McLeod v City of Westminster Magistrates Court

LORD JUSTICE MAY: This is an application for permission to bring judicial review proceedings of a decision by District Judge Snow on 4 November 2008 in the following circumstances. It was on 28 September 2006, after a trial at Kingston Crown Court, that the applicant, Robert Macleod, was convicted of the offence of conspiracy to cheat and of an offence of the acquisition of criminal property. It was a case concerning a multi-handed VAT carousel fraud, where in total and with a number of other defendants approximately £4 million had been diverted from the public revenue.

The applicant, Mr Mcleod, was sentenced to two years' imprisonment for his part in this VAT fraud. He served that sentence, and was released from Ford Prison on 5 July 2007 after serving the appropriate part of that sentence. Accordingly, he was at liberty when a confiscation order was made against him in the Crown Court at Kingston by HHJ Campbell on 18 October 2007. This was a confiscation hearing where, on what appeared to have been agreed figures, his benefit was determined to be £170,962, and his realisable assets, and therefore the amount of the confiscation order, were fixed at £110,000. This resulted from information and evidence, no doubt, about a property, the matrimonial home at 75 Briscoe Road, Essex, which was in his wife's name. However, he was judged to have an approximately 33 per cent interest in the equity of that house because he had contributed £75,000 towards its purchase price, or a deposit upon it in 2001. All that was agreed, as we read the transcript, when the confiscation order was made.

The applicant was given nine months to pay that order, and the nine months expired on 18 July 2008. Meanwhile, as we have been shown this morning, the Revenue and Customs Prosecutions Office had written a letter on 30 January 2008, which confirmed that they were the prosecuting authority enforcing the confiscation order in the sum of £110,000, and giving information as to what they might be minded to do. The letter included a warning in terms that failure to pay the order by the due date might also result in the Magistrates' Court ultimately committing Mr Mcleod to a default term of imprisonment for two years as ordered by the Crown Court for non-payment, and he was asked to note that if this happened, it would not expunge the debt, and it would be served cumulatively upon any sentence which he might currently be serving.

The letter ended by asking for his proposals for payment of the order as soon as possible. It said that if the order had not been satisfied by the date upon which his time to pay expired, and they had not received any acceptable proposals from him as to how he intended to satisfy the order, the prosecution would have no option but to apply to the court to have a receiver appointed to realise his assets.

So far as information before this court goes, there was no substantive response to that letter. However, on 8 July 2008, solicitors representing Mr Mcleod sent an e-mail to the Revenue Prosecutors asking for a three-month extension of time to pay. On 9 July, the prosecution telephoned, stating that under the Criminal Justice Act 1988, there was no power to extend time to pay, and they received no further correspondence from the applicant's solicitors.

Accordingly, the matter was listed in the Magistrates' Court for enforcement, and a date in August was notified before the City of Westminster Magistrates' Court of 23 September 2008. On that day, Mr Mcleod appeared but was unrepresented; counsel was there to represent the prosecution. Counsel told the court what the position was, and informed the court that Mr Mcleod had not put forward any proposals for payment, and indicated the view of the prosecution that the court would have to consider imposing the two-year default sentence. On that occasion, the applicant gave evidence on oath that he was bankrupt, that he had no means, and that he had been unable to sell the property which had been the subject of the confiscation order, he then saying that it had been on the market since February 2008. He provided a copy of his bankruptcy order and a copy of a means form.

So it was that on 23 September the District Judge adjourned the hearing so that Mr Mcleod could seek legal representation, and the court noted to him and warned him that the question of the default sentence would be a live issue on the next occasion. At the adjourned hearing before District Judge Snow on 4 November 2008, both the Revenue and Customs and Mr Mcleod were represented by counsel. By that date, the amount of the confiscation order had been increased by an amount of interest. There had been no payment, nor any proposal for payment.

Counsel on behalf of the applicant applied to the District Judge to adjourn the proceedings for two reasons. The first was so that the possibility of an enforcement receiver could be looked at by both parties. This was to enable the applicant to realise his share of the matrimonial property, the property being held in his wife's name. The adjournment was also sought for 14 days so that the applicant could produce evidence, among other things, of his difficulties in having the house sold. Counsel for him indicated to the District Judge that the applicant was going through divorce proceedings. It was said that he put the property on the market since the imposition of the confiscation order, but had been unable to sell it. It was said that the property had initially been on the market at £340,000, but it had not sold, and the price had had to be reduced to £280,000, below which, it was said, the applicant's wife would not agree to go. It was said that the applicant was unable to effect a sale of the property without his wife's consent, which was not, it was said, forthcoming.

Counsel on behalf of the prosecution said that the applicant had not provided any evidence that he was going through a divorce. He provided no evidence of the property being on the market, and further, it was indicated that the idea of appointing a receiver, which had incidentally been mentioned in the letter of January 2008 to which I have referred, was only raised on the day of the hearing. In face of these submissions, the District Judge imposed the default sentence of two years. In doing so, he said, in summary, this, and this I take from the Magistrates' Court's acknowledgment of service, which has obviously, by reason of his signature, been written by the District Judge himself:

The District Judge ended by saying:

As I said, Mr Mcleod applies for permission to bring judicial review proceedings to challenge this decision. The formal grounds upon which the application is made are that the respondent failed to exercise its discretion in a judicial manner when refusing the applicant's application to postpone the warrant of commitment to prison in order to allow (a) the Revenue and Customs to re-evaluate their position regarding the appointment of a receiver, and/or (b) give the applicant an opportunity to obtain evidential support to corroborate the efforts he had made to date to realise the assets that were the subject of the confiscation order, and in doing so, the proceedings were unfair.

The claim form is dated 9 January 2009, rather more than two months after the District Judge made the committal order. On 27 January 2009, Keith J made a number of procedural directions. On 9 February 2009, Pitchford J directed that the application for permission be listed for an expedited oral hearing; that counsel who appeared before the District Judge should appear at the hearing; and that an agreed bundle of documents, evidence, authorities and skeleton arguments should be lodged not less than four days before the hearing. The court this morning was not in possession, so we understand, of such an agreed bundle, but we do have most of the material which we understand was agreed to be included in that bundle. We have skeletons on behalf of Mr Mcleod and the prosecution, and we have a bundle of documents and authorities put together by the prosecution. We also have authorities attached to the original claim papers, and in total, as I understand it, we have all the material that the parties wish to put before the court.

Insofar as documents and authorities go, there is, however, still no evidence, which was one of the main stumbling blocks before the District Judge, and we are told in terms this morning by Mr Goldring, who appears for the applicant, that a conscious decision has been taken not to try to put additional evidential material before this court. On behalf of the applicant, he takes his stand on the material, or lack of it, that was before the District Judge, and upon that basis submits that the application for permission to bring judicial review proceedings should succeed.

It remains, however, the case that four months have now passed since the District Judge's committal order, and very little has happened in the meantime. I shall come in a minute to two pieces of correspondence that have been put before the court by the prosecution.

The main burden of submissions by Mr Goldring on behalf of the applicant is that Mr Mcleod, the applicant, is unable to effect the sale of the matrimonial property, which is the only source of money to pay the confiscation order. Mr Goldring refers to R v Harrow Justices, to which I have already referred, where Stuart-Smith LJ declined to give general guidance to Magistrates' Courts who are called on to enforce confiscation orders, but made general remarks to the effect that justices have a discretion whether or not to issue a warrant of commitment, and that the discretion should be exercised judicially, which scarcely needs to be said.

On page 398 of the Harrow Justices case, Stuart-Smith LJ listed matters to be borne in mind. These included that the object of a confiscation order is to divest the defaulter of money or other realisable assets, and that the mere fact of a confiscation order is evidence that, at the date of the order, there were realisable assets available to meet the requirements of the order.

In the present case, as I have said, the amount of the order was determined by agreement, as the transcript of the hearing shows. Stuart-Smith LJ also pointed out that, even at the date of the justices' consideration, it is open to the defaulter to apply for a certificate of inadequacy if the realisable assets had become less than the amount of the confiscation order. Mr Goldring, adverting to that, says that that is not an option in the present case because the matrimonial home is still there to be sold.

Another point made in the Harrow Justices case was that the prosecution have a legitimate interest in being heard, and that all methods of enforcement short of a warrant of commitment need to be considered, and that it was not a matter of the defaulter choosing to buy his way out of the order by serving a term of imprisonment in default.

As is well-known, the statutory provisions have changed materially since the date of that judgment, since a term of imprisonment in default no longer goes to reduce or extinguish the amount of the order. Indeed, that was the context of the Harrow Justices case, and explains why, unusually, it was the prosecution who had applied for the judicial review, and the prosecution who were in the process of applying for the appointment of a receiver. In the round, in that case the prosecution wanted to be able to recover the amount of the confiscation order and did not want that amount to be wiped out or reduced by the respondent serving a term of imprisonment.

It is submitted that, in this case, the District Judge failed to exercise his discretion judicially. To my mind, this is an unfortunate submission, taken alone, when the District Judge plainly addressed all the submissions that were made to him and made a reasoned judicial decision on them. It is suggested that the decision was wrong because the District Judge failed to consider the option of the appointment of a receiver. This is factually incorrect. The District Judge did consider the suggestion, indicating, quite correctly, that the possibility had only really been suggested, so it appears, on the day of the hearing, and that the suggestion had not come from the prosecution, as of course it had in the Harrow Justices case, who were not themselves indicating an intention to apply for the appointment of a receiver, nor submitting that there should be an adjournment for that purpose.

Mr Goldring also refers to the decision of Garrotte v City of London Magistrates' Court [2002] EWHC 2909, a decision in this court of 17 December 2002, where it was held that justices who had refused an adjournment application, whose purpose was to find out what the absent prosecution might have to say about enforcement proceedings, had failed to conduct a fully informed balancing exercise. It is suggested that, in the present case, the District Judge was wrong because he did not allow both parties time to make further enquiries. This, in my judgment, is not persuasive, at least so far as the prosecution are concerned. The prosecution in this case were represented on 4 November 2008 and they were not seeking time to wonder whether they might apply for the appointment of a receiver. It was the applicant's belated suggestion that this should be done.

It is uncontentious that the District Judge had power to adjourn the committal proceedings if he was so persuaded. The only question for this court is whether he failed properly to exercise his judicial discretion in refusing to do so. Mr Goldring puts before us material which he accepts he put by way of submission before the District Judge to the effect that the applicant was bankrupt; that he was unemployed; that he was getting on in age; that he had agreed that he had £110,000 worth of property, being something of the order of one third of the value of the matrimonial home. He did not, however, have a 50 per cent share and his wife had the deeds. He was suggesting the appointment of a receiver. He was not entitled to apply for a certificate of inadequacy because the asset was still there. He was in poor health.

All this information was before the District Judge, and I have no doubt that the District Judge took it all into account.

The submission then is, in reliance on the sixth proposition of Stuart-Smith LJ in the Harrow Justices case, that the District Judge failed to investigate or give the opportunity to have investigated all other means of enforcing the confiscation order, and that he was wrong to make a committal order in the circumstances that he did. Mr Goldring restates, but still has no evidence to the effect, that the reason why the applicant has been unable to pay the confiscation amount is because he is unable to realise the one asset that was available. He is a person who, submits Mr Goldring, is at the mercy of third parties. He submits that the District Judge was wrong because he did not have regard to the difficulties that the applicant faced. If he had allowed 14 or 28 days, evidence could have been produced, and he points to a subsequent event as supporting the proposition that an opportunity should have been given for consideration to be given to the appointment of a receiver. He submits that the options available had not been exhausted, and that it was not in the best interests of the public to punish the applicant with imprisonment.

The one additional piece of information that the court does have is that the prosecuting authority wrote to the applicant's solicitors in a letter dated 7 January 2009. This was further to the enforcement hearing when the default period was imposed. The letter goes on:

We are told that that letter, which is stamped as having been received on 8 January 2009, has simply not been responded to. We are also told that a letter has been written to Mrs Mcleod asking for confirmation about divorce proceedings and whether it might be appropriate for the Revenue and Customs Prosecuting Authority to intervene in ancillary relief proceedings for the purpose of recovering the amount outstanding. We are told that there has been no response to that letter.

In my judgment, the case that the District Judge failed to properly exercise his judicial discretion, and/or that he came to a wrong decision on 4 November, is simply not made out. The date for payment of the amount ordered by agreement in the confiscation proceedings was well past, and the applicant had had more than a year to arrange to sell the house to raise the amount required. In practice, he had had an additional period after the expiry of the nine-month period that he had been given at the confiscation proceedings as time to pay.

There was no evidence before the court, and in my judgment it was well within the District Judge's judicial discretionary competence to decline to accept assertions by counsel, unsupported by evidence, from one who had been convicted of conspiracy to cheat. The applicant had been warned on 23 September 2008 when the matter was first adjourned that he risked a committal order, and he had had six weeks or so in which to produce evidence. He had had legal aid since the beginning of October 2008. For what it is worth, here we are four months later and still there is no evidence, notwithstanding Keith J's directions in that respect. It is of course not obligatory for an applicant to support his application with evidence, and we respect counsel's decision to proceed today on the basis only of the material, unsupported by evidence, that was before the District Judge.

As to the possibility of appointing a receiver, the prosecution were not asking for this on 4 November 2008. It is, in my view, clear, not least from the letter of 30 January 2008, that the prosecution regarded the appointment of an enforcement receiver as a last resort if all else, including the serving a default term of imprisonment, had failed. The prosecution position on 4 November 2008 only was that if there was an adjournment, they would look into the matter. It was not their suggestion in the first place. This is not a case where the court was under-informed because the prosecution were not represented.

It seems to me that the information now before the court, that a letter written on 7 January 2009, which ended by saying that the prosecution were proposing to seek the appointment of an enforcement receiver, goes nowhere to support this application to the effect that the District Judge made a wrong decision. The submission in that respect is simply not helped by the fact that we are told that no response was received to that letter, nor to the one that had been written to the applicant's wife. In those circumstances, this court is in no better position from the point of view of evidence than was the District Judge.

As I have said, in my judgment the District Judge came to an entirely supportable decision, and in my judgment, the application for permission to bring judicial review proceedings should be refused.

MRS JUSTICE DOBBS: I agree.

LORD JUSTICE MAY: Thank you very much.

MISS NEJRANOWSKI: My Lord, I rise just in relation to costs.

LORD JUSTICE MAY: Yes.

MISS NEJRANOWSKI: My Lord, I have not prepared a costs schedule, I realise that, but I simply apply for legal costs in the sum of £765.

LORD JUSTICE MAY: There are two points: one is whether a costs order should be made at all; and the second is, if so, in what amount. Have you substantiated that figure to Mr Goldring?

MISS NEJRANOWSKI: I have not had an opportunity to.

MR GOLDRING: I am sure there is no difficulty with the figure. The applicant is legally aided in any event, so one would assume that if any costs were in fact granted, they would probably come from the same pot. I do not know what my Lord's view on that is, but I do not think the costs applied for are against the applicant himself.

LORD JUSTICE MAY: Let us clarify that. Are you seeking an order against the applicant himself?

MISS NEJRANOWSKI: My Lord, it would seem pointless to seek it against the applicant himself, and the current order is outstanding, it may be that funds will be coming from one pot to the other. I simply make the application.

LORD JUSTICE MAY: Unless someone is going to pay in accordance with an order of the court, there is not much point in making an order. Transferring from one public purse to another is pointless -- or it may well be.

MISS NEJRANOWSKI: My Lord, in that case I will leave it there.

LORD JUSTICE MAY: Yes, thank you very much. Do you need an order in relation to the applicant's costs?

MR GOLDRING: No, I think the legal representation has been extended, but thank you.

LORD JUSTICE MAY: Thank you very much.