Sandhu v Chief Constable of the West Midlands Police

This appeal raises issues as to what must be proved before a magistrates' court can make an order for forfeiture of cash pursuant to section 298(2)(b) of the Proceeds of Crime Act 2002.

On 10 May 2017 a cash sum of £54,000 was seized from the appellant. On 18 December 2017 a magistrates' court made an order for the forfeiture of the cash. On 17 January 2019 the Crown Court at Birmingham dismissed an appeal against that order. The appellant now appeals by way of case stated against the decision of the Crown Court.

Throughout the proceedings in the lower courts, the respondent's case was presented as an application for forfeiture pursuant to section 298(2)(b) of the 2002 Act on the basis that the seized cash was intended to be used for money laundering offences in the future. It was not suggested that the respondent was able to prove that the source of the cash was a specific crime or crimes or one of a specific type of crime. The respondent relied on Fletcher v Chief Constable of Leicestershire Constabulary [2013] EWHC

The Crown Court heard evidence as to the circumstances in which the cash was found by police officers who executed a search warrant of the appellant's home. The appellant gave evidence as to what he said was the source of the cash. It is unnecessary for the purposes of this appeal to refer to the detail of any of that evidence. It suffices to say that at paragraph 24 of the Case Stated, the Crown Court records that it made findings of fact, against which there is no appeal, which included the following:

The Crown Court went on at paragraph 24 to express its overall finding and conclusion as follows:

The Crown Court posed three questions of law for the opinion of this court in the following terms:

It is convenient to address that third question first. The factual background is that in October 2014 a sum of £85,989 was seized from the bank account of a Mr Nahal in the form of a banker's draft made payable to the appellant. A magistrates' court ordered forfeiture of that sum, but an appeal to the Crown Court was not resisted by the authority. It appears that the problem which the authority faced was that the money had not existed in "cash" until the banker's draft was obtained. Mr Schofield for the appellant submits that since the £85,989 had been returned to the appellant, and no further attempt made by the authority to seize or freeze it in any way, it should have been treated as money legitimately in the possession of the appellant and should therefore not have featured at all in the Crown Court's consideration of the issues relating to the £54,000. Mr Fortt for the respondent submits that the Crown Court inevitably had to consider the £85,989 because it was part of the appellant's explanation for why the £54,000 had been kept in cash rather than banked. Moreover, submits Mr Fortt, the £85,989 was in any event part of the overall picture of the appellant's financial affairs.

In our judgment there is no substance in the point raised by Mr Schofield. We do not accept that it was an error of law on the part of the Crown Court to have regard to the fact of the seizing and return of the £85,989. We agree with Mr Fortt that it was necessary to consider that money, because the appellant referred to it as part of his evidence relating to the £54,000, and in any event we do not see how the Crown Court could have excluded from its consideration this aspect of the appellant's financial affairs. There may be many reasons why the authority, having felt constrained to withdraw resistance to the appeal in relation to the £85,989, had not chosen to make any further attempt to seize that sum. It is not possible to regard their inaction as confirmation that the £85,989 was of entirely innocent origin.

We therefore turn to questions (a) and (b). It is convenient to consider these together and to begin by setting out the material parts of the relevant sections of the Proceeds of Crime Act 2002. We start with some of the provisions in Part 5 of the Act, which is concerned with the civil recovery of the proceeds of unlawful conduct. By section 240(1)(b) the general purpose of Part 5 includes:

As will be seen, later provisions of Part 5 similarly refer to the two distinct situations of property obtained through unlawful conduct and property which is intended to be used in unlawful conduct.

By section 241:

Section 242 is headed "Property obtained through unlawful conduct". It provides:

Chapter 3 of Part 5 of the 2002 Act relates to the recovery of cash in summary proceedings. Sections 294 and 295 provide for the seizing and detention of cash. The issues in this appeal relate to section 298, which by subsection (1) permits an application for forfeiture of detained cash to be made to a magistrates' court. By subsection (2):

For convenience we will refer to subparagraphs (a) and (b) of section 298(2) as the first and second limbs respectively. In relation to the first limb, it is necessary to consider sections304(1), which provides: "(1) Property obtained through unlawful conduct is recoverable property".

Part 7 of the 2002 Act is concerned with money laundering, which is defined by section

For the purposes of Part 7 "criminal property" is defined in section 340(3):

The proper interpretation of section 242(2)(b) of the 2002 Act was considered by a Divisional Court (Lord Thomas LCJ and Nicola Davies J) in Angus. The lower court in that case had been satisfied that the seized cash was property obtained through unlawful conduct on the basis that it had been obtained as a result of criminal activity, but that such activity had not been specified or identified. On an appeal by way of case stated, the court reviewed earlier case law, both civil and criminal, none of which had specifically considered the provisions of section 242(2)(b) in the context of a cash forfeiture case. It approved the approach which had been taken to the recovery of civil assets in R (on the application of the Director of the Assets Recovery Agency) v Green [2005] EWHC 3168 (Admin) and held that the same approach must be adopted in a case of cash forfeiture. At paragraph 29 Nicola Davies J (with whose judgment the Lord Chief Justice agreed) concluded:

Thus the decision in Angus is authority for the proposition that when considering the first limb of section 298(2), an applicant authority must establish on the balance of probabilities that the cash was obtained through one of a number of kinds of conduct, each of which would have been unlawful conduct. Under the first limb, accordingly, it is not enough for an applicant authority to establish only that the cash was obtained through criminal conduct of a kind which could not be identified.

Reliance was placed on that decision by the appellant in Fletcher, a case in which an honest man engaged in work at an unoccupied and derelict property had found and reported to the police a concealed box containing a large amount of cash. The lower courts ordered forfeiture of the cash. On an appeal by way of case stated, it was held by Lewis J that the Crown Court had been entitled to find on the balance of probabilities that the cash had originally been obtained by unlawful conduct of an unidentifiable kind, and that the hider had intended to use it in unlawful conduct, because almost any use of the cash would almost inevitably have involved an offence under section 327 of the 2002 Act.

Lewis J then went on to consider whether on a proper interpretation of section 298(2)(b) the money could lawfully be forfeited. It was submitted on behalf of the appellant that it could not, for to permit forfeiture would produce the absurd result that money which could not be forfeited under section 298(2)(a), for the reasons given in Angus,could nonetheless be forfeited under section 298(2)(b). Lewis J rejected that submission. He noted that the second limb focuses on whether the cash is intended by any person to be used in unlawful conduct as that term is defined in section 241 of the 2002 Act. He referred to R v Anwoir and others [2008] EWCA Crim 1354 ("Anwoir"), in which the Court of Appeal, Criminal Division had held that for the purposes of sections 328 and 340 of the 2002 Act, there were two ways in which the prosecution could prove the property derived from crime:

Lewis J held at paragraph 28 that on the facts found by the Crown Court all the elements of section 289(2)(b) were satisfied and the Crown Court had been entitled to make the order for forfeiture.

In reaching that decision Lewis J acknowledged the force of the argument that it led to an apparent oddity in having two tests for forfeiture, one requiring a more difficult test, namely that the type of criminal conduct be identifiable, than the other, which requires only that the cash be shown to come from some criminal activity, even if it be unidentifiable. He accepted that probably the overwhelming majority of cases falling within the first limb of section 298(2) could also fall within the second limb. He nonetheless concluded as follows at paragraph 34:

In the present case Mr Schofield on behalf of the appellant criticises the decision in Fletcher on the ground that it reverses or undermines the decision in Angus. He submits that section 242(2)(b) of the 2002 Act applies to both limbs of section 298(2) and that Angus provides an authoritative interpretation of section 242(2)(b) which must be applied in all applications for cash forfeiture in which it is alleged that the cash has a criminal origin. It follows, he submits, that in this case, as in Angus, it was necessary

For the respondent, Mr Fortt submits that section 242(2)(b) is only concerned with property which has been "obtained through unlawful conduct" and is not applicable to an application for forfeiture under section 298(2)(b). The decision in Angus, which was concerned with an applicationunder section 298(2)(a), therefore cannot assist the appellant. Fletcher was specifically concerned with section 298(2)(b), and for the reasons given by Lewis J in his judgment in that case, the Crown Court here was correct to order forfeiture. Mr Fortt argues that paragraph 23 of Angus cannot be read across to circumstances such as the present. Under section 298(2)(b) the court must consider whether the use of the cash would constitute unlawful conduct. In circumstances such as the present, that makes it necessary to consider the money laundering offences under Part 7 of the Act, and although Anwoir related to an offence specifically under section 328, the reasoning in it must apply with equal force to offences under sections 327 and 329. Thus, in circumstances such as these, when considering whether the use of the cash would constitute unlawful conduct, Anwoir makes clear that proof of a money laundering offence does not require the identification of a specific type of criminality.

We are grateful to both counsel for their submissions.

At the heart of Mr Schofield's argument was his submission that section 242(2)(b) is of general application in any circumstances in which forfeiture is sought of cash said to have been acquired by criminal conduct and, in particular, is applicable to both the first and second limbs of section 298(2). We are unable to accept that submission. It is in our view clear that section 242(2)(b) does no more than provide a definition, for the purposes of Part 5 of the 2002 Act, of the words "property obtained through unlawful conduct". We see no basis on which that definition can be said to be relevant to the distinct situation, contemplated throughout Part 5, of property which is intended to be used in unlawful conduct. In the present case the relevant unlawful conduct is conduct which constitutes an offence under section 327 of the 2002 Act.

It follows that the decision in Angus, which was concernedwith section 242(2)(b), does not in our view provide the support for this appellant which Mr Schofield claims from it. It would be relevant to an application for forfeiture based on the first limb of section 298(2) but is not relevant to an application such as this based on the second limb. Mr Schofield relied on the fact that in Angus the court did not expressly limit its decision to applications under the first limb but instead used language which he suggests can properly be regarded as intended to be of wider application. We are unable to accept that argument. The court in Angus was concerned with an application under the first limb and makes no reference to the second limb at all. We cannot think that the court intended its judgment to extend to a point which did not arise and was not considered in the judgment.

As for the second limb, the decision in Fletcher is directly in point, and we respectfully agree with Lewis J's analysis in that case.

As we have indicated, the unchallenged finding of the Crown Court in the present case was that the cash seized from the appellant came from some form of criminal activity, although the type of activity could not be identified, and that the appellant intended at some future time to conceal, transfer or convert it. Anwoir, which is Court of Appeal authority binding on this court, makes clear that for the purposes of section 327 of the Act, it is not necessary to show the precise type of crime from which the property was acquired if the circumstances are such as to give rise to an irresistible inference that it could only be derived from crime. In those circumstances the Crown Court was in our judgment correct to order forfeiture. It was entitled to infer on the balance of probabilities that the cash came from criminal activity and that the appellant's intended use of it would constitute a money laundering offence. The cash was therefore "criminal property" as defined in section 340(11) of the 2002 Act, and the appellant's intended use of it would be a criminal offence and would thus be "unlawful conduct" as defined in section 241(1). Thus all the necessary elements for an order pursuant to section 298(2)(b) were established.

We agree with Mr Schofield that this interpretation produces what may at first glance seem an odd result, in that it appears to relieve the relevant authority of a burden which it would carry if it brought its application under subparagraph (a). However, like Lewis J in Fletcher, we regard that as the inescapable result of the statutory provisions and consistent with the intention of Parliament. In particular, we agree with Lewis J at paragraph 30 of his judgment that the interpretation for which Mr Schofield contends would make it necessary to read into the statute words which are not there. Further, we accept Mr Fortt's submission that it is difficult to see why, in a provision which in appropriate circumstances would permit the seizure of money of undoubtedly innocent origin, Parliament should have intended to exclude the seizing of property which was clearly criminal. We would further observe that Mr Schofield's argument involves an assumption that the burden on the authority proceeding under limb two will in all circumstances be less than if proceeding under limb one. We do not think that is correct. It seems to us that the second of the two approaches permitted by Anwoir sets a high bar for a prosecuting authority, particularly where cash is seized which cannot be ascribed to a particular kind of criminal activity.

It follows that in our judgment the answer to all three questions posed by the Crown Court is “No”, and we accordingly dismiss this appeal.