APPEAL COURT, HIGH COURT OF JUSTICIARY
|
Lord Eassie
Lord Mackay of
Drumadoon
Lord Coulsfield
|
[2008] HCJAC34
Appeal Nos: XC899/06 & XC898/06
OPINION OF LORD EASSIE
in
(1) APPEAL AGAINST
SENTENCE
by
MICHAEL GEORGE VOUDOURI
Appellant;
against
HER MAJESTY'S ADVOCATE
and
(2) APPEAL
by
TRUST UNION LLC
First Minuter;
in the Petition of
HER MAJESTY'S ADVOCATE
against
MICHAEL GEORGE VOUDOURI
Respondent;
and
TRUST UNION LLC AND OTHERS
Minuters
_______
|
Act: Belmonte, Solicitor
Advocate; Belmonte & Co (for Appellant)
Act: Targowski QC
et Ms M Hughes; Trainor Alston, Coatbridge (for First Minuter)
Alt: Di Rollo QC et B
Divers; Crown Agent
2 July 2008
[1] These appeals
are concerned with a confiscation order made by the sentencing judge under
Section 1 of the Proceeds of Crime (Scotland) Act 1995 - "the Act" - subsequent
to the appellant, Michael George Voudouri, having pled guilty to a
contravention of Section 72(1) of the Value Added Tax Act 1994. The circumstances of the case; the material
parts of the legislation; and the relevant passages of the Opinion delivered by
the sentencing judge following the proof heard by him in respect of the
prosecutor's statement, the answers thereto and the minutes lodged by the
minuters, are all set out by Lord Coulsfield in his Opinion to which I
gratefully refer.
[2] The central
issue at the proof before the sentencing judge was whether the house in which
Mr Voudouri and his family were living fell within the relevant
"realisable property", as defined in the Act, for the purposes of the making of
the confiscation order. Putting matters
very shortly, the title to the house is held by the minuter Trust Union LLC, a
company incorporated in the state of Delaware, the sole shareholder in which at
the time of the proof was Mr Voudouri's father-in-law,
Mr Nikolas Savva. The missives
for the purchase of the house were concluded in the name of Trust Union, the matter
being negotiated by Mr Voudouri who held a power of attorney from Trust
Union granted some time before the negotiation of the missives. Mr Savva lived in another dwelling in
the locality owned by his daughter, Mrs Voudouri, but it was accepted that the
dwelling had been bought for Mrs Voudouri by her husband and, as a gift by
him, fell within the concept of the realisable property. The case advanced by the Crown before the
sentencing judge as respects the house did not however proceed upon the basis
that the house represented a gift by the offender, Mr Voudouri, to Trust
Union which was thus "caught" by the provisions of Section 5 of the
Act. The case for the Crown proceeded
solely on the basis of Section 4(1)(c) of the Act.
[3] The terms of
Section 4 are set out by Lord Coulsfield in his Opinion but for
convenience I quote here the terms of the Section 4(1).
"(1) In
this Act 'realisable property' means, subject to sub-section (2) below -
(a) the whole estate wherever situated of a
person -
(i) against whom proceedings have been
instituted for an offence to which this Part of this Act applies; or
(ii) in respect of whom a restraint order has
been made by virtue of Section 29(3) of this Act;
(b) the whole estate wherever situated of a
person to whom any person whose whole estate is realisable by virtue of
paragraph (a) above has (directly or indirectly and whether in one
transaction or in a series of transactions) made a gift caught by this part of
this Act, or as the case may be, an implicated gift;
(c) any other property in the possession or
under the control of a person mentioned in paragraph (a) or (b) above; and
(d) any income or estate vesting in a person
mentioned in a paragraph (a) or (b) above."
Since paragraph (a) embraces the "whole estate" of the
person against whom the criminal proceedings have been instituted, or against
whom a restraint order has been made (a restraint order may be made in respect
of a person against whom it is proposed to institute criminal proceedings - see
Section 29(3) of the Act) and since paragraph (b) similarly embraces the "whole
estate" of the donee of a gift, it follows
that paragraph (c) can only be concerned with property owned by a
third party who has given possession or control of it, as the case may be, to
either the person subject to the prosecution or restraint order or to the donee
in question. We were referred to certain
passages in volume 1 of the report by the Scottish Law Commission which
preceded enactment of the Act - Scot Law Com No. 147 Report on Confiscation and Forfeiture. From these passages it is apparent that the
Scottish Law Commission intended a very broad definition of realisable
property, which might indeed embrace property owned by such a third party. Thus, largely in the context of interim measures in the form of the
proposal for restraint orders, at paragraph 4.9 the Commission says:
"A restraint order may have to be
made as a matter of urgency where the risk of the disappearance of property
reasonably believed to be the proceeds of crime is so great that its immediate
preservation is necessary pending detailed investigations. Indeed in certain circumstances it may be
necessary to make a restraint order even before proceedings have been brought. In such cases time may well not permit a
careful appreciation of exactly how much of the property in the possession or
under the control of the alleged offender lawfully belongs to him. Secondly, in cases where the benefit he has
obtained in connection with the offence is reasonably estimated to exceed the
value of his assets, the policy of depriving him of any benefit from his crime
appears to require that as much property as possible should be made available
to satisfy a confiscation order.
Thirdly, it is necessary to prevent an offender from evading a confiscation
order by disposing of assets before a restraint order is made. The definition should therefore extend to a
person to whom the offender has made a gift; and, to take account of urgent
situations, it should comprehend not only the recipient's own property but also
any property in his possession or under his control."
[4] However it is
also clear that the Scottish Law Commission did not have in mind that the
innocent third party owner should suffer loss.
In the succeeding paragraph, paragraph 4.10 the Commission states:
"We should say at once, however, that
although we propose that 'realisable property' should be defined in broad
terms, it seems to us most unlikely that the property of an innocent third
party would be used to satisfy a confiscation order."
The Commission then goes on to discuss certain practical ways
in which the property may not remain within the control of the offender, and
the possibility of application being made to vary a restraint order.
[5] In my view it
can hardly have been the legislative intention that an innocent third party
should be deprived of his property, simply because it was in the possession or
control of either the offender or someone to whom the offender had made a gift
"caught" by the Act. For example the
offender or the donee might be the tenant of a house, or the hirer of a car or
other item of corporeal moveable property.
But, in its terms, Section 4(1)(c) would embrace that owner's property
simply by virtue of the fact that it was in the possession or control of the
offender or the donee. So the search
must be directed to identifying the means whereby the statute mitigates the
effect of Section 4(1)(c) by providing the necessary protection for the
third party.
[6] Running
through much of the submissions for the appellants was the assumption that such
protection could and should be given at the stage of assessing the realisable
property and making the confiscation order.
For a time I wondered whether it might be possible to find some means of
distinguishing "realisable property" at the preliminary and interim stages, which involve the making
of a restraint order by the civil court, from the concept of "realisable
property" at the stage at which the sentencing court has to assess its
amount. I have however come to the
conclusion that one cannot give to the definition of "realisable property"
different meanings depending upon whether the civil court is engaged at an interim stage or the criminal court is
engaged at the sentencing stage. My
conclusion in this respect receives confirmation from examining volume 2
of the Commission's report which contains the draft Bill; the equivalent clause
to Section 4 of the Act is in all respects identical. The explanatory notes to the Bill make plain
that in the context of what is now Section 4(1)(c) no different interpretation
of this paragraph of Section 4(1) is contemplated. In other words, in the scheme of this
legislation, third party protection does not enter into the assessment of the
"realisable property".
[7] The term
"confiscation order" employed in the Act has a possible tendency to mislead
insofar as it might initially suggest the taking away of specific assets. But in truth a confiscation order made under
the Act does not in itself appropriate ownership of any assets. No property is escheat to the Crown. A confiscation order is essentially an
additional monetary penalty upon the offender.
Unless an administration order is made, the means of enforcement of that
penalty is assimilated to a fine by virtue of Section 14 of the Act, which,
subject to certain modifications, applies the provisions of the Criminal
Procedure (Scotland) Act 1995 relating to fines.
[8] The making of
a confiscation order has possible effect against the property of the third party
(entering into the notion of realisable property in terms of
Section 4(1)(c)) only if an administrator is appointed in terms of
Section 34 of and Schedule 1 to the Act. The provisions of the Act respecting
administration orders are perhaps not the most lucid and straightforward. But (setting aside the position in respect of
forfeiture orders with which one is not concerned in the present case) the
appointment of an administrator may be made only as respects property subject
to a restraint order (paragraph 1of Schedule 1). Provision is made by Section 31 of the
Act for any person having an interest, or the prosecutor, to apply to the civil
court for variation or recall of a restraint order. Further, a restraint order subsists, in the
circumstances of the present case, and in terms of Section 29(6)(f), until
the confiscation order "is satisfied (whether by payment of the amount due
under the order or by the accused serving imprisonment in default)". So, in the event of the property of the third
party being subject to a restraint order, the third party owner may seek
release in the civil court, notwithstanding the conviction of the offender,
until such time as the confiscation order has been satisfied. As Lord Coulsfield points out,
Section 16(4) makes clear that, in addition to those other steps which the
third party may take, the administrator's powers must be exercised compatibly
with the interests of the third party owner.
It may also be noted that paragraph 10 of Schedule 1 makes provision for
the possibility of compensation being paid to the owner, if his property has
been realised by the administrator.
[9] So, put
shortly, although the provisions in the Act respecting the protection of the
third party owner of property coming within the terms of the "possession or
control" part of the definition of realisable property in terms of
Section 4(1)(c) may not be immediately obvious, a reading of the whole Act
enables them to be discerned. I
therefore conclude that, as respects the determination of the extent of the
realisable property in the present case, the decision of the sentencing judge
cannot be faulted. The contention before
him was essentially that only the owner of an asset could have control of it
and accordingly Mr Voudouri, not being its owner, could not be in control
of the house. A submission to similar
effect was also advanced to us at one stage in the argument. I reject that contention. Apart from the fact that, as the sentencing
judge points out, Section 4(1)(c) refers to "possession or control" (emphasis added), if ownership were the determinative
factor in that "control", all would be covered by the preceding paragraphs
which embrace the whole estate of the persons in question and
paragraph (c) would be otiose. For
the reasons already indicated I consider that issues of third party protection
do not arise at the stage of determining the amount of the realisable property
under this legislative scheme and in my view the sentencing judge properly
applied the statutory definition.
[10] In these
circumstances the appeal by Trust Union LLC must be refused. And given that the sentencing judge has
correctly applied the definition of "realisable property" I do not consider
that he can be said to have erred in making a confiscation order of an equivalent
amount. It was agreed that the total
amount by which the appellant Mr Voudouri had benefited from his crime
amounted to £3,041,114.07, thus greatly exceeding the amount by which the Crown
was able to identify as realisable property.
In light of the amount of that benefit and the other circumstances
disclosed to him, the sentencing judge considered that it would be reasonable
to infer that the ultimate source of the funds for the purchase of the house
was Mr Voudouri. It was not
submitted that such an inference could not properly be drawn and no evidence
was led at the proof by either appellant to rebut that inference by
demonstrating that the funds for the purchase of the house had a source other
than the benefit flowing from Mr Voudouri's criminal activities. In these circumstances, and for the reasons
indicated by Lord Coulsfield, I consider that the appeal by
Mr Voudouri should also be refused.
[11] I accordingly
move your Lordships to refuse these appeals.
APPEAL COURT, HIGH COURT OF JUSTICIARY
|
Lord Eassie
Lord Mackay of
Drumadoon
Lord Coulsfield
|
[2008] HCJAC34
Appeal Nos: XC899/06 & XC898/06
OPINION OF
LORD MACKAY OF DRUMADOON
in
(1) APPEAL AGAINST SENTENCE
by
MICHAEL GEORGE VOUDOURI
Appellant;
against
HER MAJESTY'S ADVOCATE
and
(2) APPEAL
by
TRUST UNION LLC
First Minuter;
in the Petition of
HER MAJESTY'S ADVOCATE
against
MICHAEL GEORGE VOUDOURI
Respondent;
and
TRUST UNION LLC AND OTHERS
Minuters
_______
|
Act: Belmonte, Solicitor
Advocate; Belmonte & Co (for
Appellant)
Act: Targowski QC
et Ms M Hughes; Trainor Alston, Coatbridge (for First Minuter)
Alt: Di Rollo QC et B
Divers; Crown Agent
2 July 2008
[12] I agree with your Lordship in the chair
that for the reasons set out in your Opinion and in the Opinion of Lord
Coulsfield these appeals should be refused.
[13] As Lord Coulsfield points out in his
Opinion, the need to realise the property at 34 Kenilworth Road, Bridge of Allan will only arise if the confiscation order made
against the appellant remains unsatisfied. In that event it would be for the
administrator appointed under the provisions of schedule 1 to the
1995 Act to realise the property. If the administrator required to do so,
it would be at that stage that any rights and interests of third parties, such
as the first minuter, could be taken into account and resolved (see Regina
v Ahmed and Another,
[2005] 1 WLR 122, and In re Norris [2001] 1
WLR 1388).
APPEAL COURT, HIGH COURT OF JUSTICIARY
|
Lord Eassie
Lord Mackay of
Drumadoon
Lord Coulsfield
|
[2008] HCJAC34
Appeal Nos: XC899/06 & XC898/06
OPINION OF LORD COULSFIELD
in
(1) APPEAL AGAINST
SENTENCE
by
MICHAEL GEORGE VOUDOURI
Appellant;
against
HER MAJESTY'S ADVOCATE
and
(2) APPEAL
by
TRUST UNION LLC
First Minuter;
in the Petition of
HER MAJESTY'S ADVOCATE
against
MICHAEL GEORGE VOUDOURI
Respondent;
and
TRUST UNION LLC AND OTHERS
Minuters
_______
|
Act: Belmonte, Solicitor
Advocate; Belmonte & Co (for
Appellant)
Act: Targowski QC et Ms M
Hughes; Trainor Alston, Coatbridge (for
First Minuter)
Alt: Di Rollo QC et B
Divers; Crown Agent
2 July 2008
[14] The appellant,
Michael George Voudouri, pled guilty on 11 May 2004 to a contravention of
Section 72(1) of the Value Added Tax Act 1994. This charge was, in substance, one of
fraudulent evasion of value added tax carried out by means of a complex scheme
known as a carousel fraud. On 8 June
2004,
Voudouri was sentenced to 4 years imprisonment. On the same day, the Lord Advocate served on
him a statement under Section 9 of the Proceeds of Crime (Scotland)
Act 1995 specifying various items of property which were claimed to be the
proceeds of the appellant's criminal conduct, and which were also described as
realisable property. The Lord Advocate
sought an order for confiscation of all the items of heritable and moveable
property specified in the statement. The
motion for confiscation was opposed by the appellant, who lodged answers. In addition, minutes were lodged on behalf of
Trust Union LLC and of the appellant's wife and daughters. For the purposes of this appeal, we are only
concerned with one item of property, a heritable property at 34 Kenilworth
Road, Bridge of Allan, Stirling, the title to which is held in the
name of Trust Union LLC.
[15] A proof was
held on the prosecutor's statement and the answers. It was agreed that the
total amount of the benefit to the appellant from the fraudulent evasion of VAT
was £3,041,114.07. It was further agreed
that his realisable assets, apart from the property at 34 Kenilworth Road,
amounted to £392,942.34. The
property at Kenilworth Road was valued at £900,000, and, having heard the
proof, the judge held that that property should be included among the
appellant's realisable assets and made an order in favour of the
Lord Advocate requiring the appellant to pay the sum
of £1,292,942.34, in terms of Section 1(1) of the Proceeds of Crime
(Scotland) Act 1995. Both the
appellant and the first minuter have appealed against that decision.
[16] Section 1
of the 1995 Act empowers the court to make a confiscation order requiring
a convicted person to pay such sum as the court thinks fit subject to the
condition, set out in sub-section 6, that in the case of an offence which is
not a drug trafficking offence, the sum must not exceed the lesser of the
benefit from the commission of the offence, and the amount that might be
realised at the time the order is made.
Realisable property is defined in Section 4 which provides:
"(1) In this Act 'realisable property' means,
subject to sub-section (2) below -
(a) the whole estate wherever situated of a
person -
(i) against whom proceedings have been instituted
for an offence to which this part of this Act applies; or
(ii) in respect of whom a restraint order had
been made by virtue of Section 29(3) of this Act;
(b) the whole estate wherever situated of a
person to whom any person whose whole estate is realisable by virtue of
paragraph (a) above has (directly or indirectly and whether in one
transaction or in a series of transactions) made a gift caught by this part of
this Act, or as the case may be, an implicative gift;
(c) any property in the possession or under
the control of a person mentioned in paragraph (a) or (b) above; and
(d) any income or estate vesting in a person
mentioned in paragraph (a) or (b) above.
(2) Property is not realisable if -
(a) held on trust by a person mentioned in
sub-section (1)(a) or (b) above for a person not so mentioned;
(b) a suspended forfeiture order is in force
in respect of the property; or
(c) it is, for the time being, subject to a
restraint order made in respect of other proceedings.
(3) For the purposes of this part of this
Act the amount that might be realised at the time a confiscation order is made
in respect of a person is -
(a) in relation to an offence which is not a
drug trafficking offence, subject to Section 7(5) of this Act, the total
value at that time of all his realisable property, and of all gifts caught by
this Part which have been made by him, less any amount due by him at that time
in respect of any compensation order under Section 249 of the
1995 Act made before the confiscation order; and
(b) in relation to a drug trafficking
offence the total value at that time of all his realisable property and all
implicative gifts which have been made by him.
(4) In assessing the value of realisable
property (other than money) of a person in respect of whom it proposes to make
a confiscation order, the court shall have regard to the likely market value of
the property at the date on which the order would be made; but it may also have
regard to any security or real burden which would require to be discharged in
realising the property or to any other factors which might reduce the amount
recoverable by such realisation."
[17] Sub-sections 5
and 6 of Section 4, deal with the effect of sequestration or
bankruptcy procedure and with implicative gifts and are not relevant to this
appeal. The Act contains provisions, in
Section 28 and following, concerning the making of restraint orders, the
effect of which is to prevent a person dealing with property covered by the
order, and with the variation and recall of such orders. Section 34 provides that Schedule 1
of the Act is to have effect as regards the appointment of administrators under
the Act and Schedule 1 inter alia
empowers the court, where a confiscation order has been made, to appoint a
person to realise the property in accordance with the court's directions and
confers various further rights and powers on any person so appointed, subject
to the direction of the court.
Section 16 of the Act, which, in terms of sub-section 1,
applies to the court's powers in relation to realisable property, provides, inter alia,
"(2) Subject to the following provisions of
this section, the powers shall be exercised with a view to making available for
satisfying the confiscation order, or as the case may be, any confiscation
order that may be made in the case of a person mentioned in
Section 4(1)(a) of this Act the value for the time being of realisable
property held by any person by realisation of such property.
(3) In the case of realisable property held
by a person by virtue only of having received a gift made directly or
indirectly by the accused which is caught by this part of this Act, the powers
shall be exercised with a view to realising no more than the value of the gift
as assessed under Section 7 of this Act.
(4) The powers shall be exercised with a
view to allowing any person other than a person mentioned in paragraph (a) and,
in relation to a drug trafficking offence, paragraph (b) of
Section 4(1) of this Act or the recipient of any such gift to retain or
recover the value of any property held by him."
[18] The
circumstances in which the property in issue was acquired and the title taken
in favour of the first minuter are set out in detail in the judgment of the
judge who heard the proof. The property,
a former manse, was advertised at an upset price of £390,000 early
in 2002. The appellant viewed the
property and later put in an offer. The
judge held that it was clear to the seller's solicitors that, in their
understanding, they were dealing with him personally in his attempt to buy the
property. At a later stage, however the
appellant told the solicitors that he would be making an offer on behalf of the
first minuter. On 25 February
2002 an
offer to purchase the property for £600,000 was received in the name of
the first minuter. The seller's
solicitors sought and received confirmation from the solicitors who made the
offer that the offer was the same as that which they had been discussing with
the appellant. Again, the judge found
that while the offer was in the name of the first minuter, the seller's
solicitors continued to be of the understanding that the offer came from the
appellant. This was confirmed by a letter from the solicitors acting in the
purchase to the seller's solicitors enclosing the principal disposition for
signature which designated the appellant as the purchasing client. Further letters written in the course of
carrying out the purchase were to the same effect. Evidence was given by Mr Moffat, a
partner in the firm of solicitors acting
for the purchaser, that the appellant was, throughout, the client for whom they
were acting, and this was confirmed by his files. The disposition delivered to the purchasing
solicitors was dated 21 March 2002 and the title was disposed in favour
of the first minuter, who were described as being incorporated in the State of Delaware and having a registered office
there. The instructions continued to be
given by the appellant but at some stage the solicitors became aware that there
was in existence a power of attorney by the first minuter in favour of the
appellant. This document bore to have
been granted on 21 January 2002 and gave the appellant wide powers
of management.
[19] After the
delivery of the disposition, the appellant took up residence in the house, with
his wife and daughters. Subsequently, on
15 September 2004, he paid for buildings and contents
insurance in the sum of £3,080.11.
There was no other evidence about any financial arrangements which may
have existed between the appellant and the first minuter. It is also part of the findings that in 2000,
before the purchase of 35 Kenilworth Road, the appellant had purchased a
property in Alloa. In this case the
title had been taken in favour of the appellant's wife and the purchase price
was £74,000. It was accepted in
these proceedings, however, that that property fell to be included in the
appellant's realisable property at a value of £130,000. It appears to be presently occupied by
Mr Nicholas Savva, who is the appellant's father-in-law.
[20] On 10
September 2004, letters of request were issued to the competent authorities in
the USA seeking assistance in investigation of the appellant's money laundering
activities and in particular seeking assistance in regard to any documentation
concerning the first minuter. By letter
dated 3 March 2005 from the US Department of Justice, it was made clear
that the law of the State of Delaware places only limited requirements on
corporations registered there in regard to the provision of information about
their activities. Such a corporation
must have a registered office and appoint a registered agent but need not
specify the nature of its business nor supply any information about its
principals, place of business or specific business activities. There is no requirement that the principals
of any such corporation should ever visit Delaware and it is not normal for the agents
for such corporations to have personal knowledge of the individuals involved in
the business. The only information which
became available about the first minuter indicated that, from 5
October 2001,
Nicholas Savva was the principal officer and sole member of the first
minuter. No trading records or accounts
of this company were produced. The
investigations carried out on behalf of the Lord Advocate further revealed that
from 2001 to 2004, the appellant claimed that his only income in the UK was the sum of £4,000 yearly
from property rental. Mr Nicholas
Savva has made no income tax returns and has not made any application for tax
credits during the same period and since 2001 has received only a
retirement pension.
[21] Before the
judge, the Crown and the opposing parties were in agreement that the issue as
to making a compensation order had to be considered in five stages. The first, was to assess the amount of
benefit to the appellant from his course of offending: the second, the amount of his realisable
property: the third, the lower of these
two amounts: the fourth, whether any
disputed items should fall within the definition of realisable property: and
the fifth, whether, if any asset fell within the definition of realisable
property, the court should exercise its discretion to decide the amount of the
value of the property which should be added to the total. Having set the scene in that way the judge
said, at paragraph [18] of his report,
"Whether any disputed asset falls
within the realisable property of an accused in any particular case depends
upon the terms of Section 4(1) of the Act cited above. The terms of Section 4(1)(c) read together
with Section 1(a) provide realisable property includes any (other)
property in possession or under control of a person convicted, whether in
solemn or summary proceedings. If
therefore it is shown that the house at 34 Kenilworth Road was in the possession
or control of the appellant at the time the prosecutor's statement was served
on him, that house would be liable to confiscation."
[22] That approach
was not challenged by the defence. The
Crown accepted, further, that the onus of proof was on the Lord Advocate
to establish that the house was under the possession and control of the
appellant and that it was necessary to prove that proposition beyond reasonable
doubt. I do not think it is necessary to
rehearse the submissions of the parties before the judge. The effect sufficiently appears from the
decision. The judge said,
"I came to the conclusion that in
this matter the submission of the respondent was to be preferred. The position of the first minuter depended
essentially on the question of ownership as the prime, and indeed sole,
criterion for determining whether a particular asset should fall within the
category of realisable assets. That is
clearly not the case. The terms of the
statute, and particularly those of Section 4(1) (c), define possession and
control of an asset to be the determining characteristic of what should be
included in the realisable property of an accused which is subject to
confiscation. No mention is made of
ownership. The principal reason for that
is obvious. It would be the easiest of
matters for those who have profited from criminal activities to transfer the
proceeds of that activity into the ownership of another in order to avoid the
confiscation process. On the other hand,
the Act provides specifically that when assets remain under the control and
possession of the offender, they can be recovered under the terms of the Act
irrespective of the identity of the title holder of those assets. No doubt the identity of the title holder may
be of significance, in one way or another, in many cases. However, essentially what the Act seeks to do
is to allow the prosecutor to recover the proceeds of criminal behaviour, and
not simply those assets which remain in the physical ownership of the
criminal. It would be naive to assume
that all such proceeds would remain in the nominal ownership of the criminal,
and repugnant to idea of justice that criminals could put the proceeds of their
activities completely outwith the prospect of recovery merely by transferring
such assets to others. It is therefore
entirely appropriate that the statute should seek to define possession and
control as the determining factor in what can and cannot be recovered in the
wake of criminal activities, rather than the question of ownership.
In
the present case, there was no direct evidence before the court that the
appellant laundered any of the proceeds of his criminal activities to any other
party for the purpose of acquiring the property at Kenilworth Road. The money for this purchase, it was agreed,
came from the appellant's father-in-law, who forwarded funds to the first
minuter in circumstances which, as I understand the submissions by counsel for
the first minuter, allowed Trust Union LLC to purchase the home in question. But even if it cannot be completely
demonstrated that the purchase price for Kenilworth Road came directly from the
appellant, the proven fact (which I find established beyond reasonable doubt)
is that he had possession and control over this property, and that in itself justifies
the conclusion that this property should fall within the appellant's realisable
assets. It does not therefore matter
that there is no manifest and direct link between the appellant and the
provision of the purchase funds. The
mere fact that possession and control of the property is proved in terms of the
Act is sufficient to establish the link between the proceeds of criminal
activity and the right of the prosecution to recover those proceeds."
[23] The judge went
on to refer to the way in which the appellant had controlled the process of
acquisition of the property, the extensive powers which he had under the power
of attorney and the fact that he and his family had lived in the house and paid
for the insurance. He said that there
were no direct submissions against the claim that the appellant enjoyed
possession of the house or exercised effective control and went on to repeat
his conclusion that the requirements of Section 4(1)(c) of the Act were
satisfied. He added that he was not in
any event satisfied that he could agree with counsel for the first minuter that
the evidence failed to demonstrate that the appellant had no link with the
provision of the purchase price but this part of his judgment will be dealt
with later.
[24] It is
therefore clear that the whole proceedings before the judge, were conducted by
the Crown on the basis that, if it was proved that any property was in the
possession or under the control of the appellant, that property fell to be
treated as realisable property and liable to be realised. The position of the Crown was that a question
of ownership, if relevant at all at this stage of the proceedings, was relevant
only in relation to the question who enjoyed possession or control. The same position was maintained by the
Advocate Depute in the argument before us, coupled with the argument that it
appeared from the circumstances proved that the whole transaction involving
Mr Savva, the first minuter and the appellant himself was a sham and that
the property was really the property of the appellant. The first minuter , on the other hand
maintained that, on the facts proved, the first minuter was the owner of the
property and that in consequence the judge should have exercised his discretion
to exclude the property from the appellant's 'realisable property'. The appellant further argued that where the
property title was held by another person, and no link to the appellant was
proved sufficient to show that the property was truly his, the property was not
'realisable property'. Both the first
minuter and the appellant submitted that it was essential that the property of
an innocent third party should be protected from confiscation. In this case, it was not proved that the
first minuter was not a genuine purchaser.
There was no sufficient evidence that the property had been acquired
with the proceeds of crime or laundered money.
There had been evidence that the sum used to purchase the property had
come from an account in a bank in Greece and that it was not proved that
Mr Savva had no resources from which such a sum could have been
provided. The Crown could have pressed
its investigations further if it was intended to prove either that the
transaction was a sham or that the money was truly that of the appellant.
[25] In order to
resolve this dispute, it is necessary, in my opinion, to understand the scheme
of the Act, which is at first sight somewhat obscure. It is, I think, important to note that the Act
envisages a progress to the actual recovery of proceeds of crime in four
stages. The first is the identification
of the benefit to the accused. The
second is the identification of the accused's realisable property, which
includes all property in the possession or control of the accused, and is not
limited either to property derived from criminal activity or to property in the
ownership of the accused. The third
stage is the fixing of the amount of a confiscation order, which, despite its
name, does not in itself affect any property: it merely fixes the amount of the
accused's liability (compare R v Muntaz Ahmed and Another [2005] 1 WLR 122). The final stage is the actual
recovery of the sum fixed, by the appointment of an administrator if
necessary. The Act does not prescribe
any particular procedure for the protection of the rights of innocent third
parties. It does make clear in
Section 16(4) that those rights are to be protected, but the protection
comes into play, in terms of the Act at the stage of actual recovery of the sum
named in the confiscation order. That interpretation,
in my view, makes reasonable sense, and is supported by the terms of the
Scottish Law Commission Reprt N. 147, to
which Lord Eassie has referred. The
starting point is that the accused has been found guilty of criminal behaviour
and held to have profited from it, in this case to a very substantial
extent. The definition of realisable
property is designed to sweep up all property which may represent the proceeds
of that criminal activity. The
provisions for restraint orders follow the same course, and are intended to
prevent dissipation of the proceeds of crime.
The court has a discretion in fixing the actual amount of the
confiscation order, and once the amount has been fixed, the accused can be called
on to pay it. It is only if the accused fails to pay that that the question of
enforcement and thus of the actual realisation of property arises.
[26] If that
analysis of the Act is correct, it follows, in my opinion, that the decision of
the judge in this case was also correct.
When the case was before the judge, the position was perhaps confused by
a failure to distinguish clearly between the stages of the process to which I
have referred, with the result that more attention was given to evidence which
might bear on the true ownership of the property than was really necessary at
that stage. In any event, the Crown had
shown to the judge's satisfaction that the house was in the possession and
control of the appellant and, in my view, it is clear that, in terms of the
Act, that is sufficient to bring the property within the definition of
realisable property. The value of the
appellant's realisable property was well below the amount of the benefit to him
of his fraudulent activities. The judge
was accordingly entitled to hold that the house was part of the realisable
property and to assess a confiscation order on that basis. It was argued in the appeal that the judge
should have exercised his discretion to exclude the house from the realisable
property of the appellant. It is not
clear to me that the judge was asked to approach the issue as one of the
exercise of discretion, but in any event it seems to me that the proper time to
deal with issues as to the rights of third parties is the stage when action is
being taken to realise the property. It
is only at that stage that the rights of third parties are actually placed in
jeopardy. It is always open to a party
in the position of the appellant to repatriate some of the vast gains which he
has obtained by fraud to meet his obligation to pay the amount of the
confiscation order.
[27] It would not,
I think, be appropriate to make any observations about the evidence which might
bear on the question of ownership of the property or the genuineness of the
purchase in the name of the first minuter. I would only remark, in view of some
of the arguments advanced, that the question of the onus of proof in any
proceedings which may follow if, for example, an administrator is appointed,
seems to me to be an open one.
[28] In all the
circumstances, in my opinion, these appeals should be refused.
