Horne & Ors, R (on the application of) v The Central Criminal Court & Ors

All three claimants challenge the issue of a disclosure order and Gayle Horne challenges the issue of search warrants issued under Part 8 (“Investigations”) of the Proceeds of Crime Act 2002 (POCA). The search warrants were issued under s.352 POCA and the disclosure order under s.357 POCA, pursuant to orders of His Honour Judge Forrester at the Central Criminal Court on 12 October 2010. The orders were made ex-parte. Subsequently the judge refused applications to set aside those orders on 9 November 2010.

The relevant facts go back many years. Raymond May was convicted of conspiracy to cheat contrary to s.1(1) of the Criminal Law Act 1977 on 24 September 2001. He was sentenced to five years’ imprisonment, reduced on appeal to four. On 2 August 2002 a confiscation order was made against him in the sum of £3,264,277.00 with six years’ imprisonment in default under the Criminal Justice Act 1988. That order culminated in the decision of the House of Lords in R v May [2008] 1 AC 1028. In giving the opinion of the judicial committee, Lord Bingham observed at [46] that Mr May had benefited from his offending to an extent substantially greater than the confiscation order made against him. Moreover, the order made was less than his realisable assets. By 13 September 2010 Mr May still owed £3,200,254.73 under the confiscation order. When District Judge Purdy, on 26 January 2010, activated the default sentence of six years, he commented that Raymond May’s approach was to prevaricate “to the nth degree”. Every inquiry as to his ability to pay had concluded that the funds to meet the order existed but were hidden. The avowed purpose of the search warrants and the disclosure order was to find out what had happened to the benefit Mr May obtained from his offending.

Mr May is not, however, the target of the search warrants and the disclosure order. The targets are his wife, his girlfriend and his eldest son.

The first argument advanced by the claimants is that the judge had no jurisdiction to issue the search warrants or make the disclosure order. In the instant case the power to issue the warrants and make the disclosure order could only be exercised for the purpose of a “confiscation investigation”, as defined in s.341 POCA. There was no dispute but that unless the orders were made for the purposes of a confiscation investigation, the judge had no jurisdiction to make them. Section 352(1) requires a judge to be satisfied of the requirements specified in that section. One of the requirements is that the warrant is sought for the purposes of the confiscation investigation (s.352(3)(a)).

Similarly, the judge must be satisfied in relation to disclosure orders of the requirements specified in s.357 (357(1)). Included amongst those requirements is an obligation to state that the person specified is subject to a confiscation investigation and that the order is sought for the purposes of such an investigation (s.357(3)(a)(b)).

Jurisdiction to issue a search and seizure warrant and to make a disclosure order depends on the existence of a “confiscation investigation”. By s.341(1) of POCA:-

“(1)

For the purposes of this Part the confiscation investigation is an investigation into –

(a)

whether a person has benefited from his criminal conduct or

(b)

the extent or whereabouts of his benefit from his criminal conduct.”

The claimants’ essential case is that once the confiscation order had been made on 2 August 2002, the confiscation investigation had ceased. Any further investigation can only have related to identifying and realising the property which had been categorised as realisable property for the purposes of s.71(6)(b) Criminal Justice Act 1988. In short, an investigation into assets for the purposes of paying or satisfying a confiscation order is not a confiscation investigation. The investigative tools, such as search warrants and dislosure orders, may only be deployed for the purposes of identifying the quantum and whereabouts of benefit and not for the purpose of assisting in the satisfaction of a confiscation order once benefit has been identified and calculated.

Mr Talbot, in his clear and careful analysis of the relevant statutory provisions, rightly draws a distinction between benefit and an amount which might be realised at the time the order is made (the realisable amount).

The procedure for making a confiscation order under s.71 Criminal Justice Act 1988 (as defined by s.71(9)(a)) begins with the determination of the question whether the offender has benefited from any relevant criminal conduct (s.71(1A)). That question is resolved by reference to the provisions of s.71(4) and (5). By s.71(4):-

“For the purposes of this Part of this Act a person benefits from an offence if he obtains property as a result of or in connection with its commission and his benefit is the value of the property so obtained.”

A confiscation order is the lesser of the benefit or an amount which appears to the Court to be the amount which might be realised at the time the confiscation order is made (s.71(6)). Section 74(3) makes provision for the calculation of the value of the amount that might be realised at the time the confiscation order is made. In accordance with the definition contained in s.74(1) realisable property may be any property held by the defendant whether it is come by legitimately or as a result of or in connection with the commission of an offence. Statutory provision is made for increases in value of the realisable property after it had been originally obtained and up to the time the confiscation order is made (see s.74(5)(6)).

The contrast between benefit and the amount which might be realised is reinforced by s.73(1) of the 1988 Act which requires a prosecutor to give written notice and a statement as to matters relevant to determining whether the defendant “has benefited from any criminal conduct” (s.71(1) and (1A)). A prosecutor is not required to tender a statement in relation to the valuation of realisable property.

The processes whereby satisfaction of the confiscation order may be achieved or enforced maintain that statutory distinction. A confiscation order is to be enforced as if it were a fine (s.75(1)). The power to investigate the whereabouts and to ensure the realisation of realisable property is conferred on a Receiver once appointed by the Court in accordance with s.80. The Court may empower a Receiver to enforce charges or take possession of property (s.80(3)) or to order any person having possession of realisable property to give possession of it to the Receiver (s.80(4)). An Enforcement Receiver was appointed over the assets of Raymond May on 23 January 2009 naming one of the claimants, Mrs Denise May, Raymond May’s wife, in the penal notice.

The powers of a Receiver in relation to realisable property are to be contrasted with the powers of investigation in relation to the calculation of benefit. Investigation powers were originally contained within s.93(H) Criminal Justice Act 1988 introduced by POCA 1995 which empowered a constable to apply for production of material relating to the extent or whereabouts of the proceeds of criminal conduct and under s.93(I) to apply for a warrant authorising search of premises. Section 102(1) of the 1988 Act defined “the proceeds of criminal conduct” to which production orders and search warrants were confined as meaning benefit from criminal conduct, the phrase to be found in ss.71(4) and (5).

Thus, under the provisions as originally drafted, production orders and search warrants could be made only for the purposes of investigating benefit and not for the purposes of establishing the whereabouts or enforcing payment of a realisable amount.

This contrast is replicated in s.341, introduced by POCA 2002, with effect from February 2003. Nowhere can the contrast be more readily demonstrated than in s.341(5) which applies in relation to an investigation into exploitation proceeds. Section 341(5) provides:-

“For the purposes of this Part an exploitation proceeds investigation is an investigation for the purposes of Part 7 of the Coroners and Justice Act 2009 (criminal memoirs etc) into -

…

(c)

the value of any benefits derived by a person from a relevant offence, or

(d)

the available amount in respect of a person.”

Had there been any intention to embrace within the concept of benefit realisable property or an available amount, Parliament could have said so. It is plain that the statute does not contemplate a confiscation investigation into anything other than the existence, quantification or location of benefit.

POCA 1995 did introduce the power of review in cases where no confiscation order had been made (s.74A). It also introduced a power of revision either where it had been determined that a defendant had not benefited (s.74B) or where a prosecutor is of the opinion that the valuation of a benefit should be greater than the benefit assessed at the time (s.74C). But all those powers are restricted to a period of six years from the date of conviction (s.74A(10), s.74B(8) and s74C(9)). They could have no application in this case.

Neither the Crown Prosecution Service nor Her Majesty’s Revenue and Customs disputed the proposition that search warrants and disclosure orders could only be made for the purposes of a confiscation investigation and that a confiscation investigation was limited to identification of the existence, quantification and location of benefit and not of realisable amount. The crucial issue therefore resolved into whether the statute permitted a confiscation investigation to take place after a confiscation order had been made.

In my judgement, there is nothing in the language, structure or purpose of the 1988 Act or the powers conferred in relation to investigation under Part 8 of POCA 2002 to confine those powers in the way for which the claimants contended. There is, as Ms Steyn, on behalf of HMRC, said, no warrant for restricting an investigation into the whereabouts of a person’s benefit in the period up to the making of the confiscation order. It is true that there is no statutory power to investigate the whereabouts of realisable amounts or to use such powers to enforce the realisation of realisable amounts. But it does not follow that the statutory powers may not be deployed to investigate the whereabouts of benefit, as defined, long after a confiscation order has been made. Provided a disclosure order or search warrant is limited to investigating the extent or whereabouts of property obtained as a result of or in connection with the commission of an offence (the words of s.71(4)), those powers may be exercised at any time.

For those reasons, the judge had jurisdiction to make the orders in the instant case. In particular, those powers could be exercised for the purposes of satisfying a confiscation order provided they were focussed and limited to benefit and not realisable amount. This leads me to the second issue, namely, whether under the guise of investigating the location of benefit, the reality was that the prosecution authorities were seeking to enforce realisation of the realisable amount.

The claimants contend that, now that so long a period has elapsed since the confiscation order was made, the reality is that the orders were sought to ascertain the whereabouts of assets which could be used to satisfy the confiscation order. It is now of no concern to the authorities to find out the location of the benefit. All they need to do and all they require is to identify realisable assets from which the unsatisfied confiscation order may be paid. After all, realisable amounts may include the benefit originally obtained.

The Court is required to identify the true and dominant purpose of the orders which the prosecution authorities have obtained. The issue of the disclosure order and the warrant will only be lawful if the true and dominant purpose was to find out the location of benefit (see R v Southwark Crown Court ex-parte Bowles [1998] AC 641 at 651D-G and 652 C-D).

The task of the Court in identifying the true and dominant purpose of the application for a search warrant and disclosure order depended on a statement from an officer of HMRC, Andrew Fatherly. He asserts that it was impossible to identify the whereabouts of the benefit from the missing trader VAT fraud in 2002 but that it is believed that it may now be possible to “trace backwards from identified assets/property to establish the whereabouts of the defendant’s criminal benefit” (1.3). Mr Fatherly acknowledges that in the course of that investigation it may be possible to uncover legitimately or illegitimately-funded assets which do not directly represent criminal benefit. These would be available to settle the outstanding confiscation order but that was not the true and dominant purpose of the orders sought (see paragraph 1.4). In paragraph 4.11 he purports to identify assets belonging to the claimants and transactions in which they were involved. He describes them as “a web of financial transactions surrounding, but not directly touching, the defendant”.

In a supporting statement Sally Nye produces the information on which Mr Fatherly originally relied. In that information the officer referred to evidence in which the defendant accepted that he had papers stored at “Beckenham”, where he shared a flat with one of the claimants, Ms Horne (5.20). Moreover, the officer explains that it is common for individuals to leave documentation and laptop computers in vehicles which would not themselves be the subject of a search warrant of premises since the vehicle may be parked elsewhere (6.2).

It is important to emphasise the intrusive nature of a disclosure order and search warrant, affecting as they do innocent third parties targeted only through their relationship with Raymond May. The issue of the warrant amounts to a serious invasion of privacy and requires the court to be rigorous in ensuring that it is clearly justified and not merely a fishing expedition in the speculative hope of finding some material (see, e.g., R (Energy Financing Team Limited) v Bow Street Magistrates’ Court and Others [2006] 1 WLR 1316 paragraph 8 [2005] EWHC 1626 (Admin)).

The statute itself requires the Court to assess whether there are reasonable grounds for believing that the information which may be provided is likely to be of substantial value (s.358(3)) and whether there are reasonable grounds for believing that it is in the public interest for the information to be provided (s.358(4)). The Court must similarly be satisfied in relation to a search warrant (s.353(5) and (6)).

If the justification for the disclosure order and the search warrant rested solely on paragraph 4.11, that, in my view, would be insufficient. The judge seems to have placed considerable reliance upon paragraph 4.11. Two full and helpful statements from Mr Leigh, on behalf of the claimants, seek to demonstrate that the transactions to which Mr Fatherly referred were innocent and ordinary family transactions and nothing to do with Raymond May.

There is, however, in my view, substantial justification for the investigation beyond those specific financial transactions. It is indisputable that Raymond May has never disclosed the whereabouts of the sum of £3.2m which he obtained as a result of his fraud on the Revenue. Despite repeated attempts to discover its whereabouts he has successfully resisted all the attempts previously made by deploying every other investigative tool. Between 2009 and 2010 up to 40 production orders were made without avail. It is with that background that one looks to see whether the orders were “likely to be of substantial value…to the investigation”.

In my view, in the light of the fact that nothing else has revealed the whereabouts of the benefit, the judge was entitled to reach the conclusion that there were reasonable grounds for believing that material on Raymond May’s partner’s premises was likely to be of substantial value to the investigation for the purposes for which the search warrant was sought. Those premises were the premises of the first claimant, Gayle Horne, with whom Raymond May had a long-term and settled relationship. Since Raymond May had successfully concealed the whereabouts of this benefit, there were, in my view, strong grounds for believing that on those premises there might be material showing how Raymond May proposed to obtain access to those large resources once at liberty to do so. The benefit must have been concealed somewhere and Raymond May would need to be in a position to obtain the advantage of that benefit. The premises of his partner and her vehicle were an obvious place to look for material revealing how Raymond May would seek to obtain the proceeds of his criminal activity which he had hitherto successfully salted away.

Similar considerations apply in relation to the disclosure orders which were the precursor to disclosure notices requiring attendance at interviews and production of documents. These three claimants were those closest to Raymond May; their relationship to him, either as partner, wife or eldest son, provides the most obvious justification for believing they would have information relevant to the means by which Raymond May may seek to obtain access to the benefit he has hitherto successfully concealed. For those reasons, I accept that the true purpose of the disclosure orders and the search warrants was to obtain information as to the whereabouts of Raymond May’s benefit; information obtained as a result of those orders and the warrant was likely to be of substantial value to that investigation. The investigation was in the public interest. As all parties accepted, the issue for the Court was whether HHJ Forrester was entitled to reach that conclusion. In my judgement, he was, and, as I have endeavoured to explain, I agree with that view.

In their final objection, the claimants contend that the warrants were defective on their face because they were not self-contained and they did not identify material which could be seized and retained.

The warrant must be drafted with sufficient precision to enable both those who execute it and those who are the subject of it to know whether any document or class of document falls within it (see Energy Financing Team Limited). Crane J said:

“…a warrant should be capable of being understood by those carrying out the search and by those whose premises are being searched, without reference to any other document.” [37]

It would, clearly, be absurd to expect the warrant to identify the material which it was hoped to recover as a result of that warrant. It was obvious that it could not be identified with any precision. Section 353(6) is predicated on the fact that it could not be identified at the time the application for the warrant was made:-

“(6)

In the case of a confiscation investigation, material falls within this sub-section if it cannot be identified at the time with the application but it –

(a)

relates to the person specified in the application, the question whether he has benefited from his criminal conduct or any question as to the extent or whereabouts of his benefit from his criminal conduct, and

(b)

is likely to be of substantial value (whether or not by itself) to the investigation for the purposes of which the warrant is sought.”

The warrant itself was expressed as authorising Andrew Fatherly or another appropriate officer:-

“to enter and search premises at…to seize and retain material in accordance with s.353(6) Proceeds of Crime Act 2002 and that does not consist of legal privilege material or excluded material.”

In my view, it would have been preferable if the warrant had identified the purpose as relating to the whereabouts of Raymond May’s benefit from his criminal conduct. But since the reference to s.353(6) cannot possibly have misled the claimant as to its purpose or placed her under any identifiable disadvantage, it does not seem to me that the absence of further specificity affords any ground for quashing the warrant.

For those reasons, I would dismiss these applications.

I agree.