CPS (Durham) v N

These are linked cases. Nelson and Pathak, as we shall describe them, are respectively an application for leave to appeal and an appeal by the prosecution under section 31 of the Proceeds of Crime Act 2002 and Paulet is an appeal against a confiscation order made under the same act.

On 18 February 2008, in the execution of a search warrant at Nelson’s address, the police discovered a JCB digger bearing a registration plate S492 JUG. This was the registration number of a similar JCB digger of which he was the registered keeper. Beneath it, the police found metal shavings consistent with recent drilling activity, and after further examination, it became apparent that the metal plate which carried the vehicle’s unique identification number had been recently fitted. All this suggested that the digger was probably stolen. It was seized by the police.

Nelson was arrested two days later. He was interviewed under caution on the same day. He declined legal representation. He gave a false explanation for the presence of the digger on his premises. He said that he had previously owned a JCB digger with the registration plate S492 JUG. He had sold this without a log book, which had been stolen in the course of a burglary at his office. Some time after selling his digger, a man named Stuart had, with his permission, parked the digger found by the police. Further police investigations revealed the identity of the true owners of the digger, which had been stolen from their locked yard on the night of 13/14 February 2008. Its correct registration number was N947 EWR. Its value was estimated at £14,000. Following the theft its identity number and registration plate had been changed. Nelson was again interviewed by the police in April 2008. On this occasion he accepted that he had known all along that the digger found at his premises had been stolen from its true owner by a group of thieves. Before the theft had taken place a member of the gang had offered him £1,000 if he would supply them with the log book for his own digger together with duplicate number plates bearing the registration number of his digger. He accepted the offer and obtained the duplicate number plates. Following the theft he was aware that the new number plates had been fitted to the stolen vehicle, and indeed he had seen one of the gang “drilling and messing about in the yard”. His belief was that they planned to take the vehicle away from his address to Holland. He said that he had never received payment.

Nelson was charged with handling stolen goods. On 18 August 2008 at Durham Crown Court he pleaded guilty to handling stolen goods. On 19 September he was sentenced to 4 months’ imprisonment suspended for 12 months. A document entitled “basis of plea” was put forward. The Crown was prepared to accept that Nelson had been promised £1,000 to hand over a log book for a digger he had sold and to provide an appropriate set of number plates for it, but that he had never received any payment. Accordingly it was asserted that he had never received any benefit from the crime, that the goods were recovered by the owner in an undamaged condition, and that this was a one-off transaction, rather than what was described as a “lifestyle offence”. In response the Crown, while not disputing the basis of plea regarding the facts, maintained that Nelson had indeed received benefit within the definition of section 76(4) of the Proceeds of Crime Act 2002.

Thereafter the Crown initiated confiscation proceedings. The appropriate statement of information alleged that Nelson had benefited to the value of £14,337.75, comprising the value of the digger itself, and an additional £337.75 which reflected changes in the value of money since the offence was committed. The statement further alleged that he held realisable assets in the sum of £35,000.

On 8 December 2008 during the course of the confiscation hearing, Mr Recorder Atherton decided that an order should not be made. The Recorder rightly rejected the submissions advanced by counsel who then appeared for Nelson that as the property had been recovered he had not obtained property for the purposes of the Proceeds of Crime Act 2002. Crucially, he rejected the contention that Nelson’s role in the offence was merely to act as a conduit or courier. The judge concluded that, to the contrary, the respondent was “an active participant” and that “but for the provision of this false identity for the vehicle the enterprise would probably not have got off the ground”. He was as liable as any for its theft. This finding of fact is unassailable.

The judge referred to the “myriad of cases presented to him” which satisfied him that the application made by the prosecution was “properly made”, but nevertheless decided that the proceedings should be stayed as an abuse of process. Summarising his reasoning, although he accepted that Nelson had obtained property from his criminal conduct he had not benefited from it. He had received no payment, but more important, as the digger had not been shipped to Holland, and was recovered, undamaged, by its owner, a confiscation order against Nelson would have amounted to a fine. He concluded that although the proceedings were properly brought, nonetheless, they should be stayed.

On 4 June 2007 in the Crown Court at Luton before His Honour Judge Kay QC Paulet pleaded guilty to three counts of obtaining a pecuniary advantage by deception namely that he was given the opportunity to earn remuneration or greater remuneration in an office or employment [with three employers] by deception namely…by falsely representing that he was entitled to work in the United Kingdom (counts 1-3), having a false identity document with intent (count 4) and driving while disqualified (count 5). He also pleaded guilty to the summary offence of driving without insurance which had been sent to the Crown Court.

On 29 June 2007 His Honour Judge Burke QC sentenced him to concurrent terms of 15 months’ imprisonment on counts 1-4, together with a consecutive sentence of 2 months’ imprisonment on count 5. No separate penalty was imposed for driving without insurance.

The total sentence therefore was 17 months’ imprisonment, with an appropriate order relating to days spent on remand, and a disqualification from driving for 18 months. The appellant was also recommended for deportation. Of immediate concern to the present appeal, he was made subject to a confiscation order in the sum of £21,949.60 with a consecutive sentence of 12 months’ imprisonment to be served in default.

The appellant came to this country from the Ivory Coast. He was living illegally in the United Kingdom at an address in Bedford. He was not entitled to seek or find paid employment here.

On 21 January 2007 the DVLA received an application for a provisional driving licence from the appellant. This application was accompanied by a French passport which, on later investigation, proved to be a false document.

On 27 February 2007 the appellant’s home address was searched by the police. Banking documents and wage slips were seized. The appellant was subsequently arrested at his place of work. He admitted that he had driven to work. His car keys were found on him, and his car was found in the staff car park. It was subsequently established that he held a provisional driving licence, but that he was disqualified from driving.

Investigations with his employers revealed that the appellant had made a written application for employment as a forklift truck driver. He had submitted the false French passport he was later to use in his application to the DVLA in support of this application. That was intended to and did support his assertion that he was entitled to work in this country. The company had taken him on in January 2006. Since that date in the course of his employment he had earned £23,814.80 in gross wages. The employers stated that they would not have employed him if they had known that the passport he produced had been counterfeit.

Working backwards it was then established that he had been employed by another company from August 2004. For this purpose he provided himself with a false National Insurance number, and again suggested that he was entitled to work. During this employment he was paid £37,890.98 gross. Again it was stated that he would not have been employed if the company had known that he was not allowed to work in this country.

Working yet further backwards it emerged that the appellant had been employed in another company between April 2003 and November 2004. During this period of employment he was paid £11,587.39 gross. As with his previous employments he suggested that he was entitled to work in the United Kingdom.

On investigation it emerged that the appellant had three accounts with Barclays Bank and one account with Nat West Bank. The total funds in these accounts was just under £22,000.

The prosecution sought a confiscation order, on the basis of total benefit figures of slightly in excess of £73,000 and a total assets figure of £22,463.60.

The judge, when sentencing the appellant, accepted that the appellant had paid all the tax and national insurance due on his earnings, and that the money he had made from his employments was truly earned, and that he had done the work for which he was paid. A precise calculation of the appellant’s net wages was not necessary. After deduction of tax and National Insurance, the benefit figure was calculated at £50,000. Thereafter an assets figure of £21,949.60 was agreed between counsel. The judge made a confiscation order in that amount.

When the appellant was invited to sign a consent order which would have enabled his restrained assets to be paid over to satisfy the confiscation order, he was not prepared to do so. He refused to hand over the savings that he had accumulated from his earnings.

Pathak was employed as a bookkeeper/accountant at Pinewood Studios. Between February 2003 and August 2006 he stole a total of £131,340.00 from his employers. He produced 36 separate cheques on behalf of his employers in erasable ink made out to the Inland Revenue and then paid them into his own account.

Pathak was confronted by his employer in September 2006. He asked for time to repay, but this was not acceptable to his employer. The police were called. He was arrested. He was not then charged. Civil proceedings were started against him. A freezing order was made on 7 November 2006, followed up on 19 December 2006 by a criminal restraint order. In the course of the civil proceedings the respondent had offered to pay a total of £153,000 to his former employer. This sum consisted of £131,340.13 of identified loss, as compensation, together with a balance to cover interest and legal costs. The employer then refused to support a prosecution, although a witness statement was obtained from the administrative manager. In December 2006 the civil proceedings were discontinued on payment to the employer of the agreed sum. Pathak raised the funds by selling a property in Abbey Road at an address in London.

Pathak was charged with theft on 22 February 2007. On 2 July 2007 in the Crown Court at Nottingham before His Honour Judge Teare he pleaded guilty to theft from his employer. On 3 August he was sentenced to 52 weeks’ imprisonment suspended for 24 months concurrent on each of 6 counts, with further offences taken into consideration. He was ordered to perform 24 hours of unpaid work before 2 August 2008. He was also ordered to pay costs of £550.00.

On 19 December 2007 a statement under section 16 (3) of the Proceeds of Crime Act 2002 was prepared on behalf of the prosecution. Following a directions hearing on 1 May 2008, on 18 September 2008 the judge stayed the confiscation proceeding as an abuse of process. Leave to appeal against this ruling was given by the single judge.

For the purposes of the confiscation proceedings the Crown asserted that Pathak had used the money stolen from his employers to make a large profit. It provided part of a deposit for a property in London, and mortgage repayments on the property were made from the stolen funds. This was the Abbey Road property, subsequently sold for a substantial profit. In respect of another property in Watford Pathak paid the mortgage out of the stolen funds, and rented it out for profit. He still owns the Watford property.

The confiscation proceedings asserted a benefit figure of £575,026 made up from the stolen cheques, assessed at £131.340, rental income from the Watford property, assessed at £11,786, profit from the sale of the London flat, assessed at £130,000 and wholly unexplained income of just over £300,000.

The total available funds were calculated at £737,468. The majority of this was property held in the name of the Pathak’s wife at an address in Sibbertoft, the matrimonial home, the equity in which was £519,000.

This was not the first occasion when Pathak had misappropriated money belonging to an employer. In December 1998 he acknowledged theft of £66,724 from his then employers. Following further investigations, civil, but not criminal proceedings, were taken against him. These culminated in his bankruptcy in September 1999. He was discharged from bankruptcy in May 2002.

Pathak asserted that following his bankruptcy he had separated from his wife, and that while they remained friendly, they led separate lives and he had not supported her or his family financially thereafter. The prosecution alleged that this was untrue. Rather, since his bankruptcy Pathak had moved assets into her name, that their financial affairs were inextricably linked, that his wife had purchased his assets from the Trustee in Bankruptcy, including pension policies in June 2005, using funds he provided from the money he had stolen in the course of the present offences, that there were a large number of unexplained and substantial bank transfers from him to his wife, and finally, that their joint declared income was insufficient to have covered their lifestyle.

In his judgment the judge addressed the effect of section 6(6) of the 2002 Act. Rightly satisfied that the victim’s loss had been settled following the initiation of proceedings, he concluded that section 6(6) of the 2002 Act applied and that, in accordance with section 7(3), the recoverable amount would be the amount “the court believes is just” and that in these circumstances “the regime is less harsh than (it) otherwise would be”. As the question of compensation to the victim had been “settled and determined”, the authorities required him to address the confiscation proceedings in what he described as their “most stringent form”, making due allowance for compensation already paid when assessing the realisable amount. He was troubled that Pathak would have been in a better position if he had withheld payment of compensation until the confiscation proceedings were concluded. In those circumstances it would be “unjustly oppressive” to subject Pathak to the confiscation mechanism. He reflected on a number of different aspects of the prosecution case, and concluded that they could not point to “any specific criminal conduct” to which they could attribute Pathak’s benefit. The purchase of property in London could not be attributed to the thefts from the victim and only the “bold assertion” that the bulk of the benefit was “unexplained income” was left. An alternative process was available to the Crown, namely to charge Pathak with money-laundering offences.

The question for decision is whether in the context of this evidence, and the areas of disputed evidence, the judge was right to regard the confiscation proceedings as an abuse of process or “unjustly oppressive” to subject Pathak to confiscation proceedings.

On behalf of Pathak Mr Rupert Mayo invited us to consider whether the prosecution was entitled to appeal against the decision of the Crown Court that confiscation proceedings must be stayed. Mr Mayo referred to three cases in which this court overruled decisions in the Crown Court refusing to make confiscation orders. These were R v Brack and Brack [2007] EWCA Crim 1205, R v Hockey [2008] 1 CAR (S) 50 and R v Gilleeney [2009] EWCA Crim 193. They did not extend to cases stayed on abuse of process grounds. The problem with Mr Mayo’s submission is simple. The absence of any previous decision confirming the prosecution’s entitlement to appeal following an order staying the proceedings is neither here nor there. A prosecutor may appeal under section 31(2) “if the Crown Court decides not to make a confiscation order”. The language is clear and simple. The decisions of the Crown Court in Nelson and Pathak were that confiscation order should not be made: so they were not made. The language is plain enough. Authority is not needed. If it were needed, this decision establishes it.

To enable the issues which arise generally to be discussed, leave to appeal is granted in Nelson, and the leave already granted in Pathak is confirmed.

One of the problems illustrated in these cases and in a number of other cases to which our attention was drawn, is that Crown Courts up and down the country are concerned about the possible consequences of the draconian legislation provided by the developing confiscation regime set out in the Criminal Justice Act 1988 as amended, the Drug Trafficking Act 1994, and the Proceeds of Crime Act 2002. Indeed we detect that orders staying confiscation proceedings are perhaps too readily being made in Crown Courts.

Abuses of the confiscation process may occur and, when they do, the appropriate remedy will normally be a stay of proceedings. However an abuse of process argument cannot be founded on the basis that the consequences of the proper application of the legislative structure may produce an “oppressive” result with which the judge may be unhappy. Although the court may, of its own initiative, invoke the confiscation process, the responsibility for deciding whether properly to seek a confiscation order is effectively vested in the Crown. When it does so, the court lacks any corresponding discretion to interfere with that decision if it has been made in accordance with the statute. The just result of these proceedings is the result produced by the proper application of the statutory provisions as interpreted in the House of Lords and in this court. However to conclude that proceedings properly taken in accordance with statutory provisions constitute an abuse of process is tantamount to asserting a power in the court to dispense with the statute.

As a matter of principle, that is impermissible, and this court has said so. Thus in R v Shabir [2009] 1 CAR (S) 497, it was observed:

As the proliferation of decisions in this court, and indeed in the House of Lords demonstrates, the statutory framework which governs the making of confiscation orders is far from straightforward. However, taking it very briefly indeed, the principle is that the court is under a duty to deprive a convicted defendant of the “benefits” of his crimes. Following the principle identified by the House of Lords in R v Smith (David Cadman) [2002] 1 WLR 54, in R v Forte [2004] EWCA Crim 3188 this court, exemplifying a consistent line of authority, such as R v Wilkes [2003] EWCA Crim 848, R v Stanley [2007] EWCA Crim 2857 and R v Rose and Whitman [2008] EWCA Crim 239, observed:

Following the earlier hearing in Paulet the Crown Prosecution Service helpfully produced a document entitled “Guidance for Prosecutors on the Discretion to Instigate Confiscation Proceeds”. The purpose of the document is to achieve consistency of approach among prosecutors up and down the country. It is a useful working document. Although we welcome this Guidance to Prosecutors, in doing so we are not making the guidance part of the judgement of the court or suggesting that it may or could add to, alter or amend the statute. It is not formal guidance within section 10 of the Prosecution of Offences Act 1985 or section 2A of the Proceeds of Crime Act 2002. In reality it represents a fair analysis of the effect of the decisions in this court and the House of Lords reflecting the concerns expressed to date about different aspects of the confiscation regime, and the continuing requirement that within the statutory context, prosecutorial decisions should continue to reflect the interests of justice. It may and no doubt will be amended in the light of experience as well as any later decisions in this court. In the end, if an abuse of process argument can be sustained at all, it must be based on abuse of process principles, as defined and explained in the authorities.

As it says, the guidance is divided into four sections:

The examples identified in the guidance are, first, “where the Crown has reneged on an earlier agreement not to proceed”: second, “in a simple benefit case, where the defendant has voluntarily paid full compensation to the victim or victims, or is ready, willing and able immediately to repay all of the victims to the full amount of their losses, and has not otherwise profited from his crime”; third, where if the court “were asked to proceed to confiscation” it might be compelled to find “that property obtained in the most part legitimately by the defendant, and to which the defendant would have been entitled but for his criminal conduct, must be treated as benefit” (a situation then closely examined in the text); fourth, “where a defendant has obtained paid employment by a false representation to his employer” and the extent of the defendant’s benefit may simply be his wages, it may be that, following the argument in this case, this fourth situation will be re-examined. And, of course, yet further considerations may yet arise which will justify inclusion within the ambit of this guidance.

As the guidance itself demonstrates, the true facts may be unclear, and may need examination in the context of confiscation proceedings. Where, following the initiation of proceedings, it emerges on investigation that the prosecutorial discretion would not have been exercised in favour of proceedings if the full facts had been known, the prosecutor should normally discontinue them, a jurisdiction similar to and derived from the right of the prosecutor to offer no further evidence in a criminal case. The confiscation process should not continue merely because it has been set in motion, and if only for the sake of consistency, it should be discontinued on the later emergence of facts which, had they been known at the outset would have led to a prosecutorial decision not to proceed.

There was some discussion in argument relating to the reduction to a power of what would otherwise be the court’s duty to make a confiscation order when the statutory conditions are fulfilled where, in accordance with section 6(6) “…it believes that any victim…has at any time started or intends to start proceedings against the defendant in respect of loss, injury or damage…”. Where this applies the amount to be recovered from the defendant will, in accordance with section 7(3), be the amount which “…(a) the court believes is just,” provided it does not exceed the recoverable amount as defined in section 7(1) and (2). Section 7(3) does not create a broad discretion enabling the court to disapply the statutory provisions. It is confined to the situations identified in section 6(6), and the exercise of the court’s power to do what it believes to be just must be seen in the context of the statute, and its purpose – within the statutory framework - , to deprive criminals of the benefits of their crimes. Therefore it does not provide the court with an opportunity in the broad interests of what it may perceive to be “just” to disapply the statute as a whole.

The section 6(6) concession does not appear to apply where a defendant has voluntarily repaid a victim for loss and damage before the victim has started or expressed an intention to start civil proceedings against him. On this view therefore the defendant would be better off not to seek to make good the consequences of his offences until the victim has started civil proceedings or given some clear indication of his intention to do so. This would mean that a defendant who made voluntary reparation would be worse off than the defendant who waited for the victim to start civil proceedings. As a number of earlier cases, such as R v Mahmood and Shahin [2005] EWCA Crim 2168, R v Farquhar [2008] EWCA Crim 806 and R v Morgan [2008] EWCA Crim 1323 demonstrate, this would plainly be contrary to the public interest that a victim of an acquisitive crime should receive reparation for it as soon as possible, and if possible, without the burden of initiating proceedings.

Our attention has been drawn to what was described as a “conundrum” addressed in R v Nield [2007] EWCA Crim 992. The court grappled with the following question:

The reasoning depended on the need to ensure that issues of confiscation and compensation were not conflated, and it has not been suggested that this analysis represented an erroneous analysis of the statutory provision. It is clear therefore that section 6(6) does not state expressly, and does not appear to provide, that compensation paid to the victim in advance of civil proceedings or an expressed intention to take them, reduces the duty to make a confiscation order to a power, notwithstanding that a defendant has in reality fulfilled this desirable statutory purpose before being impelled to do so by the threat or fact of civil proceedings. What we perceive to be a gap in the statutory process is recognised in the guidance. Where the facts demonstrate that the defendant has voluntarily repaid the proceeds of his crime to his victim and has thus deprived himself of any profit from his crimes, we endorse the guidance relating to voluntary repayment of full compensation in a simple benefit case where the proceeds of the crime have not been used to the defendant’s wider financial advantage as consistent with the interests of justice within the statutory context. In such a case the statutory purpose that the defendant should not enjoy the fruits of his offence(s) will have been achieved.

The confiscation proceedings were properly brought by the prosecution. The decision to stay the proceedings was wrong. Nelson had benefited from his criminal conduct. For the purposes of the Act, and consistently with the finding that Nelson was “an active participant”, he undoubtedly assumed the rights of the owner for the purposes of the 2002 Act. He was not a mere custodian or courier of the digger for whom the concept of benefit would be inappropriate. He did not return it voluntarily. The fact that the police recovered the digger before Nelson was able to send it on its way to Holland did not reduce nor alter the court’s duty to make an appropriate order. The Smith (David Cadman) principle, and the subsequent authorities, apply. We should add that in his judgment the recorder referred to an observation in the opinion of the House of Lords in R v May [2008] 1 AC 1028 at para 48 where Lord Bingham pointed out that the legislation did not operate “by way of fine”. To appreciate the true impact of that observation, however, it is essential to refer to the opinion of the House of Lords in Jennings v CPS [2008] 1 AC 1046 at para 13. It was pointed out:

Finally we remind ourselves that in R v Shabir the court explained that it was inherent in the statutory scheme and clearly not “sufficient to establish oppression…that the effect of confiscation will be to extract from a defendant a sum greater than his net profit from his crime(s)”. (See also Morgan and Bygrave [2009] 1 CAR (S) 133)

These proceedings were not an abuse of process. The Recorder himself acknowledged it. The appeal by the prosecutor must be allowed. We understand that Nelson has sufficient recoverable assets to meet the full extent of his benefit, and the confiscation order will be made in the sum of £14,337.75.

We shall not repeat the submissions made at the earlier hearing. Before us the case was described as a simple benefit case by Mr Tim Owen QC. He advanced the submission that Paulet’s wages were paid to him in consideration of the efficient performance by him of his duties, and that they did not constitute a pecuniary advantage derived from the misrepresentations that he was entitled to take up remunerative employment in this country when he was not. He recognised that in a virtually identical case this argument was rejected in R v Carter and others [2006] EWCA Crim 416 when, after an examination of a much earlier decision (R v King [1987] QB 547) in the context of the current statutory provisions, the court, substituting “benefit” for “property” suggested that the question is: “was the deception an operative cause of obtaining?” The answer was that the wages were “clearly obtained as a result of and in connection with the deception”. 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 obtain 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 that the employment would have ceased.

Paulet’s case cannot be distinguished. The reality is that throughout the period of his employment he was relying on a continuing dishonest representation to three different employers. He deceived them into thinking that he was entitled to obtain employment with them. That was a crucial element of his criminality. His earnings, of course, reflected the fact that he had done the necessary work, as we shall assume, to the satisfaction of his various employers. But the opportunity for him to do so, that is the pecuniary advantage, was unlawfully obtained. If the employee worked to his employer’s satisfaction, and he paid his tax and National Insurance contributions on his earnings, and his deception either lacked any significant wider public interest, or, perhaps because of the passage of time, but for whatever reason, had ceased to have any meaningful effect on his employers decision to continue his employment, the resolution of the issue might well be different. As it is there was here a wider public interest. The appellant was deliberately circumventing the prohibition against him seeking remunerative employment in this country in any capacity. No basis for interfering with the order made in the Crown Court has been shown. In our judgment the appropriate link between the appellant’s earnings and his criminal offences, in the context of the wider public interest, was plainly established. The appeal therefore fails. We suggest that the guidance should be reconsidered in the light of these observations.

The facts were somewhat complicated, and needed careful analysis. The proceedings were properly brought. Admittedly Pathak had repaid the amount of which he had deprived his employers by his dishonesty. Their loss, however, did not represent his benefit. There was ample evidence to suggest that it far exceeded the loss suffered by his employers and the reparation made to them by Pathak. There were areas of significant evidence which needed resolution. The prosecution was entitled to ask for the benefit and recoverable amount to be examined and assessed in the necessary detail. Even if the repayment by Pathak after the institution of proceedings by his former employers had altered the function of the court from a duty into a power, the “just” order required to be made by the court was not an open ended broad discretion, but involved the application of the principles relating to confiscation orders, the assessment of benefit received by Pathak resulting from his criminal activities, with, of course, appropriate allowance to be made for the sums actually paid to his former employers by Pathak, no more no less.

However this problem is addressed, in our judgment the confiscation proceedings did not constitute an abuse of process nor were they unjustly oppressive. The issue must be reconsidered in the Crown Court.