QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
|- and -
|Crown Prosecution Service
Mr Michael Newbold (instructed by CPS Proceeds of Crime) for the Respondent
Hearing dates: 25th February 2016
Crown Copyright ©
Mr Justice Garnham:
The Statutory Scheme
"(1) Subject to subsection (7) below, where a defendant appears before the Crown Court to be sentenced in respect of one or more drug trafficking offences (and has not previously been sentenced or otherwise dealt with in respect of his conviction for the offence or, as the case may be, any of the offences concerned), then —
(a) if the prosecutor asks the court to proceed under this section, or
(b) if the court considers that, even though the prosecutor has not asked it to do so, it is appropriate for it to proceed under this section,
it shall act as follows.
(2) The court shall first determine whether the defendant has benefited from drug trafficking.
(3) For the purposes of this Act, a person has benefited from drug trafficking if he has at any time (whether before or after the commencement of this Act) received any payment or other reward in connection with drug trafficking carried on by him or another person.
(4) If the court determines that the defendant has so benefited, the court shall, before sentencing or otherwise dealing with him in respect of the offence or, as the case may be, any of the offences concerned, determine in accordance with section 5 of this Act the amount to be recovered in his case by virtue of this section.
(5) The court shall then, in respect of the offence or offences concerned —
(a) order the defendant to pay that amount; …
(c) subject to paragraph (b) above, leave the order out of account in determining the appropriate sentence or other manner of dealing with him…
(8) The standard of proof required to determine any question arising under this Act as to —
(a) whether a person has benefited from drug trafficking, or
(b) the amount to be recovered in his case by virtue of this section,
shall be that applicable in civil proceedings."
"(1) For the purposes of this Act —
(a) any payments or other rewards received by a person at any time (whether before or after the commencement of this Act) in connection with drug trafficking carried on by him or another person are his proceeds of drug trafficking; and
(b) the value of his proceeds of drug trafficking is the aggregate of the values of the payments or other rewards.
(2) Subject to subsections (4) and (5) below, the Crown Court shall, for the purpose —
(a) of determining whether the defendant has benefited from drug trafficking, and
(b) if he has, of assessing the value of his proceeds of drug trafficking,
make the required assumptions.
(3)The required assumptions are —
(a) that any property appearing to the court —
(i) to have been held by the defendant at any time since his conviction, or
(ii) to have been transferred to him at any time since the beginning of the period of six years ending when the proceedings were instituted against him, was received by him, at the earliest time at which he appears to the court to have held it, as a payment or reward in connection with drug trafficking carried on by him;
(b) that any expenditure of his since the beginning of that period was met out of payments received by him in connection with drug trafficking carried on by him; and
(c) that, for the purpose of valuing any property received or assumed to have been received by him at any time as such a reward, he received the property free of any other interests in it.
(4) The court shall not make any required assumption in relation to any particular property or expenditure if —
(a) that assumption is shown to be incorrect in the defendant's case; or
(b) the court is satisfied that there would be a serious risk of injustice in the defendant's case if the assumption were to be made;
and where, by virtue of this subsection, the court does not make one or more of the required assumptions, it shall state its reasons…"
"(1) If, on an application made in respect of a confiscation order by (a) the defendant…
the High Court is satisfied that the realisable property is inadequate for the payment of any amount remaining to be recovered under the confiscation 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 Act from any risk of realisation under this Act.
(3) Where a certificate has been issued under subsection (1) above, the person who applied for it may apply to the Crown Court for the amount to be recovered under the confiscation order to be reduced."
"(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 this act."
The Competing Arguments
The Proper Approach
"(1) The burden lies on the applicant to prove, on the balance of probabilities, that his realisable property is inadequate for the payment of the confiscation order (see Re O'Donoghue  EWCA Civ 1800, per Laws LJ at para 3).
(2) The reference to realisable property must be to 'whatever are his realisable assets as a whole at the time he applies for the certificate of inadequacy. If they include assets he did not have when the confiscation order was made, that is by no means a reason for leaving such fresh assets out of consideration' (Ibid and see also Re Phillips  EWHC 623 (Admin)).
(3) A s83 application cannot be used to go behind a finding made at the confiscation hearing or embodied in the confiscation order as to the amount of the defendant's realisable assets. Such a finding can only be challenged by way of an appeal against the confiscation order. (See Gokal v Serious Fraud Office  EWCA Civ 368, per Keene LJ at paragraphs 17 and 24).
(4) It is insufficient for a defendant to say under section 83 'that his assets are inadequate to meet the confiscation order, unless at the same time he condescends to demonstrate what has happened since the making of the order to realisable property found by the judge to have existed when the order was made'. (See Gokal paragraph 24 and Re O'Donoghue at paragraph 3).
(5) The confiscation hearing provided an opportunity for the defendant to show that his realisable property was worth less than the prosecution alleged. It also enabled the defendant to identify any specific assets which he contended should be treated as the only realisable property. The section 83 procedure, however, is intended to be used only where there has been a genuine change in the defendant's financial circumstances. It is a safety net intended to provide for post-confiscation order events. (See McKinsley v Crown Prosecution Service  EWCA Civ 1092 per Scott Baker LJ at paragraphs 9, 21-24, 31 and 35).
(6) A Section 83 application is not to be used as a "second bite of the cherry". It is not an opportunity to adduce evidence or to present arguments which could have been put before the Crown Court judge at the confiscation hearing (paragraph 38 of Gokal and paragraphs 23, 24 and 37 of McKinsley)."
"… section 83(1) requires the defendant to satisfy the court that his realisable property will not satisfy the confiscation order. The reference must be to whatever are his realisable assets as a whole at the time he applies for the certificate of inadequacy. If they include assets he did not have when the confiscation order was made, that is by no means a reason for leaving such fresh assets out of consideration. Where a defendant has been in possession of an asset, such as the £35,500 here, the question obviously arises what he has done with it and whether, as might in the ordinary way well be the case, interest or "other fruits", as the judge put it, have been obtained in respect of it. In that case, if the defendant is simply silent as to what has happened to the asset, the court on a section 83 application is liable to find that he has not satisfied the section's requirements and accordingly is not entitled to a certificate of inadequacy. Whether that conclusion is arrived at or not will obviously depend on the court's appreciation of all the evidence."
"the judge has a fact-finding exercise to conduct under section 83(1) of the Criminal Justice Act 1988 . He has to assess the current value of realisable assets as a whole. All I would add, whilst expressing full agreement with what my Lord has said, is that the judge needs to keep a sense of proportion in conducting that exercise, however dishonest or uncooperative a defendant may have been with respect to what has been found to be one or more of his realisable assets. There could be cases where, on an overall view, it would be open to the judge to hold that the value was on balance of probability inadequate within the meaning of the section, even if the defendant has declined to condescend to give an explanation with respect to every single asset."
"in order to fulfil the purpose of the statutory scheme in a way that does justice, but that the underlying objective is critical… such propositions, however eminent their source, are not to be equated with statutory rules."
"52. The starting point for considering any application for a certificate of inadequacy is the confiscation order itself. Since the burden of proof at the time of the making of a confiscation order is on the defendant to show that his available assets are less than the benefit figure, it follows that there may be cases in which a confiscation order is properly made in a larger sum than the defendant is in truth able to pay, and this may result in him having to serve a period of imprisonment in default for failing to pay what he cannot pay. It may be that the defendant has been dishonest or cavalier in his evidence or it may be that, although truthful, he has not been able to produce evidence sufficient to discharge the burden of proof which rests on him.
54. At the stage of an application for a certificate of inadequacy, the burden of proof is again on the defendant. He is unlikely to succeed unless the court is satisfied that he is being candid, and an application for a certificate of inadequacy is not intended to be a means of the defendant having a second bite at the same cherry. Those principles are clearly established. However, a rule of law which said that the court could not be persuaded that the defendant was unable to pay the outstanding amount by reason of a worsening of his financial circumstances unless he gave full disclosure of what had happened in the meantime to all his assets, including previously unidentified assets, would trammel the width of s83 by imposing a restriction which is not in the statute. It would also be capable of causing not merely hardship but hardship amounting to injustice.
55. In the case of previously unidentified assets, it is possible that a defendant may genuinely have no idea or only a dim recollection what had originally happened to them. He should be allowed to try to persuade the court, if this be the case, that his identified assets have shrunk in value and that as a result he is not able to pay the amount outstanding. What the court makes of that evidence will be a matter for its judgment. Much will no doubt depend on the nature of the case. Cases involving unidentified assets can vary greatly. The case of an international drug dealer with evidence of a lavish lifestyle, ready access to large sums of cash and connections with a web of offshore companies and bank accounts, may merit different treatment from the case of a defendant whose apparent circumstances and amount of unaccounted for assets are much more modest. It is for the court to consider the totality of the evidence before concluding whether it accepts that the defendant has suffered a change of fortune such that he is probably not able to pay the balance of the outstanding money. If the defendant is not permitted the opportunity of trying to establish this, there is a real risk that even though he can demonstrate a change in his circumstances, possibly very great, he may serve an additional period of imprisonment through failure to do that which is impossible by reason of his change of circumstances."
(i) The principles enumerated by Mr Holgate in B provide a convenient starting point for the Court's consideration of a s17 application; those principles are not, however, to be construed as if they were statutory rules;
(ii) The statute contemplates that there will be cases when it will be possible for an applicant to establish that a confiscation order was properly made against him in a larger sum than in truth he is able to pay;
(iii) The burden of proof will be on him, but an applicant is entitled to try to persuade the court that his identified assets have diminished in value and that as a result he is not able to pay the amount outstanding; he is entitled to attempt that task even in circumstances where he cannot provide full disclosure of what had happened to all his assets, including previously unidentified assets; and
(iv) It is a matter for the judgment of the court, on the facts of an individual case, whether the applicant has made out such a case; in reaching that judgment the court must maintain a sense of proportion, however dishonest a defendant may have been about his assets.
The Hidden Assets
i) The Defendant (now the Applicant) was in charge of the drug importation. It was "his operation". He was "the boss". He was the "principal organiser of the importation", the "prime mover" and "the brains of the operation". The "obvious and most likely explanation" was that he had paid for the drugs. The drugs would have cost millions of pounds, and it was "almost impossible to believe" that the Defendant would have funded the purchase of the drugs other than through previous drug dealing.
ii) It was "inconceivable" that the Defendant would have carried out the present importation without previous smaller scale importations. The "scale, complexity and nature of the transaction" meant it was wholly unrealistic to conclude that this was the Defendant's first involvement with drugs.
iii) The drugs would have been bought at the lowest end of the valuations as the Defendant, being "shrewd and experienced", would "use all his expertise to strike a hard bargain". That amount was £1,907,812.
iv) The Defendant was a man "clever and experienced in money laundering, and if his assertions were true and accurate there could and would be evidence available to prove them". As such £255,728.43 in expenditure identified by the Prosecution was also assumed to have been money derived from drug trafficking.
v) He had also gifted monies and vehicles to Laura Bond, his daughter, or alternatively had used her accounts to launder money. Applying the statutory assumptions, £22,589 seized from the Defendant at the date of his arrest was also benefit from drug trafficking, as was various property found at the property Le Cailletieres.
vi) The Defendant was a "clever, sophisticated criminal, who has great experience in drug trafficking and a flare of dishonesty". By 1994, "this highly intelligent defendant would have been well aware of the undesirability of having assets registered in his name" having been acquitted of involvement in relation to an allegation of involvement in producing ecstasy.
vii) Nothing that the Defendant had said in evidence came "anywhere near to satisfying the burden that is placed upon him" of demonstrating the extent of his realisable property. The Defendant could not be believed. The Defendant had made arrangements in advance to hide his considerable assets.
viii) "Given the nature, scale and longevity of his criminal career and given his acknowledged intelligence it would be bizarre and uncharacteristic if he had not attempted to do so". In those circumstances, the judge was "as sure as one can ever be that the defendant will have the full amount of the confiscation order available, tucked away in a well disguised place".
"28. … it is relevant in connection with the question of realisable assets to point out that the judge found that the defendant was responsible for purchasing the drugs…
29. … It is plain from the amount of drugs which the appellant sought to import that arrangements must have been made as to how they were to be paid for, how they were to be distributed and how the profits were to be shared. To this day the appellant remains silent on those all important features of a drug importation. It underlines how no reliance could be placed upon anything he says about his ability to meet the amount of benefit which was identified by the judge. There remained no reliable source as to the extent of his assets.
30. It is small wonder therefore that the judge was left with the contentions advanced by the Crown…in relation to the question as to whether his assets were hidden. The Crown was able to point out that he had, throughout his history of criminality, used a number of false identities, that he owned substantial property or had owned in France and that he had been in a position to either give substantial sums, at least to his daughter, Laura Bond, or to invest using her name. An example was given of almost monthly dealings of substantial sums, through a particular stockbroker. That evidence itself demonstrated an ability to disguise the name of the true beneficial owner of assets and cash.
31. Quite apart from that evidence, there was substantial evidence of the defendant boasting, in circumstances where he could have no justification or reason to boast, of the extent of his assets. To Customs officers, on 30th June 2004, he had stated that he had been a multi-millionaire for some 20 years, that he ran a gourmet cookery school, that he imported and exported cars, had property investments and operated both as a private individual and through a company in Luxembourg and Liechtenstein which he declined to name. All of this was a mere puff he told the judge. Further, when meeting officers of the Inland Revenue in March 1996, he had told them that he had stolen some £2 million in 1976 from a London airport and spoke of substantial funds in foreign bank accounts, both then and during the course of other interviews sometimes referring to £1.2 million, on another occasion in excess of £2 million…
33. (Counsel for the Appellant) contended that there was no evidence that he had ever hidden assets and that having spent some £1.9 million on the cocaine which he did not successfully import, it was obvious that he would have nothing like enough money left, having lost that sum, to meet the sum identified by way of benefit. We do not agree. We repeat, this defendant, from his own decision to contest this case in the way he sought to contest it, deprived himself of any opportunity of providing reliable evidence as to the assets that he had accumulated during his career. In those circumstances the judge was fully justified in concluding that he had not satisfied the burden, which the statute places upon him, of demonstrating that the amount of realisable assets were less than the amount of the benefit. Thus it was his own fault and his own failure to prove that which led to the order that was made.
34. In those circumstances, we reject (the) submission that the judge was not justified in rejecting the appellant's claim that his realisable assets were less than the amount of £2.342 million."