Box, R v

J U D G M E N T

Thursday 15^th March 2018

LORD JUSTICE DAVIS: I shall ask Mr Justice Edis to give the judgment of the court.

MR JUSTICE EDIS:

1. This is an application by the prosecution for leave to appeal against a confiscation order made under the Proceeds of Crime Act 2002 ("the 2002 Act"). We grant leave. The nature of the appeal requires consideration of the tainted gifts regime created by the 2002 Act.

2. There is no appeal against the sentence which was imposed on 24^th March 2017 after the respondent pleaded guilty to one count of theft, nine counts of fraud and two counts of making a false instrument. Sentences totalling seven years' imprisonment were imposed. The respondent is now 68 years old. Between 2003 and 2015 she had enriched herself by a number of different criminal methods to the tune of £4,085,058.28. That was the agreed benefit figure found by the judge who dealt with the confiscation proceedings. There is no appeal against that finding. It is necessary to identify briefly the nature of the offending which produced this very large sum of money, a good deal of which was distributed among the respondent's family in circumstances which might require attention. She was a solicitor and a partner in a well-established and well-reputed firm of solicitors in Wakefield. She was also the Chancellor of the Diocese of Southwell and Nottingham. Both of those roles gave her trusted access to the money of other people. She cynically and repeatedly abused that trust over many years and caused loss to many of those people, in some cases with catastrophic results for them.

3. The confiscation order was made on 15^th November 2017 by Her Honour Judge Belcher. She found that the available amount was £1,929,295.88. She ordered the respondent to pay that amount and imposed a consecutive term of eight years' imprisonment in default of payment. The hearing took place on 14^th November 2017. The respondent elected not to give evidence and called no evidence on her behalf. The judge reserved her decision and gave a carefully considered ruling on the following day. Although we will differ from her in her approach to the assessment of proportionality on the facts of this case, we wish to pay tribute to the way in which she constructed her ruling and the efficient way in which she managed the whole proceedings.

4. At the hearing it was accepted by counsel for the respondent that she had a criminal lifestyle, as defined section 75 of the 2002 Act. The statutory assumptions identified in section 10 of the 2002 Act therefore applied. Each offence involved conduct which formed part of a course of criminal activity and the appellant had benefited by more than £5,000. Counsel's concession was therefore correct. The "relevant day" was 17^th February 2011.

The Issue on this Application

5. The judge was required to determine the available amount under section 9 of the 2002 Act. She did so by assessing the free property of the respondent in the sum of £1,473,045.88 under section 9(1)(a) and tainted gifts under section 9(1)(b) in the sum of £470,000. The prosecution contended that the tainted gift figure should have been higher by approximately £500,000. It is submitted that the judge fell into error in reducing it in the way that she did. That is the sole issue on this appeal.

The Approach of the Judge to the Tainted Gift Issue

6. The judge first identified the gifts in question. The prosecution had prepared a schedule which listed the gifts. As is usual, a schedule of assets was prepared by the court, based on the prosecution schedule and attached to the order. That document is not entirely clear, and we have drawn up a schedule, below, which seeks to explain what happened. The figures in bold, items 24, 28 and 30 were adjusted downwards by the judge to the extent shown in the right hand column, and the final valuation of assets for the order used those adjusted figures to produce the judge's total of £470,000 which is the total of all the figures which are not in bold.

7. The judge rejected a submission by Mr Harries, who appeared before us as he had before her on behalf of the respondent, that money which had been given to third parties and spent by them could not be included in the recoverable amount. She said that it was not necessary that specific property be identified in the hands of third parties before it could be included in the recoverable amount under the tainted gifts regime. There is no appeal against this decision, which was plainly right. The submission was based on what we consider to be a misunderstanding of section 81(2)(b) of the 2002 Act. Unless the value of property "found" under section 82(2) is greater than the value at the time of the gift of the property given, section 82(2) is simply irrelevant. Where the money has all been spent, that will be so. It is not necessary to say anything more about this submission, except that it appears that its spirit characterised the respondent's submissions not only on what gifts should be included, but also on whether the result of that exercise should be held to be disproportionate. The judge rightly found that all the items in the schedule were properly treated as tainted gifts. This appeal concerns her approach to their value and to the value of those three highlighted items in particular.

8. There was no real dispute about the value of the gifts at the date when they were made. The dispute was about whether they should be included in the recoverable amount if there was no reason to believe that they could or would be paid back by the recipients of the gifts to the respondent to be applied in discharge of her liability. The judge resolved the dispute as follows:

(1) She included £81,791.64 being the total of items 22, 25, 26, 34, and 35 which she was told were "undisputed".

(2) She allowed a sum of £354,925.83 being a sum which she described as "pragmatic", by which she meant that counsel for the respondent had accepted that there was a reasonable prospect of the recovery of these items from the recipients of the gifts.

(3) She added a figure of £33,597.30 which was the total of items 23, 27, 32, 36 and 37. She said that these items were referable to real property held and retained by the recipients and that it was therefore proportionate to include them in the total.

9. This means that the judge reduced the order by a sum of £509,079.68 below the identified value of the property transferred by the respondent to the recipients of her gifts. She subsequently clarified the arithmetical basis of this, but it is not necessary for us to set this out in detail. If the prosecutor's appeal succeeds in principle, the order stands to be increased by that sum of £509,079.68 to a total of £2,452,440.33. In reducing the total value of the gifts to this lower total of £470,000 by that means, the judge was giving effect to her assessment of what was proportionate, relying on a passage of a judgment of this court in R v Beverley Johnson [2016] EWCA Crim 10 at [31]. This, she said, along with section 6(5) of the 2002 Act, required an assessment of the proportionality of the recoverable amount. She rejected a submission by the appellant prosecutor that the proportionality of the order was relevant only to the default term of imprisonment. In that respect also she was right, as Mr Jarvis, who appears before us today on behalf of the prosecution but who did not appear below, accepts. The judge then held, in effect, that it would be disproportionate to include sums in the recoverable amount unless there was some legal or moral basis on which to consider that they would be recoverable by the respondent from the recipients. She said:

"In my judgment, to simply include all tainted gifts in the available amount without considering the factual matrix in relation to those gifts and assets held by third parties would amount to a failure to consider whether the order I propose to make would be a disproportionate order. It also fails to recognise that the third parties are innocent of any criminal conduct, whatever the position may be morally. There may be cases where they are not innocent but this is not one of those cases. Equally, bringing into the equation the value of assets held by third parties in the expectation that there is a prospect they may be realised, even though there is no way that [the respondent] can legally compel their realisation, gives effect both to the importance of deterrence in this legislation, as well as recognising that the essence is to deprive the offender of the benefits of her criminal conduct."

The Statutory Framework

10. Once the court has decided to proceed under section 6 of the 2002 Act, subsections (4) and (5) of that section govern the way in which it is to proceed. Those provisions are as follows (after amendment to accommodate the decision of the Supreme Court in R v Waya[2012] UKSC 28):

"(4) The court must proceed as follows –

(a) it must decide whether the defendant has a criminal lifestyle;

(b) if it decides that he has a criminal lifestyle it must decide whether he has benefited from his general criminal conduct;

(c) if it decides that he does not have a criminal lifestyle it must decide whether he has benefited from his particular criminal conduct.

(5) If the court decides under subsection (4)(b) or (c) that the defendant has benefited from the conduct referred to it must –

(a) decide the recoverable amount, and

(b) make an order (a confiscation order) requiring him to pay that amount.

Paragraph (b) applies only if, or to the extent that, it would not be disproportionate to require the defendant to pay the recoverable amount."

11. The requirement that the court should not make a disproportionate order may be contrasted with the way in which the criminal lifestyle assumptions are qualified in the same Act:

"10 Assumptions to be made in case of criminal lifestyle

(1) If the court decides under section 6 that the defendant has a criminal lifestyle it must make the following four assumptions for the purpose of –

(a) deciding whether he has benefited from his general criminal conduct, and

(b) deciding his benefit from the conduct.

...

(6) But the court must not make a required assumption in relation to particular property or expenditure if –

(a) the assumption is shown to be incorrect, or

(b) there would be a serious risk of injustice if the assumption were made.

(7) If the court does not make one or more of the required assumptions it must state its reasons."

12. Whereas the court has a duty not to make an assumption if it is shown to be incorrect or if it would create a serious risk of injustice, there is no such duty (or power) in respect of tainted gifts. They must be included in the available amount and at a value which may be higher than the value of any identifiable property held by the recipient to which the person against whom the order is made may have access. The requirement in section 6(5) that the result must not be disproportionate is not the same as a provision that the result should not follow if there would be a serious risk of injustice. We shall return to what "proportionality" means in the context of section 6(5) of the 2002 Act, but it is plainly an even more limited restriction on the decision-making process of the court than a general duty to avoid a serious risk of injustice.

13. Section 77 is the starting point for the tainted gifts regime. It does not define what a "gift" is for the purposes of this legislation. So far as relevant, it provides:

"77. Tainted gifts

(1) Subsections (2) and (3) apply if –

(a) no court has made a decision as to whether the defendant has a criminal lifestyle, or

(b) a court has decided that the defendant has a criminal lifestyle.

(2) A gift is tainted if it was made by the defendant at any time after the relevant day.

…

(9) The relevant day is the first day of the period of six years ending with –

(a) the day when proceedings for the offence concerned were started against the defendant, or

(b) if there are two or more offences and proceedings for them were started on different days, the earliest of those days."

14. In calculating the available amount the provisions of sections 9, 79 and 81 of the Act, which, so far as relevant, provide as follows (with one word emphasised by us):

"9 Available amount

(1) For the purposes of deciding the recoverable amount, the available amount is the aggregate of –

(a) the total of the values (at the time the confiscation order is made) of all the free property then held by the defendant minus the total amount payable in pursuance of obligations which then have priority, and

(b) the total of the values (at that time) of all tainted gifts.

…

81 Value of tainted gifts

(1) The value at any time (the material time) of a tainted gift is the greater of the following –

(a) the value (at the time of the gift) of the property given, adjusted to take account of later changes in the value of money;

(b) the value (at the material time) of the property found under subsection (2).

(2) The property found under this subsection is as follows –

(a) if the recipient holds the property given, the property found under this subsection is that property;

(b) if the recipient holds no part of the property given, the property found under this subsection is any property which directly or indirectly represents it in his hands;

(c) if the recipient holds part of the property given, the property found under this subsection is that part and any property which directly or indirectly represents the other part in his hands.

(3) The references in subsection (1)(a) and (b) to the value are to the value found in accordance with section 79.

79 Value: the basic rule

(1) This section applies for the purpose of deciding the value at any time of property then held by a person.

(2) Its value is the market value of the property at that time.

(3) But if at that time another person holds an interest in the property its value, in relation to the person mentioned in subsection (1), is the market value of his interest at that time, ignoring any charging order under a provision listed in subsection (4)."

15. The effect of these provisions is that the court was required to assess the value of the tainted gifts and to include it in the available amount. Section 81(1), as we have observed already, operates to require the court to take the greater of the value of the property given at the date of the gift or the value of property "found", as defined in section 81(2). Once it is clear that the value of the property at the time of the gift is greater than any "found" property it is not necessary to consider further what property may exist which in any way represents the original gift. In those circumstances there is no statutory warrant for any exercise akin to tracing at all.

The Rival Contentions in Summary

16. The prosecution contended that the judge erred in that she approached the proportionality issue at the wrong stage in the process. It was submitted that it is relevant only to the assessment of the default term. As we have said, that submission is not pursued before us today because of the clear terms of section 6(5) of the Act, set out above.

17. It is now submitted that the judge wrongly focussed on the degree to which the tainted gifts were still available to meet the order, or at least on the likelihood that the recipients would fund the payment of the order so far as it related to gifts which they had received. The prosecution contends that the judge misapplied the decision in Johnson,to which we have already referred at [9] above, and to which we will return.

18. The respondent, on the other hand, contends that the judge was right to focus on the value of the gifts at the date of the order and on whether the recipients were able to fund the payment of the order. It is submitted on her behalf that this follows from the terms of section 81(2), and from the decision in Johnson. We have already said that the judge was right to hold that the value of the gifts was unaffected by the fact that they may have been spent. It is important to record, and to repeat, that neither the respondent nor any recipient gave evidence before the judge.

R v Johnson

19. Both parties and the judge placed reliance on this decision, and it may be helpful to explain briefly what the issue was in that case and what is meant by the relevant part of the judgment. The appellant had sold a property to her daughter after the relevant date at a price of £140,000 but she only received £120,000 and the £20,000 difference was, she said, a gift by her to her daughter. By the time of the hearing (and perhaps at the date of the transaction itself) the actual value of the property was far lower than the agreed sale price, even allowing for the gift element. There was therefore some reason to doubt that there had ever actually been a gift at all, although the evidence from the appellant was that this had happened and the court proceeded on that basis. The £20,000 which had apparently been knocked off the price of the property was not the proceeds of crime. By the date of the making of the order, the true value of the property had either fallen or been more realistically assessed. There was negative equity. This "gift" was the only amount available and the order therefore required payment of that sum, £20,000. There was nothing else with which it could be paid, and that £20,000, if it had ever existed, no longer did.

20. The decision in Johnson was that the appeal was dismissed and the order upheld. It was proportionate on the facts. The reasons are given at [34] to [35] of the judgment. An important sentence is at the end of [35]:

"The statutory aim is the recovery of [the amount which the appellant had obtained from crime] and the means used, a confiscation order calculated in accordance with the provisions of the 2002 Act, are proportionate to it."

21. At [31] the court considered three aspects of the proper approach when making a confiscation order in circumstances which give rise to similar issues to those in that case. The court suggested that the evidence of the value of the suggested gift should be examined with care, and that the court should take care to ensure that the sentence of imprisonment in default properly reflected its findings as to the facts. In between those two observations, the court sought to reflect the decision in Waya and section 6(5) of the 2002 Act by saying that the court should consider proportionality when considering the amount which the court should order to be paid. Citations from Waya were included which expressly say that this is not the same exercise as a general discretion to avoid hardship. As we understand it, the word "disproportionate", used by Parliament in the amendment to section 6(5) of the 2002 Act, has in UK domestic law a particular meaning. In this context it means that the order must be proportionate to the achievement of the statutory aim (set out at [20] above). In almost all cases an order made in accordance with the provisions of the Act will satisfy that test. In some entirely different situations identified in the authorities cited in Johnson that may produce disproportionality. In the type of case considered in Johnson at [31] we would accept that there may be some exceptional cases where the court is affirmatively satisfied on evidence which it is able to accept that making such an order will not recover the proceeds of crime and will simply lead to a sentence of imprisonment being served which the defendant in question can do nothing about. The limit on the utility of a certificate of inadequacy under s.23 of the 2002 Act identified in Johnson is relevant here, but it must be recalled that that limit reflects the will of Parliament and there is no warrant for creating a discretion to abrogate it. In such a case, the order may on those grounds be held to be disproportionate. Johnson itself was not such a case. A court making a confiscation order will treat protestations that the case before it is such a case with scepticism and will require the clearest, most complete and unassailable evidence before avoiding the usual statutory order on this ground. This is because, necessarily, the court is dealing with criminals whose mere assertion is unlikely to carry much weight. The ease with which criminal property may be concealed by being passed to others was emphasised in the judgment of the court in Johnson and requires such an approach to the facts.

This Case: Discussion and Disposal

22. In this case there was no evidence from the respondent or her family. Accordingly, it was not possible for the judge to come to the conclusion that the order, unless adjusted, would not result in the recovery of the proceeds of crime. Therefore, there was no proper basis on which that order could be held to be disproportionate. All cases are different and this is a fact specific area where generalisations are to be avoided, but it is hard to conceive of a case where it would be proper to reduce the amount in a confiscation order in the tainted gifts regime without hearing oral evidence from the respondent and called on her behalf, and without full disclosure of documents concerning the financial circumstances of all relevant persons On this ground alone we would respectfully disagree with the judge and allow this appeal. The factual basis on which she proceeded was not properly made out on the evidence.

23. If there had been such evidence, then the court's approach was flawed, in our judgment, in one further respect. The judge was persuaded to embark on a process almost akin to tracing the stolen assets into the hands of third parties, and to find that if no assets could be found which represented the gift then that gift should not be included in the recoverable amount. This is not the way the statutory tainted gifts scheme works. It is clear from the terms of her ruling that the judge was seeking to identify the assets which the recipients had which were related to the tainted gifts. This is not the right approach. The fact that it was her approach is clear from this passage of her judgment:

"In summary, Mr Harries has invited me to identify where there are recipients who may hold assets and have money in which [the respondent] arguably has an interest, at least in the moral sense, because those assets have been paid for with criminal proceedings and there is arguably a prospect that those sums might be recovered. In those circumstances, in relation to tainted gifts, he invites me to make an order of approximately £375,000, representing in round terms the proportionate figures which I have already set out in relation to the tainted gifts …"

At a subsequent point in her ruling, the judge makes it clear that she accepts that submission.

24. For all the reasons explained in Johnson,the tainted gifts regime operates by the imposition of an order on the convicted person as an incentive for her to recover the proceeds of her crime from persons to whom she has passed them by whatever means are available to her. What those persons have done with them, or whether they received them knowing of their criminal origin, are likely to be largely irrelevant factors. What matters is whether the court is satisfied that the resulting order is disproportionate in the sense which we have explained above. If not, then the order must be made in the full value of the tainted gifts.

25. For these reasons we allow this appeal and substitute the sum of £2,452,440.33 in the confiscation order for that assessed by the judge. We do not make any adjustment to the prison sentence in default.

26. Finally, we are grateful to both counsel for their conspicuously capable submissions.