The Hon. Michael Beloff, Q.C., President;
Ian Michael Christmas
The Attorney General
Resumed appeal in respect of a Compensation Order.
M. T. Jowitt, Esq., Crown Advocate.
Advocate I. C. Jones for the Appellant.
1. This is the judgment of the Court.
2. On 26 July 2013 the Court of Appeal (Beloff P, Nugee and Logan Martin JJA) allowed an appeal by the appellant, Ian Michael Christmas, against a compensation order made by the Royal Court on 8 April 2013. On the same occasion, the Court adjourned the appeal for further consideration as to whether or not an alternative compensation order should be made against the appellant, and if so, on what terms. The adjourned hearing of the appeal took place before us on 30 and 31 January 2014.
3. By virtue of Art 6(2) of the Criminal Justice (Compensation Orders)(Jersey) Law 1994 ("the 1994 Law"), the powers of the Court of Appeal in the event of an appeal against a compensation order are the powers mutatis mutandis which are available in the case of an appeal against sentence. Art 26(3) of the Court of Appeal (Jersey) Law 1961 provides that the Court of Appeal "shall, if it thinks a different sentence should have been passed on the appellant in the proceedings from which the appeal is brought, quash the sentence and pass such other sentence warranted in law by the verdict". The Court of Appeal proceeded on the basis that it had the same power in respect of the compensation order, and for that reason retained to this Court consideration of an alternative order.
4. The compensation order was made following the conviction of the appellant (and a co-defendant, John Lewis) on 26 July 2012 of a breach of Art 2(c) of the Investors (Prevention of Fraud)(Jersey) Law 1967. The relevant Count was in the following terms:-
"John LEWIS and Ian CHRISTMAS between 1st December 2004 and 1st January 2005 made to Marie Cotrel a statement or promise which was misleading, false or deceptive, namely that a sum of £100,000 would be used as the initial purchase deposit for properties known as 104 and 203 Hawthorne, knowing the said statement or promise to be misleading, false or deceptive or being reckless as to the same, thereby inducing the said Marie Cotrel to invest a sum of £100,000 in an arrangement with respect to the said properties the purpose, or effect, or pretended purpose or effect of which was to enable the said Marie Cotrel to participate in or receive profits or income from the acquisition, holding, management or disposal of the said property".
5. The properties referred to in that Count were in Florida. They were to be purchased as part of a scheme set up by the appellant and his co-defendant to use monies provided by investors to acquire properties being developed, principally in Florida, which would later be sold at a profit.
6. The appellant's conviction was on the basis that he had made a misleading statement recklessly and not on the basis that he had been intentionally dishonest or deceptive. He was sentenced to 15 month's imprisonment.
7. The compensation order made by the Royal Court was in favour of Mrs Cotrel. It was in the sum of £100,000, of which £60,000 was to be payable within 28 days, and the balance of £40,000 within 12 months.
8. The basis on which this Court allowed the appeal from the original compensation order appears from the following extracts from the judgment:-
"We conclude that the appellant was balance sheet insolvent when the Order was made. We therefore consider that the order should not have been made without consideration of this fact and it is not apparent that it was taken into account from the judgment of the Commissioner. We are satisfied that the Order should be quashed because the Royal Court failed to have regard to a material consideration and the appeal should be allowed upon this basis by reference to the standard provided in Bhojwani v Attorney General.... The Court is therefore satisfied that the appeal should be allowed and that the Order should be quashed upon the sole ground that the Royal Court failed to take into account the fact that the appellant was balance sheet insolvent because his liabilities substantially exceeded his assets."
9. The use of the expression "sole ground" reflects the fact that the Court had rejected the other contentions advanced by the appellant on the appeal. One of those contentions is relevant for present purposes. It had been argued on behalf of the Appellant that the loss caused to Mrs Cotrel was not identifiable, so that the Royal Court had been wrong to start from the position that she was entitled to compensation in the amount of £100,000. As to that, the Court of Appeal said this:-
"In this case, we are satisfied that Mrs Cotrel's loss was caused by the conduct of the appellant for which he was convicted and that the amount of that loss is £100,000. That has been demonstrated as having occurred because of the reckless statement of the accused. We regard that as enough to justify the making of a compensation order in the sum of £100,000 (leaving aside any issue of an additional amount to allow for the effects of inflation which was sought by the Attorney General but not awarded by the Royal Court)."
Although these comments were made in the context of dismissing a possible ground of appeal, it seems to us that they are of obvious relevance in determining what loss has resulted from the offence. We therefore start from the position that the loss to Mrs Cotrel in respect of which we may make a compensation order is £100,000.
10. The power to make a compensation order is contained in the 1994 Law. Para (1) of Art 2 permits a court following conviction to "make an order (in this Law referred to as a "compensation order") requiring the person to pay compensation for any personal injury, loss or damage resulting from that offence...". Art 2 further states:-
"(2) ... a compensation order shall be of such amount as the court considers appropriate, having regard to any evidence and any representations that are made by or on behalf of the offender, any person who appears to the court to have suffered any personal injury, loss or damage resulting from the offence for which the offender has been convicted or the Attorney General...".
11. Art 3 refers to the powers of the court where it is making a compensation order. Para (1)(a), (b) and (c) permit the court respectively to allow time for payment, to direct that the amount may be paid by instalments, and to "fix a term of imprisonment (in this Law referred to as a "default sentence") which the person liable to make the payment is to undergo if any sum which the person is liable to pay is not duly paid or recovered." By para (2)(b), a default sentence in a case such as the present shall not exceed twelve months.
12. Art 3 further provides for present purposes:-
"(5) In determining whether to make a compensation order against any person, and in determining the amount to be paid under such an order, the court shall have regard to the person's means so far as they appear or are made known to the court."
13. We have received evidence from the appellant as to his means. Furthermore, representations were made to us on his behalf and on behalf of the Attorney General with reference, inter alia, to such evidence. We consider these below, and have had regard to them when considering whether or not to make a new compensation order, and if so what would be the appropriate amount of compensation.
14. The evidence as to the appellant's means that was available to the Court of Appeal on the previous occasion was supplemented before us by two further affidavits, sworn by the appellant on 6 November 2013 and 28 January 2014. Some additional information was given to us in the course of oral argument. Although comments were made by Crown Advocate Jowitt for the Attorney General about the contents of these affidavits, he did not seriously dispute that the appellant's financial position was broadly as set out in them. We consider separately the capital position and the income position.
15. The capital position:-
(i) On the information available to the Court of Appeal on the previous occasion, the appellant's liabilities exceeded his assets to the extent of between £140,000 (on the basis of what was described as the Sowden Report) and £230,000 (on the basis of the appellant's evidence). Included in the amount of his liabilities was a secured debt of about £550,000 owed to the appellants' advocates Carey Olsen and representing the costs of his unsuccessful defence of the charges against him. The Court of Appeal held that it was proper to take that liability into account.
(ii) From the material available to us, it appears that the appellant's only substantial capital asset is his matrimonial home in Jersey. It is on the market at £545,000; but a sale at £525,000 that was in contemplation at the time of the previous Court of Appeal hearing fell through, and the only offer made since then (of £425,000) was rejected. There are three charges on the property: one in favour of NatWest of about £196,000, a second in favour of Local Loans Ltd of about £39,000, and a third securing the Carey Olsen liability of about £550,000. On the assumption that the ultimate sale price is £525,000, there will be a shortfall of about £265,000 (taking into account agents' fees of £5,250). Carey Olsen will be an unsecured creditor for the whole of this amount. In addition, the appellant has a Jersey tax liability of a little under £12,000 which will be payable by the end of June 2014, and an outstanding liability in respect of Legal Aid payments of £17,962.07. He has no other assets of any substantial value: although he does own a plot of land in the UK, it is effectively valueless. He intends to live in a flat owned by his wife, also in the UK. It has an estimated value of £210,000.
(iii) It is accordingly clear that the appellant remains balance-sheet insolvent.
16. The income position:-
(i) The appellant's income is wholly derived from pension payments. He receives a Jersey occupational pension of £3,706.75 gross per month, and an occupational pension from Buckinghamshire County Council and a Jersey old age pension which together amount to £865.00 per month gross. This makes a total of £4,571.75 gross per month. These payments are now subject to UK tax; the appellant estimates that he will be left with a monthly income after tax of £3,554.95.
(ii) The appellant is aged 66. He has little prospect of obtaining further employment, because of his conviction for fraud and because he cannot obtain insurance to practise in Chinese medicine (which he is otherwise qualified to do). He is nevertheless trying to find a job.
(iii) The appellant has the following regular monthly expenditure: £710 on food and household items; £330 on utilities, including telephone; £140 on insurances; £396 on service charge and rates; £645 on motoring expenses; and £146 on pets. The total is £2367, meaning that the appellant's monthly income exceeds his monthly expenditure by £1187.95.
(iv) Although we accept that these figures give a sufficiently accurate picture of the appellant's expenditure to provide a proper basis for the Court's decision, we make two specific comments about them. First, they contain no provision for contingencies, so some of the apparent surplus should be regarded as necessary to deal with the unexpected. Secondly, the expenditure on motoring and travel strikes us as high. We were told that the appellant and his wife have two cars, which they need so that he can look for a job and so that she can care for the appellant's father-in-law. The travelling expenses also relate to the need to look after the appellant's father-in-law. Although we see the convenience of having two cars, it seems to us that the appellant may have to reconcile himself to greater use of public transport in his current circumstances. Having regard to these two competing considerations, we think it reasonable to treat the appellant as having uncommitted after-tax income of £1000 a month.
17. It is clear that the appellant's surplus income is insufficient to allow him to discharge the balance of his indebtedness remaining after sale of the matrimonial home. That indebtedness is likely to be of the order of £300,000: to pay it off, without interest, at the rate of £1,000 a month would take 25 years.
18. It is not known what attitude the appellant's unsecured creditors, in particular Carey Olsen, will take to this situation. One possibility is that they will seek to bankrupt the appellant. If the appellant were to be made bankrupt in Jersey, his Jersey occupational pension would be excluded from the bankrupt estate by virtue of regulation 2 of the Bankruptcy (Désastre)(Pensions)(Jersey) Regulations 2006. It is possible that the Viscount would also agree that the other pensions should be excluded under regulation 3. If the appellant were to be made bankrupt in the UK, it is likely that the official receiver would enter into a qualifying agreement with the appellant to limit the extent to which his pension income formed part of his bankrupt estate: Occupational and Personal Pension Schemes (Bankruptcy) (No. 2) Regulations 2002, regulations 4 and 6. It is possible that the Jersey tax authorities would be able to bypass these provisions by deducting up to 20% of the appellant's monthly pension at source until any tax arrears were discharged; but, whether that is so or not, it might be thought that the unsecured creditors would see little advantage in bankrupting the appellant.
19. Although in his written submissions Advocate Jones's position was that the Court should consider the appellant's means and if appropriate make a compensation order properly allowing for payment over three years, in his oral submissions he took a different line. He contended that the figures demonstrated that the appellant was not merely balance-sheet insolvent but incapable of paying his debts as they fell due, and that an order requiring a cash-flow insolvent debtor to pay anything on pain of imprisonment must necessarily be oppressive. Any surplus income should be used to pay existing creditors, and there was no justification for ordering payments to Mrs Cotrel to the prejudice of those creditors. Compensation orders were a substitute for a civil right of action: but Mrs Cotrel had brought and abandoned civil proceedings against the appellant, and so could not be regarded as having an existing right of action. There was a danger that unsecured creditors who might not otherwise seek to make the appellant bankrupt would do so if they saw that the cream was being taken off the top of his income to satisfy a compensation order. In the circumstances, it would not be appropriate to make any compensation order.
20. As a fall-back position, Advocate Jones submitted that it would be wrong in principle to make a compensation order extending beyond three years. He relied on AG v Cardoso  JRC 044, in which the Royal Court, when making a compensation order, "noted Archbold at paragraph 5-426 which makes it clear that the maximum period that the Court can properly allow for the payment of compensation is three years".
21. Crown Advocate Jowitt acknowledged that the previous decision of this Court made it inappropriate to order payment of a substantial capital sum, and his submissions therefore focused on the appellant's income position. He suggested that the primary question was how much the appellant could afford to pay. He made various criticisms of the financial information provided by the appellant, and submitted that the true figure for the appellant's uncommitted monthly income was nearer £2,000. Whether that was so or not, the appellant could afford to pay something in the region of £500 to £750 a month over five years. There was no obstacle in principle to an order lasting longer than three years. The Court was exercising a summary criminal jurisdiction: it should take the view that the other creditors must look after themselves.
22. As to the previous proceedings brought by Mrs Cotrel, their abandonment had been brought about by uncertainty over the amount of her loss. That was because she had been given shares in return for her investment, and there was an issue as to their valuation. That issue had now been resolved by the previous Court of Appeal decision, and there was no reason to regard Mrs Cotrel's cause of action as extinguished.
23. The 1994 Law directs us to "have regard" to the appellant's means in considering whether or not to make a compensation order and, if so, in what amount. It does not make those means a conclusive or overriding consideration. The statutory criterion is appropriateness; in determining what is appropriate, it is plainly relevant to take into account the loss that the appellant has caused. The loss caused to Mrs Cotrel was £100,000. There is no realistic prospect of the appellant compensating her in that sum, or in any sum close to it; but it nevertheless seems to us that the appellant should be required to pay as much of that sum as it is realistic to suppose he can afford.
24. We do not accept that the appellant's unsecured indebtedness means that he cannot afford to pay anything. As we have said, we do not know what the attitude of the unsecured creditors will be; but we are not prepared to assume that they would regard it as being in their best interests to bankrupt the appellant, or that, if they did seek to bankrupt him, his income would be substantially diminished. As we see it, the appellant has disposable after-tax income of £1000 per month; and we think it would be appropriate to make an order requiring him to pay half of that amount to Mrs Cotrel. In our view, it would be wrong to regard such an order as preferring her over the unsecured creditors. Mrs Cotrel has an existing entitlement to recover from the appellant the full amount of the loss that he has caused her. We accept that the reason for her abandoning the civil proceedings she previously brought was uncertainty over the value of the shares that she had obtained; and, in circumstances where the Court of Appeal has determined that the true amount of her loss is £100,000, we see no obstacle in principle to her advancing a claim of that amount. In that sense, she is already a creditor of the appellant, with a debt predating those of the other unsecured creditors. The compensation order we propose is to be regarded as a partial substitute for her civil right of action.
25. On the footing that the appellant is to pay £500 a month by way of compensation, it remains to determine for how long that liability should continue. We do not accept that it would be wrong in principle to require him to make payments for longer than three years. As Crown Advocate Jowitt pointed out, since the decision of the Royal Court in Cardoso the matter has been considered again in the United Kingdom. In R v Ganyo  1 Cr App R (S) 108, the English Court of Appeal said this in upholding compensation orders payable over eight years and five and a half years:-
"In our view neither Olliver nor Yehou are authority for a bright line rule imposing an outer limit for the period of repayment of a compensation order. Under s.130(4) of the Powers of Criminal Courts (Sentencing) Act 2000 a court making a compensation order must ask whether it is appropriate. That requires an enquiry into whether the compensation order will be oppressive or an undue burden given the offender's means, whether realistically the offender can be expected to repay in the terms proposed and whether the compensation order accords with the nature of the offence and the nature of the offender".
The relevant statutory provisions there referred to were identical to those contained in the 1994 Law. We consider that the remarks of the English Court of Appeal apply also in this jurisdiction. In our judgment, a period of five years will be neither oppressive nor an undue burden on the appellant; and we think that realistically he can be expected to repay at the rate and over the period we have identified, given his means and age. We note that Art 7 of the 1994 Law permits the appellant to seek a review of the compensation order if he suffers a substantial and unexpected reduction in his means.
26. In all the circumstances, we think that the appropriate figure to order by way of compensation to Mrs Cotrel is £30,000, payable by equal monthly instalments of £500 commencing on 28 February 2014. In default of payment, we impose a sentence of four months' imprisonment.
27. After we had announced our decision, but before this judgment could be delivered, Mrs Cotrel sadly died. We have not received any submissions in relation to the effect of this event, but in our view it makes no difference to our order. In Holt v DPP  2 Cr App R (S) 314 the English Divisional Court held that it was no obstacle to the making of a compensation order that the victim had died before the order was made. The rationale was that the compensation order was a substitute for the victim's civil right of action, which would itself have survived the death. That rationale seems to us to apply equally in the present case, with the result that the benefit of the compensation order we have made passes to Mrs Cotrel's estate.
Criminal Justice (Compensation Orders)(Jersey) Law 1994.
Court of Appeal (Jersey) Law 1961.
Investors (Prevention of Fraud)(Jersey) Law 1967.
Bankruptcy (Désastre)(Pensions)(Jersey) Regulations 2006.
Occupational and Personal Pension Schemes (Bankruptcy) (No. 2) Regulations 2002.
R v Ganyo  1 Cr App R (S) 108.