Ginwalla, R. v

1. LORD JUSTICE RICHARDS: On 15th September 2003 at Gloucester Crown Court before His Honour Judge Tabor QC, Mr Ginwalla, the appellant, pleaded guilty to an indictment containing eight counts of obtaining property by deception. He asked for 39 similar matters to be taken into consideration. All the offences had been committed between September 2002 and February 2003. They involved the use of other people's credit card numbers, obtained from a batch of credit card receipts, to obtain goods by mail order. He was sentenced to 180 hours by way of community punishment. He does not seek to appeal that element of his sentence. There were, however, further hearings to deal with confiscation proceedings under the Criminal Justice Act 1988. They were finally determined on 31st August 2004. The judge found the appellant to have benefited from his criminal conduct in the sum of £123,275.32. The value of his realisable assets was determined to be £200,707.50. Accordingly a confiscation order was made for the entire benefit sum; that is £123,275.32. A term of two years' imprisonment in default of payment was fixed. An appeal is now brought with the leave of the single judge against that confiscation order.

2. It is common ground that, by reason of the date of the offending conduct, the case is governed by the 1988 Act, as amended by the Criminal Justice Act 1993 and the Proceeds of Crime Act 1995. So we are concerned with the old law rather than the current law on confiscation orders.

3. The relevant provisions of the 1988 Act are sections 71 and 72AA. In summary, the court's task is first to determine the amount of a defendant's benefit from the actual offences of which he has been convicted. By section 71(4) a person benefits from an offence if he obtains property as a result of or in connection with its commission, and his benefit is the value of the property so obtained. This is conveniently referred to as "simple benefit". Secondly, where an offender is convicted of a course of criminal conduct comprising at least two qualifying offences, the court has a discretion, under section 72AA, to apply the statutory assumptions so as to determine whether and to what extent the defendant has benefited from his criminal conduct. This is conveniently referred to as "extended benefit". The assumptions in subsection (4) are these:

"(a) that any property appearing to the court -

(i) to be held by the defendant at the date of conviction or at any time in the period between that date and the determination in question, or

(ii) to have been transferred to him at any time since the beginning of the relevant period,

was received by him, at the earliest time when he appears to the court to have held it, as a result of or in connection with the commission of offences to which this Part of this Act applies;

(b) that any expenditure of his since the beginning of the relevant period was met out of payments received by him as a result of or in connection with the commission of offences to which this Part of this Act applies; and

(c) that, for the purposes of valuing any benefit which he had or which he is assumed to have had at any time, he received the benefit free of any other interests in it".

The application of those assumptions is, however, subject to subsection (5), two provisions of which are relevant:

"Where the court is determined that the assumptions specified in subsection (4) above are to be made in any case it shall not in that case make any such assumption in relation to any particular property or expenditure if -

(a) that assumption, so far as it relates to that property or expenditure, is shown to be incorrect in the defendant's case ... or

(c) the court is satisfied that there would (for any other reason) be a serious risk of injustice in the defendant's case if the assumption were to be made in relation to that property or expenditure."

4. Once the court has determined the simple benefit and extended benefit, the figures are aggregated to produce the defendant's total benefit. The court then determines the value of the defendant's realisable assets. A confiscation order must be made in the amount of the figure of total benefit unless that amount is greater than the total realisable assets.

5. Turning to the hearing before the judge, we can confine our attention to consideration of the position at the final hearing before him. The simple benefit was agreed at £7,861.09. That was calculated by reference to the total value of the goods obtained by the appellant through the deception offences of which he was convicted. The real issues before the judge were whether and how the statutory assumptions were to be applied to the determination of extended benefit. They centred, first, on what were described as "unidentified lodgements" or payments into the appellant's various bank accounts over the relevant period (a period which dated from six years prior to the institution of the criminal proceedings against him), and, secondly, on a number of properties that he had bought over the relevant period.

6. It was contended on the appellant's behalf that to apply the assumptions at all would create a serious risk of injustice: since he had been in receipt of substantial income from legitimate sources, his net disposable income had at all times exceeded his income and he had therefore had no need to resort to crime to obtain the properties that he now possessed. There was also argument about how the benefit was to be calculated if the assumptions were to be applied.

7. The aggregate value of the unidentified lodgements exceeded £60,000. It included over £10,000 by way of cash payments to pay off credit card debts in the period October 2001 to October 2003. It also included a total sum of £16,950 that the appellant claimed to be income derived from work with an organisation referred to as "UK" between October 1998 and January 2001 and an organisation referred to as "TLA" between January 2000 and September 2003.

8. As regards the properties, the position was that the appellant had purchased eight properties over the relevant period. He had bought one outright. In the case of the others he had paid a deposit and the balance of the purchase price was met by a mortgage. Five were held in his name, two in the name of his partner. There was also one property in joint part ownership.

9. The court had before it the prosecutor's statement, a defence reply and supplementary documents from both sides, together with certain other documentary evidence such as bank statements. The judge heard oral evidence from the appellant and a number of witnesses called on his behalf, including a Mr Beard, a forensic accountant, whose main report was dated August 2004.

10. In his judgment, the judge dealt first with the argument that he should not apply the statutory assumptions at all. He pointed to the fact that there was a very substantial shortfall between the money the appellant received and the money for which he could give a coherent explanation. He made clear that he did not find the appellant a credible witness. That was something he also stressed later in his judgment. In the circumstances he had no doubt that it was just to apply the statutory assumptions. There is no challenge to that part of his decision.

11. The judge then moved on to the benefit calculation. He dealt first with simple benefit, where he adopted the figure agreed by the parties. He moved to benefit calculated by application of the assumptions. He broke that exercise down into two parts: first, the unidentified lodgements; second, the real property.

12. As regards the lodgements, he broke them down further into three categories: first, those for which there was no supporting evidence; second, those allegedly derived from the appellant's work with UK and TLA; and, thirdly, other cash lodgements supported by evidence from members of the appellant's family. He said that there was no potent or coherent evidence to explain the lodgements in category 1 and they should form part of the benefit figure. In relation to category 2, he said that he had heard no evidence in relation to UK and that the evidence he had heard in relation to TLA was confused, contradictory, inaccurate and quite unconvincing. Those lodgements too should form part of the benefit figure. Later in his judgment, however, he said that the category 2 figure should be discounted by 50 per cent to avoid serious injustice, to cater for the possibility that there were genuine payments made to the appellant when working for TLA that had not been properly recorded. As to category 3, he accepted the evidence from the appellant's witnesses and excluded the relevant sums from the benefit figure. The total of the category 1 sums was £36,481. The total of the discounted category 2 sums was £8,471. In addition, the judge considered the purchase of premium bonds for £10,000. He excluded that on the basis that to include it would amount to double counting. He held, however, that a prize of £900 from that premium bond investment should form part of the benefit figure. If one adds together the total of the simple benefit and the further benefit figures that the judge said should be taken into account, it produces a figure of £53,717. The judge mistakenly calculated it as £52,717 and was not corrected by the parties. The error was of course in the appellant's favour.

13. In order to explain how the judge used that figure, it is necessary to turn to his analysis in respect of real property. He held that the five properties in the appellant's own name and the two in his partner's name had been purchased by the appellant and should be taken into account in the calculations. He left out of account the eighth property. As regards the seven properties, he said that he was looking at the actual benefit, which was reflected not in the market value of the properties but in their equitable value, since to do otherwise would give rise to a serious risk of injustice to the appellant. The total amount that the appellant had invested in the properties by way of deposits, payments and purchase price over the relevant period was £92,751. The judge described all those sums as deposits. In effect, they represented the equitable value of the properties at the time when they were purchased, the balance of the purchase price in each case being funded by a mortgage. Because of inflation in property prices, however, the total equitable value of the properties had increased very markedly to £203,771 by April 2003; the date which the judge thought it right to take for the purposes of the calculations.

14. The way the judge then approached the matter was as follows. He accepted that it would be double counting to take into account both the amount of the lodgements, meaning the sum of £52,717 calculated as we have explained, and the amount of the deposits. He also accepted that a significant proportion of the deposits was funded by legitimate income. But the appellant had been able to use the sum of £52,717 to fund the deposits and that sum represented 56 per cent of the total amount of the deposits. The judge referred to various different methods of calculating benefit that had been put forward by counsel, but said that in his judgment the fairest way to assess the benefit was this: the appellant originally benefited from criminal conduct to the tune of £52,717, representing 56 per cent of the deposits; the equitable value of the properties as at April 2003 was £203,771; the appellant's benefit was therefore 56 per cent of that April 2003 value, namely a figure of £114,111.76. In addition, rental income in the total sum of £16,360.50 had been derived from the properties, and the judge held that it should be split in the same way, so that 56 per cent, namely £9,163.56, was to be included in the benefit calculation. Adding the two figures together, the judge arrived at the total benefit figure of £123,275.32. As we have indicated, the total value of the appellant's property was much higher than that figure so the judge had to make a confiscation order in the same sum as the total benefit figure.

15. The main thrust of the submissions advanced by Mr Farrell QC on the appellant's behalf is that the judge failed to apply the statutory assumptions properly: he adopted a broad brush approach and did not apply the assumptions in the detailed way required by the statute. In particular, it is said that the judge erred in saying that the £52,717 could have been used for the payment of deposits without going into a detailed analysis to see whether they were in fact used for that purpose. What the judge should have done was to look at the deposit paid in respect of each of the properties individually, identify which bank account the money came from, and look in turn at where the money in the account at the time had come from. What was called for was a detailed exercise in respect of expenditure equivalent to the detailed exercise that the judge carried out in respect of income.

16. Mr Farrell directed those submissions initially at the application of the assumption in subsection (4)(b), on the basis that the deposits were expenditure. It is clear from the language and structure of the judgment, however, that the judge was focusing on the application of the assumption in subsection (4)(a). His starting point, which in our judgment was an entirely correct starting point, was an assumption that the real property held by the appellant was received by him as a result of or in connection with the commission of relevant offences. It was then necessary for him to consider whether subsection (5) operated to disapply the presumption, either because the appellant had shown, on the balance of probabilities, that the assumption was incorrect, or because it would cause a serious risk of injustice to make the assumption.

17. The judge took equitable values rather than market price in order to avoid the risk of injustice, and he took into account only a proportion of the benefit as being attributable to the criminal conduct.

18. Even if that is the right analysis of the judge's approach, as we consider it to be, Mr Farrell still advances the same essential point by way of objection to the judge's reasoning. He submits that it was still necessary to look in detail at whether the deposits were indeed paid out of the proceeds of criminal conduct. That had to be done in order to reach a proper decision on whether the appellant had shown the assumption to be incorrect. In failing to do so, it is submitted that the judge failed to act with the "scrupulous fairness" required of the court in such an exercise: see McIntosh v Lord Advocate and another [2001] 3 WLR 107 at 119, paragraph 28.

19. As regards scrupulous fairness, it seems to us that the appellant can have nothing whatsoever to complain about. Even though the judge made such clear adverse credibility findings in respect of the appellant, he still bent over backwards in a number of places to avoid any serious risk of injustice to him.

20. As to the submission that the judge erred in his approach on this particular point, we are wholly unpersuaded by Mr Farrell's submissions. First, those submissions do not reflect the realities of the appellant's financial affairs. Over the relevant period, as Mr Mercer QC submitted on behalf of the Crown, the appellant had a mixed income, partly legitimate and partly the proceeds of crime, out of which his expenditure, including the purchase of the properties, was met. The monies in the appellant's various bank accounts came from both sources and there were large transfers between accounts. It would be wholly artificial to try to separate out the source or sources of any individual payment made out of any particular account. Moreover, even if, in accounting terms, one could match a payment in with a payment out of the account, it does not follow that the payment in is to be treated as the specific source of the payment out for the purposes of an exercise of the present kind. If criminal proceeds are used to fund one item of expenditure, that may free up legitimate monies to fund another item of expenditure, and vice versa. To engage in the sort of tracing exercise urged on the court by Mr Farrell would, in our judgment, be much too narrow an approach; nor does it seem to have been the approach actually urged on the judge by counsel who represented the appellant at the time. There may indeed be circumstances in which such an approach is appropriate, in particular for the avoidance of injustice, but the present case is not one of them.

21. There are further reasons why we find Mr Farrell's submissions so unpersuasive. The burden of showing that an assumption is incorrect lies on the appellant. We do not see how the appellant could have discharged that burden if the matter had been pressed in this way in argument before the judge. The appellant's oral testimony went no further than the bald statement that none of the property was received as a result of or in connection with the commission of a criminal offence. In the written defence statements he had identified the bank account from which each deposit was paid, but the material we have been shown does not carry through the tracing exercise that Mr Farrell submits to have been necessary. There is a schedule prepared by Mr Beard which shows legitimate income and unsupported lodgements and their cumulative totals and compares them with the amounts paid out at various times by way of deposits, but that schedule cannot be entirely relied on since it treated as legitimate income certain sums that the judge declined to treat as such, and, in any event, even if taken at face value, it does not show that the deposits were in fact funded from legitimate sources. Mr Farrell did not try to take us through for any individual property the exercise he says the judge should have engaged in. He said that we do not know what answer the judge might have reached if he had gone down that path. So the stand is taken on the issue of principle that the judge adopted the wrong approach, rather than on any attempt to show that this led to an actual injustice. This may be thought not to be a very satisfactory basis on which to invite this court to quash the judge's confiscation order and substitute a very much lower one, but in any event, on the basis of what we have seen, we do not accept that the appellant could have succeeded in discharging the burden of proof upon him in relation to the exercise that it is said the judge should have engaged in.

22. Mr Farrell has a number of other more detailed points which are elaborated more fully in his skeleton argument than they were in his oral submissions. In his oral submissions he concentrated very sensibly, if we may say so, on the major issue. To a large extent the other points are covered by the generality of our reasoning so far. For example, it is said that some of the elements included in the figure of £52,717 could not have been invested in properties because there was uncontroverted evidence that they had another destination, such as the cash payments to pay off credit cards. That, as it seems to us, is met by the points we have made about mixed funds and expenditure from one source freeing up money for other items of expenditure. There are also arguments to the effect that the simple benefit should not have been taken into account at all, nor should the £900 premium bond prize. We see no greater force in those points than in the main submissions that we have already rejected.

23. In conclusion, we take the view that the judge applied the statutory assumptions in the spirit in which they are intended to be applied, adopting a sensible approach which avoided unnecessary elaboration whilst at the same time avoiding a serious risk of injustice to the appellant. We do not accept that he fell into error in any of the ways contended for on the appellant's behalf. For those reasons, the appeal is dismissed.

24. MR MERCER: My Lord, the order made on 31st August 2004 was for 12 months to pay that amount. Clearly, that order has been suspended pending the appeal. The court may consider it appropriate to order that the 12 months runs from today.

25. LORD JUSTICE RICHARDS: Do you have anything to say about that, Mr Farrell?

26. MR FARRELL: No, my Lord.

27. MR MERCER: Further, my Lord, we apply for costs against the appellant.

28. LORD JUSTICE RICHARDS: I think there are going to be two issues on costs. One is that application and the other is the recovery of defence costs.

29. MR FARRELL: Yes, my Lord, there are two issues.

30. Could I deal with prosecution costs first of all. Of course, Mr Ginwalla has to pay £123,000-odd. He now has some further time to do that, to sell those properties. He did receive leave from the single judge to argue this point. In my submission, it is not just the case that the costs follow the event necessarily in the Court of Appeal. Yes, he has lost his appeal, but it does not follow that he should therefore be required, in my submission, to pay all the costs of the prosecution for bringing an appeal when the single judge has given him leave. Of course, the court will have to take into account the full picture so far as his means is concerned. I have in fact in front of me the letter, which I hope your Lordship has had, dated 24th August, which is a report, an amended report, prepared by --

31. LORD JUSTICE RICHARDS: SIU Investigations.

32. MR FARRELL: Yes. In fact, my client says he had never seen this letter until I showed it to him today, and I was able to take some instructions from him earlier on, just a couple of hours ago.

33. LORD JUSTICE RICHARDS: But those instructing you had it.

34. MR FARRELL: No, they did not have it either.

35. LORD JUSTICE RICHARDS: Where did it come from then?

36. MR FARRELL: I was sent it direct from the Court of Appeal. What I have done is I have prepared a schedule of our costs, if I could hand that up to your Lordships please. I understand we are obliged to produce such a schedule. There is a supplementary document, that I cannot find at the moment, with my junior's time attached to it. My solicitor was granted permission to do 15 hours work for the appeal specifically by the Registrar, and that is reflected in the schedule. I do have my learned junior's preparation time as well, the breakdown of the hours worked. I am so sorry, I cannot put my hands on it at the moment. The figures are there set out. I have seen this letter. As I say, because my solicitor never received it, nor did my client, I was sent it by the Registrar. I have to say I assumed they would have seen it as well, and it was only today that I realised that they had not. I have been able to take some instructions from my client about his means and about the accuracy of this document.

37. MR JUSTICE BEAN: Is the issue whether it is true or untrue that there has been a failure to co-operate? Because if it is true that there has been a failure to co-operate, on the face of it regulation 13 is absolutely mandatory.

38. MR FARRELL: Yes. He says he did not fail to co-operate. He says that he did respond and -- I am afraid I cannot take any further instructions at the moment. I would like to see the documents referred to in this letter. I notice in the regulations that the court does have a power to adjourn this matter. Obviously we do not want to do that unless we have to. He says he never saw the letter. This document is in some ways inaccurate, although I have to say I have taken instructions from him and of course he still owns all these properties. What this document says -- I am looking at the second page: "The appellant confirmed that he owns a second property valued at £250,000 with a mortgage outstanding of £170,000". I am told that is inaccurate. What I have done with my client is gone through all the properties he does own, ask what the mortgage is, ask what the equity is, so I can give the court that information. Of course, as I say, he still has to pay this £123,000, but having -- and there are in total I think seven properties, two of which are in the name of his partner, one of which is his main residence, but in addition to his main residence in his own name there are, as I understand it, four properties which have some equity in them. I can give the figures and the names and the details, but of course your Lordship will appreciate that those were the properties the subject of the confiscation order itself.

39. I am very anxious that you do not go to a maximum order on the basis that he has not co-operated because he is telling me that he has never seen this letter and that he did co-operate. He said he did fill in a form which referred the Legal Services Commission --

40. LORD JUSTICE RICHARDS: Does he accept having received the letters that are referred to at the bottom of the first page and top of the second page?

41. MR FARRELL: Again, I am afraid I will have to just confirm that with him. Could I ask my client to come forward and sit next to my junior.

42. LORD JUSTICE RICHARDS: By all means.

43. MR FARRELL: I am told my solicitor has been in touch as well with the Legal Services Commission. I have one of those letters here dated 15th July. (Pause)

44. I am sorry to take some time on this. My client did receive the letters of 22nd June and 11th July. There was a telephone call on 20th July. He did write a letter on 12th August, I have not seen that letter. He tells me he answered the questions as best he could in that letter and referred the Legal Services Commission to the information contained in the confiscation matter effectively, saying that all the questions are in fact answered by reference to matters that are known, i.e. by reference to the properties the court knows he holds, and that was how he dealt with it. In my submission, that is not non-co-operation. I would certainly like to see the letter of 12th August, I do not know if you have it, but I have not seen it.

45. It seems to me that there are two issues: one, whether he has failed to co-operate, in which circumstances the court must make an order, and, secondly, if he has not co-operated, the court has a discretion not to make a full order. He is someone with two young children. He is working at the moment, but he does not have a very highly paid job. What he does have are these houses, some of which have equity in them.

46. LORD JUSTICE RICHARDS: Yes, I see.

47. What do you say about the prosecution costs?

48. MR FARRELL: Again, I would simply say that he is a man, apart from these properties, of relatively modest means. He did have the leave of the single judge to argue this point and in my submission he should not be ordered to pay all the costs, prosecution and his own costs, for these proceedings. I would certainly ask you to consider reducing the maximum amount -- well, we do not know what the prosecution costs are.

49. LORD JUSTICE RICHARDS: No. Has something --

50. MR MERCER: My Lord, the figure which I am given from behind me is £15,000.

51. LORD JUSTICE RICHARDS: Is it a figure that has what I might call written quantified support for it?

52. MR MERCER: It is not. It might be a realistic figure, but I would rather not enter that realm. There is nothing in writing to support the claim.

53. LORD JUSTICE RICHARDS: I see.

54. MR MERCER: I am sorry I cannot help any further. We have no solicitor's representative behind us.

55. LORD JUSTICE RICHARDS: That saves costs anyway.

56. MR MERCER: That has saved costs.

57. LORD JUSTICE RICHARDS: Yes.

58. MR FARRELL: My Lord, I found my junior's log of preparation, which amounts to 48 and a half hours. That ought to be placed on the record.

59. There it is. The total costs then would be -- sorry, I have handed the document to your Lordships -- excluding VAT, accepting prosecution costs, would be £33,000 excluding VAT. So in my submission it would not be correct in the court's discretion to make Mr Ginwalla pay the total costs of these proceedings.

60. LORD JUSTICE RICHARDS: Thank you.

(The court adjourned for a short time)

61. LORD JUSTICE RICHARDS: Mr Farrell, we are reluctant to proceed to an immediate decision without your having the chance to get full instructions from your client.

62. MR FARRELL: Thank you.

63. LORD JUSTICE RICHARDS: If we were to proceed on the basis that we would accept written submissions within seven days, but also on the basis that the decision of the court would then be dealt with in writing.

64. MR FARRELL: That would help us because I have been told by my solicitor that he wrote a letter himself on 7th October to the Legal Services Commission asking if they would provide any further information, to which he had no reply, and I notice this letter we are looking at is dated 24th August.

65. LORD JUSTICE RICHARDS: If you are content that any decision of this court can be in writing, so that we do not have to reconvene --

66. MR FARRELL: I think we are.

67. LORD JUSTICE RICHARDS: On that basis we will give you seven days, that is to say 4 pm next Thursday, for any submissions that you wish to make on the subject of the recovery of defence costs order to be made. In those circumstances, we think that if we are adjourning in your case we should also give the prosecution the opportunity to repair the omission in their application, in that it is lacking in the requisite detailed support.

68. MR MERCER: Certainly, my Lord.

69. LORD JUSTICE RICHARDS: We will give you until 4 pm on Monday to put in your figures. Mr Farrell, you will then be able to respond further in writing, again by 4 pm next Thursday, to the prosecution application for costs, and again we will take a decision in writing so as to avoid the need to reconvene.

70. MR FARRELL: Thank you very much, my Lord.

71. LORD JUSTICE RICHARDS: Thank you.