The National Crime Agency v Atkinson & Anor

INTRODUCTION

In these proceedings, the National Crime Agency (“NCA”) pursues claims against the defendants under s.243(1) of the Proceeds of Crime Act 2002 (“POCA”) for a Civil Recovery Order (“CRO”) in respect of seven properties, four bank accounts, and a Rolex watch. These claims have thus far been vigorously disputed.

At the hearing on 21 April 2015, Mr Vollenweider, who appeared pro bono on behalf of both defendants, indicated that, although the first defendant (“Mr Atkinson”) did not admit the unlawful conduct relied on by the NCA, he did not oppose the CRO sought. The second defendant (“Mrs Atkinson”) was in a different position. She was a defendant in these proceedings because she is registered as the co-owner of one of the properties, the matrimonial home at 9, Owens Farm Drive (“the Property”). She objected to the inclusion of that house in the CRO.

Thus the only issue concerned the Property, and Mrs Atkinson’s interest in it. After some discussion with counsel, it was agreed that, notwithstanding the difficulties, it was sensible, fair, and in accordance with the over-riding objective, for the dispute relating to the Property to be determined at the hearing. The underlying problems with any other course were many and various. Three matters in particular should be noted.

First, Mrs Atkinson, who has had a heart/lung transplant, had been hospitalised and was not present in court. It is not the first time that her ill-health has caused procedural difficulties. There was no guarantee that she would ever be well enough to attend court. Secondly, Mr Atkinson did not attend court either, without proper excuse. Thirdly, despite the order of Leggatt J on 17 April 2015, Mr Vollenweider had not been paid any sums at all either in relation to the prior work that he had done on this case, or for his preparation for the trial. Thus whilst he was prepared to attend court on the first day on a pro bono basis (subject to a question as to his fees, to which I will return at the end of this Judgment) there was no guarantee at all that he would be present thereafter.

In the circumstances, I concluded that the dispute in respect of the Property could be properly determined on the first day of the trial. There was a witness statement from Mrs Atkinson which would have stood as her examination in chief. Thus she was not prejudiced by her absence from court. Moreover the presence of Mr Vollenweider, who was aware of all the issues in the case, outweighed the advantages (if there were any) of an adjournment.

At the hearing, having considered the evidence and the careful submissions made by both sides, I concluded that the statutory exception relied on by Mrs Atkinson did not apply to the Property, and that it should form part of the CRO. I gave brief reasons for my decision at the end of the hearing. However, because it is a matter of importance to both Mr and Mrs Atkinson, and because it was necessary for me to make findings as to unlawful conduct in order to determine the dispute concerning the Property, I indicated that I would provide my detailed reasons in writing. That is the purpose of this Judgment.

Accordingly, in Section 2 below, I address the allegedly unlawful conduct of Mr Atkinson, and whether or not the properties which are the subject of the CRO, were obtained through unlawful conduct. In Section 3 below I specifically address the evidence in respect of the Property. In Section 4 below I identify the exception relied on by Mrs Atkinson and refer to the recent authority on that exception. Then at Section 5 I test whether or not that exception can apply to the present case. There is a short summary of my conclusions at Section 6 below.

Often, but not invariably, at this point in my written judgments I pause to thank counsel for their assistance. Rarely is such an expression of thanks more heartfelt than in the present case. The successful resolution of what would otherwise have been a ten day trial was entirely the result of the meticulous written opening prepared by Ms Dobbin on behalf of the NCA, and the clear submissions made by Mr Vollenweider. The public purse has been saved a considerable sum of money as a result of their commitment and hard work.

MR ATKINSON’S CONDUCT

Pursuant to s.241(3)(a) of the POCA, the court has to decide on the balance of probabilities whether unlawful conduct has occurred. The court then has to decide, pursuant s.242, whether property has been obtained through that unlawful conduct. If it has, then that property is recoverable property, subject to the exception in s.266 (which I deal with in Section 4).

Although Mr Atkinson does not admit unlawful conduct, I find that there is an overwhelming case against him. The misconduct consists of drug-dealing; money-laundering; and mortgage fraud. I deal with each briefly below.

As to the drug dealing, I note in particular:

Mr Atkinson has 12 convictions between 2002 and 2010. In particular, on 20 February 2009 he was convicted and jailed for making a false application for a UK passport. I accept the inference that a false passport is a valuable commodity to a drug trafficker. In addition, Mr Atkinson has a conviction for affray which involved considerable violence to both a woman and a man (who was knocked out).

Mr Atkinson was arrested as part of the Operation Confection, an investigation by Great Manchester Police and NCA into the importation of cocaine from Spain into the North West of England. 14 individuals pleaded guilty to the supply of cocaine as part of that conspiracy. I find that a transcript of a probe placed in the car of a co-defendant demonstrated Mr Atkinson’s general involvement in drug dealing, in particular the conversation between the co-defendant and Mr Atkinson in which the co-defendant was complaining that Mr Atkinson had taken his best drug dealer from him.

Although Mr Atkinson did not eventually stand trial in respect of this conspiracy, that was because it was ruled that the transcript did not support the evidence of the conspiracy particularised in the indictment. That does not, of course, stop the transcript from being relevant and admissible evidence of unlawful conduct for the purposes of the CRO.

Furthermore, although Mr Atkinson has challenged the accuracy of the transcript, in his interview following his arrest he did not deny the conversation, but suggested that it was about hairdressing. That was a fanciful explanation which I reject. Subsequently, in the interview for the purposes of the CRO, he accepted what was said by the co-defendant, but said that during the conversation, he was denying what the co-defendant was saying to him. That explanation too is implausible. Further, these subsequent (and different) versions offered by Mr Atkinson also suggest, at least on the balance of probabilities, that the conversation was indeed about a drug dealer and drugs generally.

There was a dispute between Mr Atkinson and Mr Akinyemi, a well-known drug dealer in the North West, over the use of the nickname ‘Aki’. It appears that Mr Akinyemi wanted to stop Mr Atkinson from using that name and was particularly agitated by the fact that he was driving a Porsche which used ‘Aki’ in its number plate. The dispute escalated and, although Mr Atkinson was not present, Mr Akinyemi was shot and killed by an associate of Mr Atkinson.

The obvious inference is that both Mr Akinyemi and Mr Atkinson were involved in the same business, namely drug dealing, which is why the nickname mattered to Mr Akineymi. Revealingly, Mr Atkinson indicated in his interview that Mr Akineymi was a serious criminal, “not my kind of scale at all”. That strongly suggests Mr Atkinson’s involvement, albeit at a lower level, in the same criminal trade as Mr Akineymi.

Mr Atkinson had numerous associates who were involved in drug dealing and had drug-related convictions. A number of them rented the properties from Mr Atkinson which are now, by consent, the subject of the CRO.

When Mr Atkinson was arrested, the police found that the Property had a high-value infra-red security system including a biometric data entry system which used finger print technology, six video cameras monitoring the exterior, a thick steel door and bullet proof glass windows. A replica hand gun had been found at the Property on a previous search. I consider that all of these matters point strongly to the conclusion that Mr Atkinson was involved in the dangerous world of drug dealing and thus required these various security measures to protect himself. No plausible explanation for these measures, or indeed any of the points to which I have already referred, can be found in Mr Atkinson’s statement.

For the reasons noted above, I consider that the NCA has made out their case that Mr Atkinson was, on the balance of the probabilities, involved in drug dealing and drug smuggling.

The second area of an unlawful conduct relied on by the NCA concerns money laundering. It is perhaps unnecessary to go through this in any detail. However I note the following:

Moonshine Mobile Valeting was set up by Mr Atkinson on 17 February 2006. The other owner was Gareth Hughes, who was involved in drug dealing. Mr Atkinson later sold the business in January 2010 to Mr Hughes for £50,000.

I find that Moonshine was the sort of cash-intensive business which is commonly used in an attempt to launder the proceeds of crime. Although Mr Atkinson said that his accountant could demonstrate that Moonshine was a legitimate business, the evidence of the accountant was very limited, because he did not audit the business or have any part in its day to day running. The accountant was essentially dependant on the paperwork provided by Mr Atkinson, and was unable to speak to the actual source of any of the money paid into the Moonshine account. In addition, shortly before selling Moonshine to another drug dealer, Mr Atkinson had said of the sale: “I needed some legitimate money”. That suggests that the sale of Moonshine was designed to ensure that Mr Atkinson could have what appeared to be a legitimate source of funds.

This company was set up in June 2010. The evidence to what it actually did vary but it was essentially another cash-based business. It had one employee, Robin Ocego. Mr Atkinson said that it sold auto accessories and components and was involved in car diagnostics, whilst Mr Ocego said it was solely related to audio equipment, and was similar to a business he had previously run, but which he had given up because it was unprofitable. He was earning £220 a week from Pro Audio Tuning.

I also note the evidence that, following the imprisonment of Mr Atkinson for the passport offence, money has continued to be paid into the Pro Audio and Tuning account, but there was a significant drop-off in cash payments.

Mr Atkinson sought to rely on Mr Ocego’s account of the business to show it was legitimate. But there is nothing in that account which demonstrates that this business could have legitimately generated the cash payments that were made into the company’s account. I therefore again conclude that this was a money-laundering vehicle.

I deal with the purchase of the properties in the next section, relating to mortgage fraud. However, it is important to note that, on the evidence, the properties were purchased using cash deposits which could not be explained by reference to the income declared by Mr Atkinson or revealed in the documents.

For the reasons set out above I find on the balance of probabilities that Mr Atkinson was involved in money laundering.

Finally there is the evidence on which the NCA relies which goes to mortgage fraud. Again it is unnecessary to set these out in detail. However, I note the following:

In respect of these three properties Mr Atkinson signed mortgage declarations saying that his estimated personal annual income from Moonshine was £50,000. This was entirely untrue. For the tax year 2005/2006 Moonshine declared a total turnover of £6,952 with a taxable profit of £3,791. The following year the account showed that Mr Atkinson received £24,119. I find on the balance of probabilities that the extent of Mr Atkinson’s inflation of his earnings was such that the declarations that he made could not have been honest. Furthermore, the suggestion in interview that these figures did not allow for his £25,000 wage was a fabrication because there was not such separate wage.

It should also be noted that the evidence is that the deposits were made up of various sums from Moonshine and associated companies and that, in respect of Flat 3, one amount came from Mrs Atkinson’s grandmother’s bank account. A cash payment of £8,500 was made on 16 May 2005 into that account. On 17 May, the sum of £8,505.20 was paid out of the grandmother’s account and into Mr Atkinson’s personal account. I accept the submission that that was a classic example of money laundering.

In his mortgage application form in respect of this property, Mr Atkinson untruthfully denied that he had been the subject of criminal proceedings. He also declared an income from Moonshine of £30,000 per annum for both 2005 and 2006. Again, these figures were not supported either by the accounts of Moonshine or the income he declared to HMRC. I therefore find mortgage fraud.

Again the properties were bought with sums advanced by Moonshine and others, again indicating money laundering.

Different declarations were made to the mortgage companies in respect of these two properties. The scale of the inflation of Mr Atkinson’s declared income was much less for these properties than those noted above. Accordingly I am not persuaded, on the balance of probabilities, that there was a mortgage fraud in these two cases. But that makes no ultimate difference to the outcome because, again with the funds principally coming from Moonshine, I find that the deposits for both properties were further examples of money laundering the cash proceeds of drug-dealing. Another property, at 47, Glenmore Road, is not the subject of the CRO but for the avoidance of doubt, the gross inflation of the declared income did amount to mortgage fraud in respect of that property. It was also purchased by money laundering the proceeds of drug-dealing.

Accordingly, on the balance of probabilities, I find that all of the above investment properties, with the exception of 38, The Quadrant and 20, Walnut Tree Road were purchased on the basis of mortgage fraud.

For the avoidance of doubt, I reiterate that the deposits for all of the properties noted above were the proceeds of money laundering, and the cash was generated by drug-dealing.

THE PROPERTY

For the reasons set out in Section 2 above, I conclude that all the property that the NCA seek to include in the CRO is recoverable property, as Mr Atkinson belatedly conceded. But I now turn to deal specifically with the Property itself, because, in the light of the argument raised by Mrs Atkinson, that was the live issue at the hearing. I have already described the security measures present at what is the matrimonial home.

The Property was purchased on 7 April 2009 for £270,000. It is held in the joint names of Mr and Mrs Atkinson. There was a mortgage of £200,000. There was a deposit of £70,000. In respect of both the mortgage and the deposit, misconduct is clearly made out.

As to the mortgage, Mr Atkinson said that he has been self-employed by Moonshine since 1 June 2004. That was untrue: the company was not set up until 17 February 2006. Moreover, Mr Atkinson said that his latest year of income was £29,129 whereas in fact his declared income to HMRC for that year was PAYE £5,200 and a dividend payment of £13,000. In addition, in his mortgage form, Mr Atkinson said that he earned income from BM World of £11,496. But in his declared income to HMRC, Mr Atkinson made no mention of this income at all. Furthermore, he significantly overstated his rental income.

As a consequence of these untruths, Mr Atkinson declared an income in his mortgage form which was almost double that which he had declared to HMRC. I find that the mortgage for the Property was therefore obtained by fraud.

As to the deposit for the Property, Mrs Atkinson refers in her statement to borrowing some money for the deposit from her brother and her mother. She also refers to Mr Atkinson borrowing some money from Mr Ocego. She then goes on to say:

“There were no illegitimate funds in the deposit and we enlisted the help of friends and family who were happy to help us out given the illness that I was suffering and the need for us to move to a bigger home.”

Unhappily, I consider that this evidence is untrue. First, I do not accept the suggestion that Mr Ocego loaned Mr Atkinson £20,000. Mr Ocego was earning £220 per week and would have no way of accessing such a sum. Moreover, when he was asked about the source or origin of these funds, Mr Ocego was unable to remember. I accept NCA’s case that it is simply not credible that, if this was a legitimate loan, Mr Ocego would now be unable to account for the source of the funds. Furthermore, there were no documents evidencing any loan at all: no repayment date, no rate of interest, nothing. Again, I am bound to find that that is typical of a money laundering operation.

Further sums of £5,000, £6,800 and £9,000 came from Moonshine, BM World, and another company run by an associate of the defendants. There is nothing to say that any of these sums represented legitimate income or savings on the part of either the first or the second defendants. I find that they did not. Of course the involvement of Moonshine makes this part of the deposit even more suspicious, given that it was Mr Atkinson’s principal money laundering vehicle.

That left £25,000 for the deposit. It is certainly right, as Mrs Atkinson says, that these sums came from accounts owned by her mother and brother. But the analysis demonstrates that these sums were not legitimate loans from family members.

Mrs Atkinson’s mother, Mrs Jordan, operated a bank account into which the sum of £11,500 was paid by Mr Atkinson. That sum was then paid out by Mrs Jordan to the Atkinsons, ostensibly for this deposit. Accordingly, this was not a legitimate loan from Mrs Jordan: it was clear money laundering and the source of the funds was Mr Atkinson himself.

The sum from Mark Jordan, Mrs Atkinson’s brother, was £13,500. Again, as with Mr Ocego, there were no documents evidencing any sort of loan. I accept the submission that, at least on the balance of probabilities, this was not a legitimate loan and was another transaction based on money laundering.

On the basis of that analysis, I am unable to accept Mrs Atkinson’s evidence that in some way the deposit did not include illegitimate sums and that it all came from family members and friends. On the contrary, the money all came from various sources of cash controlled by Mr Atkinson. The only inference to be drawn is that this was money from drug dealing being laundered in one way or another.

THE STATUTORY EXCEPTION

Section 266 of the POCA is in these terms:

“266 Recovery orders

(1)

If in proceedings under this Chapter the court is satisfied that any property is recoverable, the court must make a recovery order.

(2)

The recovery order must vest the recoverable property in the trustee for civil recovery.

(3)

But the court may not make in a recovery order-

(a)

any provision in respect of any recoverable property if each of the conditions in subsection (4) or (as the case may be) (5) is met and it would not be just and equitable to do so, or

(b)

any provision which is incompatible with any of the Convention rights (within the meaning of the Human Rights Act 1998 (c.42))

(4)

In relation to a court in England and Wales or Northern Ireland, the conditions referred to in subsection (3)(a) are that-

(a)

the respondent obtained the recoverable property in good faith,

(b)

he took steps after obtaining the property which he would not have taken if he had not obtained it or he took steps before obtaining the property which he would not have taken if he had not believe he was going to obtain it,

(c)

when he took the steps, he had no notice that the property was recoverable,

(d)

if a recovery order were made in respect of the property, it would, by reason of the steps, be detrimental to him.

(5)

…

(6)

In deciding whether it would be just and equitable to make the provision in the recovery order where the conditions in subsection (4) or (as the case may be) (5) are met, the court must have regard to-

(a)

the degree of detriment that would be suffered by the respondent if the provision were made,

(b)

the enforcement authority’s interest in receiving the realised proceeds of the recoverable property.

(7)

...

(8)

A recovery order may impose conditions as to the manner in which the trustee for civil recovery may deal with any property vested by the order for the purpose of realising it.”

I was referred to a number of authorities, although the only case to which detailed reference was made was the judgment of Andrews J in National Crime Agency v Amir Azam and Others (No. 2) [2014] EWHC 3573 (QB). I note the following general observations made by Andrews J in relation to the POCA in general and the exception at s.266 in particular:

“68…Part 5 of POCA is a statutory scheme which is deliberately structured in favour of the making of a CRO once the court has determined that a particular property is ‘recoverable property’…

69.

Section 266 provides the only statutory defence once a finding has been made that the property is recoverable, and that must be a deliberate decision on the part of Parliament. As I said in my earlier judgment, the impact of Part 5 is that people who are wholly innocent of wrongdoing may end up having to give up their property.

…

76.

Section 266(4) really appears to be aimed at a proprietary estoppel type of situation in which an individual has been promised an interest in identified or identifiable property, and in reliance on that promise acts to his or her detriment, for example by renovating it at his own expense, or working on the land for no reward, in the legitimate expectation of receiving it, then actually receives the property from the transferor (e.g. as a testamentary gift) only to find that it has been purchased with the proceeds of crime.”

I respectfully agree with each of those observations. They demonstrate that, in practice, the statutory exception will rarely be applicable.

THE APPLICATION OF S.226 TO THE PRESENT CASE

I am in no doubt that Mrs Atkinson is unable to bring herself within s.266. Before going through each of the relevant steps, I note that there was no pleaded reliance on this exception, despite the fact that it is the only exception to the statutory scheme, and it has always been the case that Mrs Atkinson was a defendant solely because of her joint interest in the Property. That omission suggests that s.266 was not originally thought, even by her lawyers, to apply to her. In addition, since Mrs Atkinson is asserting that this exception applies, the onus and the burden are on her to demonstrate that it does. For the reasons noted below, I consider that she has failed to discharge that burden. She is not close to being in what Andrews J called ‘a proprietary estoppel type of situation’.

First, as to s.266(4)(a), I am not persuaded that Mrs Atkinson obtained the Property: it seems clear that all of the financial arrangements were made by Mr Atkinson and all the money came from him. In any event, even if it could be said that she had obtained the Property, it has not been demonstrated that the Property was obtained in good faith. On the contrary, for the reasons set out above, the evidence makes plain that it was obtained through a combination of mortgage fraud, and the money laundering of the proceeds of drug-dealing.

It might be said that it is unfair to Mrs Atkinson for this to count against her now. But I disagree for two reasons. First, as noted above, this statutory scheme is designed to penalise even those who are themselves innocent of wrongdoing, provided that all the relevant POCA boxes can be ticked. It would I think make a nonsense of the scheme which Parliament created if the spouse or partner of a criminal could protect that criminal’s property, merely by asserting his or her own joint interest in it.

Perhaps more importantly, on the facts of this case, Mrs Atkinson has not discharged the necessary burden that she obtained her interest in the Property in good faith. Her witness statement contains important untruths. I find on the balance of probabilities that she knew that the money that was coming from her mother and her brother had originated from her husband. That in itself is enough to demonstrate an absence of good faith.

S.266(4)(b) concerns steps taken either before or after the obtaining of the property, which would not have been taken if Mrs Atkinson had not believed the property was going to be obtained, or if she had not obtained it. This exception is simply not made out. There is no evidence at all from Mrs Atkinson to address this exception. As to the position prior to purchase, Mr Vollenweider said that the court could take into account the fact that she had borrowed the money from friends and family in order to purchase the property. I do not agree with that submission for two reasons.

First, if there had been any borrowing, that would relate to the obtaining of the property, and so is covered by subsection (a), not subsection (b). In my view, subsection (b) requires something else, some other steps beyond the mere obtaining of the property in question. There is no evidence of any such other steps. But if that is wrong, and borrowing is relevant, the evidence has demonstrated that, on the facts here, there was no borrowing as such, and that the money for the deposit all came, in one way or another, from Mr Atkinson. On the basis of that finding, there were no steps taken by Mrs Atkinson before the property was obtained.

There was no evidence at all of any steps taken by Mrs Atkinson after the property had been obtained. Although Mr Vollenweider gamely tried to argue that the decorating and the maintenance of the property would be sufficient to meet this test, I disagree: if such work had been carried out, I find it would have happened anyway. But there was no evidence of such work, and no evidence that Mrs Atkinson had done or paid for any such work. Moreover, I find that the elaborate security measures would have been wholly Mr Atkinson’s doing.

The critical point is that, for an application under this subsection to succeed, evidence is required of steps taken either before or after the purchase of the property, which would not otherwise have been taken, and which caused a detriment on the part of the defendant. That is the essence of proprietary estoppel. There was no such evidence in the present case, either from Mrs Atkinson or anyone else.

Furthermore, that same analysis also means that s.266(4)(d) could not apply either. The recovery order would have to be detrimental to Mrs Atkinson by reasons of the steps taken. It follows that if there were no steps, subsection (d) could not be proved.

For those reasons, the statutory exception has not been made out, just as it was not made out in Amir Azam. Therefore it is unnecessary for me to consider the balancing exercise required by s.266(6). But I should make it clear that I would have concluded that, in undertaking the balancing exercise in this case, given its lengthy procedural history, the number of hopeless points taken by the defendants along the way, the evidence of avoidance identified by the judges who have dealt with this case on an interlocutory basis, and the public interest in the NCA recovering the realised proceeds, the order should still be made. That is despite the unhappy position of Mrs Atkinson and her daughter and their health issues.

The sale of the Property may realise £150,000. It is the single most important asset in the case. I agree with Ms Dobbin that it is important to send out the message that those who are involved in crime not only face the loss of their own property, but they are likely to cause considerable hardship and detriment to those around them, because their property too is likely to be the subject of a CRO.

CONCLUSIONS

For the reasons set out above, I find that, on the balance of probabilities, Mr Atkinson was involved in drug dealing, money laundering and mortgage fraud. The Property has been enhanced by security measures which have all the hallmarks of a drug dealer; it was obtained through a combination of mortgage fraud and the proceeds of money laundering, where the cash originated from drug-dealing. It is therefore recoverable property.

Mrs Atkinson cannot rely on section 266 of POCA in order to argue that the Property should not be included within the CRO. The burden was on her to demonstrate that this exception applies. In truth, she was wholly unable to do so. Although I have some sympathy with her plight, just as Andrews J did for the defendant in Amir Azam, the exception simply does not apply on the facts of the case.

I therefore make the CRO in the form sought by the NCA.

There is one final point. Mr Vollenweider asked the court to provide what assistance it could in ensuring that he was paid at least some monies from the frozen accounts. I indicated in strong terms that, for the reasons noted above, I agreed with and supported that application. Thanks to the good sense of Ms Dobbin and those who sit behind her, a provision to that effect has been included in the court order.