Jawad v R

This appeal against a confiscation order raises a question about the relationship between confiscation orders and compensation orders in the light of the recent decision of the Supreme Court in R v Waya [2012] UKSC 51; [2012] 3 WLR 1188 (‘Waya’).

The defendant and two others were convicted, on pleas of guilty, of a money laundering offence connected with frauds on Lloyds Bank. A count charging conspiracy to steal was left on the file. The details of the frauds do not matter. Very broadly the principal fraud consisted of opening bank accounts in a false name, paying in worthless cheques and then cross-firing the money from account to account so that multiple cash withdrawals could be made before it was spotted that the cheques would not be cleared. That enabled the fraudsters to obtain far more than the face value of the worthless cheques. In addition, gold bars, jewellery and the like, which were the product either of this practice or of the fraudulent use of bank cards obtained on the accounts were found in the possession of this defendant on his arrest. The money laundering offence to which the defendant pleaded guilty charged conversion of the fraudulently acquired bank balances; it did not relate to the credit card use.

Because this was a money laundering offence, the lifestyle provisions of the Proceeds of Crime Act 2002 (“POCA”) applied. The defendant’s benefit was therefore anything obtained from criminal conduct generally and was not limited to the proceeds of the count of which he was convicted. Before the judge the amount of benefit was agreed at £174,827.20. The loss to the bank from the frauds was put at £64,086.76. The larger agreed benefit figure was arrived at by adding together (i) that sum, directly obtained through the frauds and (ii) sums resulting from the statutory assumptions provided for by section 10 of the Act – that is to say where the defendant could not show a legitimate origin for assets passing through his hands during the relevant six year period or held by him after conviction. The defendant's available assets comfortably exceeded the agreed benefit figure and so created no lower ceiling on the confiscation order which could be made.

The transcript shows that the first thing which occurred was that the judge made the confiscation order in the sum of the agreed benefit (£174000 odd). There was no submission on behalf of the defendant that he should not do so. He was then asked by the Crown to make a compensation order in favour of the bank for the £64086.76 said to be its loss, and he was told that the bank had asked for that application to be made.

As to the latter application, counsel for the defendant invited the judge not to make a compensation order. The judge addressed two possible reasons which were advanced for not doing so. The first was that it involved an element of double counting of the £64000 odd, which was included in both orders sought. The second was that the co-accused had not been made the subject of compensation orders and it was said to be unfair to make one against this defendant, or at least unfair not to limit it to an apportioned share of the total. The judge rejected both arguments. There is no challenge to the rejection of the apportionment argument, nor could there be; after all, each of the fraudulent conspirators was jointly and severally liable to the bank for the whole of its loss.

Mr Krolick's challenge does rely on a complaint of double counting. But it is a challenge not to the compensation order, but to the confiscation order. He contends that because the confiscation order was based on a benefit figure which included the same £64000 for which a compensation order was made, there has been (to that extent) double counting. The result is, he submits, that the confiscation order can now be seen to have been disproportionate and thus an infringement of Article 1 of Protocol 1 to the European Convention on Human Rights (“A1P1”). That, he contends, follows from Waya, which decision of course post-dates the making of the orders in this case.

Mr Krolick advanced two further alternative arguments. They were these.

We accept the argument that it follows from Waya that the Crown Court has a duty to avoid making a confiscation order which is an infringement of A1P1 because it is disproportionate: see paragraphs [16] and [19] of the majority judgment in Waya. The important section of this majority judgment, viz paragraphs [10] to [35], was an integral part of the ruling in that case and it followed detailed submissions on the topic; indeed the hearing had been adjourned in part for further development of such submissions. Moreover, the Supreme Court was unanimous on this section: see paragraphs [82] – [83] of the minority judgment of Lord Phillips and Lord Reed, although paragraph [84], in which the minority derived as an extension of the principle the proposition that there exists a governing concept of “real benefit”, was not agreed by the majority: see [26]. True it is that the majority concluded that the appeal in Waya fell to be resolved without the need to modify on grounds of disproportion the confiscation order calculated in accordance with POCA. That does not, as it seems to us, make obiter the important section comprising paragraphs [10] to [35], since the majority regarded it as necessary to ask itself the question whether the order was disproportionate. Even, however, if the strictly correct legal analysis of paragraphs [10] to [35] is that they are obiter, we have no doubt that that section of the judgment must be followed as the considered view of the whole court, arrived at after argument directed specifically to the point. Differently constituted, this court has proceeded on this basis since we heard argument in the present case: see R v Hursthouse [2012] EWCA Crim 610.

In future application of Waya it is important that this section of the judgment, [10] to [35], be read as a whole and that no single part of it is taken out of context. It does not attempt the impossible task of defining exhaustively every possible example of disproportionate orders, but it does emphasise (inter alia):

It is largely on the last of these parts of the decision in Waya that Mr Krolick founds his argument.

The inconvenient similarity of these two words leads us here to use the expression “POCA confiscation order” for confiscation.

A compensation order and a POCA confiscation order are two very different things. They derive from quite separate statutes and they serve different purposes. The power to make a compensation order is now derived from section 130 Powers of Criminal Courts (Sentencing) Act 2000. Historically the power existed long before any proceeds of crime legislation and has not been modified as a result of it. A POCA confiscation order is designed to remove from the defendant the fruits of crime. A compensation order has a different purpose; it is designed as a limited and summary method of ordering the defendant to repay the loser and is available to short-circuit a civil action against the defendant in a straightforward case. Because the two orders serve different purposes, it has been held on several occasions in the past that there is no obstacle to making both orders in the same case.

Although the power to make a compensation order was not modified by the proceeds of crime legislation, POCA does contain in section 13 provisions which concern the inter-relation between the two orders. Section 13 provides, so far as material, and omitting recent amendments which do not affect this case:

“13 Effect of order on court's other powers

(1)

If the court makes a confiscation order it must proceed as mentioned in subsections (2) and (4) in respect of the offence or offences concerned.

For the Crown, the primary submission of Mr Mitchell QC is as follows:

We do not agree that section 13 necessarily means that the court must deal with a POCA confiscation order first and in doing so must ignore any compensation order which it is also being asked to make. Section 13 says that the amount of a compensation order is not to be affected (ie is not to be reduced) by a POCA confiscation order. It says nothing about the reverse proposition, namely whether the fact that a compensation order is made, or is in prospect, is or is not relevant to the making of a POCA confiscation order. We agree that on the face of POCA, and absent the necessity established by Waya to ensure that a POCA confiscation order does not infringe A1P1, the question would be unlikely to arise, because the method of calculation of a POCA confiscation order is so tightly prescribed by the Act. But once it is clear, as it now is, that disproportion must be avoided, it follows that the question of compensation might be relevant to that issue, if compensation means that money which is restored to the loser will be counted again in the POCA confiscation order. Therefore in principle it must be possible either to consider the two issues together or to have in mind, when considering the disproportion question, any compensation order which has been or is going to be made. Nevertheless, as we show below, ordinarily the concern of the judge will be less with an order for compensation than with whether actual restoration to the loser is assured.

A compensation order requires the defendant to pay the specified sum to the court, for the benefit of the loser. It is not the equivalent of a civil judgment in favour of the loser. Its enforcement depends on section 41 and Schedule 9 of the Administration of Justice Act 1970, taken together with Part III of the Magistrates Courts Act 1980. The compensation order is, by these provisions of the Administration of Justice Act 1970, treated for the purposes of enforcement as if it had been made by the magistrates (the particular magistrates’ court is specified in the order). It is then enforceable by the magistrates. The methods of enforcement include the following:

However, these methods of enforcement are all of limited effect. Chiefly, they are limited by the availability of assets. There clearly can be no distraint or other civil enforcement action (such as a charging order) unless there are identifiable assets. More fundamentally, the magistrates may not take other enforcement action unless there has been a means enquiry and the defendant is shown to have the means available: see section 87(3) of the Magistrates’ Courts Act 1980 for enforcement via the civil courts and section 82(1)(a) for commitment to prison. Criminals may often have few assets, and/or may conceal what they have. Whilst of course a compensation order will not have been made unless the defendant appeared at the time of making to have the means, it by no means follows that he will be unable to raise later the plea that he no longer has. Unless assets can be identified at the enforcement stage, the magistrates can take no effective action to extract the money. True it is that if they can properly infer the presence of assets, albeit concealed from view, they can commit to prison, but that brings us to the next practical limitation on enforcement.

Importantly, if an order for commitment in default is made, the effect is to bring to an end the obligation to pay the compensation order. That follows from the fact that the compensation order is enforceable as if it were a fine, which has always been extinguished by commitment in default. It also follows from the fact that for the different case of a POCA confiscation order it was necessary to make specific statutory provision stipulating that the obligation to pay is unaffected by serving any sentence of commitment in default: such provision was first made by section 9(5) of the Drug Trafficking Act 1994 and is now to be found in section 38(5) of POCA. We do not consider that section 79(2) of the Magistrates’ Courts Act 1980 specifically provides for extinguishment by service of time in default, but its stipulation that part payment made during service of time reduces the imprisonment pro rata is clearly entirely consistent with it and is what is to be expected from treating payment and time served as alternatives to one another.

What these enforcement provisions mean for compensation orders is that the making of the order is not the equivalent of payment or restoration to the loser. It remains uncertain whether such restoration will be made. In particular, especially where large sums are involved, many criminals may prefer serving time in prison in default to surrendering by way of payment of compensation the sums which they have obtained from the loser by their crime.

Before Waya explained the application of A1P1 to POCA confiscation orders, this court had confronted in Morgan and Bygrave [2008] EWCA Crim 1323; [2009] 1 Cr. App. R. (S.) 60the possible case of a defendant who had restored to his victim the whole of what he had obtained by his crime. The decision that a stay for abuse of process could be an available method of preventing a disproportionate order from being made is overtaken by Waya (see [17]-[18] in that decision). But the outcome of the case of Morgan on its facts is illustrative of what we have said above about the difference between an order for repayment by way of compensation and actual restoration to the loser. Whilst this court held that a confiscation order might be oppressive and call for a stay if it would take again a sum already repaid, or available for immediate repayment, it declined on the facts to interfere with the order made below. It did so because it appeared unlikely that the defendant would in fact repay the loser. The defendant was asserting that he was ready to repay the outstanding balance (of about £50,000) but the evidence showed that the only way he could do it was by selling his matrimonial home, which was an uncertain event made even less certain by the existence of a pending divorce and inevitable financial claims between the spouses. This court concluded that it was probable that the defendant was in no position to make the repayment he said he was willing to make. It adverted to the differences in enforcement between compensation on the one hand and POCA confiscation orders on the other.

Waya requires the court to consider whether a POCA confiscation order is disproportionate. We are satisfied that it generally will be disproportionate if it will require the defendant to pay for a second time money which he has fully restored to the loser. If there is no additional benefit beyond that sum, any POCA confiscation order is likely to be disproportionate. If there is additional benefit, an order which double counts the sum which has been repaid is likely, to that extent, to be disproportionate, and an order for the lesser sum which excludes the double counting ought generally to be the right order. But, for the reasons explained above, we do not agree that the mere fact that a compensation order is made for an outstanding sum due to the loser, and thus that that money may be restored, is enough to render disproportionate a POCA confiscation order which includes that sum. What will bring disproportion is the certainty of double payment. If it remains uncertain whether the loser will be repaid, a POCA confiscation order which includes the sum in question will not ordinarily be disproportionate.

For these reasons we reject Mr Mitchell’s primary submission that any compensation even if actually made is irrelevant to the right POCA confiscation order which ought to be made. But we also reject Mr Krolick’s primary submission, that the mere making of a compensation order ought to mean that the POCA confiscation order is reduced by that amount.

How should these principles be applied? It would be convenient if the statute were to provide for the court to have the power in an appropriate case to make a POCA confiscation order in the full sum and to couple with it an order that compensation in the relevant sum be paid to the loser out of it. That power is, however, not available except in the limited case of insufficient assets provided for by section 13(5) and (6). However, much the same outcome can, we think, be achieved without great difficulty. The exact circumstances of different cases may vary. But generally if the defendant has control of his assets he ought to be able to make repayment in the knowledge that, once he proves he has done so, credit will be given for it against a POCA confiscation order. Repayment made through solicitors on notice to the Crown ought readily to be provable. If repayment has not been made before the day of the confiscation hearing, proof that his solicitors are in funds and willing to give an undertaking to repay on his behalf is likely to suffice, as would the existence of a bankers’ draft in favour of the loser. There may be other methods of establishing clearly that payment is guaranteed. In those cases where the defendant does not have control of the assets in question, similar principles ought to apply. If the assets are in the hands of the Crown, after seizure, he can request realisation and repayment either direct to the loser or via an intermediary such as a solicitor who can provide a guarantee of payment. If the assets are subject to a restraint order he can apply for a variation of it on terms that sufficient of them are released to a named and safe intermediary for the purpose of realisation and repayment to the loser. In most cases steps such as these ought to be initiated by or on behalf of the defendant before the day of the confiscation hearing, but there may be some where there is justification for making them on that day, perhaps where there is a genuine dispute about the figures which needs evidence and resolution by judicial ruling. There may in a very few cases be occasion for brief adjournment of a confiscation hearing for immediate arrangements for payment to be made. What a court should not entertain, because there is no need to do so, are expressions of well-meaning intentions on behalf of a defendant which are not backed by assurance of repayment. Still less is a court likely to be receptive to pleas to adjourn the confiscation hearing for the defendant to seek ways of making repayment.

We return to Mr Krolick’s second submission, summarised at [7(i) above]. We are quite satisfied that it cannot be accepted. A loser who takes advantage of his opportunity to invite the Crown to ask the court to make a compensation order cannot in any known sense of the word be said to have started, or to be intending to start “proceedings” against the defendant in respect of the loss. A compensation order, if made, is part of the orders made by the court ancillary to sentence. The court is under a duty to consider it whether the loser seeks it or not. The ‘proceedings’ in which it is considered and, if appropriate, made, are the criminal proceedings brought by the Crown by way of indictment, not civil proceedings brought by the loser.

We are also unable to accept Mr Krolick’s third submission, summarised at [7(ii)] above. He submitted that the £64000 represented the proceeds of the defendant's particular criminal conduct, i.e. that charged in the count of which he had been convicted. In fact, this may not be true of the whole of that sum, since the only count to which the defendant pleaded guilty was the money-laundering count, and that related only to the cross-firing fraud and not to the credit card fraud, so that it looks as if not all of the £64,000 bank loss was attributable to it. We do agree, however, that clearly a part, and perhaps a substantial part, of the £64,000 represented the proceeds of particular criminal conduct. Since this was a lifestyle case, says Mr Krolick, the benefit is, by section 6(4)(b), not the proceeds of the defendant’s particular criminal conduct but the proceeds of his general criminal conduct. There we also agree. But what is plainly wrong is the last stage of the argument, which is that benefit from general and from particular criminal conduct are concepts which are mutually exclusive. In a lifestyle case, general criminal conduct plainly includes the particular conduct charged in the count of which the defendant has been convicted. There is nothing in section 6 to say otherwise and it would be nonsense if there were. Moreover, section 76(2) specifically provides that "general criminal conduct of the defendant is all his criminal conduct" (without further qualification), whilst particular criminal conduct is, by section 76(3), the restricted sub-category of conduct constituting offences resulting in conviction or which are taken into consideration.

We do not think that the rules contained in section 10 about assumptions lead to any different conclusion. Mr Krolick submitted that in a case where the particular criminal conduct was more than six years old the assumptions would not apply to bring it within the umbrella of general criminal conduct. We agree, but the assumptions are only one route by which sums may be held to be the proceeds of general criminal conduct. In the case postulated by Mr Krolick, of a robbery committed seven years before the confiscation proceedings and never charged on indictment, its proceeds would be proved to be the product of general criminal conduct without recourse to the assumptions.

Since the confiscation hearing in the present case preceded Waya the defendant was not alerted to the significance of a guaranteed method of repayment to the loser, either ahead of the hearing or in the event that a compensation order were made. We were told that he has not yet paid the compensation ordered. We conclude that he should have the opportunity to do so, in guaranteed form. In the light of representations made by Mr Krolick on the appellant’s behalf after he saw the draft judgment (which mentioned a period of 14 days) and in the particular circumstances of this case, if within 28 days of the handing down of this judgment the appellant repays to Lloyds Bank the sum of £64,086.76, together with the interest properly payable upon it, then the appeal will be allowed to the extent of reducing the confiscation order by £64,086.76. If he does not, the appeal will be dismissed.

It was at first thought that this appellant needed a grant of an extension of time to enable him to appeal. If he had, that would have raised the question whether someone against whom a confiscation order was made entirely in accordance with the law as it was understood to be at the time ought to be granted an extension of time if he seeks to appeal on the basis of a change of law made subsequently – in this case as a result of the Supreme Court decision in Waya. As it turns out, the appellant does not need any extension of time. A very few days’ extension was granted by the single judge and we thus have before us a properly constituted appeal which must be determined according to the law as it now stands.

We therefore do not have to decide the question mentioned and we have had only brief submissions upon it. We nevertheless think that we should make clear the general approach of this court, over many years, to change of law cases. An extension of time will not be granted routinely in such a case simply because the law has changed. It will be granted only if substantial injustice would otherwise be done to the defendant, and the mere fact of change of law does not ordinarily create such injustice. Nor is the case where an extension will be refused limited to one where, if the law had been correctly understood at the time of the proceedings in the Crown Court, a different charge or different procedure might well have left the defendant in a similar position to that in which he now finds himself. The line of authority setting out this court’s approach culminates in R v Cottrell & Fletcher [2007] EWCA Crim 2016; [2008] 1 Cr App R 7, where the judgment was given by Sir Igor Judge P, as he then was. But that line of authority includes similar pronouncements by successive Lords Chief Justice from Lord Lane CJ onwards. An early example is R v Mitchell (1977) 65 Cr App R 185 in which Lane LJ (as he then was) expressly approved the decision of this court in R v Ramsden [1972] Crim LR 547. There, a defendant who had been convicted of dangerous driving before Gosney (1971) 55 Cr App R 502 had held that fault was a necessary ingredient of the offence was refused leave to appeal out of time after the latter decision had been published. The Court observed that alarming consequences would flow from permitting the general re-opening of old cases on the ground that a decision of a court of authority had removed a widely held misconception as to the prior state of the law on which the conviction which it was sought to appeal had been based. No doubt otherwise everyone convicted of dangerous driving over a period of several years could have advanced the same application. A similar proposition was recently adumbrated by the Supreme Court of Ireland in A v Governor of Arbour Hill Prison [2006] IEFC 45 where the court held that absolute retroactivity would lead to ‘dysfunctional effects in the administration of justice.’ A further clear example from the jurisprudence of the Court of Appeal Criminal Division is R v Ballinger [2005] EWCA Crim 1060; [2005] 2 Cr App R 29.

Whilst the point does not arise in the present case, and we do not decide it, we think it important that defendants should not be encouraged to think that the effect of Waya is likely to be that confiscation orders made when no disproportionality point was taken, or was rejected, can now be re-opened. We doubt very much that, if an extension of time had been required in the present case, we should have granted it.