ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
(MR JUSTICE LIGHTMAN)
Royal Courts of Justice
Strand
London, WC2
B E F O R E:
LORD JUSTICE PILL
LORD JUSTICE LAWS
SIR MARTIN NOURSE
IN THE MATTER OF KEITH JAMES O'DONOGHUE
Applicant/Defendant
-v-
IN THE MATTER OF THE CRIMINAL JUSTICE ACT 1988
(Computer-Aided Transcript of the Stenograph Notes of
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MS P SMALL (instructed by Saunders & Co) appeared on behalf of the Applicant
MR S HELLMAN (instructed by the Central Confiscation Branch) appeared on behalf of the Respondent
J U D G M E N T
LORD JUSTICE LAWS: This is an appeal with permission granted by Carnwath LJ on 6th August 2004 against the decision of Lightman J made in the Administrative Court on 10th February 2004 when he refused the appellant's application for a certificate of inadequacy under provisions contained in the Criminal Justice Act 1988. As is well known, that statute confers upon the Crown Court the jurisdiction to make confiscation orders against convicted criminals in certain classes of case so as to deprive the criminal of the actual or presumed fruits of his crime. The quantum of a confiscation order is based upon what the statute calls the defendant's "realisable property". Section 83(1) provides:
"If, on an application by the defendant in respect of a confiscation order, the High Court is satisfied that the realisable property is inadequate for the payment of any amount remaining to be recovered under the order the court shall issue a certificate to that effect, giving the court's reasons."
The essential facts of the case and the judge's approach in principle to the application before him are crisply explained in three paragraphs of the judgment of Lightman J:
On his conviction for obtaining property by deception and theft on the 16th July 2001, Mr O'Donoghue was sentenced to three years in jail and a confiscation order was made against him in the amount of £94,587 of which £43,223.42 remains unsatisfied. The £94,587 reflected what the court found to be the realisable value of a number of his assets, of which three are relevant. One is a Vauxhall Vectra car valued at £3,500. It was later sold for £2,450. The second is a caravan valued at £14,000 and later sold for £3,950. Mr O'Donoghue claims that he is entitled to a certificate of inadequacy reflecting the shortfalls of £1,050 and £10,050 in respect of these items. The third item is the sum of £35,500 which approximately one year prior to the confiscation hearing was withdrawn from an account at the Woolwich plc in the name of a Ms Casey and which has not been paid into court or accounted for despite an order that Ms Casey notify the CPS of its whereabouts and repatriate an equivalent sum.
The prosecution accept that, if Mr O'Donoghue establishes that the value of his realisable property other than the car and the caravan remains the same as at the date of the confiscation order, he is entitled to a certificate of inadequacy in the shortfall in respect of the car and the caravan of £11,100. But the prosecution say correctly that in order for Mr O'Donoghue to obtain a certificate of inadequacy, he must establish that the value of his realisable property as a whole has decreased since the date of the confiscation order and that therefore it is no longer adequate to satisfy the amount of the confiscation order and that account must be taken of any undisclosed interest or other fruits obtained from the £35,500.
The question raised is whether account should be taken of the possible or probable interest or other fruits of this sum. It is clear that on an application for a certificate it is not possible to go behind the finding in the original confiscation order as to the amount of the defendant's realisable assets and accordingly that he was the beneficial owner of the sum of £35,500. A challenge can only be made by way of appeal against that finding in the confiscation order. It is likewise clear that the burden is on the defendant to establish that the value of his assets is inadequate to satisfy all the value of the confiscation order, and for this purpose it is not sufficient for him to come to court and say that his assets are inadequate unless at the same time he condescends to demonstrate what has happened since the making of the confiscation order to the realisable property found by the trial judge to have existed when the confiscation order was made: see Gokal v. SFO [2001] EWCA Civ 368. In the circumstances as a matter of principle the burden must be on Mr O'Donoghue on this application to satisfy the court as to what he has done with the income and fruits of the £35,500."
Unassisted by authority, I should with respect hold that this reasoning is obviously right. As Lightman J was at pains to emphasise, 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. All this is, I think, entirely in line with the decision of this court in Gokal [2001] EWCA Civ 368, to which the learned judge referred: see in particular paragraph 24 of the judgment of Keene LJ which with respect I need not set out.
Miss Small for the applicant submits in effect that her client should have the advantage of the reduction in value of those particular assets which were indeed shown to be worth less than at the time of the confiscation order, while at the same time being free from any possible inference to be drawn from his silence as to the £35,500. That is to seek a benevolence which simply cannot be found on the face of section 83. Miss Small has sought to confront us this morning with dire consequences if this appeal is dismissed: late appeals against the confiscation order itself to the Court of Appeal Criminal Division, and increased terms of imprisonment in default of payment of the confiscation order. I am entirely unmoved by such points. The simple fact is that this appellant has not proved his case under section 83(1).
Miss Small relies, as she relied below, on the decision Collins J in Turner CJA 8/2000, of which unfortunately there appears to be no transcript. We only have counsel's note of the judgment, and a note from Collins J's clerk, to which I will revert in a moment. The judgment in Turner was delivered on 4th June 2003. A confiscation order had been made against the defendant in the sum of approximately £1.324 million. One of his realisable assets was the sum of £236,000 in a Spanish bank account. On an application for a certificate of inadequacy, Collins J found a shortfall of £15,762.23. Arithmetically that was on the basis that the £236,000 was treated as not having been enlarged by any interest that might have been paid upon it. Collins J stated, according to counsel's note:
"It seems to me it would be to speculate to say that there was a sum of money available to meet the £15,762.23."
Accordingly, Collins J granted a certificate of inadequacy. Lightman J in the present case considered, at paragraph 6 of his judgment, that Collins J would not have approved counsel's note of his judgment:
"For it fails to take account of the burden of proof on the defendant."
And so, with respect, it does. The note from the judge's clerk, which was sent to counsel's clerk on 16th February 2004, and thus after Lightman J's judgment, indicates that Collins J's recollection was that his decision was informed by the case's particular facts and he did not consider that his judgment was:
"...authority for any general proposition that to assume interest on money deposited in a bank would amount to speculation".
With great respect, if Turner were an authority for any such proposition, I would feel driven to hold that it was wrong. Turner is here of no assistance, and certainly does not begin to displace my view that the judge in this case was entirely right for the reasons he gave.
The appellant, by Miss Small, has another point. She submits that Lightman J's decision is repugnant to Article 6 of the European Convention on Human Rights because it is in some way objectionable for the court to take account of what have been referred to as hidden assets, and then require the defendant to rebut their existence. She relies on the decision of the European Court of Human Rights in Phillips v United Kingdom, application 41087/98. But Phillips was concerned with Article 6(2) of the Convention, which provides, as is well known:
"Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law."
Phillips involved consideration not of section 83(1) of the Criminal Justice Act 1988, but rather of the statutory assumption falling to be made in the Crown Court when making the confiscation order under the parallel legislation relating to drugs contained in the Drug Trafficking Offenders Act 1984. It was said in Phillips that this statutory assumption violated Article 6(2). The court held that there was no violation of Article 6(2). However paragraph 46 of the judgment of the court is relied on by Miss Small:
"Finally, when calculating the value of the realisable assets available to the applicant, it is significant that the judge took into account only the house and the applicant's one-third share of the family business, specific items which he had found on the evidence still to belong to the applicant. The judge accepted the applicant's evidence when assessing the value of these assets. Whilst the Court considers that an issue relating to the fairness of the procedure might arise in circumstances where the amount of a confiscation order was based on the value of assumed hidden assets, this was far from being the case as regards the present applicant."
It is to be noted that this last observation was cast in the subjunctive, "might arise"; and with great respect to the court at Strasbourg, I would for my part not wish it to be taken that it necessarily represents the position in British human rights law, given the nature of our duty imposed by section 2 of the Human Rights Act 1998 to take the Strasbourg jurisprudence into account rather than necessarily to follow it. But it is not necessary to arrive at any conclusion in relation to that. The truth is that the reasoning of the court in paragraphs 4 to 6 cannot be read across to the facts of the present case. Section 83(1) does not require the defendant to rebut an assumption. It merely requires him to show what his realisable property is, and in particular, in a case like this, to show what has happened to the realisable property found by the judge to have existed when the confiscation order was made. There is no question of that requirement being excessively harsh or unfair.
On top of all this, we should surely not lose touch with reality. In the course of making his findings at the confiscation hearing, which of course could only be challenged by an appeal to the Court of Appeal Criminal Division (and none was brought), the learned judge in the Crown Court said this, in relation to the £35,500:
"This account is in his wife's name and she, Mary Casey, gave evidence to the effect that the money was put into the account belonging to her uncle, who was involved in buying and selling horses, vehicles and tools. The whole situation is unbelievable. There is no reason why the uncle could not have put the money into an account bearing his own name. Of course, no evidence has been called from him.
"Keith O'Donoghue's account in relation to these various monies [that is to say monies including the money in the Woolwich account] has been inconsistent with what he said at the time of arrest. I have no doubt that his evidence is false and those various sums will be brought into account as part of the benefit."
The plain fact is that the £35,500 remains unaccounted for, its destiny unexplained. For all these reasons there is in my judgment nothing whatever in this appeal and I would dismiss it.
Another point arises at the behest of the respondent Crown Prosecution Service. At the end of his judgment, paragraph 10, Lightman J said this, having held that the appellant was not entitled to a certificate of inadequacy:
"This is not however necessarily the end of the matter. Where a defendant fails to discharge the burden of proof in respect of an asset, the court may, depending upon the significance of the non-disclosure in respect of the adequacy or otherwise of the realisable assets adopt either of two alternative courses. The first is to refuse the application for the certificate. The second is (for the purposes of the application) to presume that the defendant has obtained a reasonable return. For this purpose every reasonable presumption will be made against him as a wrongdoer ie a party who has failed to make disclosure."
The Crown say that the judge was wrong to hold that this court might presume that the defendant has obtained a reasonable rate of return on the money in question. I agree with the Crown's submission. Such an approach dilutes, or even extinguishes, the burden on the defendant to demonstrate under section 83 what his realisable assets are and the defendant may, after all, get a better return than a reasonable one on money that he has stashed away and for all sorts of reasons.
In any event the presumption of a reasonable return invites uncertainty when there need be none. I think Lightman J was, with deference, wrong to contemplate it as a possible course for the court to take. That said, as I have already indicated, I would dismiss this appeal for the reasons I have given.
SIR MARTIN NOURSE: I agree.
LORD JUSTICE PILL: I also agree that the appeal be dismissed for the reasons given by Laws LJ. 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 unco-operative 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.
Furthermore, in particular cases, although certainly not in the present one as to which I agree with my Lord, it would be open to a judge to hold that a sum of money which formed a part of a realisable asset had been in an interest-bearing account during the relevant period.
Order: Appeal dismissed.