Glatt, R. v [2006] EWCA Crim 605

Case No 200203846D5[2006] EWCA Crim 605
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM THE CROWN COURT SITTING AT SOUTHWARK
His Honour Judge Elwen
T19971490
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate Friday, 17 th March 2006
Before
THE RIGHT HONOURABLE LORD JUSTICE HOOPERTHE HONOURABLE MR JUSTICE TUGENDHATSIR DOUGLAS BROWN
Between
R.CrownLOUIS GLATTDefendant
(Transcript of the Handed Down Judgment ofSmith Bernal WordWave Limited190 Fleet Street, London EC4A 2AGTel No: 020 7421 4040 Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Tim Owen QC and Mr Ivan Krolick (instructed by Byrne & Partners) for Appellant, GlattOliver Sells QC, Andrew Mitchell QC and Martin Evans for Respondent
Judgment
[1]This is another case which concerns Part VI of the Criminal Justice Act 1988 which is headed “Confiscation of the Proceeds of an Offence”. Part VI was amended more than once, and has subsequently been replaced by the Proceeds of Crime Act 2002. The instant case is concerned with Part VI as originally enacted.[2]Louis Glatt was convicted by a jury of a conspiracy to contravene the provisions of Section 93A of the Criminal Justice Act 1988, contrary to Section 1(1) of the Criminal Law Act 1977. His unsuccessful defence at the trial was that he thought that he was acting on behalf of the mother of Ellis Anthony Martin (“Martin”) and not on behalf of Martin. Martin’s fraudulent activities (described below) were not challenged.[3]Glatt was sentenced to seven years’ imprisonment. He now appeals against a confiscation order in the sum of £3,676,508.50 made on the 29th May 2002. He was ordered to pay the sum within two years and ordered to serve three years’ imprisonment in default of payment. In a passage in a ruling given by

the judge he said:

“It was accepted by the prosecution, both at the trial and the retrial that Mr Glatt had not benefited personally in the sense of having made any money from his participation in the conspiracy, apart from the receipt from an old Rover car and agreement for the payment of his fees. In both trials the case was summed up to the jury on that basis.”
[4]It is submitted, on the appellant’s behalf, that the trial judge, HHJ Elwen, ought to have found that the benefit obtained by Mr Glatt had no value. In the alternative it is submitted that the judge erred in his approach to the discretionary power vested in the judge to make no order or to reduce the amount ordered. Mr Krolick argues the first point on behalf of the appellant and Mr T Owen QC argues the second point. As part of the first submission, Mr Krolick raises a novel point of law on the interpretation of Part VI.[5]Between October 1994 and January 1997, Ellis Anthony Martin (“Martin”) was responsible for cheating the Revenue of a sum not less than £18 million by smuggling or diverting beers, spirits and cigarettes. The investigation into this fraud was given the name Operation Methuselah. Martin and a number of other defendants pleaded guilty to involvement. Four others were convicted at trial. Glatt’s trial took place later. This court dismissed Martin’s appeal and that of his co-defendants on 23 November 2005. The appellant, Glatt, who was tried separately, then abandoned his only remaining ground of appeal against conviction.[6]In March 1996 Martin was convicted of an earlier similar fraud which spanned the period November 1993 to July 1994. The investigation into that fraud was called Operation Jeroboam. He was subsequently sentenced to a substantial term of imprisonment. Whilst on bail awaiting sentence and in prison following sentence, Martin ran the Methuselah fraud.[7]Martin was able to carry out the Methuselah fraud because of the appellant Glatt, who was a solicitor at the time. Glatt pretended that various members of Martin’s team were legal representatives, thus enabling Martin to give the instructions to them to carry out the fraud. Martin also needed help in laundering the proceeds. Glatt gave considerable assistance in that regard. It was Glatt’s task on the instructions of Martin to acquire property by way of investment for Martin.[8]It was admitted at the trial that after his arrest in June 1994, Martin was made the subject of a restraint order by the High Court which required him to preserve his assets. The order was made on 22 July 1994. It restrained Martin from in any way dealing with any money goods, property or other assets whatever within or without the jurisdiction. In Operation Jeroboam the judge made a compensation order of some £3.3 million. Glatt was aware of both the restraint order and of the Jeroboam confiscation order. The following admission was made at the appellant’s trial:
“Martin was laundering the proceeds of the fraud by removing the profits from the jurisdiction. He was also investing the proceeds in real property. Residential and commercial properties were purchased in London and the Home Counties, and also in France. The properties in London were managed by Gardner [one of Martin’s co-defendants] who had a management company called JPG Property; the French properties were located by Hutchinson [also a co-defendant] and were purchased in the name of Josephine Cruickshank, Martin’s mother, with the exception of a brandy distillery called Cognac Chollat which was purchased in the name of New England Trading Corporation. Glatt or French lawyers instructed by Glatt provided the legal services on the acquisition of these properties.”
[9]It was further admitted that the properties purchased were held by a series of off-shore holding companies and that Glatt provided legal services in respect of each of the companies. The off-shore companies were themselves managed by an Isle of Man company and by a Guernsey company. Martin’s mother was shown as the owner of the company assets. Glatt had a power of attorney from her so that he could sign documents in her absence. Glatt was in regular contact with the two management companies and produced draft minutes of meetings.[10]For the purposes of the confiscation hearing the officer in the case, Mr Ford, prepared a statement. There was no challenge to paragraph8.1 and8.2 which read:
“There can be no doubt that Louis Glatt has received very significant sums emanating from Martin’s criminal enterprises and has been directly instrumental in the conversion of such monies into the acquisition of various properties and other assets purchased in the names of off-shore companies for the ultimate benefit of Martin. Glatt was an expert in the field of off-shore companies and was responsible for the acquisition of those companies used for Martin’s benefit. At all material times he was the sole liaison with the relevant management companies who acted on his instructions alone.”
[11]As this brief outline of the facts shows, this was as bad a case of money laundering as one could expect to see. As a solicitor, Glatt abused his professional position in order to assist Martin, whilst in prison, to launder the proceeds of a very large fraud.[12]Martin was made the subject of confiscation order in the sum of £10,000,342. The judge did not accept Martin’s denial about the extent of his assets. That order was quashed on appeal because of a failure on the part of the prosecution to serve the proper notice. Hutchinson was ordered to pay £1000 and Gardner was ordered to pay £28,502.18. Both were co-defendants in Martin’s proceedings. Gardner’s confiscation order was reduced on appeal to about £19,000 and Hutchinson’s order was quashed on appeal. See R v Brown [2001] EWCA Crim 2761.[13]The sum of £3,676,508.50 which Glatt was ordered to pay reflected the amount of money which had either directly or indirectly passed through Glatt’s hands being the proceeds of Martin’s fraud. There were five discrete categories referred to by Mr Ford. 1) The total sum of £419,500 was paid primarily in cash into his client account by Glatt or his secretary. 2) Additional sums were paid or transferred into the client account of Louis Glatt & Co by Martin’s associates. This category amounts to about £1.9million. 3) £759,055 was paid by Martin’s associates directly to the bank accounts of the “Glatt created” off-shore companies. 4) A variety of properties were purchased by Martin or his companies using Glatt’s services. A receiver was appointed in connection with the proceedings against Martin, and the receiver sold the properties. The price received by the receiver exceeded the price paid for the properties by £728,750. The confiscation order included this sum in the total amount of the confiscation order. 5) Martin bought a second-hand Rover motor car for £7,200, which became registered in Glatt’s name.[14]There is no issue about the inclusion of the sum in the fifth category. However, if the only sum payable is £7,200, no confiscation order could be made. This is because no order could be made if the value of the benefit was less than £10,000.[15]Unlike most defendants, the appellant Glatt has considerable assets. Glatt largely failed to co-operate with the investigation into his financial affairs but the judge was satisfied that he had realisable assets of the amount (at least) of the confiscation order. To meet the confiscation order it might be thought that the appellant could have used the properties which Glatt bought on behalf of Martin, using the money in categories 1, 2 and 3. If Glatt had been able to use that property then it seems likely that there would have been no dispute about this confiscation order. However the properties which were acquired for Martin by Glatt in Operation Methusalah were not available having been used to meet the compensation order against Martin in Operation Jeroboam. Thus the prosecution sought (and obtained) an equivalent sum out of the non-criminal assets of Mr Glatt. The appellant had hoped to advance an argument based on “apportionment” but a recent decision of the Court of Appeal, to which we turn later, made that argument unsustainable.[16]Thus it can be seen that this case has two particular features. Glatt had no personal benefit out of the fraud (other than the Rover) and, if this order is upheld, HM Customs and Excise (“HMC&E”) will, in one sense, so it is submitted, recoup twice, once from Martin and once from Glatt. On the other hand, as Mr Evans points out, Martin’s total fraud cost the Revenue well in excess of the £3.6 million which Glatt has been ordered to pay. The argument on this appeal was heard on 24th and 25th November. At that time the Court was given to understand that all the property (other than the car) which Glatt obtained as a benefit had in fact been sold for the benefit of the Crown, to whom the proceeds had been paid by the Receiver. This was pursuant to the confiscation order made against Martin in the earlier proceedings, and not under an order made in these proceedings (that having been set aside in Brown). So at that stage it appeared that all the property obtained by Glatt had been realised in the course of proceedings resulting from a confiscation order. As to a small proportion of it, it has also been the subject of the confiscation orders of £28,052.18 and £1000 made against Gardner and Hutchinson. But this information needed to be checked and it was left on the footing that the parties would inform the Court in writing of the position. On 1st December 2005 Mr Sells QC and Mr Evans for the Crown prepared a Note for the Court stating that, to that date, the value of the property recovered in respect of the offence for which Glatt was convicted amounts to £2,423,157, leaving a shortfall well in excess of £1m. Thus, in so far as it is submitted for Glatt that there is double recovery in this case, the evidence is that it is limited to that amount of about £2.4m. Mr Owen QC, counsel for, Glatt does not agree this figure, but neither is he able to dispute it. The Note dated 1st December 2005 was intended to reach this Court but unfortunately it did not do so. The fact that it had not reached this Court came to light when the draft of this judgment was circulated in the usual way with an invitation to counsel to submit a list of typing corrections and other obvious errors. For this reason, and for two other other reasons which will be referred to below, the Court reconvened at the request of the Crown to hear further argument on 6th March 2006.

THE STATUTORY PROVISIONS

[17]It is helpful to start with the interpretation section. By virtue of s.102(1), “interest” in relation to property, includes “right.” The word “property”:
“includes money and all other property, real or personal, heritable or moveable, including things in action and other intangible or incorporeal property.”
By virtue of s.74(2), the expression “value of property” is to be construed in accordance with the provisions of section 74(4)–(6). Mr Krolick particularly relies on this. Lastly s.74(7) provides that:
“Property is held by any person if he holds any interest in it.”
[18]S.71(1) of the 1988 Act provides that courts shall have power to make an order under this section requiring the offender to pay such sum as the court thinks fit. S.71(2) provides that the Crown Court may make an order if certain requirements are satisfied. None of these requirements is relevant to the issues in this case.[19]S.71(4), one of the key provisions in this case, provides:
“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.”
[20]There is no dispute in this case that in so far as category 1 and 2 are concerned, the appellant obtained the property as a result of or in connection with Martin’s fraud. In so far as category 3 is concerned, it is submitted that he did not obtain the property because it was paid directly to the bank accounts of the offshore companies, albeit they were set up by Glatt.[21]The appellant’s principal argument is that the property which he obtained had no value for the appellant because he had no beneficial interest in the money received in categories 1, 2 and 3. If this is right then it would also be wrong to include category 4 in the confiscation order, relating as it does to the increase in the value of the properties purchased.[22]S.72 (3) provides:
“When considering whether to make a confiscation order the court may take into account any information that has been placed before it showing that a victim of an offence to which the proceedings relate has instituted, or intends to institute, civil proceedings against the defendant in respect of loss, injury or damage sustained in connection with the offence.”
We note in passing that a provision with a similar effect to this is still to be found in the 2002 Act s6(6).[23]There is no dispute that s.74(1), (2) and (3) assists the court in (and only in) determining the amount that might be realised at the time a confiscation order is made (the defendant’s “realisable assets”).[24]S.74(4), another key provision in this case, provides:
“Subject to the following provisions of this section, for the purposes of this Part of this Act the value of property (other than cash) in relation to any person holding the property [A] – (a) where any other person [B] holds an interest in the property, is – (i) the market value of the first-mentioned person’s [A’s] beneficial interest in the property, less (ii) the amount required to discharge any encumbrance (other than a charging order) on that interest; and (b) in any other case, is its market value.” (a) where any other person [B] holds an interest in the property, is – (i) the market value of the first-mentioned person’s [A’s] beneficial interest in the property, less (ii) the amount required to discharge any encumbrance (other than a charging order) on that interest; and (b) in any other case, is its market value.”
[25]The argument for the appellant is that s.74(4) applies to the determination of value for the purposes of section s.71(4), as well as to the process of determining the amount that might be realised at the time a confiscation order is made. Mr Krolick points to the opening words of the subsection and in particular the words “for the purposes of this Part of this Act” as well as to the definition of “value of property” in s.102(2).[26]Mr Evans, on behalf of the respondent, submits that section s.74(4) is concerned only with the determination of realisable assets. He further submits that, if he is wrong about that, then Martin did not, for the purposes of the section, hold any interest in the property.[27]It is important to note that s.74(4) only applies to the valuation of property in relation to a person “holding” the property. Mr Krolick submits that at the time he obtained the property for the purposes of s.71(4) the appellant was holding the property and therefore the subsection bites.[28]S.74(5) and (6) are not easy to understand. S.74(5) provides: “References in this Part of this Act to the value at any time (referred to in subsection (6) below as ‘the material time’) of any property obtained by a person as a result of or in connection with the commission of an offence are references to-(a) the value of the property to him when he obtained it adjusted to take account of subsequent changes in the value of money, or(b) where subsection (6) below applies, the value there mentioned, which ever is the greater.” (a) the value of the property to him when he obtained it adjusted to take account of subsequent changes in the value of money, or (b) where subsection (6) below applies, the value there mentioned,[29]S.74(6) provides: “If at the material time he holds –(a) the property which he obtained (not being cash); or(b) property which, in whole or in part, directly or indirectly represents in his hands the property which he obtained, the value referred to in subsection (5)(b) above is the value to him at the material time of the property mentioned in paragraph (a) above or as the case may be, of the property mentioned in paragraph (b) above, so far as it so represents the property which he obtained, but disregarding any charging order.” (a) the property which he obtained (not being cash); or (b) property which, in whole or in part, directly or indirectly represents in his hands the property which he obtained,[30]It is accepted that these two subsections apply when making the s.71(4) calculation of value. (We can ignore charging orders which are orders made on realisable property to secure payment to the Crown, see s.78).[31]An example illustrates these subsections at work. A thief T steals a ring. The court must determine T’s benefit under section 71(4). His benefit is the value of the ring. In determining the value of the ring to T at the time he stole it, s.74(5)(a) requires the court to determine the value of the ring “to him” when he obtained it and then adjust that figure “to take account of subsequent changes in the value of money”, i.e. inflation. It has been authoritatively decided in a case to which we turn later that the value to T is not the amount of money which he could obtain (or did obtain) on the sale of the stolen ring, but the economic value to the loser (Ascroft [2003] EWCA Crim 2365). Mr Krolick submits that this case is wrong.[32]Let us assume, however, that this case is right and that the value of the ring to T as adjusted is £3000. That will be the benefit unless the application of s.74(6)(a) or (b) achieves a higher figure, in which case the higher figure will be the benefit. S.74(6)(a) applies if T still holds the ring at the time of the confiscation order. If we assume that the ring is worth to T more than £3000, say £3200, the benefit (i.e. the value of the property obtained at the time of the theft) would then be £3200.[33]If T has disposed of the ring (obtaining some property in exchange) before the confiscation order is made, s.74(6)(b) comes into play. Let us assume that he disposed of it for £500 and with the £500 bought a second ring. If the value to T of that second ring is at the time of the confiscation order more than £3000, say £3500, then the benefit (i.e. the value of the property obtained at the time of the theft) will be £3500. If he has spent the £500 on living expenses, then s.746(b) has no application and the benefit would be, on our example, £3000 (the adjusted value of the ring).[34]If s.74(4) comes into play in determining “benefit” under section 71(4), as Mr Krolick submits, then it would have the following effect on the ring example. The benefit, being the value of the ring at the time it was stolen, would be the market value of the ring (by virtue of s.74(4)(b)) unless the application of s.74(5) and (6) would achieve a higher value. That would be consistent with the authority to which we have referred and Mr Evans would have no objection, in practice, to that method of determining the benefit.[35]The dispute between the parties concerns s.74(4)(a) and its application to s.71(4). Returning to the ring example, the owner of the ring at the time of the theft (obviously) holds an interest in the ring even without the definition of “interest” as including “right” (s.102(1)). Mr Krolick submits that the court must determine the market value of T’s “beneficial interest in the” ring at that time because T was then holding the property. At that time it had no market value for T, so he submits, in a case where (as here, so he submits) there is an owner who is able and willing to make a claim to the ring, which is enforceable in law. He accepts that the court would then have to go on to consider s.74(5) and (6). He submits that s.74(5)(a) does not alter the position. The value to T when he obtained the ring was nil. The words “to him” achieve the same result as the expression “beneficial interest in the property” in s.74(4)(a)(i), so he submits. S.74(6)(a) does not assist if he is still holding the ring.[36]If, however, on disposal of the ring T received money or, for example, another ring, s.74(6)(b) comes into play. What is the value to T of the proceeds of the sale of the stolen ring? Mr Krolick accepts that the value to T is the amount of money he received, or the ring which he received, at the value current at the time of the confiscation order. Thus, he submits, the thief is only liable to account for the proceeds of his crime, in accordance, so he says, with the original aims of the legislation. If, on the other hand, he has thrown the stolen ring away, no confiscation order can be made and the proper order would be a compensation order under what is now s.130 of the Powers of Criminal Courts (Sentencing) Act 2000. While Mr Krolick did not address the facts on a different assumption, we understand that he would submit that in a case where there is no person claiming an interest in the ring (or its proceeds), or if there is someone making such a claim, but the claim is not good, or legally enforceable, then the value of the ring to T will not be nil. In that case it will be a figure which is equivalent to its market value, subject to any uplift under section 74(5)-(6).[37]We now turn to the facts of this case and carry out the same exercise as we have done with the thief and the ring. What was the value of the property the appellant obtained? We start with s.74(4). Mr Evans submits (as we have noted) that this subsection is irrelevant, being concerned only with realisable assets. If Mr Krolick is right and the subsection does apply when determining the value under s.71(4), Mr Krolick submits that the value of the property (cash etc) obtained was nil, because, given that it was Martin’s money, the appellant had no beneficial interest in it (or his interest had no market value). Although Mr Krolick relied on the fact that the appellant was a solicitor and on the rules about client accounts, it seems to us that Mr Evans was right to say that the appellant could claim no special advantages as a solicitor. He should be treated as any launderer would be treated. Mr Krolick submitted that treating him in this way did not alter his argument that the appellant had no beneficial interest. What matters, in his submission, is that Martin was the beneficial owner and was in a position to make what Mr Krolick submitted was a legally enforceable claim to the money. To make such a claim all that Martin had to plead was the receipt by Glatt of the money (and not the illegal transactions out of which that arose) and so his claim would succeed on the basis of the law as stated in Tinsley v. Milligan [1994] 1 AC 340.[38]S.74(5) and (6) do not alter the position, so Mr Krolick submits. The value to T of the property was nil (the words “to him” achieving the same result as the expression “beneficial interest in the property” in s.74(4)(a)(i)). So, in order to succeed on this point, Mr Krolick has to succeed at two stages. First he must be right that s.74(4) applies in the manner he contends for. If it does, then he must be right in his submission that Martin’s claim against Glatt for the money is a legally enforceable claim, which has the effect that the value of Glatt’s interest in the money is nil (on the facts of this case, Martin’s claim against Glatt is good or bad in its totality).[39]Mr Evans submits that, if s.74(4) is applicable to the s.71(4) calculation, Martin did not, within the meaning of s.74(4)(a) hold an interest in the property. Mr Evans submits that to the extent to which civil law cases (such as Tinsley v. Milligan [1994] 1 AC 340) might suggest the contrary, they should be ignored. In any event Mr Evans submits that the words “value to him” do not equate with “market value of the … beneficial interest” and he relies on authority to support his contention that “value to him” does not have the meaning for which Mr Krolick contends. The value to the appellant of Martin’s property at the time he obtained it was, so Mr Evans submits, its face value, ignoring any interest that Martin might have. Mr Evans also points to the practical consequences if Mr Krolick is right. Take this example. Examination of the accounts of a defendant convicted of conspiracy to defraud show that £1 million has passed through his account during the period of the conspiracy, for which no legitimate explanation is available. If Mr Evans is right, the prosecution will expect to have no difficulty making the judge sure that the defendant has benefited from the fraud by obtaining this £1 million and that the value of the benefit includes this £1 million. If Mr Krolick is right and if the defendant, who we shall call D1, says that he was holding the £1 million for D2, the prosecution would have to make the judge sure that the defendant was not telling the truth. If the judge was not sure, then the £1 million would not be included in the value of the benefit. D1 would have had the benefit but the benefit would have no value to him. His beneficial interest in the money would have no market value and the value of the property to him for the purposes of ss.74(5) and (6) would also be nil. The example becomes more bizarre if D2 denies that he had anything to do with the £1million or says that it was D1’s and not his and the judge cannot be sure that D2 is lying. Mr Krolick metaphorically shrugged his shoulders when an example like this was put to him.[40]Before resolving these competing arguments, we consider the policy behind Part VI of the 1988 Act, the provisions of which are often described as draconian. There is guidance on this in the cases. But first it is helpful to return to the example given above, and set out other examples of situations in which the Act has been, or may be, considered.[41]There is nothing exceptional about the fact that this case involves more than one person who might have rights to the money, and that their roles in the criminal conduct are different. It is clear that the effect of the legislation may be that the Crown receives payment from different individuals in respect of the same property. The effect may also be that each individual who is the subject of an order may lose more than the profit that he has made by his criminal conduct, and, in effect, pay twice over. The involvement of individuals can arise in a series or chain (where the proceeds of crime are passed from hand to hand) or in parallel (where individuals are jointly involved in the criminal acts).[42]Consider first the liability of individuals involved in series or chain. The thief T steals a ring with a market value of £3000. He sells it to a handler H1 for £1000. H1 sells it to another handler H2 for £1500. It is found by police in H2’s possession. All three are convicted. The fate of the ring itself may depend upon whether the true owner claims it or not: if she does, it will be restored to her by a restitution order, or she may claim for compensation in civil proceedings. If there is no traceable owner, or no claimant comes forward for some other reason, there will be no order for restitution or compensation.[43]In this example, on the Crown’s case, a confiscation order may be made against T for £3000. This is the benefit to him. As explained in Ascroft [2003] [EWCA] Crim 2365 at para 60, in cases where the goods acquired are not themselves illegal (as drugs are) the value to the defendant is what it would have cost him to obtain legitimately the goods that he had in fact obtained dishonestly. On Mr Krolick’s analysis, then as to £1000 it is his profit from the crime (that being what he sold it for), but as to the balance it is not profit but something else, which can only be a penalty. A second confiscation order for £3000 may be made against H1. In his case, this is the benefit to him, but it is not all profit from the crime. As to the £1000 he paid to T, it is his working capital invested in the criminal business. As to the balance of £2000, it either is profit (on the Crown’s case) or, on Mr Krolick’s includes £500 profit (being the difference between what he paid to T and received from H2), and as to the remaining £1500 it is a penalty. A third confiscation order for £3000 may be made against H2. In H2’s case, no more than £1500 can be profit, and his profit may be less (on Mr Krolick’s case) if he would have been unable to sell it for its market value of £3000. In addition (since a confiscation order is an order to pay money (s.71(1), and is not a proprietary remedy), there is the possibility that he may be deprived of the ring itself, whether by restitution to the owner or forfeiture.[44]Where individuals are involved in parallel, they may have similar roles or different roles. For example, a person may be party to a joint enterprise to commit burglary, or he may become involved only as a minder.[45]Suppose that in the example given in para 42 above, the ring is delivered by H2 to a minder M, and is found in his possession. On the Crown’s case, a fourth confiscation order in the sum of £3000 can be made against M, in addition to the orders made against T, H1 and H2.[46]In addition, at each stage (theft, handling and minding) there may be more than one individual jointly engaged. Subject to any question of apportionment, confiscation orders in the same amount may be made against each of those individuals.[47]On the Crown’s case there is thus no limit in principle to the total value of all confiscation orders that may be made against individuals involved in the theft and handling of a single ring. In R v May [2005] EWCA Crim 97 counsel accepted that there was this potential for multiple recovery in relation to chain cases (para 36), and the court held (at para 41) that it existed where defendants were jointly involved.[48]Similar questions arise in civil proceedings instituted for delivery up or damages, in a case of wrongful interference with goods, or, in other cases of fraud, for restitution, whether at common law or in equity. Where there has been a large robbery or fraud, there are examples of litigation in which fifty or more defendants have been joined to claims for delivery up, damages and restitution. See the Brinks Ltd v Abu-Saleh litigation reported at various stages, under this and other names, for example [1995] 1 WLR 1487, and the Grupo Torres litigation, also reported at various stages (for example [1996] 1 Lloyd’s Rep 7). However, in civil cases there is a limit in principle to the total value of all orders that may be made in the victim’s favour. The limit is the value of the property stolen or dishonestly obtained. That value is either its value at the time the true owner was deprived of it, or if it has increased in value, then the higher figure.[49]There are crimes, such as those of which Martin was convicted, where the victim is not the owner of property, and the benefit obtained is the result of evading liability to pay taxes or excise duties. In these cases, there may also be civil proceedings of the kind contemplated in s.72(3) (see R v Edwards [2004] EWCA Crim 2923; [2004] All ER (D) 459 at para 71 below). A person convicted of smuggling or tax evasion remains liable for the duty or taxes evaded. In the case of drug trafficking, there was separate legislation which was in force at the time the offences which we are concerned with were committed, namely The Drug Trafficking Offences Act 1986. In the case of drugs and other property which it is illegal for anyone to possess, there will be no civil proceedings by anyone claiming to be entitled to the property. So the need for forfeiture and confiscation orders is particularly acute in the case of crimes involving the possession of valuable illegal property. Correspondingly, the Drug Trafficking Offences Act 1986 s.1(5) (which requires the court to take account of the confiscation order it makes before imposing a fine or making other orders, such as a forfeiture order) does not refer to a compensation order.

THE LEGISLATIVE POLICY

[50]There are a number of statements as to the legislative policy.[51]In Welch v UK (1995) 20 EHRR 247 Welch was convicted of drugs offences and sentenced, on appeal, to 20 years imprisonment and a confiscation order of £7000 was made under the 1986 Act. He had been arrested in November 1986, the operative provisions of the 1986 Act came into force on 12 January 1987, and he had been sentenced in August 1988. The object of the proceedings before the European Court of Human Rights (“the Strasbourg court”) was to obtain a decision as to whether the facts disclosed a breach of Art 7 of the Convention (prohibition on retrospective penal provisions). The Strasbourg Court concluded (para 35) that, taking into account the combination of punitive elements it found to be present (set out at para 33), the order did amount to a penalty and there had been a breach of Art 7. One of these elements cited was the discretion of the trial judge, under s.4 of the 1986 Act, in determining the amount of the confiscation order. The 1986 Act s.4 contains provisions which correspond to the 1988 Act ss.71(6)(b), 72(4), and 73(6), which provide that the amount of a confiscation order is not to exceed the amount that might be realised.[52]The definition of benefit under the 1986 Act is different from that under the 1988 Act (set out at para 19 above). It reads as follows: 1(3) For the purposes of this Act, a person who has at any time (whether before or after the commencement of this section) received any payment or other reward in connection with drug trafficking carried on by him or another has benefited from drug trafficking.[53]This difference in wording (“received any payment or other reward”, rather than “obtains property”) is not material to the general legislative policy. But it is material to other matters, as noted below.[54]The submissions of the UK Government, represented by Mr Moses QC (as he then was) are set out at para 24: 24. The Government contended that the true purpose of the order was twofold: firstly, to deprive a person of the profits which he had received from drug trafficking and secondly, to remove the value of the proceeds from possible future use in the drugs trade. It thus did not seek to impose a penalty or punishment for a criminal offence but was essentially a confiscatory and preventive measure. This could be seen from the order in the recent case, which had been made for the purpose of depriving the defendant of illegal gains. Had no order been made, the money would have remained within the system for use in further drug-dealing enterprises…[55]The Strasbourg Court quoted from Hansard (para 11) where the Secretary of State is recorded as saying: "By attacking the profits made from drug trafficking, we intend to make it much less attractive to enter the trade. We intend to help guard against the possibility that the profits from one trafficking operation will be used to finance others, and, not least, to remove the sense of injury which ordinary people are bound to feel at the idea of traffickers, who may have ruined the lives of children, having the benefit of the profits that they have made from doing so. ... We need the legislation because the forfeiture powers in existing law have proved inadequate. The courts cannot order the forfeiture of the proceeds of an offence once they have been converted into another asset - a house, stocks and shares, or valuables of any sort. The Operation Julie case was the most notorious example of the courts being unable to deprive convicted traffickers, as they wished, of the proceeds of their offences ... the Bill is designed to remedy those defects. It will provide powers for courts to confiscate proceeds even after they have been converted into some other type of asset." (Hansard of 21 January 1986, Cols 242 and 243)[56]In R v Cuthbertson [1981] AC 470, 482-484, the House of Lords had held that the forfeiture powers given to the court by s.27 of the Misuse of Drugs Act 1971 did not apply to offences of conspiracy. More fundamentally, it was held that the forfeiture power applied only to tangible property (including drugs, apparatus, vehicles and “cash ready to be, or having just been, handed over for them”). It did not apply to intangible property, or to property situate abroad, and it did not authorise the court to follow or trace assets which could have been forfeited (but for the fact that they had been exchanged) into the other assets for which they had been exchanged. The arguments of counsel, set out at [1981] AC 472, are a reminder that until the Forfeiture Act 1870 a convicted felon did forfeit all his property to the Crown, and this was regarded as a source of revenue for the Crown. Following and tracing are means by which the law enables a victim to recover the proceeds of theft and fraud from the wrongdoer in civil proceedings. The 1986 Act and subsequent legislation adapt these civil law procedures to provide a statutory procedure for the recovery of the proceeds of drug trafficking, theft and fraud in the criminal court.[57]The Strasbourg Court also summarised statements of the law on this and related matters as follows: 13. In determining the amount of the confiscation order the trial judge may take into consideration the degree of culpability of the offender. For example, in R. v. Porter [1990] 12 Cr App Rep (S) 377 the Court of Appeal held that where more than one conspirator was before the court the total proceeds of a drug trafficking conspiracy could be unequally allocated as their respective share of the proceeds if there was evidence that the defendants had played unequal roles and had profited to a different extent. Similarly, in the present case, the trial judge made a much smaller order in respect of the applicant's co-defendant in recognition of his lesser involvement in the offences…15. Prior to the passing of the 1986 Act, Lord Salmon expressed the view that forfeitures of money had both a punitive and deterrent purpose (House of Lords decision in R. v. Menocal, [1979] 2 WLR 876).16. The domestic courts have commented in various cases on the draconian nature of the confiscation provisions in the 1986 Act and have occasionally referred to the orders, expressly or impliedly, as constituting penalties (R. v. Dickens [1990] 91 Criminal Appeal Reports 164 [at p167: ‘intentionally draconian’]; R. v. Porter [1990] 12 Criminal Appeal Reports 377 [at p379]; In Re Lorenzo Barretto, High Court decision of 30 November 1992 and Court of Appeal decision of 19 October 1993). In the Court of Appeal decision in the last-mentioned case, which concerned the question whether a power to vary confiscation orders introduced by the Criminal Justice (International Co-operation) Act 1990 could be applied retrospectively, the Master of the Rolls (Sir Thomas Bingham) stated as follows (at p. 11): "While it is true that a confiscation order is made before sentence is passed for the substantive offence, and the term of imprisonment in default is passed to procure compliance and not by way of punishment, these are in a broad sense penal provisions, inflicting the vengeance of society on those who have transgressed in this field."17. However, the domestic courts have also referred to the confiscation provisions as not being punitive but reparative in purpose (Re T (Restraint Order; Disclosure of Assets) [1992] 1 Weekly Law Reports 949).

stated as follows (at p. 11):

[58]In Re T at p 954 Parker J had referred to: “…a very clear Parliamentary intent, first, that a person convicted of a drug trafficking offence, in addition to being punished for that offence, should not be punished for other offences of a like nature, but deprived of the benefits of all his other drug trafficking; secondly, that his property should, for that purpose only, be assumed to constitute such benefits in the absence of proof to the contrary; and, thirdly, and most importantly, that self-incrimination should be no ground for failing to comply with a Crown Court order under section 3”.[59]Tivnan [1999] 1 Cr.App.R.(S.) 92, 96-97 was another case concerned with the Drug Trafficking Offences Act 1986. Rose LJ said, in a passage approved in Re P [2000] 1 W.L.R 473, at 479 as being applicable to all confiscatory proceedings:
“It is intended to strip those who deal in drugs of any possible profit from so doing, by depriving them of their realisable assets, whether or not these are the proceeds of drug trafficking, up to the amount by which they have benefited from drug dealing.”
[60]Simon Brown LJ (as he then was), who had cited these words, returned to the point at p481, saying: “…the central policy underlying this legislation - Parliament's desire to strip criminals of their present assets to the extent of their past criminal profits. The Act is designed essentially to impoverish defendants, not to enrich the Crown”.[61]In Phillips v UK (2001) 11 BHRC 280 one question for the consideration of the court was whether Art 6 applied to confiscation proceedings, and the other was whether there had been a violation of the right to peaceful enjoyment of property under Article 1 of Protocol No. 1. At para 28 of the judgment it is recorded that: The Government submitted that the confiscation order should be regarded as a penalty for the drug-trafficking offence for which the applicant had been tried and found guilty; the confiscation proceedings did not amount to his being charged with any additional offence and Article 6 § 2 did not, therefore, apply.[62]The court held that Art 6 § 2 (the presumption of innocence) did not apply at this stage of the proceedings, and the statutory presumptions did not give rise to a violation of the right to a fair trial under Art 6 § 1, although that did apply.[63]The court then considered the complaint of breach of Article 1 of Protocol No. 1, which states:
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”
[64]Phillips submitted that the principles raised under the above Article were almost identical to those under Article 6 § 2, and that a fair balance had not been struck between public policy and individual rights.[65]At para 50 the Court held that a confiscation order amounts to an interference with the applicant’s right to peaceful enjoyment of his possessions and that Article 1 of Protocol No. 1 is therefore applicable. The decision of the Court as to violation is set out at paras 51-52 as follows: “51. As previously stated, the confiscation order constituted a “penalty” within the meaning of the Convention. It therefore falls within the scope of the second paragraph of Article 1 of Protocol No. 1, which, inter alia, allows the Contracting States to control the use of property to secure the payment of penalties. However, this provision must be construed in the light of the general principle set out in the first sentence of the first paragraph and there must, therefore, exist a reasonable relationship of proportionality between the means employed and the aim sought to be realised (see, among many examples, Allan Jacobsson v. Sweden (no. 1), judgment of 25 October 1989, Series A no. 163, p. 17, § 55). 52. As to the aim pursued by the confiscation order procedure, as the Court observed in Welch …, these powers were conferred on the courts as a weapon in the fight against the scourge of drug trafficking. Thus, the making of a confiscation order operates in the way of a deterrent to those considering engaging in drug trafficking, and also to deprive a person of profits received from drug trafficking and to remove the value of the proceeds from possible future use in the drugs trade”.[66]Shortly afterwards, Lord Steyn set out the legislative purpose of the Act (as amended) in R v Rezvi [2002] Cr App R (S) 70 at para 14: “The provisions of the 1988 Act are aimed at depriving such offenders of the proceeds of their criminal conduct. Its purposes are to punish convicted offenders, to deter the commission of further offences and to reduce the profits available to fund further criminal enterprises. These objectives reflect not only national but also international policy. The United Kingdom has undertaken, by signing and ratifying treaties agreed under the auspices of the United Nations and the Council of Europe, to take measures necessary to ensure that the profits of those engaged in drug trafficking or other crimes are confiscated: see the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (19 December 1988); Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, Strasbourg, November 8, 1990. These Conventions are in operation and have been ratified by the United Kingdom”.[67]This passage was in the context of demonstrating that the legislation did not violate the European Convention on Human rights in so far as it pursued a legitimate aim.[68]The following propositions appear from the foregoing. A confiscation[69]As already noted, (unlike the Drug Trafficking Act 1986) the 1988 Act contemplates (in s.72(3)) cases where there is a victim who may have a civil claim for restitution or damages. In such cases, at least where the victim is not the Crown, it is clear that the 1988 Act and related statutes cannot have a compensatory purpose: an order that money be paid to the Crown would not provide compensation to a victim who was not the Crown. In so far as the criminal courts had powers to order monetary compensation, they were derived from the Powers of Criminal Courts Act 1973, as amended from time to time (now the Powers of Criminal Courts (Sentencing) Act 2000). Similarly, there were powers to make restitution orders (now s.148 of the 2000 Act) by which persons entitled to stolen property might have their stolen property, or goods representing that property, delivered up to them. There were also provisions in s.43 of the Powers of Criminal Courts Act 1973 for the forfeiture or deprivation of property used (or intended for use) in the commission of crimes (now s.143 of the 2000 Act). By s.72(3) of the 1988 Act, the Court is required to take account of any confiscation order before making a forfeiture order. So the court has to consider a civil claim by a victim before the making of a confiscation order, but (as in the Drug Trafficking Act 1986 s.1(5)) a confiscation order is to be made (if at all) before the court considers a forfeiture or deprivation order.[70]The 1988 Act contemplates that both a compensation and confiscation order may be made against the same person in the same proceedings (s.71(7)), but where the court does that, the compensation takes priority in the event that the defendant’s means are insufficient.[71]The Act does not in terms contemplate that it shall operate as a means of compensating the Crown where the Crown is the victim, for example of evasion of duties and taxes, although a confiscation order may in practice have that effect. Compensating the Crown would only be necessary in cases where the Crown has suffered a loss, but does not have a civil claim against the defendant. Such a purpose will be unnecessary in most cases, since the Crown remains entitled to the duties and taxes evaded, and perhaps to other civil remedies, whether or not the defendant has been convicted. See R v Smith (David) [2001] UKHL 68; [2002] 2 Cr App R (S) 37.[72]In R v Edwards [2004] EWCA Crim 2923; [2004] All ER (D) 459 the facts were similar to those in Smith. The defendant had attempted to evade duty on importation of cigarettes, but did so by car, and was stopped while still inside the port area. The judgment includes the following at paras 24-25: “24. …On this appeal it was not argued that the provisions of the CJA arguably gave rise to the unlawful confiscation of property and a breach of Protocol 1, Article 1 of the ECHR because they could give rise to double recovery of the duty. In response to enquiry from the court, counsel for the respondent stated that where a confiscation order has been made, based upon a benefit calculated by reference to the unpaid duty, the Customs and Excise authorities do not, as a matter of practice, seek recovery of the unpaid duty by way of civil proceedings. That both civil and criminal remedies are available is not in doubt. Should the Customs and Excise Authorities pursue a civil remedy where a confiscation order had been met, it is clear there would, in effect, be double recovery of the duty. 25. The firm practice of the Customs and Excise Authorities is, in our judgment, well placed”.[73]What is referred to in this passage as double recovery is recovery from the same individual, both in confiscation proceedings, and in civil proceedings to enforce payment of the duty. There is nothing in this passage concerning double recovery in the other sense, namely the possibility of confiscation proceedings against a person who has been convicted, and civil proceedings against another person jointly involved against whom no confiscation order has been made (perhaps because he has not been prosecuted for some reason).[74]By the time Smith and Edwards came to be decided, the general power under s.71(1) of the 1988 had become an exception to the new general rule that the court was under a duty to make a confiscation order. Under s.71(1C) (set out in para 25 of Edwards), it remained a power where the court was satisfied that a victim of any relevant conduct has instituted, or intends to institute civil proceedings, instead of being a duty, which it has otherwise become. It was to s.71(1C) that the court in Edwards was referring in the stating that the practice of the Customs & Excise Authorities is well placed. After citing that subsection, the court notes that the Authorities had confirmed, in answer to the court’s question, that they did not intend to, and would not, institute any civil proceedings against the appellant in respect of the duty.[75]In the present case, although the point was raised in argument by Hooper LJ, we have not been addressed on whether Glatt could be sued in the civil courts by the Crown for his role in assisting in the disposal of Martin’s money, and no assurance has been given of the kind given to the court in Edwards. If Glatt had been assisting in the disposal of the proceeds of a robbery or fraud, it is plain that the victim could sue him for his role as a dishonest assistant. See Barlow Clowes International Ltd & Anor v Eurotrust International Ltd & Ors (Isle of Man) [2005] UKPC 37 para 28 and the cases referred to in para 48 above. It is for consideration whether or not the Crown would have had any corresponding claim against Glatt for his role in this case. Since Glatt’s role involved the breach of a restraint order, it appears to us to be at least arguable that, subject to proof of damage, the Crown would have had a cause of action against him in conspiracy or negligence. See the cases on civil liability for disobedience to a freezing order, namely Surzur v Koros [1999] 2 Lloyds Rep 611 (as explained in Michaels v Taylor Woodrow [2001] Ch 493 para 40) and Customs & Excise v Barclays Bank Plc [2004] EWCA Civ 1555; [2005] 1 WLR 2082.[76]Mr Evans pointed to the losses suffered by the Crown in the present case. But he did not invite us to find that the 1988 Act has, as one of the legislative purposes, to compensate the Crown for its losses in those cases where there is no civil claim that the Crown can make against the defendant.[77]When the making of a confiscation order under the 1988 Act became a duty, and not just a power, it became in effect a form of mandatory sentence. A confiscation order under the 1988 Act, in the form in which it was enacted and was in force at the time relevant to Glatt, was by contrast a form of discretionary sentence. The possibilities of injustice arising are greater in the case of a mandatory sentence, and in cases concerning the Act as amended the courts have been concerned as to how to avoid such injustice: see for example R v Wilkes [2003] EWCA Crim 848 para 31 (“The provisions are compatible with Convention rights because any serious or real risk of injustice can be avoided either by not making the assumptions [under s.72AA(4)] or by disapplying them”). In practice the cases involving the Crown where the court has no possible discretion may be limited. This remains the case under the 2002 Act s.6(6). Given the very wide scope of civil remedies available, the cases where the Crown will be in a position to institute civil proceedings are likely to be numerous.

THE RELEVANCE OF SUBSEQUENT LEGISLATION

[78]Mr Krolick invited us to use the subsequent legislation, including the Proceeds of Crime Act 2002, as an aid to the interpretation of the 1988 Act. He cited R v Montila [2004] 1 WLR 3141. That case concerned a different provision of the 1988 Act, namely s.93C(2), together with the Drug Trafficking Act 1994 s.49(2) (converting the proceeds of criminal conduct, and of drug trafficking, respectively). At para 41 Lord Hope of Craighead noted the different language used in the corresponding provisions of the 2002 Act, commenting that it would be surprising if the intention of Parliament in 2002 was to reduce the scope of the offences in question. He referred to the international instruments which the three statutory provisions had all been implementing. He had identified them earlier (they are referred to by Lord Steyn in the passage cited in para 66 above). These were followed by EEC Council Directive of 10 June 1991 (91/308/EEC). The Criminal Justice Act 1993 s.93C implemented the Directive. Both the Vienna Convention and the Directive are now implemented by the Proceeds of Crime Act 2002.[79]The 1988 Act, Part VI, in the form originally enacted antedated these international instruments. We have not been referred to other international instruments preceding the 1988 Act. The reason given in Montila for departing from the general rule, and using a later statute as an aid to the construction of an earlier one, does not therefore apply to the statutory provisions with which this case is concerned.[80]At the hearing on 6th March 2006 Mr Sells QC and Mr Mitchell QC appeared for the Crown. At this hearing Mr Sells QC submitted that when a court comes to exercise its discretion pursuant to the 1988 Act in its amended form, but it has to do so at a date after the Act was amended to remove the discretion (as the Judge had to here), then the court should take into account the intention of Parliament as expressed in the amending legislation. The 1988 Act was amended by the Proceeds of Crime Act 1995, and by the time the confiscation order was made in this case in 2002, Parliament had again legislated for a significant diminution of the use of the discretion by the Crown Court, both in the 1995 Act and in the Proceeds of Crime Act 2002. Mr Sells QC submits that in making the order in 2002 the Judge was entitled (although not bound) to consider that the removal of the discretion in 1995 could properly be taken into account in a case where the order was made seven years later, after the legislative landscape had so radically changed. He submits that this Court, when it comes to consider the ground of appeal relating to the exercise of the discretion by the Judge, should also have regard to the 1995 and 2002 legislation. Mr Sells QC relies on R v Khurshid Ahmed (Court of Appeal 9905818 X4) an unreported decision of this Court made on 8th February 2000.[81]This submission had not been advanced by Mr Evans, rightly in our view. Khurshid Ahmed was convicted of three offences of conspiracy to defraud committed in periods between January 1995 and November 1997. The fraud was inflating the invoices for goods supplied by Ahmed’s business to a customer. The co-conspirators would sign receipts for the full amount of goods invoiced, although not all the goods were in fact delivered. Ahmed received the full invoice price and split the dishonest gains with the co-conspirators.[82]The Judge approached the case on the footing that all three counts related to offences committed after the coming into force of the 1995 Act, and so that his discretion was limited accordingly. This Court accepted that in relation to Counts 1 and 2 the 1995 Act did not apply, so that he did have the discretion afforded by the unamended 1988 Act (para 23 of the judgment). Counsel for Ahmed then submitted that had the true position been appreciated the Judge would have exercised his discretion to make a confiscation order of less than the full amount of the benefit obtained, because Ahmed had not kept all the benefit, but had passed three quarters of it on to his co-conspirators. This Court rejected that argument on the familiar ground that the fact a defendant passes some of his benefit on to somebody else is neither here nor there (para 25). The Court then added in para 27 an observation that under the unamended Act, the judge would inevitably have borne in mind the fact that, although the amended provisions did not apply at the relevant time, Parliament had thought it necessary to pass an amending Act which made it incumbent, in relation to offences committed after 1st November 1995, to make confiscation orders of the kind the judge had in fact made in that case.[83]In our judgment the observations in para 27 are obiter, given the conclusion already reached in para 25, and are not authority for the submission advanced in this case by Mr Sells QC.[84]Mr Sells QC also referred us to a decision of this Court handed down after the hearing of this case, that is on 27th January 2006 in the case of R v Ajay Kumar Sharma [2006] EWCA 16 Crim. In that case the defendant was convicted of an offence of conspiracy to defraud committed in the period October 2000 to May 2002. The judge made a confiscation order under the 1988 Act as amended by the 1995 Act. One of the grounds of appeal was that the judge failed to read down section 71 of the 1988 Act (as amended) as providing the court with a discretion. The argument was based on Articles 8 and Article 1 of Protocol 1 of the European Convention on Human Rights. At para 25 of the judgment the Court observed that it cannot be disproportionate for a defendant to be made accountable for what he has obtained. The amount of the benefit he obtained is not affected by the amount which might also be obtained by others to whom he transfers any part of the benefit. A decision on the construction of the 1988 Act as amended, and the impact of those articles of the ECHR does not assist in the exercise of the undoubted discretion that exists under the 1988 Act in its unamended form.[85]We reject the submission of Mr Sells QC. The 1988 Act, as unamended, is penal, the amending legislation is not retrospective, and cannot be retrospective: see para 51 above. It must be applied in accordance with its terms, and with any interpretation of it, or guidance in respect of it, given by this Court.

s.74(4), AGENTS AND MINDERS

[86]Glatt’s position is comparable to that of a person who minds drugs or stolen property, or an agent who carries money abroad. There are a number of cases in which defendants carrying out this, and other, roles have been considered by the courts. In many cases it is unclear what role a defendant has in fact played in the criminal conduct. But in others, including the present case, the defendant’s role can be identified from the indictment or basis of plea, or from the judge’s remarks.[87]A number of the cases cited to us related to defendants whose roles were clear and who could be described as couriers or minders or launderers. In all but two, confiscation orders were made in respect of the whole value of the property in question, and not on the basis of the reward the defendant received. Mr Krolick relied on two of these in particular, R v J [2001] 1 Cr App R (S) 273 and R v Johannes [2001] EWCA Crim 2825; [2002] Crim LR 14.[88]In R v J the appellant was convicted, together with others, of conspiracy to supply Class A drugs. The confiscation order was in the sum of £22,890. His realisable assets were £5,422. Lord Woolf CJ, at paras 11 and 13, approached the appeal on the basis that that the Judge had said that the appellant did not have a beneficial interest in the drugs with which he had been entrusted. The question was whether it was proper to draw the inference that they had been paid for. The Court of Appeal held it was not proper to draw that inference, given what the Judge had said. The reason that question was important was that the Crown were relying on the statutory assumptions under the Drug Trafficking Act 1994 s.4(3)(b). These included the assumption that any expenditure by a defendant since the beginning of the period was made out of payments received by him in connection with drug trafficking. That means that the Crown have to show expenditure, and they were unable to do this in a case where the Judge considered that the appellant had not paid for the drugs in his possession. The 1994 Act includes, at s.2(3), a provision in the terms set out in para 52 above, which corresponds to the differently worded provisions of s.71(4) of the 1988 Act. The decision said nothing about that section. Under s.4 of the 1994 Act, the Court was required to make the assumption for the purpose of determining whether a defendant had received any payment, and if so, the value of any payment received. The Court was not approaching the matter on the footing that the drugs the appellant was minding were property that he had obtained (the test under the 1988 Act), since that was not the test to be applied under the 1994 Act.[89]In Johannes the Judge said the he was sure the appellant was a custodian or minder of the drugs worth £99,000 found in his possession, and had no financial interest in them. The Court of Appeal, following R v J, held that on that finding the statutory assumption under s.4(3) of the 1994 Act had been displaced. It followed that a confiscation order including the value of the drugs had to be set aside. The case adds nothing to R v J.[90]Mr Evans referred us to: R v Simpson [1998] 2 Cr App R (S) 111, R v Metcalfe [2001] EWCA Crim 1343, R v Wilkes [2003] EWCA Crim 848, R v May [2005] EWCA Crim 97 para 39-41 and Jennings v CPS [2005] Civ 746 para 28-42.[91]Simpson was another case under the Drug Trafficking Act 1994. But in Simpson the appellant was found in possession of cash, the proceeds of trafficking. He was not found in possession of drugs. That Act includes the provision cited at para 52 above, and the further provision, s.4(1), that any payments received by any person in connection with drug trafficking “are his proceeds of drug trafficking”. It was submitted that in this laundering case, the appellant did not receive the cash within the meaning of the Act, because he was merely a bailee of it. A confiscation order was upheld in the value of the cash, and not of the much smaller sum contended for the appellant, namely his own personal reward for carrying the cash.[92]Simpson turns on s.2(3) of the 1994 Act and is not decisive of the interpretation of s.71(4) of the 1988 Act. Mr Krolick submits that it has no application because it turns on the words of the 1994 Act. This submission does not sit well with his reliance on the R v J and Johannes, which do turn on the words of the 1994 Act, but on the words of a provision in that Act which has no corresponding provision in the 1988 Act.[93]In Metcalfe [2001] EWCA Crim 1343 the point arose directly in relation to s.71(4). Mantell LJ held at para 12 that there was no reason why the approach of the court should be any different in relation to s.71(4). Mr Krolick notes the brevity of the reasoning, and that in particular, the Court was not apparently invited to consider his argument relating to s.74(4), to which there is no equivalent in the 1994 Act.[94]Mr Krolick sought to suggest that Lord Rodger of Earlsferry was suggesting a difference in R v Smith (David) [2001] UKHL 68; [2002] 2 Cr App R (S) 37 at para 32. That case concerned the smuggling of cigarettes. A minor issue related to the boat used and the facts are set out at para 10. Another smuggler, Marriott had been released on bail in November 1997. While on bail he approached the Respondent and, it appears, put up £55,000 with which the Respondent bough the boat. The Crown did not argue that the Respondent had himself put up any of the money to buy the boat. The boat was used to smuggle cigarettes in April. It was used again in May, when it was stopped with Marriott and the Respondent on board. The confiscation order made against the Respondent was made on an assessment of benefit received totalling £185,666.40. This included £55,000 in respect of the boat, as well as the value of the cigarettes. The order was limited to £46,250, the value of his realisable property (para 12). The boat was forfeited (para 14). The passage relied on by Mr Krolick is at para 32 where Lord Rodger says:
“… it is not entirely clear, on the available evidence, what the value of the boat would have been to the respondent at the time when he obtained it (s.74(5)).”
Mr Krolick submits this is a reference to the fact that the Respondent did not put up any money. That may be a possible interpretation, but the citation can hardly stand as a statement of legal principle.[95]In Walls [2002] EWCA Crim 2456; [2003] 1 Cr App R (S) 31 at para 25 this Court held that s.74(4) applied only when the Court is making the valuation of the offender’s realisable assets. Mr Krolick recognises that that is against him, but submits that it is not binding because the case in fact related to a different statute, the Drug Trafficking Act 1994.[96]Of the other cases cited by Mr Evans, May and Jennings v CPS are on joint control. In Jennings the arguments are set out at para 26. The appellant contended that his benefit was what he got and retained for himself. After a detailed review of the authorities, including May, Laws LJ concluded that a restraint order had been properly made against each of two defendants in the whole sum alleged to be the proceeds of the conspiracy. In May at para 36 Keene LJ said: “If he obtains property within the meaning of s71(4), it matters not that he does so merely as a collector or distributor for others involved in the offence: it is the obtaining and not the retention that matters”.[97]R v Ellingham [2004] EWCA Crim 3446; [2005] 2 Cr App R (S) 32 is another case under the 1988 Act. The appellant pleaded guilty to fraudulent evasion of duty on cigarettes. His basis of plea was that he was not the organiser of the importation, but merely assisted in it, for a fee plus expenses. A confiscation order was made following a finding that the benefit was the whole sum of the duty evaded. There was no confiscation order in relation to a separate money laundering conviction in that case, but Pill LJ cited another case in which there was, R v Alagobola [2004] EWCA Crim 89; [2004] 2 Cr App R (S) 48.[98]In Alagobola the defendant was convicted of money laundering under s.93A(1)(a) of the 1988 Act. £121,570 was paid into the defendant’s bank account by a third party. The Judge found that the appellant’s suspicion about the money, and therefore his criminality, did not arise until some time after the deposit of the money into his account. The judge found that the benefit to be £62,238.61 and limited the confiscation order to that sum. The main reason for this was that the bank had recovered the balance. Pill LJ said this:
“20 On the face of it, however, his submission is an attractive one. It is said that the appellant in fact derived no benefit; on the contrary, he sought to deprive himself of any benefit when he realised the possible source of the funds by ridding himself of them as soon as he could. 21 It seems to us, however, that the submission is founded upon the fallacious assumption that when the appellant dealt with the money by transfer he derived thereby no benefit. On the contrary, it seems to us the appellant was now in possession of the funds in his account which he knew or suspected were the proceeds of criminal conduct. By dealing with it following the acquisition of knowledge, upon the instructions of the alleged criminal, he was, in our view, and for the purpose of onward transmission, obtaining property in connection with the commission of an offence. He was exercising the right of the holder of the account to deal with the funds within it and he was dealing with those funds with a guilty mind. Accordingly, his benefit was the value of the property so obtained. Benefit from criminal conduct does not, for the purposes of s.71, mean personally to enjoy the fruits of criminal conduct. 22 Mr Moss [for the Crown] went further in argument. He submitted that upon the appellant acquiring knowledge or suspicion that the fund was criminal proceeds, the appellant, without more, obtained the fund for the purpose of s.71. 23 This submission we cannot accept. The appellant would obtain the fund only if he decided to retain it or to deal with it for his own or another's purposes. If, for example, he had gone to the police and reported his suspicions, it seems to us he could be said neither to have committed an offence under s.93A(1)(a), nor to have obtained property within the meaning of s.71. The appellant did, however, deal with the fund with knowledge on the instructions of the criminal, and by so doing, for the purposes of transfer, he obtained. 24 Thus it seems to this Court the judge was right to find as he did and the appeal must be dismissed.”
[99]It follows, if Mr Krolick is right, that the effect of s.74(4) has been overlooked in a number of cases. We do not consider that it has been overlooked. The value referred to in s.74(4) is the value of property (other than cash), and is in effect either the value of that person’s beneficial interest, or the value of the whole, if no other person holds an interest. This provision is an appropriate one for calculating the realisable property held by the defendant. But the effect of applying this to s.71(4) would be to exclude from the scope of the legislation all those who obtain property as minders, or couriers or agents, and to give rise to the problems of proof described in para 39 above. Given that the objective of the legislation includes a deterrent and penal element, and that there is in principle no objection to multiple recovery in the sense of recovery of the same sum from different individuals, it is difficult to attribute to the legislature the purpose of excluding such an important group of offenders from the scope of the legislation.[100]There would also be an anomaly if Mr Krolick’s submission on s.74(4) is correct. The minder or courier caught with his principal’s cash would on any view be treated as having received the benefit of that cash, because cash is excluded from s.74(4). But if the principal’s money is paid into the minder’s bank account through the clearing system, since a bank account is not cash, s.74(4) would apply, and he would not be treated as having received the benefit. This anomaly arises in the present case, since category(1) is cash, and category(2) is money in a form other than cash. £419,500 was paid primarily in cash into his client account by Glatt or his secretary. See para 13 above.[101]Those who dishonestly assist in money laundering and other crimes by obtaining the property, but do so in the capacity as agents, might consider themselves fortunate if they do not have to pay someone (that is to the victim or, if none sues, the Crown) the value of the loss they have assisted in causing. Justice does not require that they be excluded from the provisions of the Act simply because they are likely to have to make payment out of their lawfully owned property without having enjoyed a beneficial interest in the property they have obtained. So far as the civil law is concerned, they are in general liable to be sued as joint tortfeasors or conspirators, or for knowing assistance in a fraudulent breach of trust (see the cases cited in para 48 above). They may have to meet any judgment out of their lawfully acquired assets. If the victims of offences were always in a position to institute civil proceedings, Parliament might not have thought it necessary to introduce the 1988 legislation. But in reality the victims are not always known, or if known, not always in a position to institute proceedings for other reasons. The proceeds of crime legislation prevents criminals from retaining as a windfall what the law contemplates should in principle be paid to the victims.[102]In cases involving very large sums of money, the disposal of the proceeds of crime (and civil wrongs) is difficult to achieve without the assistance of professional agents. The fact that they have not themselves profited from the crime to the full value of the loss is a point that arises on the issue of contribution between defendants to civil proceedings. It is not normally a defence to the claim. If the financial risk to which they are exposed in the confiscation proceedings is limited by the amount of the reward they gain, the deterrent will be much less than if the financial risk is limited by the amount of the property they obtain. If multiple recoveries from different individuals, which in total exceed the value of the loss caused, is considered to create an injustice in a particular case, then that can be addressed under the 1988 Act (in its unamended form) in the exercise of the court’s discretion. There may be other ways of addressing the point under later legislation.[103]For these reason, s.74(4) does not, in our judgment, apply to the assessment of the value of benefit under s.71(4), at least in the way which Mr Krolick submits.

MARTIN’S CLAIM TO THE MONEY HELD BY GLATT

[104]In Tinsley v Milligan [1994] 1 AC 340 two women ran a business together. They put a house into the name of the plaintiff for the purpose of concealing the fact that claims made by the defendant against the Department of Social Security were fraudulent. Later they fell out and the plaintiff claimed possession from the defendant. She counterclaimed for a declaration that the property was held on trust for the two of them in equal shares. The counterclaim succeeded. The principle, as stated by Lord Brown-Wilkinson at the end of his speech is: “In a case where the plaintiff is not seeking to enforce an unlawful contract (such as a right of property) the court is neither bound nor entitled to reject the claim unless the illegality of necessity forms part of the plaintiff’s case”.[105]This principle can cause problems for the police when faced with claims for the delivery up of property, which they have seized. In Webb v. Chief Constable of Merseyside Police [2000] Q.B. 427, 446-447 May LJ said: “In my judgment, the court should not extend the law in the way suggested. Although from the Chief Constable's perspective the money is the proceeds of crime, from another perspective the court should not, in my view, countenance expropriation by a public authority of money or property belonging to an individual for which there is no statutory authority. There is statutory machinery for the prosecution of those who deal in drugs and for the confiscation upon conviction of the proceeds of their drug dealing. There is statutory machinery for the confiscation upon conviction of the proceeds of other serious crime. There is statutory machinery for the forfeiture of the cash proceeds of drug trafficking which are being imported into or exported from the United Kingdom. There is no statutory power to confiscate the proceeds of drug dealing within the United Kingdom where the person entitled to possession of the money is not convicted of a drug trafficking offence. I recognise that there may be circumstances where for a variety of reasons a prosecution may not take place. But that does not, in my view, justify expropriation by means of a defence to a civil claim for return of money which has been seized from persons who are not convicted. It is one thing to prosecute to conviction and to take positive steps authorised by statute to confiscate the proceeds of crime from the convicted defendant. It is quite another to resist the claim of an innocent person by asserting some or all of the ingredients of what might have been a prosecution; or to effect confiscation in this way from a convicted person against whom statutory confiscation machinery has not been used. Innocent claimants would, I am sure, be deterred from pursuing entirely proper claims for the return of money or property to which they were entitled. I can foresee quite unacceptable possible consequences of the development of the law for which the Chief Constable contends in these cases. If statutory provision for civil confiscation are inadequate, it is for Parliament to strengthen them after proper consideration of all the implications”.[106]Martin is, of course, not innocent, and has been convicted. Moreover, as noted in para 8 above, the following facts were admitted by Glatt. After Martin’s arrest in June 1994, Martin was made the subject of a restraint order by the High Court, which required him to preserve his assets. In Operation Jeroboam the judge made a confiscation order of some £3.3 million. Glatt was aware of both the restraint order and of the Jeroboam confiscation order.[107]The money held on Martin’s behalf by Glatt could found a confiscation order in proceedings against Martin. The facts are therefore far removed from those in Tinsley and Webb. It may be that (but for the restraint order) Martin would have been legally entitled to demand that Glatt pay the money in question to Martin or to his order, and that in order to frame such a demand, he would not have had to rely upon his illegal activities. But given the restraint order, Glatt could not comply with any demand by Martin. For reasons explained in R v Brown (failure to serve the right notice on time) the confiscation order made in relation to this conspiracy against Martin in the sum of £10,000,342 was made and set aside on appeal. But the assets were nevertheless available to meet the order made against Martin in Operation Jereboam. They were in fact realised for that purpose. It is quite unrealistic to submit that Martin had a claim, which was enforceable against Glatt, in respect of these assets held by him.[108]The fact that Martin did not have an enforceable claim does not mean that the property was beneficially owned by Glatt. It means that the enforceable claim was ultimately going to be made on behalf of the Crown. For reasons stated above, in so far as Glatt obtained the property, it counts as a benefit to him under s.71(4) and its value is its market value.[109]But this result also means that this is not a case where the confiscation order amounts to double recovery in the sense of requiring Glatt to pay the same sum twice. The possible double recovery in question here is recovery from Martin (albeit in respect of an earlier offence) and recovery from Glatt.

WHAT WAS OBTAINED BY GLATT?

[110]In relation to categories (3) and (4) Mr Krolick submits that since these were not payments obtained by Glatt personally, they were not obtained by him within s.71(4). For the Crown it is submitted that a person obtains property if he receives property in a form over which he exercises a degree of control, even if the beneficial interest remains throughout with another person.[111]The facts as set out in the Statement of Mr Ford dated March 2001 are set out in paras 8 to 10 above, and as follows. In August 1994 Glatt, on Martin’s instructions, obtained Dolphin Properties Ltd. There was a change of name to Zero One. Seven properties were acquired by this company. In March 1995 Intercounty Ltd was acquired by Glatt on the specific instructions of Martin. This company also acquired seven properties. Other companies obtained by Glatt on Martin’s instructions are referred to as New England Trading, and Hallworth Finance. Centreville acquired on property. Two additional properties were acquired by Martin’s mother and another company referred to as JPG Properties. It is not suggested that Glatt had any beneficial interest in these companies, and he is not said to be the owner of the shares.[112]Mr Ford’s evidence in his paras 8.2 (para 10 above) as summarised in his para 8.4.i is that the companies were “controlled” by Glatt on behalf of Martin. The Skeleton Argument on behalf of Glatt sets out extensive passages from the Crown’s case as set out in its 1997 Statement of Evidence and subsequent documents. Little is said of the role of Glatt. From this it appears that the management of the properties was substantially carried out by Gardner and Hutchinson. Their roles in purchasing and managing properties, and handling cash, are also summarised in the judgment in Brown at paras 3(iii) and (xii). Hutchinson visited Martin in prison, posing as one of Glatt’s clerks. Gardner made some of the payments which were credited to Glatt’s client account.[113]Glatt took very little part in the proceedings at first instance. He adduced no evidence to explain or contradict the statement of Mr Ford in this respect. When ordered to inform the court whether he accepted or disputed the calculation of the minimum benefit figure set out in Mr Ford’s statement, a one sentenced response was given, dated 17th May 2001. At that time Glatt was not represented by the solicitors and counsel representing him before us. It reads: “Without prejudice to the defence submissions as to the proper meaning of ‘benefit’ in s. 71(4) of the CJA 1988, the defence accepts that the calculation of the minimum benefit figure is accurate”.[114]In the skeleton argument filed on his behalf in May 2001 by Glatt’s counsel at that time, the passage in which Mr Ford states that Glatt controlled the companies is set out, as are extensive quotations from the authorities, including Rees (unreported 19th July 1990) and Patel [2000] 2 Cr App R (S) 10. No submissions are made in that skeleton in relation to ‘control’, whether as to the facts or as to the law, although the point was raised in a Supplementary skeleton argument on behalf of Glatt on 15 May 2002. On 16 May 2002 HHJ Elwen accepted the Crown’s submission that the effect of the document dated 17th May 2001 was that the court was not entitled to hear argument concerning the valuation of Glatt’s benefit. He held the benefit had been conclusively accepted by Glatt in the sum of £3,787,300. In his ruling of 29 May 2002 the Judge recorded what he had decided on 16 May 2002. The Judge said that there was no good reason advanced, almost twelve months later, as to why the defendant should be allowed to resile from it.[115]Before this court the Crown stood by this (on the basis of R v Tredwen (1994) 15 Cr App R (S) 580), but accepted that if there were shown to be an error of law in the basis of the concession, that concession could be re-opened on appeal.[116]The question whether Glatt did exercise control over the companies is one of fact, and in the absence of any statement from Glatt, there does not appear to us to be any basis on which that could have been disputed before the Judge, or could be re-opened before us. Of course, like Gardner and Hutchinson, Glatt exercised control not for his own benefit, but for the benefit of Martin.[117]Category (3) is said to be money paid directly into the off shore accounts of the four companies. Category (4) represents the increase in value of the properties acquired by Glatt and beneficially owned by Martin, as subsequently sold by the Receiver.[118]There are authorities on the meaning of ‘obtain’ in the 1988 Act. In Rees (unreported 19th July 1990) Auld J (as he then was) held that “obtains” was not restricted to cases where the defendant had received the property into his possession, but included “obtaining for another or enabling another to obtain or to retain”. This part of Auld J’s judgment is available to us in the form of the extracts in the judgment of Buxton J (as he then was) in Gokal (unreported 7th May 1997) and Patel [2000] 2 Cr App R (S) 10. Rees had pleaded guilty to three counts of obtaining money by deception with others. The total involved was £90,051.95, (the sum sought by way of confiscation order) but only in the case of count 1 did the building society suffer a loss of the whole of £33,465 obtained from it. In Patel Douglas Brown J identified the relevant facts as follows:
“As is apparent from the judgment of Auld J., Rees pleaded guilty to three counts of obtaining money by deception, the money in each case being mortgage funds from a building society. He received loan moneys totalling £90,051.95: £33,465 in count one; £29,786.95 in count two; and £26,800 in count three. The argument on behalf of Rees to restrict benefit only to £33,465 derived from the fact that, in the face of the other two counts, the building society did not suffer a loss because there was adequate security for, and repayment of, the loan under the mortgage. Auld J.'s decision was that, irrespective of any net loss to the building society, Rees had actually obtained, with others, the total amount of the loans. What happened thereafter was irrelevant to the question of benefit…. ”
[119]It appears that the issue in Rees arose partly out of the fact that the money was obtained jointly with others, and partly out of the fact that some of it was not lost. It is distinguishable from the issue in this case. The point made in relation to category (3) is that the property was not obtained by Glatt at all, and that it was not obtained for him either, but wholly on behalf of Martin.[120]In Currey [1995] 16 Cr App R (S) 421 the defendant was convicted with another of conspiracies to publish and import obscene articles. The defendant was the banker for both. The confiscation order was made on the basis of the total receipts generated. The appellant submitted unsuccessfully that the benefit should not have been assessed on the total that passed through his hands, but on his profit. Currey is thus unlike the case on category (3) in that the defendant received the whole of the property himself and passed some of it on to his co-defendant.[121]The issue in Gokal (unreported 7th May 1997) arose from the fact that the Gulf Group of companies, by reason of the fraud perpetrated by Gokal and others, had obtained the total of £548m. The fraud had been necessary to enable BCCI to continue to fund Gulf. It was argued that Gokal was to be taken for the purposes of the 1988 Act as having obtained the whole of the £548m, because he caused that to be obtained by Gulf group.[122]Buxton J noted that Rees may have turned on the fact that it was a case involving s.15(2) of the Theft Act, which concerns obtaining property by deception. This provides: “For the purposes of this section a person is to be treated as obtaining property if he obtains ownership, possession or control of it and ‘obtain’ includes obtaining for another or enabling another to obtain or to retain”.[123]Buxton J held that s.71(4) required “what can fairly be described as an obtaining by the defendant”. He stated that he saw no reason for reading the Theft Act definition as found in s.15(2) into the 1988 Act. He added: “Indeed, the fact that that definition is said to be specific to that section would suggest that the ordinary meaning of the word ‘obtains’ is not as set out in s.15(2)”.[124]Gokal appealed but not on this point, on which the decision of Buxton J was favourable to him. A further point argued before Buxton J was that the money was to be treated as Gokal’s, by piercing the corporate veil. Buxton J declined to take that step in that case. He considered that the realistic description of the case was that the Gulf companies were beneficiaries of Gokal’s fraud.[125]Gokal has this in common with the present case. The relevant property was obtained by the companies through the criminal conduct of the defendant, but not by the defendant, nor for the benefit of the defendant. In this respect it is the only one of this line of cases where the issue arises on facts similar to the ones in relation to category (3). On the other hand, it does not appear from the judgment in Gokal that Gokal exercised control over the Gulf companies, whereas Glatt did exercise control over the companies that received the property in category (3).[126]In Saia (unreported 20th April 1999) Saia and others were convicted of conspiracy to defraud. Separate payments had been made to the defendants or one alone. The prosecution submitted that in assessing the benefit obtained by each defendant the court must attribute to each conspirator the gross proceeds of the particular conspiracy regardless of which of them may in fact have received the proceeds. Langley J agreed with Buxton J. He did “not think that a person obtains property which he causes to be received by someone else”. He reached this conclusion as a matter of ordinary English usage, and did not find the reference to the Theft Act helpful. Consequently he held that the court had to look at the extent of obtaining by the defendant personally. The case is therefore unlike the present one, to the extent that Saia, unlike Glatt, had a beneficial interest in some of the monies obtained.[127]In Patel [2000] 2 Cr App R (S) 10 the Court of Appeal considered the point in relation to the 1988 Act as amended by the 1995 Act. Patel had been convicted of conspiracy to obtain property by deception. He ran a post office, and had received stolen benefit books from a co-conspirator. Importantly, the appellant took the whole of the proceeds from the safe, and then paid to his co-conspirator his share. Douglas Brown J stated:
“We share the view of Buxton J that s.15(2) of the Theft Act 1968 cannot assist in the construction of the 1988 Act where the offender is not charged with obtaining property by deception under s.15 or conspiracy to do so…”
[128]Patel is thus unlike the case on category (3) in that the defendant received the whole of the property himself and passed some of it on to his co-defendant.[129]In Metcalfe [2001] EWCA Crim 1343 robbers had obtained £1.2m. Metcalfe was not a robber. He was a gambler who whose role was to launder the proceeds of the robbery. He received the money from the robbers and used it to place bets. He lost a lot in the process, but on occasion received winnings which he then gave to the robbers or their nominees. He was convicted of assisting others to obtain the benefits of criminal conduct. His benefit was assessed on the basis of what he had received, when he submitted it should be on the basis of his own fee or reward. The case is similar to the case against Glatt on categories (1) and (2), but differs from the case on category (3), because Metcalfe did receive all the money himself.[130]In May [2005] EWCA Crim 97; [2005] 2 Cr App R (S) 67 the Court considered Patel and other cases, in the context of considering property that was under joint control. However, the property had been received by companies, and in that context there is a reference to receipt by others, and to piercing the corporate veil. At para 37 Keene LJ said:
“It seems to this Court to be important that there was a finding here that the companies retaining the VAT fraudulently were jointly controlled by various of the appellants. Once the corporate veil is pierced, as the appellants accepted it can be (a step endorsed by this Court in Dimsey and Allen [2000] 1 Cr.App.R.(S) 497 at 502), the property held by the company in question is to be regarded as the joint property of those controlling that company. It is analogous to the situation where conspirators have put the proceeds of the fraud straight into their joint bank account. In such a situation each is entitled to the full amount in the account. If one concentrates on the words of the statute, as one must, it seems to us that each individual "obtains" the property jointly held.”
[131]On the basis of May Glatt abandoned the submission he had hoped to make to the effect that the court was required as a matter of law to apportion between the conspirators the totality of the benefit obtained by them. However, he submitted that the point was relevant to the exercise of the court’s discretion.[132]Mr Krolick submitted that piercing the corporate veil was not a course the court was asked to take. This may have been because the natural person standing as principal behind the corporate veils of the off shore companies was Martin, not Glatt.[133]Jennings v CPS [2005] EWCA Civ 746; [2005] 4 All ER 391 was an appeal against the continuation of a restraint order. The order was made in respect of an alleged conspiracy to defraud and fraudulent trading. The conspiracy was to defraud members of the public seeking loans. The company took fees from them, but no loans were ever made. The submission for the appellant was that the court should look to see what the defendant had got and retained for himself. The controlling director and shareholder was RP, who was due to be charged with conspiracy. A similar restraint order had been made against him. The appellant claimed he was no more than an employee, but the Crown alleged he was at the heart of the conspiracy, and that he played a full role in spending some of the cash generated. The Crown alleged that large sums sent to the company in the form of postal orders were cashed at a local post office but not credited to the accounts of the company. The restraint order was made on the basis of the alleged proceeds of the conspiracy amounting to £580,000 odd.[134]Laws LJ held (para 49) that the fact there was some evidence suggesting RP kept far and away the bulk of the money did not touch the merits of the order against the appellant. The case thus proceeded on the assumed basis that the appellant did receive the proceeds of the conspiracy and had an interest in at least some of them, unlike the case against Glatt on category (3).[135]At paras 29-37 Laws LJ considered these cases other than Saia. He held at para 37 that Gokal (and by implication Saia) were out of line with the general run of authority. He said at para 38 that: “All that is required is that the defendant’s acts should have contributed, to a non-trivial (that is, not de minimis) extent, to the getting of the property”.[136]In response to this Mr Krolick submitted that the decision in Jennings v CPS, although decided in June 2005, did not have regard to the legislation subsequent to the 1988 Act. We have referred to this submission as a matter of principle, in para 78.[137]In particular, Mr Krolick notes that in the 2002 Act s.76 corresponds to the definition in s.71(4) of the 1988 Act, including the word “obtains”. It includes:
“(4) A person benefits from conduct if he obtains property as a result of or in connection with the conduct… (7) If a person benefits from conduct his benefit is the value of the property obtained”
[138]In the 2002 Act there is a definition of ‘obtains’ at s.84(2), which the focus of Mr Krolick’s submission: “(b) property is obtained by a person if he obtains an interest in it… (h) references to an interest, in relation to property other than land, include references to a right (including a right to possession)”.[139]It appears that the draftsmen considered the situation of property obtained by one person for another, and considered it necessary to state that in such a case obtaining an interest in property sufficed for obtaining property. The Act does not say that obtaining an interest in the property is a necessary condition of ‘obtaining’, nor does it in terms speak of control. On the other hand, there is nothing in the 2002 Act equivalent to the broader definition of Laws J in Jennings v CPS in para 135 above, namely that contributing to getting the property suffices. Of course, in Jennings Laws LJ was addressing an assumed factual situation where the defendant did retain control over and some interest in the property received by the third party, and his words must be understood in that context.[140]It must also be borne in mind that the provisions in question are in a penal statute and must be construed strictly, as Rose V-P stated in Attorney General's References Numbers 114-116 of 2002 and Numbers 144-5 of 2002 [2003] EWCA Crim 3374, para 18. It makes a difference to the scope of the legislation if it is confined to those who do have an interest in property received by a third party, or if it extends to those who have no interest.[141]We would accept Mr Krolick’s submission only up to a point. In our judgment it may be that “obtains” does not include a case where a person causes property in which he has no beneficial interest to be received by someone else over whom he has no control. We do not have to decide that. But ‘obtain’ does include the cases where a defendant retains control over property received by a third person as a result of steps taken by him, as well as cases where he obtains an interest in property received by a third person.[142]Accordingly, since Glatt had some control over the companies, albeit for the benefit of Martin, he did obtain the property referred to in category (3), and, consequently, any increase in value of such property within category (4).

DISCRETION

[143]In exercising his discretion the Judge said that although Glatt was not in the same position as Currey (see para 120 above), who had disposed of the money he had received, the reasoning in that case applied equally to him, in that the money had been disbursed for investment. The judge took into consideration that Glatt was a professional man who had abused his trust, without which the operation could not have been carried on as it was. He said: “For the court to exercise its discretion otherwise than by making an order would be to subvert the legislation”.[144]The points made for Glatt are: i) The effect of the order is that there has been double counting in relation to the benefit set out in Mr Ford’s statement; ii) The benefit should have been apportioned between Glatt, Hutchinson and Gardner, as a matter of discretion. A calculation has been done dividing each item or class of property in Mr Ford’s statement equally between each of the defendants namely Martin, Gardner, Hutchinson and Glatt. Since in relation to some property all four were involved, and in relation to other parts either three or two of them were involved, with a particular part of the property, this arrives at a figure of £976,121.66 as Glatt’s share of the benefit. iii) That the order should have been limited to a defendant’s actual gain, which in Glatt’s case was nothing over the £10,000 minimum; iv) That Glatt should have been treated similarly to Gardner, and in Gardner’s case the Court of Appeal had reduced the confiscation order to about two thirds of the maximum available; v) That Glatt and his family have been ruined and the order is unfair, oppressive, and disproportionate when considered in conjunction with the rest of Glatt’s sentence and the loss of his profession; vi) That the Judge erred in comparing Glatt’s position to that of Currey; vii) That the Judge erred in considering himself bound to exercise his discretion to impose the maximum order.[145]For the Crown it is submitted that: i) The legislation envisages ‘multiple recovery’; ii) There is no occasion to apportion the benefit, where, as here, it is clear which defendant has received what property; iii) As to Gardner and Hutchinson, the cash they had actually handled was included in the benefit they had been found to obtain, and as to the other property the Judge had ruled that mere involvement in property purchases without receipt of funds did not constitute obtaining a benefit; iv) The judge exercised his discretion rightly, and was well equipped to do so, having conducted the trial and retrial of Glatt and having sentenced all the conspirators and conducted all related confiscation proceedings; v) The circumstances in which this Court was entitled to interfere were limited, namely where the Judge had failed to take into account a material consideration and had taken into account an immaterial consideration.[146]We have already referred to cases where this Court has held that the legislation envisages multiple recovery and double counting is not objectionable: see R v May [2005] EWCA Crim 97 (para 47 above), Jennings v CPS (para 96 above). We ourselves proceed on that basis: see para 99 above).[147]It is right to consider, as the Judge did, whether the making of this order, or not, would serve to fulfil the purpose of the legislation.[148]In the present case Glatt did not use any of his own funds to obtain the property (as might a trafficker in stolen goods or drugs) and he did not obtain any reward for his services (apart from the car worth less than £10,000). What he did employ, as the Judge pointed out, was his position as a solicitor, but he has forfeited that in any event.[149]So the purpose of a confiscation order against Glatt cannot be to take away his profits from crime, in the ordinary sense of the word profit. Nor can the purpose be to remove from him assets which he has used to commit crimes, in order to prevent him misusing them in that way in the future. We have found these to be the legislative purpose as set out in paras 50 to 68 above. We have also concluded (as the Crown accepts) that compensation is not one of the purposes of this legislation, for the reasons given in paras 69 to 77 above. This does not mean that HMC&E has no way of obtaining compensation for any losses suffered as a result of conduct such as Glatt’s involvement in the breach of the restraint order. The civil law has developed in recent years, as set out in para 75 above. The criminal courts might also have power to make a compensation order in such circumstances.[150]In these circumstances, it has to be asked what legislative purpose would be fulfilled by the order made. We find none. As stated above, Glatt has already been sentenced to the term of imprisonment of seven years (para 3 above) and has, of course, forfeited his profession as a solicitor. In addition, we were told on 6th March, sums that he will in any event have to pay, or cannot recover, are the Receiver’s fees and his legal costs, for which the figures given to us are respectively £546,519.62 and £645,024.37, a total of £1,291,543.99.[151]The Judge was referred to Re K The Times 1 October 1990, of which we have the full judgment in the form of a Lexis print out. In that case McCullough J was asked to discharge a restraint order made under the 1988 Act. K had been charged with six offences of dishonesty while trading as an estate agent. It was alleged that he had bought properties with the assistance of mortgages, which had been procured by making false statements about his earnings and other matters. The benefit alleged was the total sum of £242,744.78 received from those providing the mortgage funds. These capital sums were secured on the properties purchased. Counsel for K submitted that the benefit was thus the equity of redemption. McCullough J did not accept this. He held that the benefit was the value of the houses. He explained: “There is nothing unfair to the defendant in this construction, since both capital and interest secured on the house will be taken into account at stage (3) [valuing his realisable assets], … and in any event, as I will come to presently, I would expect the judge to do so when arriving at a fair figure at stage (4) [whether it appears that a confiscation order may in fact be made]”.[152]McCullough J then turned to consider how the trial court might exercise the discretion under the 1988 Act. He held that the restraint order in that case was appropriate. But before reaching this conclusion he said this: “[the trial court] will not make an order which would be oppressive; in other words it will seek to be fair. So, for example, if a defendant with realisable assets of £200,000 committed an offence of the kind with which K is charged and thereby obtained a house worth £100,000 with the assistance of a mortgage of £70,000 and had not otherwise benefited (for example by letting or reselling), one would anticipate that, notwithstanding that the £70,000 had been left out of account in assessing the value of he defendant’s benefit from the crime, the judge would order confiscation of no more than £30,000. Indeed, in the example, he might decide to make no order at all, since not only would the defrauded mortgagee have lost nothing (being able to recover the advance in full from his security), the defendant (assuming that he had paid the balance of £30,000 in cash) would overall have gained nothing”.[153]In R v Layode (unreported 12 March 1993) this court, presided over by Watkins LJ, considered an appeal against the making of confiscation order in the sum of £133,891 made in respect of the defendant’s conviction for mortgage frauds. In that case the defendant had bought one property for £80,000 with the assistance of advances from the building society of £72,000. The judge included the £80,000 when valuing the benefit. This court held that he was right to do so. McPherson J gave the judgment of the court. He quoted with approval the passage in McCullough J’s judgment in K cited above. He also referred to Rees as follows:
“Auld J considered all aspects of that particular case. He stressed the discretionary nature of the provisions of s.71(1)… He pointed out further that in the exercise of that discretion ‘if it is the case that the building societies have been able to recover the moneys dishonestly obtained, it seems to me, subject to any further submissions, that the proper exercise of the court’s discretion should be to exclude those sums in determining the amount of the order’. This court agrees with that approach…”
[154]In our judgment, for the reasons given in para 85 above, this approach is one which we ought to follow in this case. It is not necessary or fair to impose any further sanction on Glatt in the form of a confiscation order.[155]Accordingly, in our judgment the judge fell into an error of law when he directed himself that “For the court to exercise its discretion otherwise than by making an order would be to subvert the legislation”. For the reasons given, we would therefore set aside his order, and make no confiscation order against Glatt. Before concluding this judgment we would like to acknowledge our indebtedness to Janet Ulph LLM LLM for her work “Commercial Fraud: Civil Liability for Fraud, Human Rights, and Money Laundering” recently published by OUP.[156]In these circumstances we do not need to consider the other points advanced under this head. The appeal succeeds to that extent.

THE HEARING ON 6TH MARCH 2006

[157]The Crown asked for this case to be listed for rehearing on three grounds, namely i) the error of fact as to the amount recovered by the Crown under an earlier confiscation order, due to the Note of 1st December 2005 not having been received by the Court (referred to in para 16 above); ii) in order to advance the new argument based on the decision in Ahmed which we have considered and rejected in para 85 above) iii) in order to address the Court upon certain authorities referred to in the draft judgment, and the textbook referred to in para 155 above, which had not been referred to in argument.[158]In this revised judgment we have corrected the factual error, and dealt with the argument based upon Ahmed. It remains for us to address the third point.[159]At the hearing on 6th March 2006 Mr Sells QC did not submit that in the draft judgment the Court fell into any error of law in the sections of the judgment preceding the section headed Discretion. All the references to cases not referred to at the hearing in November 2005, save for one, were in sections of the draft judgment in which we have upheld submissions for the Crown, and rejected submissions for Glatt, and which have not needed to be revised following the submissions on 6th March 2006. The textbook also relates to those sections, and does not address the exercise of discretion under the unamended 1988 Act.[160]The exception was a reference to para 75 above in the section headed Discretion which we have revised in this judgment (see para 149 above). The erroneous reference in the draft did not affect the conclusion we had reached in that section. Nevertheless, for the purposes of this judgment, we have reconsidered the whole of the section headed Discretion, and have reached the same conclusion.

order

i) is a penalty, and is a measure to which Article 1 of Protocol No. 1 is applicable; ii) is designed to deter those who consider embarking upon criminal conduct; iii) is designed to deprive a person of profits received from criminal conduct and to remove the value of the proceeds received from criminal conduct from possible future use in criminal conduct; iv) is designed essentially to impoverish defendants, not to enrich the Crown (Re P).

Cited in 12 later judgments

and 3 more of the most senior