of agreement for the operation of the aircraft. Whilst direct share ownership by Mr Johnson should be in the original arrangement, after its completion there could be discussion if mutually advantageous alternative ownership structures were possible. For Mr Johnson to take advantage of the discount available through CFS facilities and with the various fuel broker organisations, CFS proposed to invoice for an estimated one month's consumables and would request a top up of funds from time to time once that was exhausted. An operating agreement was said to be enclosed with the letter.
15. Secondly, there is a one page agreement signed on 21 December 2001 by Mr Johnson personally, not Helix ("the December 2001 operating agreement"). That agreement was to run for 12 months with 6 months notice by either party after the first six months. On termination the parties would buy the other out or the aircraft would be sold. Under the agreement the purchaser was to take "a 50 percent stake in the aircraft" (clause 4). Clause 5 provided that expenses should be borne on a 50/50 basis:

"i hangarage

ii insurance costs

iii residual loan cost to Finova Finance Company (the purchaser may at his option pay $325,000 and be relieved of the mortgage obligation under the loan agreement to the finance company).

iv RVSM [reduced vertical separation minima] costs.

v compliance costs

vi scheduled engine maintenance

vii improvements."

The agreement was to start on the completion date. All sums due to CFS up to the completion date were to be for the account of Redcar Associates Ltd, including the engine reserve accrued to date, and all obligations owed by CFS up to the completion date were to be the responsibility of Redcar Associates Ltd. All other maintenance, apart from scheduled engine maintenance and the above shared costs, was to be borne in proportion to the hours flown.

16. There is no mention of any specific price or amount in this document. However, on 11 December 2001 $637,462 had been received from Eupo Technology (Hong Kong) Ltd by the solicitors then acting for CFS. That Hong Kong company was used by Mr Johnson for money laundering purposes. NatWest Bank issued a receipt for the amount. On 12 March 2002 CFS also received some £70,000 (less £12 bank charges) in an account with Abbey National bank in Alderney, from Grand Sino Company Ltd, which is accepted as being another of Mr Johnson's money laundering companies.
17. Thirdly, there is a letter from CFS to Mr Johnson dated 14 August 2003 ("the 14 August 2003 letter"). Despite the date of that letter Mr Backhouse claims that it was written, probably in December 2001 or January 2002, but that when he produced a copy subsequently from his computer the 2003 date was printed. That letter referred to "your recently signed agreement confirming what we have originally agreed except that it was to be for 12 months with 6 months either way after that". After referring to cost-sharing, which would be compliant with Civil Aviation Authority requirements, and breach of warranty issues, the letter suggested that if Mr Johnson were content he should sign and fax back a copy identifying the identity of the purchaser for the purposes of the arrangement. That was never done. The letter continued that the purchaser was to take 5 percent of the shares in CFS, would lend CFS $675,000 interest free for the duration of the agreement, and on termination would be entitled to a share in the sale proceeds, the calculation for which was then set out.
18. From early 2002 there are a number of letters from CFS to John Jackson, Mr Johnson's pilot and agent. A letter of 12 February 2002 asserts that nothing had been received from Helix for consumables. A week later, in a further letter, CFS wrote that the parties were now 2 months into the agreement with many bills, for example, for fuel, having been settled. In mid March the £70,000 payment, already referred to, arrived.
19. Later that year, on 29 October 2002, Mr Backhouse wrote to Mr Johnson to advise that his original float had been used up, even allowing for the expenses paid for by John Jackson, details of which have already been received and taken into account. There is a manuscript note: "Do you have a payment reference number for the £25,000. Has it since gone to a different account?" In evidence Mr Backhouse said that this was his handwriting, but no amount was received. Three weeks later, on 19 November 2002, Mr Backhouse wrote again requesting a top-up, perhaps the same amount again, since he estimated that there was approximately £30,000 to be invoiced. He required £50,000 as soon as possible. That letter also contained a request for a meeting to discuss outstanding matters "which are both urgent and important which cannot be delegated to John Jackson". In evidence Mr Backhouse said this related to replacement of the aircraft.
20. A letter of 3 December 2002 from Mr Backhouse stated that he was still to receive the top up funds and that CFS had arranged a short term loan facility in order to cover expenditure pending their receipt. On 17 February 2003 a further letter to Mr Johnson recorded that Mr Backhouse had discussed the proposal to upgrade the aircraft with Mr Jackson and for those purposes it was valued at $800,000. Invoices to the end of January 2003 were enclosed. There is also this passage: "John Jackson has incurred some expenditure and you have bought fuel, which needs to be taken into account. Additionally the maintenance is up to and including October so there will be other bills which I do not expect to be significant".
21. The aircraft had an engine overhaul in September 2003. By October 2003 Mr Johnson had reduced his use of the aircraft to some 30 percent of the total time it was utilised. At the end of 2003 there was further correspondence. On 5 November 2003 Mr Backhouse wrote to Mr Johnson stating that the current position could not continue and that it was a condition of the hire purchase agreement that the required maintenance be completed and that bills be paid on time. Because of Mr Backhouse's personal guarantee to Finova he could not permit the agreement to go into default. A further letter the following day from Mr Backhouse to Mr Johnson stated that, as Mr Johnson was aware, there was a not inconsiderable balance on unpaid consumables due. They had agreed during their meeting earlier in the year that it would be necessary for both the engine overhaul, the installation of reduced vertical separation minima, and the new paint and interior, to make the aircraft more marketable.
22. A further letter on 18 November 2003 from Mr Backhouse to Mr Johnson stated that unless they made an alternative arrangement there would be no option but to recommend that the aircraft be sold by CFS for $700,000, which matched the best three offers received in its pre-overhaul condition. Mr Backhouse also requested Mr Johnson's confirmation that John Jackson was able to act exclusively on Mr Johnson's behalf. Finally, in a letter on 24 November 2003 Mr Backhouse wrote to John Jackson to advise that he has accepted Mr Johnson's offer in connection with the resolution of outstanding issues relating to what he called the user contract arrangements of December 2001. Under it Mr Johnson would make no further payments nor receive any further benefits, and that all liabilities and contractual obligations as between the parties in connection with the aircraft would be extinguished. The same day Mr Backhouse wrote to Mr Johnson requesting confirmation that the resolution proposed and outlined to Mr Jackson was acceptable. There was a letter of 1 December 2003 from Mr Johnson to CFS – apart from the 21 December 2001 operation agreement the only letter from Mr Johnson in the entire correspondence – that all liabilities and contractual obligations between the parties were extinguished ("the 1 December 2003 termination")

The receiver's investigations

23. Following Mr Johnson's arrest on suspicion of having committed further offences on 26 February 2004 the police searched the defendant's properties and found two letters from Mr Backhouse to Mr Johnson relating to the aircraft and also to an Augusta 109 Helicopter. Proceedings in relation to the Augusta 109 helicopter ultimately led to a judgment of Blake J on 18 July 2008, to which I return: Re J, CJA/115/2002.
24. In early April 2004, following seizure of the letters at Mr Johnson's home, which mentioned Mr Backhouse, the receiver wrote to him, advising him of his appointment, enclosing a copy of the restraint and management receivership order of 23 September 2002, and asking Mr Backhouse to confirm the nature of Mr Johnson's interest in the aircraft and whether Mr Johnson was an officer or shareholder of CFS (and if a shareholder, the percentage of his shareholding). Mr Backhouse sent a holding reply on 21 April 2004, explaining that he had returned from holiday on 19 April and would write in reply to the questions in the next few days. Mr Backhouse wrote on 28 April:

"To the best of my belief Craig Johnson has never been an officer or shareholder of [CFS]. During 2001 there were discussions that he would take a stake in [the aircraft] or CFS but this proposal did not come to fruition. Craig Johnson benefited from a user arrangement with a potential entitlement to part of the balance of proceeds of sale providing certain payments towards overhaul/improvements were made. These payments were never made and the user arrangement came to an end last year by mutual agreement. … After discussions it was agreed that CFS Ltd would borrow the money from a source introduced by him and manage the aircraft in conjunction with the pilot. The aircraft would also be available for me to fly on a favourable basis."

25. That reply prompted further questions containing letters from the receiver dated 6 and 14 May 2004. Mr Backhouse replied on 26 May. In his letter he stated:

"Craig Matthew Johnson does not have any interest in Citation Flying Services Ltd, Citation Flying Services LLP or G-Jet J. The user arrangement finished in 2003 … G-Jet J use by Craig Johnson was invoiced to Helix."

Further responses by Mr Backhouse on 10 and 11 June 2004 stated that when the arrangements for the aircraft came to an end there were significant outstanding amounts due and that no payments had been received in connection with it after September 2002. A further letter of 30 June 2004 from Mr Backhouse to Mr Sinclair requested him to provide Mr Backhouse with evidence that the aircraft formed part of Mr Johnson's estate after September 2002. On 29 July 2004 Beatson J listed the matter for hearing within 7 days. The minute of order dated 5 August 2004 required disclosure by 31 August 2004 of any information or documentation relating to the purchase, finance, ownership, lease, charter and maintenance of the aircraft.

26. In response to the court order, on 18 August 2004, Clarkson Penhale Solicitors of Morecombe, Lancashire, replied on behalf of CFS (the "Clarkson Penhale letter"). It explained that Mr Backhouse met Mr Johnson in the latter part of 2001, that at the time CFS was looking for a partner to use and maintain the aircraft and that Mr Backhouse wrote to the defendant on 29 November 2001 setting out what he understood they had agreed, enclosing an operating agreement for Mr Johnson to sign and return. That was done on 21 December 2001. Mr Backhouse then wrote to Mr Johnson acknowledging the signed agreement. For some reason it was dated 14 August 2003 which cannot be the correct date and Mr Backhouse believed that it was sent in either December 2001 or January 2002. Pursuant to the operating agreement and discussions with Mr Johnson, Mr Johnson paid $675,000 to CFS around Christmas out of which $343,000 went to Finova. The remainder of the $675,000 was used in connection with an engine overhaul, engineering costs and maintenance. In April and May 2002 Mr Johnson paid a further $70,000 for consumables in connection with the aircraft.
27. Unfortunately, the Clarkson Penhale letter continued, Mr Johnson did not live up to his side of the operating agreement and by the later part of 2003 the amount which he owed in respect of his share of the operating costs had exceeded the two payments made. The operating agreement ended. Later, since CFS "was free from the shackles of the loan from Finova it was able to sell [the aircraft] to Dublin Aero Services on 30 April 2004 for $1,609,750 after "a chance meeting some weeks earlier at the Grand National". DAS had sold [the aircraft] to G-Jet J Ltd on 30 April 2004 for $1,600,000".
28. The invoices for these sales were enclosed. G-Jet J, the Clarkson Penhale letter said, was owned by Beetham Holdings Ltd but although all shares were registered to them the agreement was that 50 of those shares would be transferred to DAS. There was a $1 million mortgage on the aircraft to Lombard. Beetham Holdings Ltd and DAS were to share 50 percent each of the maintenance costs and each company was to have an equal share in using the aircraft. There was a schedule setting out a concluding deficit of $98,750 owed by Mr Johnson in relation to the aircraft, the calculation taking into account the two payments of $675,000 and $70,000 Mr Johnson made.
29. The Clarkson Penhale letter led to a further letter from the receiver dated 18 November 2004, requiring further clarification of information, in particular about the two payments which Mr Johnson had been said to make for the aircraft. The reply dated 17 December 2004 came from Mr Backhouse, not his solicitors. In it Mr Backhouse stated that the payment of $70,000 was net of charges and paid into his then solicitors' client account. He believed that the payment of $675,000 was actually $637,500. In both cases he believed that the source of the monies was the same (from Hong Kong). In relation to the operating agreement invoices were made out as requested by Mr Johnson, although the 50/50 share of maintenance costs had been set out in the operating agreement. It became clear that the amount to be invoiced to Helix would be less because of its reduced maintenance costs to 30 percent in October 2003.
30. A further letter from the receiver on 11 February 2005 requested additional information, so that the payments of $70,000 and $637,500 could be documented. The receiver asked whether the amendments in the 14 August 2003 letter had been signed by Mr Johnson. Copy invoices were also requested to support the items said to be deducted from the sale proceeds of the aircraft. Mr Backhouse's reply on 1 March 2005 said:

"While agreeing that we believe that the funds came from the same source [Hong Kong], we do not accept that payments made in connection with the jet constituted a purchase of it or an interest in it but merely gave rights in connection of (sic) proceeds of sale."

31. As a result of an application by Mr Sinclair to the court, a consent order was agreed on 10 November 2005. On 16 December 2005, pursuant to the order, the receiver served a list of outstanding questions on Mr Backhouse relating, inter alia, to the aircraft. Mr Backhouse replied on 15 March 2006. In relation to the payment of $70,000 his answer was that this was a contribution towards Helix's share of costs "as a lot of chasing had been done to get this …" As to the letter dated 14 August 2003, this had not been signed by Mr Johnson


"as it was an acknowledgment from Mr Backhouse in response to the agreement [Mr Johnson] had signed on 12 December 2001 to the effect that they now had a "deal". Our client believes that the date of 14 August 2003 is there because the software our client uses automatically puts in the date it prints the document."

32. Replying to a question as to how the sale consideration for the aircraft was determined – in CFS' letter to Mr Johnson of 17 February 2003 it was valued at $800,000, but sold to DAS for $1,609,750 – Mr Backhouse replied that after February 2003 there had been a major refurbishment to the interior of the aircraft, and a substantial overhaul to its engines. The consideration was determined by reference to the book value and by agreement with DAS.
33. In a witness statement dated 21 February 2007, Mr Sinclair as management receiver, said that it was evident that Mr Johnson had a half share in the aircraft, which he had disposed of in December 2003. He had documentation from Mr Backhouse for the amounts which Mr Backhouse claimed to have offset against that interest as part of the settlement calculation. That meant that he was unable to determine if Mr Johnson still had an interest in the proceeds of sale.
34. In his witness statement dated 8 June 2007 Mr Backhouse apologised for not providing invoices; it was an oversight. He was not aware of the restraint order when dealing with Mr Johnson in November or December 2003. The fact that the aircraft was eventually sold to DAS was no secret since DAS was used in connection with the aircraft in which he had an interest. Overall, Mr Johnson had lawfully relinquished his interest in the aircraft on 1 December 2003.
35. In a further witness statement in May 2008 Mr Backhouse referred to the invoices he had provided in respect of sums "that were offset against the defendant's half share in this jet". Mr Johnson's deficit in relation to his share in respect of the aircraft was recalculated as $268,742, not $98,750.
36. A fourth witness statement from Mr Backhouse, dated 11 June 2009, was prompted by the application for appointment of an enforcement receiver. In that statement Mr Backhouse said that when he met the defendant in 2001 he had all the trappings of a successful high net worth individual and that the two of them reached an agreement "to co-own and share the expenses of running [the aircraft] on a 50/50 basis". The agreement was reduced to writing dated 21 December 2001 as a result of which Mr Johnson paid $637,500, which represented the purchase price for his stake in the aircraft. A substantial part of that money was used to reduce the amount owing to Finova. There was a further payment of $70,000, which was a contribution to ongoing running costs. Those were the only two payments ever made by the defendant. The deficit at the end of the arrangement between himself and Mr Johnson had resulted in a deficit of $268,742. He was not aware of the restraint order when he dealt with the assets. The agreement of 21 December 2001 was included, showing a 50/50 basis of ownership/maintenance. As Mr Backhouse understood it, Mr Johnson's involvement was a 50 percent ownership of the aircraft with a 50 percent liability towards its maintenance and running costs. Subsequently, since Mr Backhouse acquired Mr Johnson's half share in the aircraft as a bona fide purchaser for value without notice of the restraint order, he must have acquired good title to it.
37. There was to be a hearing on 28 October 2009 in relation to the current proceedings. That was vacated and a timetable for service of evidence by both the applicant and Mr Backhouse agreed. In the light of that Mr Sinclair wrote to Mr Backhouse's new solicitors on 13 November 2009 asking for information to be provided by 4 January 2010. No response was received. On 11 February 2010 Mr Sinclair made his first witness statement as enforcement receiver in the absence of answers from Mr Backhouse. In the course of his witness statement he identified certain gaps in the information available to him, in particular relating to the two payments which Mr Johnson was said to have made in relation to the aircraft. On 12 March 2010 Mr Backhouse finally responded to the questions in Mr Sinclair's letter. That led to Mr Sinclair's second witness statement dated 13 May 2010.
38. Mr Backhouse's fifth witness statement dated 23 July 2010 set out for the first time his explanation of the destination of the $637,482 received from Mr Johnson's company on 11 December 2001. The balance left after payment to Finova of $354,003 on 22 February 2002 was $283,479. That balance remained with his solicitors until mid December 2002, when an equivalent amount was transferred to his mother. It was in this witness statement that Mr Backhouse finally attached the correspondence with Finova. Mr Backhouse said that it became clear in December 2001 that Mr Johnson wanted to implement the agreement through use of Helix, namely, an agreement to co-own and use the aircraft on a 50/50 basis, the co-ownership being "geared to the proceeds of Jet J upon a sale". In evidence Mr Backhouse explained that he was introduced to Mr Johnson indirectly through their mutual association with Jonathan Stagenetto, a fiduciary and formation agent in Gibraltar. That is why Helix and Mr Backhouse's company, CFS, had common shareholders and directors.
39. In his fifth witness statement Mr Backhouse said further that the $283,479 was Mr Johnson's "premium to buy into the plane, i.e. to own half of it". He received the $637,462 and £70,000 in good faith, for value and without notice that this was recoverable property. He knew nothing of Mr Johnson's criminal activities at the time of the agreement. It was an arm's length agreement, as with other arrangements he had made about the aircraft. Under the agreement Mr Johnson had the option of paying a further amount, $325,000, to be relieved of future "mortgage" payments. He chose not to do so but was billed for his contribution to these payments and never challenged them. When he and Mr Johnson parted company, Mr Johnson was $111,859 in deficit.

STATUTORY FRAMEWORK

40. The statutory jurisdiction governing the present application is the Criminal Justice Act 1988, which still applies to offences committed before 24 March 2003. Part VI extended with some modifications the confiscation regime established under the Drug Trafficking Act 1994 to cover all acquisitive indictable offences. Sections 80(1)-(2) empower the High Court to appoint receivers for the purpose of enforcing confiscation orders. Such receivers may be empowered to take possession of realisable property subject to such conditions or exceptions as may be specified by the court (section 80(3)(b)). Under section 80(4) the court may order any person having possession of realisable property to give possession of it to the receiver. It may also empower the receiver to realise any realisable property in such manner as it directs: s80(5). Section 80(6) provides as follows:

"(6) The court may order any person holding an interest in realisable property to make such payment to the receiver in respect of any beneficial interest held by the defendant or, as the case may be, the recipient of a gift caught by this Part of this Act as the court may direct and the court may, on the payment being made, by order transfer, grant or extinguish any interest in the property."

Section 80(8) of the Criminal Justice Act 1988 precludes the court from empowering receivers to realise assets, in which a third party has an interest, until such time as the person has been afforded a reasonable opportunity to make representations to the court.

41. Key to the confiscatory jurisdiction under Part VI of the Criminal Justice Act 1988 are the repeated references to realisable property. That is defined in section 74(1) (subject to certain non-relevant exceptions) as

"(a) any property held by the defendant; and (b) any property held by a person to whom the defendant has directly or indirectly made a gift caught by Part VI of this Act."

"Property" includes money and other real and personal property, including things in action: s. 102(1). By section 74(10) a gift is caught if it was made by the defendant at any time after the commission of the offence, and the court considers it appropriate in all the circumstances to take the gift into account. Section 74(12) provides:

"(12) For the purposes of this Part of this Act –

(a) the circumstances in which the defendant is to be treated as making a gift include those where he transfers property to another person directly or indirectly for a consideration the value of which is significantly less than the value of the consideration provided by the defendant; and

(b) in those circumstances the preceding provisions of this section shall apply as if the defendant had made a gift of such share in the property as bears to the whole property the same proportion as the difference between the values referred to in paragraph (a) above bears to the value of the consideration provided by the defendant."

42. Section 82(4) of the Act provides that the powers of the High Court and of a receiver appointed under the Act

"shall be exercised with a view to allowing any person other than the defendant or the recipient of any such gift to retain or recover the value of any property held by him."

A leading commentary opines that the rights of the third party override the duty to ensure the confiscation order is paid: Confiscation and the Proceeds of Crime, (Mitchell, Taylor, Talbot eds.) para 8-042.

THE DEFENDANT'S REALISABLE PROPERTY

43. The applicant puts its case against Mr Backhouse on three alternative bases: (1) that the aircraft itself is an asset of Mr Johnson, either in whole or in part; (2) that Mr Johnson's payment of $637,000 is his realisable property; and (3) that Mr Johnson's disposal of his interest on 1 December 2003 was at an undervalue. Mr Backhouse claims that there is no basis for a claim in relation to the aircraft or against him. The 21 December 2001 operating agreement was genuine, it was for use of the aircraft and a proportion of its sales proceeds, and when it ended two years later Mr Johnson was in substantial debit so that there was no undervalue.
44. Before considering these matters, it is necessary to set out certain of my findings about Mr Backhouse and his dealings with Mr Johnson. As to Mr Backhouse, I am mindful of Mr Berkley QC's submission, that it would be wrong (as he put it) to give a dog a bad name because of the way Blake J regarded Mr Backhouse's evidence in Re J. I am also mindful of Mr Berkley QC's warning that Mr Backhouse might be reticent about matters for reasons removed from any concerns about his transactions with Mr Johnson. His unusual personality, that he has chosen to operate in off-shore jurisdictions and the informality of his dealings, should not be taken to impeach his credibility. There is also the valid point that Mr Backhouse, as a busy businessman, cannot be expected to recall details of matter which happened years ago. Mr Johnson has been dishonest on a massive scale; it is grossly unfair to tar Mr Backhouse with the same brush.
45. However, there is every reason to treat Mr Backhouse's evidence with considerable scepticism. His dealings with Finova lacked candour, and his attempts to justify that before me – because he did not think they were entitled to the information, that they were really only interested in the money and that the person at Finova with responsibility for his account was making technical and unreasonable demands – do not bear scrutiny. Mr Backhouse was moving CFS' seat without Finova's approval from Alderney to Gibraltar, and CFS was in breach of one of a number of important terms of the hire purchase agreement, in particular, the requirement for an operator. Without question Finova were entitled to the information; Mr Backhouse would have appreciated that.
46. More serious was Mr Backhouse's lack of candour with the receiver. While in his first response in April 2004 he was claiming to the receiver to be unable to respond since he had been away on holiday, Mr Backhouse was engineering the purchase of the aircraft from Finova and its sale by CFS in Gibraltar through Ireland to G-Jet J in this country. His response, when it came on 28 April 2004 was evasive – as far as he knew Mr Johnson was not an officer or shareholder of CFS. There was no mention of the 21 December 2001 agreement or, more significantly, the payment by Mr Johnson of $637,000. His evidence in court that he did not know of the court order was incredible, given that the order was mentioned in the receiver's letter and enclosed with it. His later replies, including those through the solicitors Clarkson Penhale, following a court order, also lacked openness. The Clarkson Penhale letter suggested that DAS was an independent entity, whereas it was simply his registered business name in Ireland. The "chance meeting" at the Grand National was unexplained. It required a series of letters and court orders over a number of years for the receiver to be provided with explanations and documents. Even at the end of this drip feeding of information, the record is incomplete. In his evidence Mr Backhouse regularly attributed the blame to others, including his lawyers, for errors in the information provided and for the failure to disclose documents. He said that he only sometimes looked at what went out in his name. He made the extraordinary statement in evidence that he did not provide the 21 December 2001 operating agreement on advice. This simply will not do. It is no surprise that Blake J took such a dim view of Mr Backhouse in Re J. It is difficult for me to rely on what Mr Backhouse says about transactions concerning the aircraft, without documentary support.
47. Notwithstanding my concerns about Mr Backhouse's evidence, it seems to me that that the only conclusion open is that he is correct in his claim that the 21 December 2001 operating agreement was genuine. Over the nine years from 1992, and then between 2004-2008 with Beetham Holdings Ltd, the aircraft was used under sharing arrangements made between Mr Backhouse and others. Such arrangements are used in civil aviation because a private jet needs to be used a certain number of hours per annum to make operations economic. One person may not have that demand. So there is nothing unusual in Mr Backhouse entering this arrangement for Mr Johnson's use of the aircraft so as to build up the hours of use. And use the aircraft Mr Johnson did, although as he became more entangled with the criminal justice system his use declined.
48. Apart from his right to use the aircraft, the 21 December 2001 operating agreement provided that Mr Johnson should have a 50 percent stake in the aircraft. The payment on 11 December 2001 of $637,462 from one of Mr Johnson's Hong Kong companies accords with a fifty percent stake, given the original principal ($1,350,000) on the hire purchase agreement with Finova and subsequent valuations (for example, the $800,000 in Mr Backhouse's letter of 17 February 2003, $700,000 in his letter of 18 November 2003 and the valuation at $1,600,000 (after substantial refurbishment) in the 30 April 2003 sale. The 29 November 2001 letter, which Mr Backhouse says enclosed for signature what became the 21 December 2001 operating agreement, referred to direct share ownership by Mr Johnson. It also provided that Mr Johnson should be relieved of his obligation to pay the finance costs for payment of $325,000. The $637,462 more than covered that. It will be recalled that on 22 February 2002 a payment of $354,003.60 was paid to Finova and the outstanding balance on the hire purchase agreement was reduced.
49. In my view, it is untenable for Mr Berkley QC to suggest that all Mr Johnson obtained under the 21 December 2001 operating agreement was the use of the aircraft and a share of the proceeds once the option to purchase under the hire purchase agreement was exercised. Under the 21 December 2001 operating agreement Mr Johnson was entitled to a half share of the aircraft. In support of that submission Mr Berkley QC invokes the 14 August 2003 letter, supposedly wrongly dated, and sent to Mr Johnson in December 2001 or January 2002. Quite apart from the issue of that letter's bona fides, it cannot be used to interpret the 21 December operating agreement since it came into existence after the latter was signed. It never had force because, as Mr Backhouse conceded in his evidence, Mr Johnson did not sign and send it back, required on its own terms to make it effective.
50. The two company secretary certificates, from Form-A-Company (Gibraltar) Ltd, probably from early 2003, certified that under the CFS-Helix agreement Helix agreed to pay $350,455 – not the $637,462 Mr Backhouse actually received – in return for rights to use the aircraft and to a share of the proceeds on its sale. These certificates are thoroughly unsatisfactory, not least because of their patent defect of being undated. Until their production, Mr Backhouse had failed to provide Finova with any documentation about the payment to it of the $354,003.60 on 22 February 2002 despite being pressed for the best part of a year. Nor was there an explanation concerning the re-registration of CFS, an Alderney company, in Gibraltar.
51. Mr Munday QC submits that the implication of the Finova letter to Mr Backhouse in October 2002 is that it was Mr Johnson who was dictating that the aircraft should be domiciled in Gibraltar. He also points to the commonalities between the ownership structure of CFS and Helix namely, FAC Sub Nom (No.1) Ltd being the board of directors to both, and FAC Sub Nom (No.2) Ltd holding 100 percent of the shares of Helix and 90 percent of the shares of CFS. In my view these company secretary certificates, along with the Helix letter of 18 December 2002, did not represent the true position. They were constructed to satisfy Finova's legitimate demands under the hire purchase agreement for details of the third party injection of funds, and why the registration of CFS had been transferred to Gibraltar without its consent. It is most unfortunate that their terms were incorporated in the recitals to the formal waiver and amendment agreement of 10 April 2003.
52. Crucially, none of these documents had contractual effect. Nor can Mr Backhouse's own statements, in April 2004 and later, advance his case that Mr Johnson had made a payment for co-ownership geared to the proceeds of sale. The fact is that the terms governing Mr Johnson's rights were contained in the 21 December 2001 operating agreement, which was with Mr Johnson personally, and which on its terms conferred on Mr Johnson an entitlement to a 50 percent stake in the aircraft. Mr Johnson paid $637,462 for this stake.
53. What, then, of the purported clean break termination on 1 December 2003, under which Mr Johnson is said to have relinquished any claims he might have against Mr Backhouse? Mr Berkley QC submits on Mr Backhouse's behalf that like the 21 December 2001 operating agreement, the 1 December 2003 agreement is entirely explicable and makes commercial sense. Mr Johnson fell into a debit position and was pursued for money. The debit position would have increased over the remaining life of the hire purchase agreement because of the need to refurnish and modify it. Mr Johnson's use of the aircraft was probably less important after his arrest and the restraint order of September 2002. The arrangement was therefore a liability and not an asset; Mr Johnson did well to get out of it.
54. In my view, the 1 December 2003 termination should not be recognised as such. First, there is Mr Johnson's long established history of hiding assets by putting them in the names of others. Further, apart from the 1 December 2003 letter purportedly generated by Mr Johnson, there is no other letter to show any prior or subsequent disposal of his interest. Thirdly, and most persuasive in my view, is that the 1 December 2003 termination does not make commercial sense. The logic of Mr Backhouse's case is that Mr Johnson was prepared to walk away from his rights under the 21 December 2001 operating agreement having obtained nothing for his $637,000 and £70,000 payments except use of the aircraft over a two year period. Accepting for a moment that notwithstanding the £70,000 payment there was a deficit on expenses when Mr Backhouse and Mr Johnson parted company. I note that Mr Backhouse has never contended that it reached anything like $637,000. That is why from 2004 he asserted that Mr Johnson was also obtaining a right to share in the proceeds of the aircraft when sold, an assertion I have rejected. If Mr Backhouse wants me to accept the 21 December 2001 agreement as a genuine commercial transaction, the other side of the coin to commercial reality is that Mr Johnson would never have paid for a half stake in the aircraft, at an outlay of $637,000, and contributed to the expenses of its use, and be prepared to abandon his rights only two years later. I return to this below.
55. That leaves Mr Backhouse's six figure deficit on the operating expenses for the aircraft. If there had been a deficit of that magnitude, it might have been expected that it would be pursued. Mr Backhouse's explanation, that he was keen to move on with another co-venturer, does not account for the absence of any efforts made to recover the money owing from Mr Johnson. Although there were chasing letters for payments at various points during the period late 2002 early 2003 Mr Backhouse seemed content to continue with the current arrangements, albeit for a different aircraft. In the lead up to the purported termination on 1 December 2003 Mr Backhouse did not set out contemporaneously in any document to Mr Johnson a reconciliation of payments made, as against expenses incurred, giving a balance between them. Moreover, Mr Backhouse's sums do not add up. In February 2002 there was the payment of almost £70,000, misstated by Mr Backhouse over a number of years as $70,000. That payment was attributable to Mr Johnson's use of the aircraft. But as well as the £70,000 other sums can properly be inferred to have been paid for expenses, given the reference to £25,000 in the manuscript annotation to Mr Backhouse's letter of 12 February 2002; the mention of expenses paid by Mr Jackson, Mr Johnson's pilot, in the letter of 19 November 2002; and the allusion to payments in the 17 February 2003 letter. These additional payments were attributable to use of the aircraft.

A beneficial interest in the aircraft?

56. The first basis on which Mr Munday QC advances the applicant's claim is that Mr Johnson became a beneficial owner of the aircraft, and that he has not disposed of that interest. Because Mr Johnson has a beneficial interest in the aircraft it is realisable property within section 74(1) (a) of the Criminal Justice Act 1988. That beneficial interest was the half share in the aircraft.
57. Mr Munday QC begins with the operating agreement of 21 December 2001, which gave Mr Johnson expressly a 50 percent stake interest in the aircraft. As I have found, the purported termination on 1 December 2003 was of no effect. The sale of the aircraft on 30 April 2004, by CFS to Mr Backhouse trading as DAS, after CFS had purchased it from Finova, did not extinguish that interest because, as Mr Munday QC put it in closing, that could be because Mr Backhouse dealt with Mr Johnson as a constructive trustee. The sale from DAS to G-Jet J on the same day falls to be considered in the same way. In any event, now that the beneficial ownership of G-Jet J is wholly Mr Backhouse's, Beetham Holdings Ltd having sold its 50 percent shareholding, there is no other third party, with the exception of the current mortgagee, Lombard. Mr Backhouse encumbered the aircraft with that mortgage in 2004, being himself on notice since April 2004 of the restraint order.
58. With respect to Mr Munday QC, the suggestion that Mr Backhouse was in the position of a constructive trustee of the beneficial interest Mr Johnson had provides no basis for me to find that the aircraft is realisable property within the terms of Part VI of the Criminal Justice Act 1988, especially given the protection the legislation confers on a third party's property interests. Whatever the intention of the December 2001 operating agreement, it did not given Mr Johnson any immediate beneficial interest in the aircraft. At most Helix eventually had 6 of the 112 issued shares in CFS when it was registered in Gibraltar. Both parties accepted that Helix can be treated as one of Mr Johnson's companies, although there is no direct evidence about his exact relationship with it. Importantly, until 26 April 2004, Finova was the owner of the aircraft, CFS only the hirer. It will be recalled that typically for a hire purchase agreement there were anti-alienation provisions binding the hirer. Mr Backhouse could not create any beneficial interest in the aircraft at any time during that period.
59. After CFS bought the aircraft from Finova on 26 April 2004, given my finding that the 1 December 2003 termination was not effective as expressed, it may be that a beneficial interest vested in Mr Johnson. But there was no explanation of how that occurred, whether under the 21 December 2001 operating agreement a beneficial interest could vest in the future, and if it did whether by way of a trust over the aircraft, because that agreement was specifically enforceable as regards Mr Johnson's half share or on some other legal basis. Moreover, the aircraft was sold on 30 April 2004 by CFS to Mr Backhouse, using his Irish business name, DAS, and then on-sold to G-Jet J, a company which at some point he owned with Beetham Holdings Ltd. Without analysis it is not open for me to conclude that after those transactions any beneficial interest Mr Johnson had in the aircraft survived because subsequent ownership was with notice of that interest.

A beneficial interest in or gift of money?

60. The second basis on which Mr Munday QC advances the applicant's case is in relation to Mr Johnson's $637,482 payment on 11 December 2001. On his case there is no accounting for that payment, in particular, the agreement of 21 December 2001 makes no mention of the sum, and no other document has been produced by Mr Backhouse to account for it. On that basis, while Mr Munday QC concedes that the £70,000 payment on 12 March 2002 is no longer an asset of Mr Johnson, he asserts that the $637,462 remains a realisable asset of Mr Johnson in that either it remains his beneficial property, or it was a tainted gift.
61. With a statutory basis, in this case in section 74 of the Criminal Justice Act 1988, a remedy is available after tracing money through bank accounts into assets and their substitutes, although the tracing exercise itself may not be straightforward. As Mr Munday QC concedes however, his second submission is premised on the 21 December 2001 operating agreement having no effect. Since I have held that the agreement makes commercial sense, his argument fails. There is no need for me to embark on a tracing exercise.

Gift/disposed at undervalue?

62. In broad terms the third basis on which Mr Munday QC advances the applicant's case is that when Mr Johnson lost his rights under the 21 December 2001 operating agreement, that was caught by the gift provisions of section 74 of the Criminal Justice Act 1988 since Mr Johnson was, in effect, giving away his half share in the aircraft. In reply Mr Berkley QC contends that under the 21 December 2001 operating agreement Mr Johnson obtained for his money the use of the aircraft over the two year period December 2001-December 2003. That had a value because some rich men and women desire the convenience and luxury of a private jet. Mr Johnson had that desire and under the 21 December 2001 operating agreement he did not have to charter or hire such an aircraft. He had access to the aircraft from Liverpool airport on a 50 percent basis without making any other capital contribution. When the user value is then factored into the analysis, the applicant's approach becomes illusory absent clear and cogent valuation evidence of the capital value at the point of disposal, and the value to be attributed to the access and use of the aircraft by Mr Johnson. In Mr Berkley QC's submission plainly there has been no gift for the purposes of section 74. Moreover, it is not appropriate under section 74(10) to make any order in respect of Mr Backhouse in this case.
63. In my view what occurred is that when Mr Johnson lost his rights in the aircraft there was a gift within the terms of the Act. Those rights under the 21 December 2001 operating agreement were to use the aircraft and to a fifty percent share in it. Certainly Mr Johnson used the aircraft. The £70,000 payment was attributable to the expenses of using it. There were also the other contributions for Mr Johnson's use of the aircraft, which can be inferred. Given these payments there is no way that Mr Johnson's use could have consumed the $637,462 or anything like it. Mr Johnson was effectively disposing of his rights under the 21 December 2001 operating agreement for a value significantly less than what they were worth. The difficulty arises in calculating that value. Mr Backhouse has not produced any contemporaneous records setting out the state of account between him and Mr Johnson regarding payments for the aircraft. The enforcement receiver, Mr Sinclair, has had great problems in making calculations. For the hearing he and an accountant acting on behalf of Mr Backhouse, Mr M G Perkins, have produced contending patterns of expenditure in relation to the aircraft. Only Mr Sinclair gave evidence before me.
64. Both Mr Sinclair and Mr Perkins have begun with the value which Mr Backhouse himself attributed to the aircraft in the sales on 30 April 2004, £1.6 million. In the absence of any evidence of valuation at the time that seems the only course open. Taking into account the refurbishment work and installation of the RSVM alti-metre modifications in early 2004, both Mr Sinclair and Mr Perkins place a value of $1,219,855 on the aircraft as at December 2003. To obtain his half share in the aircraft, Mr Johnson had to contribute to the payments under the hire purchase agreement with Finova. Mr Sinclair has calculated the total amount owed to Finova at $556,433, Mr Perkins at $570,759. I am persuaded that the correct figure is Mr Sinclair's. Moreover, as Mr Sinclair points out, part of Mr Johnson's payment of $637,462, i.e. $354,003, went to paying off CFS' obligations under the hire purchase agreement. Under the 21 December 2001 operating agreement a payment of $325,000 relieved Mr Johnson of his obligations in that regard. Mr Johnson also had an obligation to pay his share of the engine overhaul undertaken in September 2003. Mr Sinclair calculates that as $94,665, but Mr Perkins says it is higher, at $146,444. That difference revolves around the issue of the engine overhaul reserve. Mr Sinclair has persuaded me that his approach is correct. The upshot is that I accept Mr Sinclair's figures. Before me his calculations produced a bottom line of $461,268.59, which in my judgment is recoverable as a tainted gift under section 74 of the Criminal Justice Act 1988.

Conclusion

65. In establishing a regime for pursuing the proceeds of crime Part VI of the Criminal Justice Act 1988 assumes the ordinary rules as to how a defendant has an interest in property. That means that the prosecution must analyse how under ordinary principles of property and trust law a defendant acquired and hold property which is said to be subject to the confiscation order. In this case the prosecution has not persuaded me that the defendant obtained a beneficial interest in this aircraft, or that this interest survived the various transactions to which it was subject. However, the prosecution has established that the defendant disposed of a value of not less than $461,268.59 to the respondent as a tainted gift when he abandoned his rights to the aircraft. That amount is available to the enforcement receiver to satisfy the confiscation order.