Jersey Unreported Judgments

[2006]JCA082B

COURT OF APPEAL

7^th June 2006

Before:

Sir Philip Bailhache, Kt., Bailiff. M.S. Jones, Esq., Q.C. J.W. McNeill, Esq., Q.C.

The Attorney General

-v-

Peter Wilson Michel

And

Simone Anne Gallichan

Appeal against the Judgment of Commissioner Sir Richard Tucker, dated 2^nd June 2006.

C. E. Whelan, Esq., Crown Advocate.

Advocate D. F. Le Quesne for P.W. Michel.

Advocate C. M. Fogarty for S. A. Gallichan

JUDGMENT

McNeill. JA

1.        By his judgment, the learned Commissioner refused the application on behalf of the defendants that Counts 1 and 9 of the Indictment be struck out. 

Appeal Out of Time

2.        The defendant Gallichan sought leave to appeal out of time.  In the special circumstances of her case we are prepared to grant leave.  There had been unfortunate administrative uncertainty as to the proper procedure to be followed in appeals under the provisions of Part 10, Article 90 of the Police Procedures and Criminal Evidence (Jersey) Law 2003 relating to Preparatory Hearings.  Whilst the delay on the part of those representing this defendant in applying for leave to appeal was significant and whilst the procedures under the Law should improve the efficiency of the trial procedure rather than hinder it, we are persuaded that there is adequate reason for granting leave.  In these circumstances, the hearing before us is treated as an Appeal Hearing both as regards the defendant Gallichan and the defendant Michel. 

Principal Submissions

3.        These appeals concern charges of money laundering in Jersey.

Article 32 of the Proceeds of Crime (Jersey) Law 1999 provides, among other matters as follows:-

"32      Assisting another to retain the benefit of criminal conduct

           (1)        Subject to paragraph (3), if a person enters into or is otherwise concerned in an arrangement whereby -

           (a)  the retention or control by or on behalf of another (in this Article referred to as "A") of A's proceeds of criminal conduct is facilitated (whether by concealment, removal from the jurisdiction, transfer to nominees or otherwise); or

           (b)  A's proceeds of criminal conduct -

           (i) are used to secure that funds are placed at A's disposal, or

(ii) are used for A's benefit to acquire property by way of investment,

knowing or suspecting that A is a person who is or has been engaged in criminal conduct or has benefited from criminal conduct, he or she is guilty of an offence.

           (2)        ....

           (3)        ....

(4)        In proceedings against a person for an offence under this Article, it is a defence to prove -

(a)        That the person did not know or suspect that the arrangement related to any person's proceeds of criminal conduct;"

4.        "Criminal conduct" is defined in Article 1 of the Law as meaning:

            "conduct, whether occurring before or after Article 3 comes into force, that -

(a) constitutes an offence specified in Schedule 1; or

(b) if it occurs or has occurred outside Jersey, would have constituted such an offence if occurring in Jersey"

           Schedule 1 is in the following terms:

           Any offence in Jersey for which a person is liable on conviction to imprisonment for a term of one or more years (whether or not the person is also liable to any other penalty), but not being

           (a) a drug trafficking offence; or

(b) an offence under any of Articles 15 to 18 of the Terrorism (Jersey) Law 2002.

5.        The principal submissions before us, both in writing and orally, concerned the issue as to whether tax evasion, which might constitute a crime in other jurisdictions, constituted qualifying criminal conduct in Jersey, namely, an offence which, in Jersey, would render the perpetrator liable to a minimum custodial sentence of one year's imprisonment.  A number of arguments were advanced. 

6.        It was contended for the defendants that tax evasion or tax fraud had traditionally been dealt with by the prosecuting authorities in Jersey as an offence under the Income Tax (Jersey) Law, 1961, as amended.  Income tax and its machinery were said to be statutory creatures and, whether evasion was negligent or fraudulent, the statute prescribed the relevant penalties.  Those penalties were exclusively financial.  It was therefore not possible to conceive of an offence and a valid prosecution other than under the statute. 

7.        We disagree.  The relevant provision of the Law for present purposes is Article 137(1).  It provides, among other matters:-

"If any person fraudulently or negligently -

(a)                   Delivers any incorrect statement required by Article 16;

(b)                   Makes any incorrect statement, return or declaration in connection with any claims for any allowance, deduction or relief;

(c)                   Submits to the Comptroller any incorrect accounts in connection with the ascertainment of his or her liability to income tax, the person shall be liable to a fine ..."

8.        This provision is undoubtedly penal in that it provides for a fine in respect of commission of an offence.  However, the provision is essentially an administrative one and the offence can be committed even by negligence, which is a civil rather than criminal concept, proven by reference to an objective test and not requiring the mental intention almost invariably required of Customary Law crime.  On the other hand, the concept of fraud, whether civil or criminal, generally requires guilty intent.  However, the act which constitutes the offence is, quite simply, the submission of an incorrect statement, return or account; that is, something which fails to state accurately the tax payer's personal or financial position for the relevant period.  Such conduct is not only reprehensible, but will have adverse consequences for the Revenue authorities who will have had to discover the inaccuracy, take steps to analyse the altered underlying position and make a further assessment.  It is not immediately obvious to us that such a provision would necessarily be expected to cover the more complex structures of tax evasion.

9.        We note also the terms of Article 137(4):

"Where the Comptroller is of the opinion that any person has committed an offence against paragraph (1), the Comptroller may accept a pecuniary settlement instead of proceedings being instituted in respect of the offence; and where any criminal proceedings are instituted against such person for any form of fraud or wilful neglect in connection with or in relation to income tax or any proceedings are instituted against the person for the recovery of any sum due from the person, whether by way of tax or penalty, in relation to income tax, any statements made or documents produced by the person or on the person's behalf shall not be inadmissible in the proceedings by reason only that it has been drawn to his or her attention that -

(a)       The Comptroller may accept a pecuniary settlement instead of proceedings being instituted; and

(b)       Though no undertaking can be given as to whether or not the Comptroller will accept such a settlement in the case of a particular person, it is the practice of the Comptroller to be influenced by the fact that a person has made a full confession of any fraud or default to which he or she has been a party and has given full facilities for investigation,

and that the person was or may have been induced thereby to make the statements or produce the documents."

10.      Manifestly, this provision envisages that, even where an offence under Article 137(1) may have been committed and the Revenue has entered into an arrangement with the tax payer which avoids prosecution, the possibility of criminal proceedings arising out of the same underlying facts remains.  This could happen in a number of ways.  The most obvious is the Revenue discovering further fraud because there had not been full disclosure in the proceedings which led to the compromise.  What is of interest, for present purposes is, first, that the statute does not provide that the discovery reopens the use of sub-paragraph (1) but looks to what can only be Customary Law criminal proceedings relating to some part of a tax evasion process. Second, that further proceedings are specifically identified as criminal. Third, that the charges envisaged relate to fraud or "wilful neglect", rather than "negligence", the event that creates liability to a fine in sub-paragraph (1). Thus, whilst Article 137(4) is an evidential provision, the need for this evidential provision is the possibility of a person - in this case a tax payer - being exposed to a charge of Customary Law fraud in respect of dealings with the Revenue authorities. 

11.      Accordingly, whilst the decisions in Attorney General v Bates [2004] JRC 135 and Attorney General v Fann [1996] (unreported), to which we were referred by the defendants, disclose certain fairly basic tax fraud being prosecuted under the Income Tax (Jersey) Law, they do not indicate that the provisions of that Law is the only basis on which an offence of defrauding the Revenue authorities may be prosecuted.  Further, given other authorities to which we shall refer, the fact that there is no evidence of tax evasion previously having been charged as a Customary Law crime is not a bar to the sustaining of the Crown's position in these present proceedings. 

12.      Turning to consider the Customary Law, the defendants contended that a criminal offence of defrauding the Revenue could not come within the parameters of fraud under the Customary Law as set out by this Court in Foster v Attorney General [1992] JLR 6. 

13.      Again we disagree.  In Foster the Court held that, in order to establish criminal fraud in Jersey, it was necessary to show that the defendant deliberately made a false representation with the intention of causing thereby - and with the result in fact of causing thereby - actual prejudice to someone and actual benefit to himself or someone else: see [1992] JLR at p.26, lines 27 - 34.  However, the Court went on to state (at page 29, lines 1 - 22) that it was impossible to say that every case satisfying those requirements would be a case of criminal fraud.  If the conduct in question exhibited the requirements and was at least similar (but not necessarily identical) to conduct held criminal in decided cases, a charge of fraud might be held justified.  If the conduct was not similar to conduct held criminal in decided cases, a charge of fraud would be unlikely to be held to constitute criminal fraud in Jersey. 

14.      It seems to us that, properly characterised, the conduct alleged to have taken place here is the creation of false structures leading to false accounts and the presentation of false documents.  Among the decided cases referred to in Foster will be found instances of falsification of accounts (Attorney General v Gardner, Royal Ct. (1840), 11 P.C. 547, unreported) and dishonest management (Attorney General v Le Bailly, Royal Ct. (1873), 20 P.C. 77).  In our opinion such conduct is similar to - but, of course, not identical with, the usual elements of the more complex types of tax evasion such as the creation of false structures and accounts. 

15.      If, on the other hand, characterisation of conduct is properly to be approached by reference to the nature of the result rather than by reference to physical acts, the case of Attorney General v. O'Brien Royal Ct [1919] 27 PC 106 is an example of conviction for fraud to the prejudice of the States.  It therefore seems to us that tax evasion comes within the parameters set out in the decision in Foster and can therefore constitute an offence under the Customary Law. 

16.      Further, we are not persuaded that a material distinction exists between traditional fraud and tax evasion by reason of any consideration that, in instances of tax evasion, the money is, in the first instance, "legitimately" in the hands of the tax payer.  As soon as a taxable event has occurred, the receipts in the hands of the tax payer are receipts for which the tax payer is bound to account to the revenue authorities.  False representations in respect of those receipts cause prejudice to the States (or the Revenue) and benefit to the tax payer just as in the case of any other fraudulent activity. 

17.      Upon the basis of the views which we have expressed, it cannot be said that the Customary Law crime of fraud by way of tax evasion falls within the terms of Article 137(1).  The latter covers the submission of incorrect statements, accounts and declarations but leaves open the prospect of Customary Law fraud. That prospect must be in respect of more heinous activities, whether dishonesty in reaching a settlement in relation to Article 137 proceedings or dishonesty in creating false structures for the purpose of evading liability to taxation.  There is, of course, no indication that the statutory offence was being created to make new provision for an existing Customary Law crime. 

18.      We were strongly urged to consider the views expressed by the House of Lords in R v. Rimmington [2005] 3 WLR 982 and to hold that because of the existence of the offence under the Law a Customary Law offence could not be charged. We do not consider that the views expressed in that decision preclude us from reaching the views which we have reached.  That case dealt with proper charging practice in circumstances where a generally-expressed common law crime fell within the terms of a specific statutory provision: see Lord Bingham of Cornhill at paragraphs 30 and 31 and Lord Rodger of Earlsferry at paragraphs 52 and 53.  However, as we have indicated, Article 137 cannot be said to cover the whole of the Customary Law offence of fraud.

Admissibility of Evidence of matters prior to 1st July 1999

19.      This is a submission made on behalf of Mrs. Gallichan but not adopted on behalf of Mr. Michel. 

20.      As we understand matters, the Crown seek to rely upon conduct prior to 1 July 1999, the commencement date for the Proceeds of Crime (Jersey) Law 1999.  By reference to this evidence the Crown seek to establish identification of the origin of funds which the defendants administered and also the defendants' knowledge as to the criminal origin of such funds.  It is noteworthy, however, that the Crown is not charging the defendants under the 1999 Law in respect of conduct predating the coming into force of that Law.  Rather, the purpose of considering matters prior to 1st July 1999 is to confirm the existence of facts which continued into the relevant period after 1 July 1999, namely, origin of funds and the defendants' state of knowledge. 

21.      During oral argument before us, Counsel for Mrs. Gallichan specifically accepted that not all evidence of matters prior to 1 July 1999 could be excluded.  For example, as regards evidence in relation to companies, the date of incorporation and other details required for incorporation and registration would be a matter of public record and, accordingly, deemed knowledge.  If that is so, - and we consider the concession rightly made - we do not see how a logical distinction can be drawn between one pre-commencement piece of evidence and another.  Company information which is on the public record is admissible to show that a state of facts which commenced before 1 July 1999 continued to be the relevant history of the company after the coming into operation of the Law.  We see no logical basis for excluding evidence as to the likely state of mind of the defendant after 1 July 1999, which state of mind existed because of knowledge gained before that date.  A relevant state of mind at a given point will always depend upon prior knowledge whether gained in the split second before or many years before the point of inquiry.  So long as the Crown is not charging the defendants under the 1999 Law in respect of conduct predating the coming into force of that Law, we see no good reason why the prosecution should not be entitled to prove the requisite elements of the offence from and after 1 July 1999 by reference to the actual or imputed state of mind at that time, which state of mind had been created in preceding years.  We do not see why information gained at a time when certain acts may not have been criminal offences should be excluded in seeking to prove that a criminal offence was committed after the Law had come to be in force. 

Count 1

22.      Before us, Counsel for the defendants contended that Count 1, as amplified in the Particulars, does not fulfil the requirements of Article 32 of the Proceeds of Crime (Jersey) Law 1999. 

Article 32 provides, as we have already stated, as follows:-

"32      Assisting another to retain the benefit of criminal conduct

(1)       Subject to paragraph (3), if a person enters into or is otherwise concerned in an arrangement whereby -

(a)       the retention or control by or on behalf of another (in this Article referred to as "A") of A's proceeds of criminal conduct is facilitated (whether by concealment, removal from the jurisdiction, transfer to nominees or otherwise); or

(b        A's proceeds of criminal conduct -

           (i) are used to secure that funds are placed at A's disposal, or

           (ii) are used for A's benefit to acquire property by way of investment,

           knowing or suspecting that A is a person who is or has been engaged in criminal conduct or has benefited from criminal conduct, he or she is guilty of an offence.

           (2)        ....

           (3)        ....

(4)        In proceedings against a person for an offence under this Article, it is a defence to prove -

(a)        That the person did not know or suspect that the arrangement related to any person's proceeds of criminal conduct;"

23.      It was contended on behalf of the defendants that, whilst the "arrangement" required as a constituent part of the offence set out in Article 32(1) was not individually defined, certain essential ingredients could be discerned from the wording of the article.  These ingredients were said to be:

(i)        The facilitation of retention or control,

(ii)       That the property controlled was the proceeds of criminal conduct, and

(iii)      That the proceeds were the property of (A).

24.      Against this background, as we understood Counsel for the defendants, there were a number of distinct contentions. 

25.      One was that the Count had to specify an arrangement with a specified person (being what was referred to as "the predicate criminal"), or with an intermediary on his behalf.  We reject this submission.  In our view there is no warrant for it in the Law.  Article 32 specifies only - for present purposes - that there be an arrangement which has the result of, or is part of the mechanism for, relevant retention or control, that the property controlled is the proceeds of crime and that it is A's.  Whilst the offence is only complete when the defendant knows or suspects that the other person has a connection with criminal conduct, it seems to us an unwarranted restriction either that the arrangement must be able to be specified as being with, or on behalf of, an identified person or that the defendant knew that individual.  What is required is that the defendant knew or had reason to suspect the owner's connection with criminal conduct.  Whilst that may be easier to prove where the identity of the individual is known to the defendant, we see no inherent obstacle in seeking to prove that, in the whole circumstances, the defendant either knew or must have suspected that the property was the property of an owner who had the requisite connection with criminal conduct.

26.      This approach appears to us entirely consistent with the usual nature of money laundering where the "arrangements" will have numerous, often diverse, links in a chain which tries to render the proceeds of crime untraceable.  It is consistent with this that the Law itself does not require the arrangement to be with or on behalf of A. 

27.      Further, the view which we reach is not, we think, precluded by consideration of the defence set out in Article 32(4).  It seems to us that, even without specification of a particular individual, it is still open to the defendant to prove that he did not know or suspect that the arrangement related to any person's proceeds of criminal conduct. 

28.      It was also suggested that Count 1 and its Particulars did not provide a charge where the three ingredients set out above coincided but, rather, merely referred to the setting up of a scheme.  Again we reject this argument.  Retention of control of property is specified.  That the property is the proceeds of criminal conduct is specified.  That the property was the property of clients of Michel & Co. is specified.  What is charged is not merely the setting up of a system, but the operation of an arrangement where funds were transferred to Jersey and thereafter to England.

29.      The defendants further contended that, as the "arrangement" required coincidence of the ingredients, coincidence was not reached until the point at which an individual or separate offence had to be charged and, thus, that Count 1 was duplication.  We reject this argument too.  Counts 2 to 9 inclusive are charges of individual instances of being concerned in an arrangement.  What is charged under Count 1, on the other hand, is a single arrangement operated for the benefit of clients of Michel & Co.  That arrangement may or may not embrace the individual instances of conduct specified for Counts 2 to 9 but it is certainly capable of covering a very much wider range of activity than is specified in Counts 2 to 9.  Whilst Count 1 instructs a broad spectrum of activity which might include the instances charged in Counts 2 to 9 it seems to us that, in the particular circumstances of the 1999 Law, a defendant might both commit an individual offence and, separately, commit an offence by putting into operation an overarching arrangement.  In these circumstances we do not consider the complaint as to duplication well founded.

30.      Lastly in respect of Count 1, it was contended on behalf of the defendants that the Commissioner had not produced a reasoned Judgment.  Whilst we observe that the reasoning was restricted, we observe also that the applications both to the Commissioner and to this Court have been carried out in such an expedited time frame that full reasoning from the Commissioner could not necessarily have been expected. 

Count 9

31.      As regards Count 9, it was submitted on behalf of the defendants that, without specification of a prior offence, the Crown could not succeed in proving that the funds were the proceeds of relevant criminal conduct, namely, an offence which, in Jersey, would render the perpetrator liable to a custodial sentence of one year's imprisonment. 

32.      Whilst we observe that inability to prove the carrying out of a specific offence might, at first sight, appear to constitute an impediment on the route to proving the requirements of Article 32 as regards a putative Jersey offence, it seems to us to be going too far to presume that there could not be adequate circumstantial evidence which, according to the standards of proof in criminal cases, would suffice to entitle the trial Court to conclude (a) that the proceeds in question were the proceeds of criminal conduct and (b) that the criminal conduct would have satisfied the requirements of schedule 1.  We therefore reject this contention.

33.      For all these reasons the appeals are refused.

Authorities

Police Procedures and Criminal Evidence (Jersey) Law 2003.

Proceeds of Crime (Jersey) Law 1999.

Attorney General v. Bates [2004] JRC 135.

Attorney General v Fann 1996/100.

Income Tax (Jersey) Law 1961.

Foster v Attorney General [1992] JLR 6.

Attorney General v. O'Brien Royal Ct [1919] 27 PC 106.

R v. Rimmington [2005] 3 WLR 982.