Crown Prosecution Service v MN

I have been sitting simultaneously in the Administrative Court hearing an application by the Crown Prosecution Service for the appointment of a receiver under section 80 of the Criminal Justice Act 1988 (CJA No 3 of 2000) and in the Family Division hearing ancillary relief proceedings (NN04D00593). A brief chronology of key events will set the applications in context.

The husband, who was born in 1963, and the wife, who was born in 1971, married in Bangladesh in 1992. They came to this country in 1997. There are no children of the marriage. On 3 November 1999 the husband was arrested for conspiracy to defraud, his co-conspirator in fact being his cousin, the husband of his wife’s sister. On 20 January 2000 Maurice Kay J made a restraint order under section 77 of the 1988 Act. On 7 September 2000 the husband was convicted and sentenced to 3½ years imprisonment. On 16 November 2000 a confiscation order was made against the husband under section 71 of the 1988 Act in the sum of £571,073.38. On 28 January 2002 the Crown Prosecution Service applied for the appointment of a receiver under section 80 of the 1988 Act. On 2 February 2002, according to the wife, she and her husband separated. On 15 April 2004 the wife presented a petition for divorce. On 6 July 2004 the wife served her Form A. On 4 October 2004 the decree nisi was granted. Following various adjournments both matters came before me for hearing on 12 October 2005.

When the matter was opened before me it was agreed on all sides that the relevant assets consisted of five freehold properties and a collection of furniture, paintings and other objets d’art. Two of the properties (referred to in the proceedings as Victoria Promenade and Field Drive) had been sold for £112,000 and £54,000 respectively. The other properties (Windingbrook Lane, Holbein Gardens and Austin Street) were each the subject of agreed valuations, in the sums of £475,000, £275,000 and £80,000 respectively. The five properties were therefore agreed to be worth in total £996,000, this figure, of course, taking no account of the costs of realisation. The chattels were the subject of a valuation by a jointly appointed expert in the sum of £64,000 (the precise figure is £64,031 but for ease of exposition I take the rounded down figure). On the face of it, therefore, the assets were worth a total, before realisation costs, of £1,060,000.

I say on the face of it because the Crown is sceptical as to whether the chattels are really worth only £64,000. Mr Dennison on behalf of the Crown Prosecution Service was able to point to a number of seeming discrepancies between the valuation and other pieces of evidence. For example: a painting valued at £6,000 had been bought for £25,000 and was shown in the wife’s Form E valued at £50,000; another painting bought for £5,500 and shown in the Form E as worth £5,000 was valued at £300; porcelain which had cost at least £7,600 was valued at £990 (in the Form E it was said to be worth £100,000); three carriage clocks valued at £1,800 were shown in the Form E at £9,000; and a number of rugs and carpets valued at £7,820 were put in the Form E at £30,000. Allowing for the over-optimistic exaggeration which may perhaps characterise what the wife says in her Form E (though the Crown could argue that it may reflect, at least in part, what she had been told by the husband) the discrepancies between the purchase costs and the valuations of the two paintings and the porcelain give one food for thought.

At a very early stage in the proceedings, indeed before the Crown was even aware that there were divorce proceedings afoot, the husband and the wife had reached agreement in relation to her ancillary relief claims. It was agreed between them that she should have Windingbrook Lane, the chattels and a lump sum of £25,000. It will be appreciated that this would have left the Crown distinctly ‘light’. The Crown would have been left to satisfy a confiscation order in the sum of £571,000 (for ease of exposition I again take the rounded down figure) out of the proceeds of four properties (Victoria Promenade, Field Drive, Holbein Gardens and Austin Street) worth a total of only £521,000; and that even before finding the costs of realisation and the lump sum of £25,000 to be paid to the wife.

The Crown estimates that the costs of realisation will amount to some £13,500, inclusive of VAT. (It is known that the realisation costs of Victoria Promenade amounted to almost £5,700.) In addition, if a receiver was appointed the Crown estimates that his remuneration and other costs would amount to some £4,500 inclusive of VAT. On this basis the Crown would be left with a net sum of £478,000 to meet a confiscation order of £571,000. The wife, on the other hand, would have received assets worth £564,000 in total (assuming the valuation of the chattels to be correct). The husband would have been left with nothing.

Not surprisingly the Crown opposed the division of the assets as agreed between the husband and the wife. Mr Dennison pointed out that there is another suitable property available for the wife, Holbein Gardens, where in fact she is currently living and which appears to have been the former matrimonial home. This would enable the Crown to realise Windingbrook Lane, and since this is worth £200,000 more than Holbein Gardens there would then be more than enough money available to discharge the confiscation order in full. Mr Dennison also disputed that the wife should be allowed to retain the chattels – particularly if in truth they are worth more than £64,000 – if the consequence was to be that the confiscation order remained partially unsatisfied.

Mr Dennison pointed out that to the extent that the wife had been enjoying a high standard of living during the marriage she was in truth, whether she knew it or not, being supported – pampered was the word he justifiably used – at the expense of the victims of her husband’s criminality. The wife’s Form E was sworn on 12 August 2004, long after her husband had been convicted, jailed and made the subject of a confiscation order. Mr Dennison properly drew attention to this revealing passage in the Form E. Speaking of the period before her husband’s arrest in November 1999 the wife says:

“I had enjoyed a high standard of living. I had £12,000 per annum clothing allowance. I enjoyed living very comfortably in luxurious surroundings in a large detached house in a nice area. I was given £5,000 per annum for personal grooming. I ate at the best restaurants, I shopped only in the best shops, like Harrods, Selfridges, Fortnum & Mason. I have always been given luxury cars like Mercedes. I feel that I had a better life than most people. Travel was always by first class.”

I have no reason to doubt the accuracy of this account – Mr Talbot did not seek to dispute it on behalf of the husband – but it shows, as Mr Dennison says, that whether she knew it or not, and I am prepared to assume that she did not, this was a wife who was enjoying the fruits of her husband’s offending and whose lavish expenditure was made possible only by his criminality.

Shortly after opening his case, and just as his client was about to go into the witness-box to give evidence, Mr Wright on behalf of the wife told me that she was adjusting her claim and had proposed terms which, so far as they went, were acceptable both to the Crown and to the husband. In place of Windingbrook Lane it had been agreed that the wife would have Holbein Gardens, together with the chattels and a lump sum of £25,000. The Crown was content to agree, because it would be left with four properties (Victoria Promenade, Field Drive, Windingbrook Lane and Austin Street) worth a total of £721,000 out of which to meet the confiscation order of £571,000 as well as the wife’s lump sum of £25,000.

At this point the husband changed tack. Having previously reached an agreement with his wife which would have left him nothing, he now sought an order that would leave him with whatever was left over from the proceeds of sale of the four properties after the Crown’s claims had been met. This residue, according to the Crown’s calculations, might amount to something of the order of £107,000, after deducting from the gross proceeds of sale of £721,000 the costs of realisation amounting to some £13,500, the receiver’s remuneration and other costs amounting to some £4,500, the £571,000 required to meet the confiscation order and the wife’s lump sum of £25,000.

Mr Wright for his part submitted that the residue should go to the wife. Battle was therefore joined between the wife and the husband as to the destination of the residue. The Crown, of course, has no interest in it, for its claims will be met in full whatever happens to the residue.

Mr Wright sought to justify the wife’s claim to the residue essentially on two grounds. First, he said, I had to take into account as a very important factor in the exercise of my discretion the fact that the husband had willingly entered into an, albeit informal, agreement from which he was now seeking to resile. The husband, he said, was merely reacting opportunistically to the wife’s recognition, in the light of the Crown’s unyielding attitude, that she would have to accept Holbein Gardens, worth only £275,000, in lieu of the previously agreed Windingbrook Lane, worth £475,000. Giving the wife the residue, in addition to Holbein Gardens, the chattels and the lump sum of £25,000, would, he said, accord more closely with the agreement that had originally been reached.

Secondly, he said that, were she to receive the residue, the wife would end up with assets worth a total of £471,000 (£275,000 + £64,000 + £25,000 + £107,000) or some 44% of the total assets of £1,060,000. That, he submitted, was by no means excessive having regard to the relevant principles, even though the husband would go way with nothing. Mr Wright referred in this context to Re MCA; HM Customs and Excise Commissioners and Long v A and A; A v A (Long Intervening) [2002] EWCA Civ 1309, [2003] 1 FLR 164, CPS v Grimes, Grimes Intervening and Grimes v Grimes [2003] 2 FLR 510 (reversed on another point Grimes v Crown Prosecution Service [2003] EWCA Civ 1814, [2004] 1 FLR 910), and X v X (Crown Prosecution Service Intervening) [2005] EWHC 296 (Fam), [2005] 2 FLR 487. More particularly he referred to the principle of equality as between husband and wife laid down in White v White [2000] 2 FLR 981. He sough to bolster his argument by pointing out that the wife had never worked. Were she, on the other hand, to receive no part of the residue she would be getting only some 34% of the assets.

Mr Talbot on behalf of the husband sought to blunt Mr Wright’s submissions by pointing out the confiscation order is a liability which has to be met, so that, as he would have it, the assets available for division are not £1,060,000 but only £489,000 (ie, £1,060,000 less £571,000 and ignoring for the purposes of this calculation the realisation costs of £18,000). If the wife receives, as he accepts she should, Holbein Gardens, the chattels and a lump sum of £25,000, then she will be taking £364,000, or some 74% of what he says is the true value of the available assets.

Mr Talbot accepts that although the confiscation order has to be taken into account under section 25(2)(b) of the Matrimonial Causes Act 1973 as one of the husband’s financial obligations, where as here the wife is innocent she can equally pray it in aid under section 25(2)(g) as conduct of the husband which it would be inequitable for the court to disregard: see X v X (Crown Prosecution Service Intervening) [2005] EWHC 296 (Fam), [2005] 2 FLR 487, at para [41]. But, as Mr Talbot points out, for the purpose of the exercise which has to be carried out under section 25 of the 1973 Act the value of the assets available for distribution between the spouses has to be calculated net of any assets which are, or represent, the proceeds of crime. And in the present case, he suggests, some of the assets may indeed be, or represent, the proceeds of crime.

Now in principle that is indeed the correct approach: see, for example, A v A; B v B [2000] 1 FLR 701 at pp 728-729 and X v X (Crown Prosecution Service Intervening) [2005] EWHC 296 (Fam), [2005] 2 FLR 487, at para [10]. But it has to be remembered that one cannot for this purpose simply assume that the value of the assets, if any, which are tainted by crime is the amount of the confiscation order. For as I pointed out in X v X (Crown Prosecution Service Intervening) [2005] EWHC 296 (Fam), [2005] 2 FLR 487, at para [18], a confiscation order is not limited to the profits of crime. It extends in principle to all the money which has passed through the defendant’s hands in the course of his criminal behaviour. It is not confined to what sticks to his fingers or is left in his hands at the end of the day. It extends, as it were, to the turnover and not just the profits of his criminal activities. So one cannot assume that the tainted assets in the present case amount to £571,000 or, putting the same point the other way round, that the untainted assets amount to no more than £489,000. The untainted assets may be – I think they probably are – worth more than that. On the other hand, it seems to me that in all the circumstances it can properly be inferred that at least some part of the assets in the present case – maybe quite a significant part: how much it is quite impossible to assess – are indeed tainted, in the sense that they are, or represent, the proceeds of the husband’s criminality.

It follows, as it seems to me, that the wife cannot simply say that the starting point in accordance with ordinary White v White principles is that she is entitled to 50% of assets worth £1,060,000, so that in going away, as she would like, with £471,000 she is getting, as Mr Wright would have it, only 44%. But equally I do not think that Mr Talbot is justified in asserting that the wife on Mr Wright’s approach would be getting no less than 74% of the assets, for this assumes, and I am not prepared to make the assumption, that the untainted assets amount to no more than £489,000. The truth, whatever it may be, lies somewhere in-between; where precisely, it is now quite impossible to say.

At the end of submissions I had concluded that the proper order to make in all the circumstances was for the wife to receive, in addition to Holbein Gardens, the chattels and the agreed lump sum of £25,000, a further lump sum (assuming the residue is sufficient) of £25,000 or one-quarter of the residue, whichever is the larger. The effect of this, assuming a residue of £107,000, was that, after discharging the confiscation order in the sum of £571,000 and paying the realisation and other costs and expenses of £18,000, the remaining £471,000 would be paid as to £390,750 (£275,000 + £64,000 + £25,000 + £26,750) to the wife and the balance of £80,250 to the husband. On this basis the wife would have received some 37% of the assets, if one treats the assets as being worth £1,060,000, and some 80% if one treats the assets as being worth £489,000, the value net of the confiscation order.

My reasons for coming to this conclusion can be summarised as follows. The wife is entitled in the circumstances of this case to have her needs – her reasonable requirements – met. (I use those phrases in the sense in which they would have been used before the decision in White v White.) That would have been achieved by the order I had in mind. The wife would be able to go on living in the former matrimonial home. In addition she would have a fund of £114,000 to live on, assuming the chattels to be worth £64,000. (Out of this she would have to meet any storage charges that have accrued in relation to the chattels since they were seized by the police.) An award in this form would go a significant, though far from the whole, way towards meeting what had been agreed by her husband, while still leaving him with a modest fund with which to re-establish himself. In all the circumstances it seemed to me that an order in this form would best meet the requirements of fairness and justice having regard to all the factors identified in section 25 of the 1973 Act.

Before parting with this aspect of the case there are two further points I should make.

I do not accept for a moment that the wife has any “need” or “requirement” for the chattels as such. She does not. They represent the outward and visible sign of the pampered lifestyle – funded by crime – to which I have already referred. Had they needed to be sold in order to meet the confiscation order I would have had little hesitation and no compunction in ordering them all to be realised. However innocent the wife may be, there would be something deeply offensive in allowing her to go on living in such style whilst the confiscation order remained unsatisfied. But the fact is that the confiscation order will be satisfied in full, and the husband agrees that the wife should have the chattels. So be it. As far as I am concerned the wife can have the chattels, given that the Crown’s demands will be met in full, not because she needs the chattels but simply because they are a convenient means of providing, in part, the fund which I agree she needs.

I was satisfied that the order I had in mind would meet the wife’s needs. It may be, though for the reasons I have already given I cannot be sure, that it would have fallen short of giving her what she would otherwise have been entitled to on a White v White basis. So be it. That is the price which even a wholly innocent wife may have to pay if justice in the particular circumstances is to be done both to her and to her albeit criminal husband. An innocent wife is not to be made to pay unduly for her husband’s crimes. And if this is the only way in which a confiscation order can be paid in full and an innocent wife’s needs properly met, then it may be that a criminal husband will properly and justly be sent away with nothing at all. But there may be more scope for leaving the husband with something, even at the price of giving his innocent wife less than she might be entitled to on a pure White v White basis, if there is a surplus after her needs – her reasonable requirements – have been met in full. That is the situation here, so I am able to leave the husband with three-quarters of the residue, even though that is less than the 100% of the residue which he was seeking. I emphasise that I am laying down no principle. I am merely indicating an approach which may be appropriate in some cases and which I am satisfied is appropriate in this particular case.

After announcing my decision in the ancillary relief proceedings I turned to the Crown’s application for the appointment of a receiver. It was while I was considering this that I was told by Mr Talbot that his client, the husband, had just told him that there was a bank account containing some £7,000 which had not been disclosed in his Form E. Mr Wright, not surprisingly, asked me to reconsider my decision in the ancillary relief proceedings, inviting me to consider, amongst other matters, the extent to which my decision might have been different had I known about this additional £7,000. Having heard further submissions I decided that this additional sum should be split between the husband and the wife, a further £3,500 being added to her basic lump sum – an adjustment to which the Crown made no objection.

My final order was, therefore, that there should be a clean break, the wife receiving Holbein Gardens, the chattels, a lump sum of £28,500 and a further lump sum of either £25,000 or one-quarter of the residue, whichever is the larger.

Mr Dennison submits that I should appoint a receiver, in effect for the purpose of now selling the two remaining properties (Windingbrook Lane and Austin Street). He further submits that I should include in the order a provision enabling the receiver to apply any excess of what is realised over the amount required to satisfy the confiscation order towards not merely his costs and disbursements but also his fees. I had at an earlier stage of the proceedings ruled that I have power to make such an order, my reasons for that being set out in a separate judgment: Re HN, Re MN, Re RN [2005] EWHC 2982 (Admin). The question now is how I should exercise the power which I indubitably have to do what Mr Dennison asks.

On the face of it the Crown is entitled to a receiver in order to realise the funds with which to discharge the confiscation order. That, after all, is no more than the ‘legislative steer’ in section 82(2) of the 1998 Act would normally demand. Moreover, in the present case the confiscation order was made as long ago as November 2000 and much of it remains unpaid. On the other hand, since the effect of my ruling is potentially to throw on to the defendant’s assets the burden of meeting the receiver’s costs, disbursements and fees, it may be proper, in an appropriate case, to defer the appointment of a receiver for a short period to give the defendant the opportunity himself (subject, of course, to suitable safeguards) to realise the assets – something he may perhaps be able to do more advantageously and at lesser expense than a receiver. As against that, a defendant who, having been given such an indulgence, fails to avail himself of it may for that very reason find it difficult to dispute thereafter that a receiver should not merely be appointed but also allowed his costs, disbursements and fees out of the assets.

In the present case it could well be said, as Mr Dennison does, that the husband has had more than enough time in which to realise his assets and that he has hitherto shown a marked lack of zeal in furthering that objective. On the other hand, the husband can pray in aid the fact that until the ancillary relief proceedings were concluded he could not know which, if any, of the properties was to be retained by the wife. In all the circumstances I propose to give the husband a further short period – until January 2006 – in which to realise Windingbrook Lane and Austin Street. If he fails for any reason to do so, then a receiver will have to go in to do so. And if that turns out to be necessary the receiver will be allowed his costs, disbursements and fees out of the assets he realises. There is, in my judgment, absolutely no reason why if it becomes necessary to have a receiver the Crown should be left paying his costs, disbursements and fees. On the contrary, in this case (as I should think in most such cases) the only proper order is that the burden of meeting those costs, disbursements and fees should be thrown on the defendant rather than on the Crown. Why, after all, should the public purse be expected to pay for something necessitated by a solvent criminal’s failure to discharge a confiscation order? I can think of no good reason.

The remaining issue relates to the costs of the proceedings. I was told that the Crown’s costs of the proceedings (that is, the proceedings in both courts) amount to some £8,825 inclusive of VAT. The wife lodged a schedule showing that her costs amount to £15,150 inclusive of VAT. I was given no precise details of the husband’s costs though I understood them to be in excess of £7,500. It was agreed that as between the husband and the wife there should be no orders as to costs. Nor did the Crown seek any order for costs against the wife. The Crown sought orders that its costs be paid by the husband and that those costs be deducted from the share of the residue which would otherwise be payable to the husband.

Mr Talbot sought to persuade me that there should be no order as to costs but in my judgment that would quite manifestly not meet the justice of the case. Quite apart from anything else, the husband had sought to resist the appointment of a receiver and had tried unsuccessfully to argue that I had no jurisdiction, and that in any event I ought not, to provide for the payment of the receiver’s remuneration and expenses out of the assets. More convincing was his submission that the Crown should have only part of its costs, to reflect the fact that the Crown had taken, and until quite shortly before the final hearing had persisted in pursuing, an unjustified claim to recover interest on the amount of the confiscation order. I think that this should be taken into account, though not to the extent suggested by Mr Talbot, in assessing what costs the husband should have to pay. My conclusion at the end of the day, taking into account all the circumstances of the case and having regard in particular to the provisions of CPR 44.3, was that justice all round would best be done by ordering the husband to pay three-quarters of the Crown’s costs.

Accordingly, at the end of the hearing on 13 October 2005 I made orders to give effect to the various decisions I have now explained.