Carter, R. v

MR JUSTICE NEWMAN: Ruslan Kulish, Viktoriya Kulish, Denis Lyashkov and John David Carter were convicted and sentenced in March 2004, at Kings Lynn Crown Court, for offences of dishonesty and deception in connection with the running of a gang mastering business in East Anglia. Gang mastering being the business of supplying casual labour to farmers and growers and other employers is not unlawful or criminal, but in this instance it was because the casual labour which was provided to farmers, food processing companies, flower growers and packers comprised illegal immigrants or asylum seekers who had no right to work in the United Kingdom. Further, in order to satisfy any customer who asked, false standard acknowledgment letters known as SAL2s, which are documents issued by the Immigration and Nationality Directorate of the Home Office, were prepared which purported to identify the worker as entitled to work.

The above conduct was charged in count 3 of the indictment as a conspiracy to use false instruments, namely the SAL2s, with the intention of inducing someone to accept them as genuine and by reason of so doing, to do an act to their own or others prejudice.

The case bears similarity to a prosecution of defendants, who came before the Canterbury Crown Court in a trial which concluded on 16th March 2004. Sentence in that case came on appeal to this Court, as the case of R v Cox [2004] EWCA Crim 2467.

Ruslan Kulish was convicted of the conspiracy and sentenced to 7 years' imprisonment. He was also convicted and sentenced on the following other charges, count 4, possession of false registration cards, 2 years concurrent; possession of replica immigration stamps, 2 years concurrent and count 6, concealing the proceeds of criminal conduct, namely money laundering offence, 7 years concurrent. Further, a confiscation order was made in the sum of £940,330.96 or in default 5 years' imprisonment.

Ruslan Kulish has not sought to appeal his convictions but the Full Court granted leave to appeal against the Confiscation order and referred sentence to this Court, including his application for an extension of time to appeal against a sentence of imprisonment.

Denis Lyashkov was convicted of an offence of obtaining a pecuniary advantage by deception and was sentenced to 2 years' imprisonment to be served concurrently with the three year sentence on count 6 for money laundering. He was acquitted on count 3, the conspiracy charge. The Full Court granted him leave to appeal against conviction on count 6 and referred sentence and the confiscation order of £50,001. 10 to this Court.

The central allegation against him was that he being a person not entitled to work, had obtained employment by a deception, namely that he was entitled to work. He was not entitled to work because he had obtained a false SAL2, under an assumed identity and as a Russian. He earned £50,001.10 in wages over 3 years. These wages were, as we have indicated, held to be a benefit within the meaning of section 71 of Criminal Justice Act 1988. Since he had realisable assets in that sum, a confiscation order was made in the full amount of the benefit.

The Full Court granted leave to appeal on count 6, the money laundering charge, because the jury had acquitted him of the conspiracy on count 3. We shall have to examine the connection between count 3 and count 6 later in this judgment.

Victoria Kulish, she is the sister of Ruslan and the partner of Lyashkov. She entered a late plea of guilty to obtaining a pecuniary advantage by deception. She, like Lyashkov, had obtained an SAL2 as a result of a deception and used it to obtain employment. She was sentenced to 1 year and 3 months, but to be served concurrently with the sentence on count 6, the money laundering. She was also acquitted on the count 3, the conspiracy and was sentenced to 2 years' and 9 months imprisonment for the money laundering.

The amount she earned over 3 years, namely £36,836.23 was taken as the benefit she had obtained. Her realisable assets being less a confiscation order was made in the sum of £16,443. She appeals on count 6 and against the confiscation order.

Finally, John Carter, he was convicted on the money laundering charge and sentenced to 4 years and 6 months, but he only appeals in connection with sentence, which the Full Court has referred to this Court. There is a considerable degree of overlap between the various arguments for the appellants in connection with the confiscation orders which were made, but we will, first of all, turn to Ruslan Kulish's case.

The Confiscation

The judge reached the following conclusion of fact:

As to the issues of law which were raised, the judge:

The mathematics of the above allowing 40% or 50% share taken by Ruslan Kulish applied to the gross receipts of £4.3 million was calculated as £1,885,432.60. Had the judge accepted Mr Lamming's argument on his behalf, which Mr Lamming repeated in this Court, he would have taken the total net receipts, namely only the sums it was said Ruslan Kulish had drawn down which totalled £549,800. Mr Lamming's central submission is that sum should have been the benefit found by the court.

Ruslan Kulish's realisable assets were assessed at £940,330.90, namely less than the benefit which the court had concluded he had obtained. If Mr Lamming is right and the benefit should have been £549,800, Ruslan Kulish stands to retain about £400,000 of his realisable assets which on the Crown's case he obviously obtained from the implementation of the conspiracy.

Section 71(4) of the Criminal Justice Act 1988 states:

Mr Lamming submits that Ruslan Kulish was convicted of playing a part in the conspiracy "to use false instruments with the intent of inducing someone to accept them as genuine and by reason of so doing to do an act to their own or other's prejudice." From that he says it can be seen that the conspiracy consisted in possessing the false instruments in case they were needed and being prepared to produce them on demand. The £3 million received and paid out as wages was not obtained, he submits, by the use of false instruments, it was the product of the labour of the workers. Put another way, he submits "benefit" means receipts or profits. Where a business has been run to generate a profit albeit pursuant to a criminal conspiracy, the expenses of running the business are, he submits, outside the ambit of the statutory regime which governs confiscation orders. We cannot accept these submissions.

The purpose of the conspiracy was to obtain payment from employers by supplying them with workers who were not entitled to work in the United Kingdom, namely to supply illegal labour. It required false documents to further that purpose. If the documents had not been available the conspiracy could have failed. If the workers could not, when it was required, be shown entitled to work, the business would have failed. The payments were made by customers for the supply of illegal labour over 3 years, in the belief that the labour they were being supplied was legal. The total turnover comprised the proceeds of the conspiracy, according to its terms and as it had been implemented. It was integral to the conspiracy that the workers were paid. Not to have paid the workers would have undermined the continuation of the illegal business to which the conspiracy had given rise. The ill-gotten gains from the conspiracy were reinvested, so as to enable the conspiracy to continue. The proceeds as received from time to time were used to further the criminal enterprise.

On any basis, it seems to us, odd to suggest that where you have used the proceeds of a criminal enterprise to such an end, namely the furtherance of your criminal enterprise in the future, you should somehow, at the end of the day, be able to claim credit for that which you have used to enable your own illegal conduct to continue. But the short and, in our judgment, conclusive answer to Ruslan Kulish's position, is that the sums were received into accounts controlled by him and he undeniably therefore, as a matter of law, obtained the proceeds.

The judge concluded that he controlled the payments out. There is no appeal against the judge's finding of fact that he did so. Mr Lamming has taken us to the growing list of case law on the statutory power of confiscation in the 1988 Act. They include the following cases: R v May & Ors [2005] 1 WLR 2002, R v Richards [2005] EWCA Crim 491, R v Patel [2000] 2 Cr App R(S) 10, R v Currey (1995) 16 Cr App R (S) 421 and R v Smith (David) [2002] 1 WLR 54.

Once it was found that Ruslan Kulish obtained all the proceeds, it is clear, in our judgment, from the House of Lords judgment in Smith, that what he did with them afterwards is irrelevant. On one view to pay wages may be regarded as being commendable. But, in truth, he used the money to obtain a future criminal benefit. He therefore benefited by making the payments and we see no basis for concluding that the benefit he obtained from so doing can operate so as to reduce the total benefit he obtained.

Mr Lamming, in his written argument, acknowledge in the light of the cases, in particular in May and Patel, that Mr Ruslan Kulish had received an apportionment according to the agreed share in the proceeds. As it appears to us, the judge would have been entitled to make a confiscation order against him on the basis that he had benefited to the full amount of £4 million. As it happens, it would have made no difference had he done so, because, as we have stated, his realisable assets are less than the full amount.

Having regard to the state of the law and the number of occasions when the law has been reviewed by the Court (see most recently the R v Kumar Sharma [2006] EWCA Crim 16) where one can see the latest short review, this Court consider no benefit is to be gained from carrying out a further review.

In our judgment, section 71 is clear. The benefit is not receipts, it is not net profits, nor is it the sum after distribution, nor is it the sum after sharing it with others, it is the amount obtained. A person who controls the funds in a bank account has obtained them.

Mr Lamming also raised arguments under Article 1 Protocol 1 of the European Convention of Human Rights but we will deal with those arguments when we deal with the confiscation arguments advanced on behalf of Viktoriya Kulish and Lyashkov.

So far as Ruslan Kulish is concerned, we turn to the application for an extension of time for appealing the sentence of 7 years.

The Single Judge refused an extension of time in connection with sentence. He held, correctly, in our judgment, having regard to the terms of section 18(2) of the Criminal Appeal Act 1968, that time runs from the date on which the sentence against which the appeal is to be made was passed. It does not run from the completion of all aspects of the sentencing, which it is accepted as a matter of principle includes the separate process of making a confiscation order.

That said, had we considered that there was merit in the ground, we would have granted an extension of time for leave to appeal. But we have not seen sufficient merit in the points made for the following reasons. Ruslan Kulish was at the heart of the conspiracy on a significant and very profitable scale. The employment of illegal labour operates so as to prevent those who are entitled to work from being so employed. It is not open to persons who dishonestly provide labour to assert that the United Kingdom labour market could not satisfy the need. The proper protection of the right to work and the regulation of the labour market, which operates so as to protect that right to work, provide for an important social objective. Operating on the scale involved here is capable of distorting the market and having significant consequences on the local community. But the consequences also extend to the distortion of the control of immigration and the regulations which are in force, to supervise asylum seekers. Being able to work, has undoubtedly been a benefit to the workers and may have given relief from the level of central government provision which is made to them but that cannot enure to the benefit of the appellants. The conduct of the appellant, Ruslan Kulish and the others, had the capability to distort and affect the control of immigration and the regulation of asylum seekers. Further, it exposed all those involved, including the workers and the employers, to the danger of committing a range of criminal offences.

In our judgment, the sentence which was passed had to be one which met the gravity of this conduct. Mr Lamming relied in particular upon the case of Cox, to which we have already referred. In that case, a division of this Court concluded, in similar circumstances, that sentences of 7 years were to be seen as severe but not manifestly excessive. Mr Lamming endeavoured to distinguish that case from this and, in particular, to suggest from paragraph 21 of that judgment, that the features of the case went beyond the fact of a conspiracy to defraud. There was also, in that instance, a conspiracy to use false instruments and a conspiracy to facilitate entry into the United Kingdom.

In our judgment, the ambit and impact of the criminality which we have shortly summarised does not, in our judgment, disclose any significant difference on the facts to affect the sentences which were upheld in the case of Cox and which were imposed here. In our judgment, it was a severe sentence. Circumstances such as this can call for severe sentencing. But we are satisfied that it was not manifestly excessive. Thus leave to appeal against sentence is not granted nor is an extension of time.

Denise Lyashkov and Viktoriya Kulish each obtained employment by using a SAL2, bearing a false name and an entitlement to work. Each was convicted of obtaining a pecuniary advantage, namely opportunity to earn remuneration contrary to section 16(1). Each was also convicted of Concealing Proceeds of Crime (count 6) contrary to the Criminal Justice Act 1980 section 93C(1)(a).

As to Lyashkov the confiscation order in the sum of £50,000 odd was based on his conviction on count 2, obtaining a pecuniary advantage. He obtained the employment and was paid that amount in wages. The benefit must, according to section 71(4), be property obtained as a result or in connection with the commission of that offence. Mr Bodnar submitted that the wages were paid and obtained as a result of the performance by him of his duties, not the pecuniary advantage of having an opportunity to work. He has referred this Court to a number of cases on the meaning and application of section 16 of The Theft Act, which he submits support a contention that where employment, initially obtained by deception, is taken up, the wages thereafter received are not properly regarded as having been obtained by deception. He submits the opportunity provided Lyashkov with no benefit.

The judge held that but for the SALs issued in bogus identities they would not have offered employment. Once offered each took up the opportunity to work which it gave them and earned wages. As a result he concluded that each obtained wages as a result of their work, which was obtained as a result of the offence, or in connection with the offence. He concluded that no assistance could be obtained from the Theft Act cases and the offences of obtaining money by deception or theft. He referred to section 71(5) where the subsection provides the benefit, in cases of pecuniary advantage should be taken as a sum of money equal to the value of pecuniary advantage. Mr Bodnar submits that if subsection (5) is applied, the pecuniary advantage obtained was the opportunity to work not the wages from work.

The argument assumes that the pecuniary advantage flowing from the opportunity is less than and is to be distinguished from the taking up of the opportunity to work and the payment for the work then taken up.

Mr Bodnar's argument was in effect founded, although he was anxious to distance himself from the case with or argument which depended upon, the case of R v Lewis 1922. It appears as a footnote in Russell on Crime 12th ed 1964 Volume II p 1186 note 66. In that case the defendant had obtained a job as a school mistress by falsely stating that she had a teacher's certificate. She was held to be not guilty of obtaining her salary by false pretences on the ground that she was paid because of the service she had rendered and not because of the false representation.

The argument raised by Mr Bodnar was raised long ago, in 1986, in the reported case of R v King David [1987] 1 QB 547. In that case, to which it is unnecessary to refer on the facts, Neill LJ dealt with an argument, which like Mr Bodnar's, started with reliance upon the case of Lewis. At page 552 Neill LJ referred to the scanty nature of the report and to the facts and he thereafter also referred to various learned comment from academic consideration to which the case of Lewis or the footnote had been subjected. Having stated that careful consideration had been given to these arguments, Neill LJ stated at G to H:

The case of Lewis, as it will be apparent, cannot be taken as having decided any principle of law. It is a case which stands obviously upon its own facts, with its own limitations. It seems to us to be obvious that where you obtain an opportunity to work from an offer of employment being made to you, and the offer has been induced by a false representation that you are entitled to work, then the false representation continues thereafter for the benefit of the offender who, permitting the representation to continue is able to retain employment.

Once made, it continues to have effect throughout the employment which has been taken up. At any stage, had the representation been corrected, it is plain the employment would have ceased. Although the question as formulated by Neill LJ in the case of King was directed towards a different statutory provision from the one which we are considering, namely whether or not the benefit was obtained within the meaning of section 71(4), namely, obtained as a result of or in connection with its commission, the formulation of the question, in our judgment, is nevertheless apt. Substituting "benefit" for "property" the question is: was the deception an operative cause of obtaining? In our judgment, the answer to that question is plainly, yes.

In order to develop the ground of appeal Mr Bodnar next sought to place the receipt of wages in a special category, which the law has recognised as special and to which the law has accorded special protection. He stressed how the Theft Act had specifically provided for a pecuniary advantage gained in connection with employment.

In our judgment, despite the care with which Mr Bodnar sought to advance and develop such argument, none of this is anywhere near the point when one is considering the words in section 71(4). In our judgment, the wages were clearly obtained as a result of and in connection with the deception.

Mr Bodnar, like Mr Lamming, raised arguments in connection with proportionality of the confiscation which had taken place. He relied upon the impact of the provisions of European Convention of Human Rights and Article 1 Protocol 1 in particular. He developed an argument by reference to a number of cases which preceded the amendment to the Criminal Justice Act 1988, which he said led to what should be regarded as a narrower and tighter interpretation to be given to the word "benefit" and instead of it being a question of what it could be seen was a benefit which had been obtained, one should approach the matter, as he submitted rather more by reference to this question:

In our judgment, Parliament has provided a clear answer as to the meaning of "obtain" and the meaning of "benefit". The provisions of the Act are not capable of the sort of extended interpretation which Mr Bodnar asks us to deploy. Nor are we satisfied, for the reasons that have been stated in other cases and to which it is unnecessary to refer, that this regime which is acknowledged and emphasised by the House of Lords is a Draconian regime is one which gives rise to a lack of proportionality, save only in the window of opportunity which argument has now left open in the pending appeal to the House of Lords in the case of May. As it happens in this case, the defendants were given the benefit of an apportionment as between themselves, according to their agreement, namely the percentages as agreed between Ruslan Kulish, Carter and Mutch. As we have already indicated, on one clear view of the authorities to date, Ruslan Kulish has already received an apportionment which, on any basis, puts him in a position which might be contemplated to be the best result which could be obtained from the case of May. Equally each of the other defendants have obtained the benefit of the apportionment and so far as this Court is concerned, nothing more needs to be said in relation to the Convention argument.

We turn now to the convictions of Viktoriya Kulish and Lyashkov on count 6. Viktoriya Kulish was charged on count 1 that she had on or about 15th May dishonestly obtained for herself a pecuniary advantage, namely the opportunity to earn remuneration in an office or employment from out Gs Marketing Limited by deception, namely by falsely representing that she was in possession of a valid form of SAL2 from the Home Office, which in fact was in the name of another, which purported to show she was entitled to work. He, Denis Lyashkov, was charged separately with a similar offence. Both continued to work for Gs marketing until they were arrested in April 2003, nearly 3 years later.

As we have recalled, there is no appeal against their convictions on these counts but Mr Bodnar has drawn on the character of the convictions on counts 1 and 2, which were the operative counts upon which they were convicted and their acquittals on count 3, namely the conspiracy. From that starting point, he has mounted the appeal against the conviction of each of them on count 6.

The events having commenced before 24th February 2003 were charged under section 93C(1) of the Criminal Justice Act and not the successor provisions of the Proceeds of Crime Act 2002. We need, briefly, to refer to count 3, but in view of the concessions which have been made by Mr Mayo, who has appeared here for the prosecution, it is sufficient to record that from the outset of the trial, until a point very late in the trial, when the matter was clarified, it had been the position of the Crown that each of the defendants and, in particular, Denis Lyashkov and Viktoriya Kulish were charged on count 6 in relation to money laundering, because of their participation in the conspiracy which had been laid against each of them in count 3. It is their acquittal of the conspiracy in count 3 which creates the difficulties. But we must mention but shortly how events changed, as we have been told by Mr Mayo, at the trial.

As the trial developed, it emerged from the evidence that there had been receipts by Denis Lyashkov of the proceeds of the conspiracy from Ruslan Kulish, the receipt of money. It was also said that the evidence disclosed that the appellant, Viktoriya, had received her wages from G's Marketing Limited, via a bank account opened in the name of another defendant, which had then passed into her hands. As a result it was said she could be identified, as could Lyashkov, as having been the direct recipients of certain proceeds of the criminal conduct of Ruslan Kulish and the others.

For that reason, shortly before the summing-up, if not before speeches of counsel to the jury, the judge and prosecuting counsel, with the assistance of the defence, entered into a discussion as to whether, contrary to the way in which the case had been opened, and indeed largely conducted, apart from some cross-examination when Mr Mayo took the opportunity of developing that which turned out to be the altered basis of a possible conviction on count 6, the jury should be left with a case on count 6 as against the two appellants which did not depend upon a conviction on count 3.

We have endeavoured, in the course of this hearing, to ascertain what response there was from counsel and, in particular defence counsel, to this course. As it happens Mr Bodnar, who appears for the two appellants in this Court, was not counsel below. The recollection of Mr Mayo is that there was not strong voice against the course. Mr Lamming, who was there but had his mind on Mr Ruslan Kulish rather than the other two defendant recalls objection being taken. But there has been no transcript and this court is ignorant of precisely what took place.

Suffice it to say, having considered the matter we are satisfied, without going into the detailed argument Mr Bodnar has advanced by reference to the law, namely whether or not on the facts as they were left to the jury, it was open to the jury to convict under section 93C(1)(a) as opposed to another section of the Criminal Justice Act, we are satisfied that it was too late in the day for the change to take place. We are satisfied, too, that if it was to take place it required the most careful direction to the jury as to how they were to apply the altered view of count 6 to the facts as they affected each of these appellants.

We consider having the benefit of the jury's acquittal of these two appellants on count 3, that it is very difficult to fit the facts into the framework of the facts as they were in the court below. We are unclear how it is that the jury could have concluded that they were guilty on count 6. For those reasons and without it being necessary to go into the detailed argument, we are satisfied that the convictions on counts 6 in respect of both Viktoriya Kulish and Denis Lyashkov are unsafe. That leaves us with sentence only in respect of the two appellants, Lyashkov and Viktoriya Kulish. We have been informed that both have served their sentence. They have been deported and the only interest they have in this Court considering whether the sentences which were imposed in respect of the deception counts were manifestly excessive relates to any future wish they might have to return to this country.

In our judgment, putting aside the motive for wishing to ventilate the level of sentencing in this Court, having regard to the persistence of their conduct, over the period of time with which the offence was concerned, and having regard to the gravity of the central offending and the consequences, as we have already detailed them, we can see nothing manifestly excessive in the periods of custody which were imposed. Thus, their applications in relation to sentence are dismissed.

That leaves Mr Carter. Mr Carter was convicted only on the money laundering count 6, concealing or transferring the proceeds of criminal conduct. The conspiracy to use false instruments was ordered to remain on the file on the usual terms and he was sentenced to 4 years and 6 months' imprisonment. The short points which have been, despite their shortness effectively made by Mr Shelley, on his behalf, are that this is a man of previous good character, a professional man, whose participation in these events was the setting up of the companies, in order to enable the funds to be fed through the companies. He was acquitted of being involved in the conspiracy on count 3. He was therefore on the periphery of these events. When the sentence is looked at by reference to what the judge had in mind in relation to the money laundering on the counts which we have quashed and when we look at it, by reference to the total sentence which the main protagonist Mr Ruslan Kulish was required to serve, he submits it is simply out of line and despite the fact that he fought the case, we should conclude that four-and-a-half years is manifestly excessive.

Having considered the matter carefully we are persuaded, so far as Mr Carter is concerned, that the judge did impose a sentence which was unnecessarily high and out of line with the level of offending as it had been found by the jury. Indeed, the level of sentencing has the character of the sentence which might have been imposed upon him had he been convicted of the conspiracy, albeit his participation in the conspiracy, being limited to the limited activities which it was said he had carried out. Therefore, we feel it right to intervene in connection with that sentence. To quash the sentence of four-and-a-half years and to impose one of three-and-a-half years.

MR BODNAR: One thing arises, an application for certificate to go to the Lords. For my part, I would be grateful for the time to absorb Newman J's judgment and to make such an application, make it in writing within 14 days.

LADY JUSTICE HALLETT: Which point exactly? The count 6 point? We have not decided the point of law that you wished to raise. The count 6 point.

MR BODNAR: In relation to confiscation, it will certainly be for my part an immediate point the question of construction compatibility with Article 1 and Protocol. As I say, I would be grateful to consider my Lord, Newman J's, judgment for a few days and make such application in writing.

LADY JUSTICE HALLETT: Certainly.

MR LAMMING: I make the same point on behalf of Ruslan in relation to the confiscation point that I argued. The Court will be aware that when giving leave back in October, this Court indicated that this might well be a matter that could usefully be considered together with Bailey. I will take time in formulating a point, and we will submit it in writing.

LADY JUSTICE HALLETT: Certainly.

MR LAMMING: In those circumstances I will be inviting the Court, if it certified the point, in the light of what was said in October and the fact that May has got leave from Their Lordships, also in this case also exceptionally itself grant leave.

LADY JUSTICE HALLETT: Pause there if you would? I am thinking of timing, Mr Bognar and Mr Lamming. I shall be out of the jurisdiction from the 16th, but my Lords are around in February, the rest of February. Any way we will just see where we go, once we have had a chance to reflect.

MR BODNAR: The answer is we have 7 days rather than 14.

LADY JUSTICE HALLETT: I am sorry about that but I am not, changing my plans.

MR LAMMING: We know the House of Lords is not sitting until mid- October.

LADY JUSTICE HALLETT: We have some time to play with. I am not going for a long time.

MR JUSTICE NEWMAN: Whether you get a certificate or not the House of Lords can have this case drawn to their attention and they can consider the point which is being, the way intended to be adapted in relation to these other vaguely related May cases. The House of Lords looks at in most cases the certificate or leading argument.

MR LAMMING: We do not want to argue it now because that was the very point that was made. We will take time, and I have seen the petition in May. I have a copy from counsel in that case. It is directly specifically to the apportionment point not the general interpretation of section 71(4).

LADY JUSTICE HALLETT: We will wait to see what you produce.