Summers, R. v

MR JUSTICE PENRY-DAVEY: On 2nd February 2006 in the Crown Court at Bristol the appellant pleaded guilty on rearraignment to 32 counts of obtaining a money transfer by deception. On 28th April he was sentenced to four years' imprisonment on each count concurrent. A count of conspiracy to defraud was quashed. Two counts of money laundering were ordered to remain on the file. Two other defendants called Mills and Mead were acquitted on a number of counts and were discharged.

On 15th March 2007 a confiscation order in the sum of £4 million was made, with 18 months to pay from that date and six years' imprisonment in default. Compensation of £1,902,464 was to be paid out of the sums recovered under the confiscation order. There is no appeal in this case against the sentence of imprisonment. The appeal, with the leave of the single judge, is against the confiscation order.

The offences charged covered a period from 1997 to 2004. The fraud perpetrated by the appellant was an elaborate investment fraud described by the Crown as a typical "Ponzi" scheme. Investors were persuaded that the appellant had access to High Yield Investment Programmes and a high yield or return was promised ranging from 25% to 60% and in some cases 100% in a year. It was too good to be true, but numbers were induced to invest substantial sums under what were described as Secure Investment Programme Agreements. Under the terms of the agreement the money was paid over for the sole purpose of investing in a trading programme for the buying and selling of what was said to be a form of bank investment. The security of the money was said to be guaranteed and secure because there was a form of bank guarantee or professional indemnity insurance backing it. The agreements however were entirely bogus. The appellant had no access to any sort of trading programme of the type represented into which the money could be invested and none of the money was so invested. The monies were paid into a succession of accounts. Some repayments of capital and interest were made to earlier investors by a process of teaming and lading with money coming from later investors and the earlier investors thinking their capital was producing a return from the trading programme they believed their money had been invested in. Payments were made to a number of intermediaries, including Mills and Mead who negotiated the agreements in part II of the indictment.

The first three counts of that indictment related to monies coming from a Miss Gordon, an elderly lady living in a retirement home in Torquay whose affairs were controlled by the proprietor of the home and her accountant, Mr Marlow. The total amount obtained from her in 1997 and 1998 was £1,744,000.00, the majority of which was paid into the appellant's account, Bank Sarasin, in Switzerland. Happily in civil proceedings brought by the Public Trustee, for whom Allen & Overy acted, £1,313,779.00 of Miss Gordon's money was recovered in due course.

Counts 5 to 27 of the indictment covering the substantial period of the fraud between 1998 and 2002 involved the use by the appellant of Channel Islands Accounts of companies operated by Mr Roger Taylor to receive the investors' monies. The total amount obtained in respect of those counts was well in excess of $2 million, approximately £1,450,000.00. The determined benefit in respect of payments into the Channel Island Accounts, not all from defrauded investors and excluding payments which were accepted as relating to Mr Taylor's own separate business, was approximately £5 million.

Counts 28 to 33 of the indictment related to further monies totalling £145,000 obtained by the appellant by means of substantially identical frauds committed in 2003 and 2004 when he was on bail.

It was the Crown's case that the appellant had no intention of investing the money and did not invest it, rather using it as if it were his own, spending much of it on himself. It was also their case that Mead and Mills were his assistants, recruiting investors and helping him keep them at bay.

The Crown made clear from the earliest stage of the confiscation proceedings their case that the appellant had undisclosed hidden assets. The appellant sought to say that he had no such assets beyond those disclosed and no undisclosed bank accounts.

The confiscation hearing extended over some days and at the outset of his ruling the judge referred to his earlier decision as to the amount of benefit, somewhat in excess of £11 million. That aspect of the matter was, it appears, ultimately agreed and the benefit figure is not significantly challenged in this appeal. The appeal relates solely to the amount of the confiscation order, namely the sum of £4 million, which it is submitted was manifestly excessive or wrong in principle.

The legislative framework for this case is contained in sections of the Criminal Justice Act 1988. Section 71(6) provided as follows:

It is clearly established by authority and was accepted in this case that the burden of establishing that the realisable amount was less than the benefit so as to justify a lower figure for the confiscation order was on the appellant to the civil standard on the balance of probabilities and it is equally clear that if he sought to establish that he had to do so by clear and cogent evidence: Walbrook & Glasgow [1994] 15 Cr.App.R (S) 783 followed in Anderson [2005] EWCA Crim. 3384. Following from that, it is also clear that there is no burden on the prosecution to show a prima facie case of hidden assets, but for the appellant to provide evidence demonstrating the extent of his realisable assets: Barwick [2001] 1 Cr.App.R (S) 129 and Barnham [2006] 1 Cr.App.R (S) 16.

At paragraph 39 of the judgment in the latter case, Gage LJ, giving the judgment of the court, said:

We should refer finally to section 71(1C) providing as follows:

The ruling of the judge after a significantly lengthy hearing has the merit of brevity, but it is suggested that it is seriously defective in a number of respects. Having referred to the benefit figure, he said this:

The appellant suggests that the rationale behind the principle that the onus is on the defendant to establish that the amount that might be realised is less than the benefit figure is that the prosecution often cannot know what has become of the proceeds of the defendant's criminal activities. It is however submitted on the appellant's behalf that there is a distinction to be drawn between the situation where a defendant is unable to show what has become of all or part of the proceeds of his criminal conduct reflected in the benefit figure and where it is asserted that he has other assets available to satisfy the confiscation order not derived from the proceeds of his criminal conduct. In the latter case it is submitted effectively that the burden should be on the prosecution to show that he has such other assets, alternatively that there should at least be some evidence that he does. It is submitted that the distinction is of importance in this case. The submission is made that the destination of the proceeds reflected in the benefit figure was substantially explained in the evidence and that the unexplained would not justify an order to the extent of £4 million. In particular the fact is relied on that the benefit figure was very much a gross figure which did not take into account repayments to investors of monies recovered in civil actions brought, for example, on behalf of Miss Gordon, or monies paid to or retained by others involved innocently or otherwise in the mechanics of the fraud. It is suggested that analysis of the bank accounts which formed the basis of the prosecution statements substantially demonstrated how much was received personally by the appellant and in particular during the substantial period of the fraud when payments into the Channel Islands accounts reflected in the benefit figure were approximately £5 million and payments out to the appellant were in the region of £428,000. It is suggested too that the destination of the monies received by the appellant and his various accounts and how the sums were spent is substantially explained by the prosecution's own analysis of the accounts. Following that, the appellant submits through Mr Mercer that although the judge was entitled to reach the conclusion on realisable assets on the basis of a broad assessment rather than a precise calculation, he failed in his judgment to explain in any way how he had reached the figure of £4 million or to address the submission that the disposal of benefit assets was substantially explained, or to make any findings to the extent to which it was unexplained, or to distinguish between benefit assets and other assets. In the result it is submitted that the order the judge made could only be justified by a finding that the appellant had substantial undisclosed other assets and that there was no evidence of that in this case.

The respondent submits that the burden lay and remained on the appellant to prove that the realisable amount was less than the benefit figure. The judge found that the appellant was dishonest, prevaricating, seeking to minimise his considerable dishonesty, not providing disclosure or, if so doing, only on a drip-feed basis, that he was adroit at laundering money, including moving it about to make it difficult to trace and was forced to admit in cross-examination that he would not disclose money to the authorities if it was inconvenient to do so. Those conclusions are relied upon by the Crown and it is submitted that the judge approached the assessment of the realisable amount applying proper principles. The suggestion is also made that the appellant may have been fortunate not to have been subject to a confiscation order in the full sum of the benefit figure, but it is contended equally that the fact that the judge identified a substantially lower figure amply demonstrates that he had taken account of the material before him as he said in terms he had done. It is, the respondent points out, common ground that the judge was entitled to reach his conclusion on the basis of broad assessment rather than precise calculation which may well in many cases be the only possible approach.

The assertion that where hidden assets are alleged by the Crown it is for the Crown to prove the amount and availability wrongly it is submitted seeks to reverse the clear burden on the appellant. Thus the judge properly concluded, it is suggested, that the appellant's evidence did not satisfy him that there were no hidden assets. He was however unable to be precise and only able to take an overall view of the amount that had been kept back and hidden.

The respondent concedes that the judge made no express reference to the matter in his judgment, but it is submitted that the practical effect of his ruling was to discount from the benefit figure the approximate sums recovered or paid to victims and intermediaries. That figure, it is submitted, can be identified from the evidence and in particular a schedule of amounts paid out of Swiss and Channel Island bank accounts, amounts frozen in the Channel Islands and other direct payments to the appellant. That figure overall it is submitted is in the region of £5.8 million, and with the retail price index addition at 15.2% as with the benefit calculation amounts to a total of approximately £6.7 million. That total, it is submitted, is in line with the figure the judge identified in his ruling of £7 million no longer being available to the appellant in the form of realisable assets. It is clear from the ruling that it was on the basis of that figure of £7 million that the judge concluded that the figure of £4 million was the proper amount to order by way of confiscation.

There was also in the case another schedule produced by the prosecution of realisable assets on which we were addressed. That totalled some £4.188 million, less the £600,000 or so which in the event was discounted by the judge in respect of gifts, leaving in the region of £3.5 million. Of that the appellant conceded in argument that £1.3 million was available and the judge was in our judgment entitled to conclude that he was not satisfied that the balance of £2.2 million was not available to the appellant on the evidence and arguments that he had heard. In any event, that schedule was limited to identified realisable assets related to the benefit amounts, and did not include realisable assets from other unconnected sources.

Thus, although the judge did not refer expressly to the discretion that he had as a result of the assistance of civil proceedings in the case, nor indeed did he refer to the other conceivable way of approaching the matter, it is submitted that what he ordered was in line with a proper exercise of discretion and was therefore not manifestly excessive or wrong in principle.

We have considered the ruling that the judge made with some care. It is in our judgment defective in that it fails to indicate the basis, even in general terms, of how the judge had reached the figures concerned and simply stating that he had taken all the evidence into account is no substitute for indicating, even if briefly, his conclusions and the basis on which those conclusions were reached including in this case the important figures of £7 million and £4 million.

However, in our judgment the fundamental submission made on the appellant's behalf to the effect that there is some form of shifting of the burden of proof away from the defendant is misconceived. On the basis of clear authority the burden of showing that his realisable assets are less than the amount of his benefit under the Act rests and remains on the appellant and it was, in our judgment, not for the prosecution to establish that the appellant had undisclosed assets, more particularly where the case from the outset was clearly that he had such assets, but for the appellant to the appropriate standard and on the basis of evidence to satisfy the court that he had no such assets. The judge properly concluded that the appellant had failed to discharge that burden.

Thus we come back to the figure for confiscation which the judge identified. Although the basis on which the judge reached the two figures of £7 million and £4 million was not explained in the course of the ruling and should have been, what we have to consider is whether the amount of the order, namely £4 million, was clearly excessive or wrong in principle. Although it was unsatisfactory for the judge not to identify the basis on which he reached the ultimate figure in our judgment there is a rational and proper basis for both figures, having regard to the matters that we have set out, and in the result there is no proper basis for saying that the ultimate amount of the order, namely £4 million was manifestly excessive, nor that the making of an order in that amount was wrong in principle.

Our decision in this case in no way discounts or diminishes the desirability of a judge in cases of this kind identifying, even if only in general terms, the basis on which figures are arrived at. In all the circumstances of this case, however, we conclude that there was a proper basis for the conclusion the judge reached even though he failed to explain or identify that basis and accordingly the appeal against sentence is dismissed.