Gabriel, R. v

1.On 28 October 2004, at the Burnley Crown Court, before Mr Recorder Conrad QC and a jury, the appellant Janis Gabriel was convicted of two counts of Possession of Criminal Property contrary to section 329(1)(c) of the Proceeds of Crime Act 2002. On 26 November 2004, she was sentenced to six months' imprisonment concurrent in respect of each of the two counts. She now appeals against her conviction by the limited leave of the single judge who, having read the papers, refused leave on the grounds put forward and invited the appellant to put forward a further ground, which has been the subject of the appeal at this hearing.

2.The facts are as follows. The appellant lived with her husband and three teenage sons at 63 Garden Street, Padiham. The source of the household income was approximately £500 per week in benefits. On 3 July 2003, police officers searched the house and seized £11,700 in cash. On 16 September 2003, another team of police officers searched the house and found £6,070 in cash in various locations in the house. £3,000 of that sum was found concealed behind the lining of a plastic air rifle carrying case. The appellant was arrested. On legal advice she made no comment to questions asked of her. Her husband was also arrested, but he was released without charge.

3.The prosecution's case was that the sums of money seized by the police were the proceeds of crime. The defence case was that the monies seized were the result of savings honestly acquired and the proceeds of gambling winnings.

4.The evidence that was adduced on behalf of the Crown can be shortly stated. Police Constable Nunn said that on 3 July he searched the main bedroom of 63 Garden Street and under the water bed mattress he found a bag tied up within another bag. Inside the bag was £10,000 in £20 notes. He also found other monies, including a further £240 in £20 notes and £330 in £10 gift vouchers. The appellant explained to him that the money was made up of savings from various benefits and money won at bingo. Within the house the officer observed a 42 inch plasma television screen, an ornate mahogany fireplace, a conservatory with a swimming pool and sauna, a large fridge, spa jets in the bathroom, a computer, good quality stereo equipment throughout the house, and Playstation games and DVDs. There was also a closed-circuit television set up outside the house which could be viewed from a monitor in the living room.

5.Police Constable Mowat's evidence was that he found boxes of footwear, appliances in the kitchen and in the heated swimming pool in the conservatory. He asked the appellant's husband why there was a CCTV system and was told, "Because we have bother with Duigan and others. They're drug dealers and won't leave us alone. They're gonna torch my house and cars." Mr Gabriel could not recall how much the CCTV cost, but stated that he would have receipts for all the items in the house somewhere.

6.Police Constable Fort gave evidence that tests for traces of drugs on the money had proved negative.

7.On 16 September 2003 a different team of police officers went to the house. On searching the house, £6,070 was found inside an air pistol case. The appellant was arrested.

8.There was evidence from witnesses from the Department for Work and Pensions and from the Inland Revenue, which was read to the jury, as to the benefits of which the appellant and her family were in receipt from 25 February to 15 September 2003. Those totalled £14,674.49, which equated to approximately £500 per week.

9.There was also evidence in the form of a witness statement which was read about the odds of winning the £500 jackpot on a gaming machine. On average 23,000 games would have to be played before a £500 jackpot is paid out. Kelly Darwin, in a witness statement which was read, said that the appellant had won the jackpot of £500 on the gaming machine and on a couple of occasions she had won £1,018.65 at bingo.

10.At interview the appellant made no response in accordance with legal advice.

11.At the close of the prosecution case the appellant dismissed her solicitors and counsel and asked for an adjournment to obtain fresh legal representation. That application was refused. Accordingly, she went into the witness box and gave evidence. She said that the television, fireplace and water bed were the only expensive items in the house. The swimming pool was more like a glorified paddling pool with a hosepipe to fill it. The water bed was for therapeutic reasons for her disabled husband and the pool for him to exercise in. The conservatory was more of a DIY outhouse that friends and family had helped to build over five to six years. The bathroom was three to four years old and had been installed with the help of friends. Other items in the house were just normal, like other people had. The kitchen was not new. The units had new doors which she had bought out of the "Loot" newspaper. She said that her husband was ill. He saved money that they received in benefits and hid it. There was £3,000 in the bank, which was compensation. She told the police during the first raid that she had not before seen the £10,000 found under the bed on her husband's side. She agreed that on the second raid the police found in a drawer the air rifle case and a wallet belonging to her husband. Both had money in them. She had sold the car and brought the money home. She had won the jackpot five or six times on the gaming machines.

12.When she was cross-examined, the appellant said that the £11,700 was made up from benefits and winnings and that the £6,070 found ten weeks later had "just accumulated". She had sold the car for £1,500 and had had jackpot wins. She said that she collected the benefit money in cash and took it home. She gave it to her husband. She did not set up bank accounts to hide the money. Neither she nor anyone else in her family was involved in criminal activity. The CCTV was originally a camera that had been set up to keep out people who had been bothering them. The Mondeo car belonged to her and her husband, and the Escort belonged to a friend who had asked to leave it on the drive. The Mondeo, she said, was sold between the two police visits. She said that the water bed cost £1,000 and that her husband had given her the money for it. The bath cost about £200 and had been bought three to four years previously. The stereo was a Christmas present for her son. The fridge-freezer was bought for £900 at the end of 2001. The camcorder and yellow motorbike belonged to her husband. She said that the sauna had been installed in 2002/2003 for about £500-600. The projector belonged to someone else. The plasma screen cost £3,000 in Christmas 2002. The money for it came from her husband's drawer. The money in the wallet, she said, belonged to her husband.

13.The case as put to the appellant by the prosecution was that the sums of money found in the house were the result of money laundering. In opening the case to the jury, Mr O'Brien, counsel for the prosecution, said:

"So looking at these sums of money, members of the jury, ask yourselves whether you are sure that the sums are the proceeds of crime, whether directly or indirectly. Let me give you an example. If a sum of money is stolen then that would be criminal property because that is the proceeds of crime directly. Equally, if goods are stolen and then sold on, the money resulting from that sale would be criminal property. Do you follow? So that is the first element."

15.After the jury had retired, and before verdict, they asked a question which, in accordance with sensible practice, was the subject of discussion between the Recorder and counsel for the prosecution before a direction was given. The question read:

Following a short discussion between counsel and the Recorder, having read out the question, the Recorder said to the jury:

16.It was that question and direction which formed the basis of the ground of appeal on which the single judge gave leave. In giving leave he observed:

There are other grounds of appeal for which leave was refused. Because of our decision in relation to this ground of appeal on which leave was granted, there is no need for us now to go into those other grounds.

17.It is submitted on behalf of the appellant that the answer given by the Recorder to the questions raised by the jury was wrong. Miss Manley, who appears on behalf of the appellant, submits that the answer ought to have been, "Not necessarily". She points to the fact that the Department of Work and Pensions had continued to pay non-means-tested benefits to the appellant right up to the date of the trial. There was no evidence provided at trial of any declaration signed by the appellant; nor was any evidence given of what information she had or had not given to the Department of Work and Pensions either when her claims were first made or at a later date. Further, Miss Manley submits that the only evidence from the Inland Revenue was confirmation that the appellant was in receipt of Child Benefit. There was no evidence as to any tax returns. It is submitted that the failure to declare income to the Revenue or the Department of Work and Pensions may constitute an offence, but the legitimate buying and selling of goods cannot be an offence of itself.

18.On behalf of the respondent, Mr O'Brien submits that the regular buying and selling of goods is not legitimate trade when the appellant is claiming state benefits. In the course of submissions to this court he was driven to say that claiming state benefit for a second, third, fourth and fifth time in the knowledge that money had been earned from a legitimate trade would have the effect of converting the profits from the legitimate trade into criminal property. He also submits that the money which was found hidden in various places in the house supports the contention that it was dishonestly obtained money. Further, he relies on the fact that, when giving evidence, the appellant gave no evidence of any legitimate trade. Indeed, she did not in any way suggest that the money had been accrued by the buying and selling of goods. He reminds the court that in answering the question, the Recorder (in a passage to which we have not as yet referred) said that dishonesty must be an element.

19.In our judgment the questions raised by the single judge are important on the facts of this case. We start our conclusions by setting out the relevant statutory provisions. The material parts of section 329 read as follows:

Section 340 is an interpretation section. It deals with criminal conduct and criminal property. In its material parts it reads:

20.In our judgment the difficulty raised by the jury's question is that it appears to assume that a failure to declare income from the buying and selling of goods to the Inland Revenue and the Department of Work and Pensions per se gave rise to criminal property. The Recorder's answer does nothing to dispel this assumption. Mr O'Brien on behalf of the prosecution accepts that that would appear to be the proper assumption to be gleaned from the jury's question. He submits that a trade in stolen goods would mean that the profits obtained were criminal property. We agree with that proposition. However, we do not agree with his submission that profits made from trading in legitimate goods, without declaring the profits to the Inland Revenue or the Department of Work and Pensions, could in any circumstances convert the profits into criminal property. We do not see how it can be said that, after the second and third occasion of the claim for benefits, in the knowledge that there were profits obtained from legitimate trading, that could of itself convert the profits into criminal property. In our judgment the failure to declare the profits does not make the trading a criminal offence.

21.It was for the prosecution to prove that the money the subject of the counts was criminal property. The answer given by the Recorder to the jury did not explain that profits from legitimate trading could not constitute criminal property. In our judgment he ought so to have done. This difficulty is not overcome by the Recorder's direction that it must be dishonest. He did not explain who must have acted dishonestly and at what stage or in what connection, and with what transaction the dishonesty must be proved. We recognise that the failure to declare profits for the purposes of income tax may give rise to an offence, but that does not make the legitimate trading in goods an offence of itself.

22.The prosecution's submissions in relation to that part of the question which relates to benefit fraud are stronger. We can see how benefits obtained on the basis of a false declaration or a failure to disclose a change in circumstances may amount to obtaining a pecuniary advantage, namely the benefits: see section 340(6) of the Act. But in this case no attempt was made to prove that the appellant or anyone else in her family had made any false declaration or failed to disclose a change of circumstances. Miss Manley points out that it appears that at least some of the benefits that were obtained were benefits which were granted on a non-means-tested basis. There was no evidence as to how much were on a non-means-tested basis.

23.This gives rise to what we consider to be one of the main difficulties in the way of the prosecution's attempt to uphold these convictions. The case as opened by counsel, and as put to the appellant, was one of alleged money laundering. It was not put on the basis of an income tax fraud or benefit fraud. The suggestion made to the appellant was that either she or someone else in her house had been engaged in some criminal activity. It was never suggested that she was trading legitimately and not declaring income to the Inland Revenue or the Department of Work and Pensions. The question from the jury raised a matter which had never been the subject of any evidence or any allegation.

24.Finally, the question from the jury raises two alternative bases upon which there might be criminal conduct. The Recorder's direction in relation to both of them was exactly the same. It is not possible for this court to say with any certainty on which basis the jury found the appellant guilty. Indeed, Mr O'Brien concedes as much. If it was on the basis of failing to declare to the Inland Revenue profits from legitimate trading, for reasons which we have already given the verdicts are, in our judgment, unsafe. It must follow that, even if the appellant could properly be convicted on the basis that the money found resulted from a benefit fraud, we cannot be satisfied that that was the basis on which the jury convicted her.

25.In the circumstances we have no need to deal with the other grounds of appeal for which leave was refused. Whether or not the Recorder's decision to refuse an adjournment so that the appellant could be represented can properly be challenged, it was, to say the least, very unfortunate that when this difficult question was raised by the jury the Recorder did not have the benefit of counsel for the appellant to help resolve it.

26.Finally, we think it may be helpful to add a general comment. There can be no doubt that the money laundering provisions of the Proceeds of Crime Act 2002 are draconian. The scope of section 329 is wide. It requires proof of no more mens rea than suspicion. The danger is that juries will be tempted to think that it is for the defence to prove innocence rather than the prosecution to prove guilt. In R v Louizou and Others [2004] EWCA 1579 the prosecution had set out the factors upon which it relied and from which it submitted the jury could draw proper inferences. In our judgment it is a sensible practice for the prosecution, as was done in Louizou, either by giving particulars, or at least in opening, to set out the facts upon which it relies and the inferences which it will invite the jury to draw as proof that the property was criminal property. In doing so it may very well be that the prosecution will be able to limit the scope of the criminal conduct alleged. Before this court Mr O'Brien very frankly admitted that at the start of the trial he did not have in mind any form of benefit fraud. Had this happened in this case, we very much doubt that an allegation of income tax fraud or benefit fraud would have been included in the alleged criminal conduct. If it had, the defence would have been alerted to the necessity of dealing with such an allegation.

27.For these reasons this appeal is allowed and the convictions quashed. Are there any other matters with which we need deal?