NW & Ors, R v

This is a prosecutor’s appeal pursuant to s.58 of the Criminal Justice Act 2003, brought with leave of the judge below, against a terminating ruling made on 27 April 2007 at the Bournemouth Crown Court. The ruling consisted in the decision of His Honour Judge Wiggs, the trial judge, to accede to a submission of no case to answer advanced on behalf of all four defendants in the trial proceeding before him. The defendants faced an indictment containing 33 counts of what in shorthand may be called money laundering. There were three statutory offences charged. Counts 1, 2 and 11 charged offences of entering into an agreement to acquire, retain, use, or control criminal property contrary to s.328 of the Proceeds of Crime Act 2002 (“POCA”). Counts 3, 5, 7, 9, 12, 14, 16, 18, 20, 22, 24, 26, 28, 30 and 32 alleged 15 offences of transferring criminal property contrary to s.327 of POCA. Counts 4, 6, 8, 10, 13, 15, 17, 19, 21, 23, 25, 27, 29, 31 and 33 alleged 15 offences of removing criminal property from England and Wales to Jamaica also contrary to s.327. Ss.327 and 328 appear in Part 7 of the Act (cross-headed “Money Laundering”).

The overall period covered by the indictment was 1 July 2003 - 3 July 2005, though individual offences were said to have been committed over shorter periods within the overall span.

As we have indicated there were four defendants. The Crown’s case was that the prime mover was the defendant NW. Something over £105,000 was transferred out of the UK to Jamaica. The Crown alleged that all of it represented the proceeds of criminal conduct in which NW was involved. The other three defendants were related to or associated with NW. Each of counts 1, 2 and 11 alleged an agreement contrary to s.328 between NW and one of the other defendants, in effect to carry out the transactions charged in the two groups of offences contrary to s.327: first, the transfer of money from NW to the three others, and secondly the removal of the money by those three from the UK to Jamaica.

The total sum said to have been the subject of the arrangements charged at counts 1, 2 and 11 was £105,198. The sum involved in the first set of s.327 charges – transfer by NW to the other 3 – was £32,999: and the sum involved in the second set – removal from the UK to Jamaica – was also £32,999. It was of course the same money. This figure differs from that involved in counts 1, 2 and 11 because the s.327 counts were specimen charges.

In order to bring home any or all of these offences the Crown had to prove that the funds involved constituted “criminal property” within the meaning of POCA s.340, which also defines “criminal conduct” for the purpose of these statutory offences. S.340 provides in part as follows:

“(2)

Criminal conduct is conduct which –

(a)

constitutes an offence in any part of the United Kingdom, or

(b)

would constitute an offence in any part of the United Kingdom if it occurred there.

(3)

Property is criminal property if –

(a)

it constitutes a person’s benefit from criminal conduct or it represents such a benefit (in whole or in part and whether directly or indirectly), and

(b)

the alleged offender knows or suspects that it constitutes such a benefit.

(4)

It is immaterial –

The essence of the issue in this appeal may be put shortly. To establish guilt under s.327 or s.328, must the Crown prove what particular criminal conduct, or at least what type of criminal conduct, has generated the benefit which the alleged criminal property represents? Or is it enough if they can show, no doubt by reference to the large sums involved and the defendants’ want of any apparent means of substance (as well as any other relevant evidence), that the money in question can have had no lawful origin – even if they have no evidence of the crime or class of crime involved? The Crown say the latter suffices. In his terminating ruling the learned trial judge held that it did not. He granted leave to appeal on these grounds:

“1

[T]he learned judge erred in ruling at the close of the Crown’s case that the defendants had no case to answer because the monies they allegedly transferred to Jamaica could not be criminal property as the prosecution had no evidence of specific criminal conduct, or even a particular type of conduct, on the part of any defendant, so that all the prosecution could say is that those monies had no lawful origin.

2

[T]he learned judge erred in ruling that the circumstances surrounding the origin of the monies transferred created a reverse burden of proof for the defendants to overcome.

There is a real prospect of success in this appeal.

This is an important area of law which needs to be clarified.”

On granting leave to appeal the learned judge made no provision for the appeal to be expedited, and discharged the jury.

Since the appeal raises a pure question of law it is unnecessary to canvass the facts to any great extent beyond the bare summary we have already given. The Crown claimed to have evidence tending to prove the arrangements between NW and the others, the transfers from NW to the others, and the removals by the others of the funds to Jamaica. The removals were effected through Western Union or Jamaica National Overseas Ltd. The Crown also claimed to have the names of the recipients in Jamaica. These facts were by no means all agreed or admitted, indeed some were or would be hotly contested; but the Crown say that there was at least enough evidence upon which a reasonable jury might find the facts alleged.

The Crown was also able to establish, or so it claimed, that NW had no visible means of support. He had arrived in the United Kingdom on 3 September 2001. His passport was held by the Immigration Service throughout the period covered by the indictment. The Department of Work and Pensions had no record of benefits paid to him since his arrival in this country and Her Majesty’s Revenue and Customs had no trace of any tax records relating to him. SW and RC were in receipt of state benefits throughout the period of the indictment. CC is the daughter of RC and the mother of NW’s child. There are no tax records for her, or RC. Over £5,000 cash was found at RC’s home on 3 August 2005. There was evidence of very frequent phone calls between the defendants.

All that said, it is clear that the Crown were in no position to prove any particular criminal activity, or type of criminal activity, perpetrated by NW or anyone else.

It is important to appreciate that the submissions of no case to answer with which the learned judge below had to deal fell into two distinct parts. There was first an overarching submission for all the defendants to the effect that the Crown were required to allege and prove at least the type of criminal activity said to constitute the relevant “criminal conduct” within the meaning of POCA s.340(2). Secondly, there was a series of distinct submissions to the effect that in any event there was insufficient evidence, as against each defendant, to justify the case going further. The judge ruled in favour of the defence on the first issue and so did not rule on the second.

This appeal is accordingly limited to the pure question of law which we have already identified, arising out of the judge’s ruling on the first issue: must the Crown prove what particular criminal conduct, or at least what type of criminal conduct, has generated the benefit which the alleged criminal property represents? The judge’s reasoning concludes as follows (transcript of ruling 14E):

“The difference between this case and the case of IK [to which we shall return in due course] is that in that case there was evidence of dishonest conduct. In this case, all the prosecution can say is that the money has no lawful origin and, in my estimation, that does reverse the burden of proof upon these defendants, and, as that is not a proper way to leave a case to a jury, I decide on the facts of this case on the Crown case as presented to me and presented to this jury that there is no case to answer.”

The appellant’s argument is simple enough to state. It is that in order to establish guilt under POCA s.327 or s.328 the Crown must prove that the defendant had dealt with what he knew or suspected was criminal property, that is (see s.340) property which constitutes or represents a person’s benefit from conduct which constitutes an offence in any part of the United Kingdom – but that is all: s.340 contains no provision to the effect that property can only be shown to be criminal property if the prosecution can identify, or at least categorise, the criminal conduct behind it. Nor is any such requirement to be found in any general rule of evidence, whether given by statute or the common law.

In those circumstances Mr Bartlett for the Crown submits that if the prosecution proves primary facts from which a reasonable jury applying the criminal standard of proof may infer that the property in question must have been the fruits of a criminal offence or offences by some person (and the defendant knew or suspected that that was so), then the offence charged, whether under s.327 or s.328, is made out. There is no reason in law or in logic to conclude that the circumstances in which such an inference may be drawn are limited to cases where the prosecution can identify the particular offence or type of offence committed.

The respondent defendants’ argument may be encapsulated in two propositions. (1) The Crown’s submission involves a reversal of the burden of proof, and the judge was right to reject it on that ground. (2) On the proper construction of POCA s.340 the Crown are required to prove at least the type or class of crime which has generated the benefit which the alleged criminal property represents. To confront this second proposition will require some examination of authority.

In our judgment the respondents’ first argument confuses a reversal of the burden of proof, which would of course be illegitimate, with a different proposition, namely that unless the Crown can identify the crime or class of crime in question, no inference of guilt can as a matter of fact be drawn. It is notable that the written submissions of no case put before the judge by (at least) NW and SW (and relied on before us) develop detailed arguments to the effect that the evidence against them is as consistent with an innocent explanation of the transferred cash as with its being the proceeds of crime. Whether or not that is right no doubt depends on the outcome of the second area of argument advanced before the judge at the close of the Crown case – that is, the submissions for each defendant to the effect that in any event there was insufficient evidence to justify the case going further. As we have indicated the judge did not have to, and did not, deal with that because he ruled in favour of the defence on their first overarching submission to the effect that in principle the Crown had to prove at least the type of criminal activity said to constitute the relevant “criminal conduct”.

We did not understand the respondents to submit that there could never be a case in which the Crown might properly invite the jury to infer from the available facts that criminal activity was the only reasonable and non-fanciful explanation for the presence of the relevant property in the hands of the defendants, even though there was nothing to show what class of crime was involved. We would in any event reject so general and unqualified a proposition. Everything, of course, depends on the particular facts. The protection for defendants is that such an inference can only properly be drawn if it meets the criminal standard of proof, and the jury must of course be so directed.

Accordingly there may be cases (whether or not this is one) in which guilt under POCA s.327 or 328 could be inferred, applying the criminal standard, without proof of the class of crime in question. Whether a prosecution in such a case is lawfully and properly brought depends in our judgment on the correctness or otherwise of the respondents’ second argument, namely that on the correct construction of POCA s.340 the Crown are required to prove at least the type or class of crime in question, to which we will come in due course.

However the respondents’ first argument, that allowing such convictions would sanction an illegitimate reversal of the burden of proof, is in our view without substance. Such cases merely take their place among a multitude of other instances in which the prosecution’s force depends on circumstantial evidence, and therefore inference. The argument proves too much: it would mean that every case where guilt is established by a critical inference from circumstance is vitiated by reversal of the burden of proof. There is no such reversal of the burden of proof. There is only a particular, and perfectly legitimate, mode of proof: inference from circumstance. At paragraph 3.3 of her written submission of no case the defendant SW pertinently cites paragraph 10-3 of the 2007 edition of Archbold:

“Circumstantial evidence is receivable in criminal as well as in civil cases; and, indeed, the necessity of admitting such evidence is more obvious in the former than the latter; for, in criminal cases, the possibility of proving the matter charged by the direct and positive testimony of eye-witnesses or by conclusive documents is much more rare than in civil cases; and where such testimony is not available, the jury are permitted to infer from the facts proved other facts necessary to complete the elements of guilt or establish innocence. ‘It must always be narrowly examined, if only because evidenceof this kind may be fabricated to cast suspicion on another... It is also necessary before drawing the inference of the accused’s guilt from circumstantial evidence to be sure that there are no other co-existing circumstances which would weaken or destroy the inference’ per Lord Normand in Teper v R [1952] AC 480 at 489 (PC).”

The citation from Lord Normand is an apt reminder that the inference which the jury are invited to draw must pass muster by the criminal standard of proof.

No doubt, if such an inference is prima facie there to be drawn, an evidential burden is cast on the defendant to show that after all the inference is wrong: there is another explanation for the defendant’s dealing with the property. But it is surely commonplace that the presence of such an evidential burden does not reposition the legal burden of proof. In the terminating ruling the learned judge cited an observation of Moses J, as he then was, in Muneka v CCE [2005] EWHC Admin 495 at paragraph 13:

“I should say for the sake of clarity that in answer to the question in relation to the reverse burden of proof, although it was not argued before me, it is plain that there was no reverse burden of proof properly so called. All that happened on the facts was that the facts were so startling that they called for an explanation. No truthful explanation was given. That does not amount to a shift of any burden of proof.”

Beyond Moses J’s dictum in Muneka there is, so far as we are aware, no authority which casts particular light on this argument regarding the burden of proof. Loizou [2005] 2 CAR 618 supports the proposition that it is open to the Crown to prove that relevant funds had become criminal property by inference (see per Clarke LJ as he then was at paragraph 14); but this with respect goes no distance for our purposes, since Clarke LJ’s observations give no indication whether the facts to be proved must include the type of crime committed and there is no discussion of any issue relating to the reversal of the burden of proof.

We conclude, for the reasons we have given, that the judge was wrong to characterise the Crown’s position as involving any reversal of the burden of proof. We turn to the respondents’ second submission.

As Mr Bartlett submitted, what has to be proved in order to establish guilt under POCA s.327 or s.328 is that the defendant had dealt with what he knew or suspected was criminal property, that is (see s.340(3)) property which constitutes or represents a person’s benefit from conduct which constitutes an offence in any part of the United Kingdom. Does that import a requirement to prove the particular offence, or class of offence, said to have been committed?The force of Mr Bartlett’s negative answer to this question rests, we consider, in the fact that the statutory words appear to contain no reference, certainly no express reference, to any need to particularise the crime or class of crime in question. However the respondents submit that authority, including learning in the Court of Appeal, rules out the Crown’s position or at least creates very considerable obstacles in its way; and in fact demonstrates that at least the class or type of crime must be identified and proved.

It is convenient first to address two cases which were at the centre of the argument before us, Green [2005] EWHC Admin 3168 and Szepietowski [EWCA] Civ 766. They were concerned with civil enforcement provisions contained in Part 5 of POCA which we should set out:

“240(1)This Part has effect for the purposes of—

(a)

enabling the enforcement authority to recover, in civil proceedings before the High Court or Court of Session, property which is, or represents, property obtained through unlawful conduct,

(b)

enabling cash which is, or represents, property obtained through unlawful conduct, or which is intended to be used in unlawful conduct, to be forfeited in civil proceedings before a magistrates' court or (in Scotland) the sheriff.

(2)

The powers conferred by this Part are exercisable in relation to any property (including cash) whether or not any proceedings have been brought for an offence in connection with the property.

241(1)Conduct occurring in any part of the United Kingdom is unlawful conduct if it is unlawful under the criminal law of that part.

(2)

Conduct which—

(a)

occurs in a country outside the United Kingdom and is unlawful under the criminal law of that country, and

(b)

if it occurred in a part of the United Kingdom, would be unlawful under the criminal law of that part,

is also unlawful conduct.

(3)

The court or sheriff must decide on a balance of probabilities whether it is proved—

(a)

that any matters alleged to constitute unlawful conduct have occurred, or

(b)

that any person intended to use any cash in unlawful conduct.

242(1)A person obtains property through unlawful conduct (whether his own conduct or another’s) if he obtains property by or in return for the conduct.

(2)

In deciding whether any property was obtained through unlawful conduct—

(a)

it is immaterial whether or not any money, goods or services were provided in order to put the person in question in a position to carry out the conduct,

(b)

it is not necessary to show that the conduct was of a particular kind if it is shown that the property was obtained through conduct of one of a number of kinds, each of which would have been unlawful conduct.”

In Green Sullivan J had to decide a preliminary issue which had been framed as follows:

“Whether a claim for civil recovery can be determined on the basis of conduct in relation to property without the identification of any particular unlawful conduct, this first question to include whether the claimant can sustain a case for civil recovery in circumstances where a respondent has no identifiable lawful income to warrant the lifestyle and purchases of that respondent”.

The critical paragraphs in Sullivan J’s judgment are these:

“17 I readily accept Mr Crow’s submission that sections 240 and 241 are framed so as to make it clear that the Director need not allege the commission of a specific criminal offence or offences. I further accept that Part 5 proceedings are not limited, as were the earlier forfeiture proceedings, to any particular kind or kinds of criminal offence, for example, drug trafficking, money laundering, et cetera, but it does not follow that the Director is not under any obligation to describe the conduct which is alleged to have occurred in such terms as will enable the court to reach a conclusion as to whether that conduct so described is properly described as unlawful conduct. For the purposes of sections 240 and 241(1) and (2) a description of the conduct in relatively general terms should suffice, ‘importing and supplying controlled drugs’, ‘trafficking women for the purpose of prostitution’, ‘brothel keeping’, ‘money laundering’ are all examples of conduct which, if it occurs in the United Kingdom is unlawful under the criminal law. It is possible that more detail might be required if conduct outside the United Kingdom was being relied upon, but that is an inevitable consequence of the Director having to establish that the conduct in question was unlawful in both the foreign country and the United Kingdom.

18 If there was any doubt about what sections 240 and 241 required the Director to prove in a claim under Part 5, it would be resolved by subsection 241(3). Mr Crow submits that Parliament inserted subsection (3) out of an abundance of caution, to make it clear that the civil standard of proof applied in those cases where the Director did allege that certain matters constituting unlawful conduct had occurred. The subsection did not require the Director to identify any matters which were alleged to have constituted unlawful conduct. Absent any such allegation, subsection (3) was of no application, and the normal civil standard of proof would apply by necessary inference from the fact that the proceedings were civil, not criminal: see section 240(1).

19 I do not accept that submission, not least because the draftsman could easily have achieved the objective contended for by Mr Crow by saying in subsection (3) ‘The court must decide on a balance of probabilities whether it is proved that unlawful conduct has occurred’. I do not consider that the words ‘any matters alleged to constitute’ in subsection (3) should be treated as though they were otiose. The interpretation of subsection (3) advanced on behalf of the Director looks at the subsection in isolation. When read in the context of sections 240 and the remainder of 241, it is plain that Parliament envisaged that in civil recovery proceedings the Director would identify the matters alleged to constitute unlawful conduct in sufficient detail to enable the court, not to decide whether a particular crime had been committed by a particular individual, but to decide whether the conduct so described was unlawful under the criminal law of the United Kingdom (or the criminal law of the United Kingdom and the foreign country in question).

20 That view is reinforced when one turns to consider section 242. Subsection (1) states that a person obtains property through unlawful conduct ‘if he obtains property by or in return for the conduct’ (my emphasis). Again, these words inevitably prompt the question: what conduct? If the answer is simply (unspecified) unlawful conduct, why did the draftsman not say property is obtained ‘through unlawful conduct’ if it is obtained ‘by or in return for unlawful conduct’. He did not do so because Parliament envisaged that the Director would not simply make a general allegation that there had been unlawful conduct, but would set out the matters which were alleged to constitute a particular kind or kinds of unlawful conduct: see paragraph (b) of subsection (2) to section 242. Mr Crow submits that paragraph (b) sets out what the Director need not show. It does not say that she must show that conduct was of any particular kind.

21 I am unable to accept that submission, since the draftsman could have achieved that objective by omitting all the words after ‘kind’ where it first appears in the paragraph, so that subsection (2)(b) simply read: ‘in deciding whether any property was obtained through unlawful conduct - (b) it is not necessary to show that the conduct was of a particular kind.’ I do not consider that the remaining words in paragraph (b) should be treated as though they were otiose. If the Director is not alleging that the property was obtained by or in return for one of a number of kinds of unlawful conduct, then she has to show that the conduct was a particular kind of unlawful conduct. It is important that paragraph (b) in subsection 242(2) is not considered in isolation but in the context of sections 240 and 241, and in particular subsection 241(3). When the three sections are read together it is plain that the submission on behalf of the Director, that she does not have to allege any matters showing that the unlawful conduct was of any particular kind or kinds, would result in a strained and unnatural interpretation of Part 5.”

At paragraph 25 Sullivan J observed in more general terms:

“Although proceedings under Part 5 of the Act are, in rem, directed at the property in question and not at the criminality of any particular individual, form should not be allowed to obscure substance. Part 5 proceedings are not concerned with any property, however obtained. They are concerned only with property which has been obtained through conduct which is unlawful under the criminal law. It would be surprising if a claimant in civil proceedings, who had to allege criminal conduct as a necessary part of his claim in rem, was not required to give the respondent and the court at least some particulars of what that conduct was said to be. The requirement that fraud or illegality should be specifically pleaded is not simply a procedural nicety. Rather, it reflects the requirements of elementary fairness. In my judgment, the Act deliberately steered a careful middle course between, at the one extreme, requiring the Director to prove (on the balance of probabilities) the commission of a specific criminal offence or offences by a particular individual or individuals and, at the other, being able to make a wholly unparticularised allegation of ‘unlawful conduct’ and in effect require a respondent to justify his lifestyle. I say ‘in effect’ because, although Mr Crow emphasised that the burden of proof to the civil standard would rest throughout any proceedings under Part 5 on the Director, he placed considerable reliance upon those cases which demonstrate that facts may be proved by inference, and that the absence of (or an untrue) explanation, where one is called for, may be sufficient to discharge that burden.”

Before offering any comment on this reasoning we should consider the other learning, starting with Szepietowski. There the Court of Appeal (Civil Division) was concerned with certain further points arising in connection with the civil recovery provisions of POCA Part 5, in particular the question what constituted an arguable case on an application for an interim receiving order under s.246. As Waller LJ pointed out at paragraph 23 both sides had referred to Sullivan J’s decision in Green and both accepted it was correctly decided. We should cite these passages from the judgment of Moore-Bick LJ:

“102 ... The judge [sc. Sullivan J] made the point that in ordinary civil proceedings fraud and illegality must be specifically pleaded with reasonable particularity and went on to express the view in paragraph 25 that it would be surprising if a claimant in civil proceedings who had to allege criminal conduct as a necessary part of his claim was not required to give the respondent and the court at least some particulars of what that conduct was said to be. He concluded that Parliament had deliberately steered a careful course between requiring the Director to prove the commission of a specific criminal offence or offences by a particular individual or individuals and allowing her to make wholly unparticularised allegations of ‘unlawful conduct’ of the kind that would require a respondent to justify his lifestyle. I agree. It seems to me that it is essential if there is to be a fair trial that the respondent should know the case against him in sufficient detail to enable him to prepare properly to meet it.

...

106 As Waller LJ has observed, neither party took issue with the conclusions reached by Sullivan J in R (Director of Assets Recovery Agency) v Green, but in my view that should not deter us from considering them with a critical eye. When deciding what the Director must prove it is important to bear in mind that the right to recover property does not depend on the commission of unlawful conduct by the current holder. All that is required is that the property itself be tainted because it, or other property which it represents, was obtained by unlawful conduct. Section 304 allows property to be followed into different hands and although section 308(1) of the Act protects a bona fide purchaser for value without notice, it is not difficult to think of circumstances in which property might be recoverable from someone who is himself entirely innocent. It is important, therefore, that the Director should be required to establish clearly that the property which she seeks to recover, or other property which it represents, was indeed obtained by unlawful conduct.

107 In order to do that it is sufficient, in my view, for the Director to prove that a criminal offence was committed, even if it is impossible to identify precisely when or by whom or in what circumstances, and that the property was obtained by or in return for it. In my view Sullivan J. was right, therefore, to hold that in order to succeed the Director need not prove the commission of any specific criminal offence, in the sense of proving that a particular person committed a particular offence on a particular occasion. Nonetheless, I think it is necessary for her to prove that specific property was obtained by or in return for a criminal offence of an identifiable kind (robbery, theft, fraud or whatever) or, if she relies on section 242(2), by or in return for one or other of a number of offences of an identifiable kind...”

Thus as regards the civil recovery provisions of POCA the law is settled. Mr Bartlett cannot submit that Green was wrongly decided, since it has been endorsed by the Court of Appeal in Szepietowski. The Director, seeking relief under Part 5, must prove at least the class of crime said to constitute the “unlawful conduct” referred to in ss.240 – 242. The question in this case, raised in effect by the respondent’s second argument, is whether this conclusion has to be read across to the differently worded provision made in Part 7 of POCA by s.340.

We turn to the learning on the criminal provisions contained in Part 7 with which we are directly concerned. There is first the case of Gabriel [2007] 2 CAR 11. The appellant had been convicted on two counts of possessing criminal property contrary to POCA s.329(1)(c) (which we need not set out: “criminal property” bears the meaning assigned by s.340).The single ground of appeal arose out of the Recorder’s answer to a question put by the jury. They asked: “Does the regular buying and selling of goods to supplement household income without declaring this constitute a criminal offence, given the declarations made on application for benefit (or lack of declaration to the Inland Revenue)?” The Recorder’s reply was: “The answer is yes, both matters can constitute a criminal offence provided that there is dishonesty on the part of the person concerned. All right? So I hope that helps you”. This court allowed the appeal on the basis that the Recorder’s answer failed to dispel an assumption seemingly inherent in the jury’s question, namely 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. Giving the judgment of the court Gage LJ added this:

“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 Loizou... 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 Loizou, 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...”

The next case is IK [2007] 2 CAR 10, which the judge below described (transcript 11G) as “[p]erhaps the most difficult case that I have to contend with”. Like this case, IK was a prosecutor’s appeal brought under s.58 of the Criminal Justice Act 2003 against a ruling of no case to answer. There were 12 counts in the indictment. The trial judge’s ruling concerned counts 1, 2 and 12, each of which charged offences contrary to POCA s.328(1). There were three defendants. MR ran a grocery business called Ambrosia. SK owned a money transfer business called KME, and his son IK helped him run it. The prosecution said that MR siphoned off turnover from his business which was not declared to the tax authorities and sent it out of the jurisdiction via KME. Count 11 (not the subject of a submission of no case) charged MR with cheating the Revenue by keeping a false account of his business takings. £200,000 in cash was said to be destined for KME to take out of the country. Count 12 charged MR and SK with laundering this sum which was said to constitute criminal property within the meaning of s.340. As for counts 1 and 2, we may adopt Dyson LJ’s account of the essential facts:

“9 We turn to counts 1 and 2. When the records of KME were analysed following the arrest of SK and MR, it was discovered that, although approximately £60 million had been deposited into the KME sterling account, a smaller sum was shown in the daily reconciliation sheets. The existence of a discrepancy of £5.9 million was not in dispute. It is the prosecution case that this discrepancy represents the proceeds of criminal conduct and that this is the reason why it was not shown in the records. More than 2500 false customer receipts were produced. It was an admitted fact in the case that the receipts are false. In addition, false customer lists and statement summaries were produced... It is the prosecution case that SK and IK deliberately and dishonestly concealed £5.9 million of large cash transactions and then manufactured false documents which purported to be a true record of KME money transfers.

10 There was no evidence of the provenance of the £5.9 million. The case was put on the basis that the jury could properly infer a criminal source from the dishonest non-recording of the transactions and the subsequent wholesale forging of documents designed to paper over the absence of records of the money laundering. It was said that the cheating of the Revenue which was the subject of count 11 and which gave rise to the criminal property which was the subject of count 12 was an example of the type of criminal conduct which might have given rise to the discrepancy which was the subject of counts 1 and 2.”

The judge had first ruled that there was no case to answer on count 12 on the footing that although it should have been declared to the Revenue, the £200,000 cash was in fact the product of legitimate trading and was not criminal property within the meaning of s.340(3). He considered he was bound so to rule by force of Gage LJ’s reasoning in Gabriel. It was then submitted to him that he should also stop the case on counts 1 and 2 because (although there was no evidence of the provenance of the discrepant £5.9m) the jury could not exclude the possibility that, just like MR’s £200,000, it was in fact the proceeds of legitimate trade.

Much of this court’s judgment, delivered by Dyson LJ, is directed at the judge’s ruling on count 12. The court held (we summarise) that despite the original legitimate source of the cash it would be open to a jury to conclude that it was criminal property because it was in effect the subject-matter of the cheat offence charged at count 11: “[t]he difference between Gabriel and the present case is that in the present case, as was not disputed, the prosecution had made out a prima facie case of cheat.” (paragraph 30) Accordingly the judge had been wrong to rule as he did on count 12. In those circumstances, “the basis on which he ruled on counts 1 and 2 must also fall away. No other argument was advanced that there was no case to answer in relation to counts 1 and 2. It is clear that, but for their success in relation to count 12, the defence would not have submitted that there was no case to answer in relation to counts 1 and 2.” (paragraph 33)

Then the court said this at paragraph 34:

“It was open to jury to infer that the discrepancy of £5.9 million was the product of criminal conduct and was therefore criminal property. It is true that the prosecution could not identify the provenance of the money. But the facts to which we have referred at paras 9 and 10 above provided ample material from which the jury could make the necessary inference.”

It is convenient first to measure the impact of Gabriel and IK. Neither was in terms concerned with the question we must answer, whether in a money laundering case the class of crime said to constitute “criminal conduct” has to be proved. However such a requirement might be thought to be implicit in, or at least consistent with, Gage LJ’s reasoning in paragraph 26 of Gabriel; and in IK the “necessary inference” referred to in paragraph 34 is in context surely an inference as to the class of crime in question. In our view neither of these authorities offers material support for the Crown’s position in the present case, and both at least sit with (even if they do not march with) the contention the other way.

The cases on the civil enforcement provisions, Green and Szepietowski, with respect have more to tell us. In that context it is clear that the class of offence in question has to be proved. It is true, however, that the language of the material sections in Part 5 of POCA is different from that of s.340. In Green Sullivan J specifically relied on particular features of those provisions, notably ss.241(3) and 242(2)(b) (see paragraphs 18 – 21 of his judgment), in support of his conclusion that in seeking relief under Part 5 the Director must identify at least in general terms the type of conduct relied on as constituting criminal conduct. Moore-Bick LJ in Szepietowski (paragraph 106) placed some reliance on s.304. Part 7, and in particular s.340, contains no analogue to those provisions, and to that extent Green and Szepietowski are distinguishable from the present case.

But there is more to be said about this learning. Neither Sullivan Jnor the Civil Division of this court limited their reasoning to narrow considerations of language. Sullivan J expressed himself in more strategic terms in paragraph 25 of Green, and his approach was taken up by Moore-Bick LJ at paragraph 102 of Szepietowski. For convenience we repeat this extract from the latter passage:

“He [sc. Sullivan J] concluded that Parliament had deliberately steered a careful course between requiring the Director to prove the commission of a specific criminal offence or offences by a particular individual or individuals and allowing her to make wholly unparticularised allegations of ‘unlawful conduct’ of the kind that would require a respondent to justify his lifestyle. I agree.”

In earlier passages in his judgment Sullivan J had dwelt in some detail on materials placed before him “in order to identify the particular legislative purposes of the Act and the mischief to which Part 5 of the Act is addressed” (paragraph 3). We need not go into the details of the documents. At paragraph 5 he acknowledged that

“there is no real dispute as to the legislative purpose of the Act, the mischief to which Part 5 was directed, or the context in which it was enacted. Although the terminology varies, all four documents recognise that ‘a careful balance has to be struck between the civil rights of the individual and the need to ensure that the State has the tools to protect society by tackling crime effectively’.”

This “careful balance” is plainly reflected in Sullivan J’s conclusions as to the construction of Part 5, in his more general remarks at paragraph 25, and in Moore-Bick LJ’s endorsement of that view at paragraph 102 of Szepietowski. We have to decide whether a like approach should be adopted to the criminal provisions of Part 7.

We have already referred to the linguistic differences between Part 5 and s.340. In our judgment they are not so pressing as to yield a conclusion that the legislature in enacting Part 7 intended, in the context of criminal measures, to strike the balance between civil rights and the protection of the public at a markedly different place from where, as authority shows, it lies in relation to Part 5. Indeed it would be anomalous, not to say bizarre, if the Crown were not required to identify the class of crime in question in a criminal prosecution while the Director is so required in a civil enforcement suit. Sullivan J’s description of the legislative purpose of POCA, adopted by Moore-Bick LJ, is surely no less apt as a guide for the application of Part 7 as it is for that of Part 5.

In short, we do not consider that Parliament can have intended a state of affairs in which, in any given instance, no particulars whatever need be given or proved of a cardinal element in the case, namely the criminal conduct relied on. It is a requirement, to use Sullivan J’s expression, of elementary fairness.

For all these reasons this appeal will be dismissed.