Shahid, R. v [2009] EWCA Crim 831

[2009] EWCA Crim 831Case No 200805896 D1
IN THE COURT OF APPEAL
CRIMINAL DIVISION
Venue Royal Courts of JusticeDate Friday, 13th March 2009
Strand
London, WC2A 2LL
B e f o r e:
LADY JUSTICE HALLETT DBE
MR JUSTICE KEITH
THE RECORDER OF LIVERPOOL
Sitting as a Judge of the Court of Appeal Criminal Division
Between
R E G I N ACrownv
Between
ABDUL SHAHID
Computer Aided Transcript of the Stenograph Notes ofWordWave International LimitedA Merrill Communications Company190 Fleet Street London EC4A 2AGTel No: 020 7404 1400 Fax No: 020 7831 8838(Official Shorthand Writers to the Court)
Mr A Eissa appeared for AppellantMiss R Campbell appeared for Crown
J U D G M E N T
[1]MR JUSTICE KEITH: On 11th April 2005 at Birmingham Crown Court, the appellant was convicted of two specimen counts of cheating the public revenue. He had pleaded not guilty. On 30th September 2005, he was sentenced at Coventry Crown Court by Judge Fisher to 12 months' imprisonment on each count, to be served concurrently with each other but suspended for two years. He was also ordered to pay compensation of £1,688.92 to the Birmingham City Council Housing Department within 2 years. On the same day, a confiscation order was made against him in the sum of £135,524.60 under Part VI of the Criminal Justice Act 1988 ("the 1988 Act"). That sum had to be paid within 2 years of the date of the order, with 3 years' imprisonment in default of payment, to be served consecutively to any terms of imprisonment which he was liable to serve for the offences. He now appeals against the imposition of the confiscation order with the leave of the single judge, who granted the appellant an extension of time of 3 years and 5 days for filing his application for leave to appeal.[2]The facts of the offences are that over a period of time the appellant claimed income support and council tax benefit. In order to claim those benefits, a claimant must not have capital in excess of the limits prescribed by the Secretary of State for Work and Pensions. At the relevant time, the prescribed limit for income support was £8,000, and the prescribed limit for council tax benefit was £16,000. The appellant had claimed these benefits without declaring that he had capital in excess of these prescribed limits. Both counts related to a course of conduct between June 2001 and November 2003, count 1 relating to income support and count 2 relating to council tax benefit.[3]It was common ground that the amount which the appellant had benefited from, as a result of the offences to which the indictment related, was £15,178.91. But this was a case in which the prosecution asked for the confiscation order to be calculated, not only by reference to the sums which the appellant had obtained in connection with the actual offences of which he was convicted, but also by reference to all the property which had passed through his hands in the 6 years immediately before the criminal proceedings against him were instituted, on the basis that this property represented the proceeds of crime. In other words, the prosecution was seeking to rely on the radical provisions -- including primarily section 72AA of the 1988 Act -- which were introduced by section 2 of the Proceeds of Crime Act 1995, and which permit confiscation orders to be made on that basis, unless the defendant proves that the property did not represent the proceeds of crime. The prosecution gave notice of its intention to proceed on this basis by a notice dated 20th December 2004. At one stage it was being said on the appellant's behalf that no such notice had been given, but it is now acknowledged that it had been.[4]Both the prosecution and the appellant tendered statements to the Crown Court for the purposes of the hearing relating to the application for a confiscation order. Those statements revealed that, in the 6 years immediately prior to 4th June 2004 when the proceedings against the appellant were commenced, sums totalling £188,879.19 had been paid into an account in the appellant's name at Barclays Bank; sums totalling £7,910 had been paid into another account in the appellant's name at Barclays; and sums totalling £2,974 had been paid into an account in the appellant's name at the Nationwide Building Society. Those three sums amounted to £199,763.19 in all. For his part, the appellant denied that these sums represented the proceeds of crime, and he gave an explanation for them, but the judge found that these sums had to be treated as the proceeds of crime, subject to such sums as the appellant may have received legitimately.[5]The statements also revealed that a property had been purchased on 21st June 2002 for £38,000 in the joint names of the appellant and his wife. The appellant claimed that the property had in fact been purchased by someone else who had provided £14,000 by way of deposit, and that the remainder of the purchase price had been funded by that other person by a mortgage loan of £25,000 from the Halifax Building Society, albeit in the appellant's name. However, the judge found that this property was the property of the appellant and his wife in equal shares. The property was sold on 31st October 2003, and the judge found that the net proceeds of sale amounted to £41,500, being the sale price of £66,500 less the £25,000 outstanding on the mortgage. The appellant's half-share in the proceeds of sale therefore amounted to £20,750, which the judge also treated as the proceeds of crime.[6]When you add the £15,178.91, which was the agreed sum which the appellant had benefited from as a result of the crimes to which the indictment related, to the sums of £199,763.19 and £20,750, which the judge treated as the proceeds of crime, and you then subtract sums totalling £59,346.98, which the prosecution acknowledged the appellant had received from legitimate sources during the relevant period, the resulting sum of £176,342.12 represented the net amount which the judge treated as the proceeds of crime. It is surprising that benefit frauds totalling £15,000 or thereabouts should be the springboard for a finding that the appellant benefited from crime in a sum exceeding £175,000, but this is by no means the first time that this legislation has produced such a result.[7]The judge was then required to assess the amount of the appellant's realisable assets. She found that they amounted to £135,524.60. The first of the assets which comprised that sum was the appellant's share in his matrimonial home. That had been purchased in 1992 in the joint names of the appellant and his wife. In August 2004, the appellant transferred his interest in it to his wife. He claims that his wife had permitted him to have the proceeds of sale of some land in Bangladesh on the understanding that he would transfer his interest in the matrimonial home to her. But the judge found that the appellant had not proved that his half-share in the matrimonial home was no longer his. She found that the value of the property was £70,000, and accordingly the value of the appellant's interest in it was £35,000.[8]The judge also found that the appellant had a number of other assets. They included the sum of £20,750, which represented his share of the net proceeds of sale of the property which had been sold on 31st October 2003 for £66,500; sums totalling approximately £75,000, which had been withdrawn -- for the most part in sizeable amounts of £500 or more -- from one of his accounts at Barclays; and the sum of £6,463.58, which we understand to be the proceeds of sale of some shares previously owned by him. All in all, when you add up all these assets, and then subtract the sum of £1,688.90, which the judge ordered the appellant to pay by way of compensation, the judge found that the resulting sum of £135,574.60 represented the appellant's realisable assets. Since that sum was less than the sum which the judge treated as the proceeds of crime, that was the sum which the judge made the subject of the confiscation order. The judge made that order despite the fact that on 1st September 2005 (in other words, just over four week earlier) a bankruptcy order had been made in respect of the appellant on his own petition for bankruptcy.[9]Against that background, we turn to the grounds of appeal which were drafted by Mr Adrian Eissa, who represents the appellant today but who did not represent the appellant either at his trial or at the hearing of the application for the confiscation order. The first ground is that the appellant's intervening bankruptcy is said to have deprived the judge of the power to make a confiscation order against him. The argument is that a bankrupt is not in control of his own affairs because his assets are in the hands of his trustee in bankruptcy. The provisions of section 102(8), 84(1) and 84(2) of the 1998 Act are said to be in line with that argument.[10]We do not agree. As a matter of principle, we do not think that a bankrupt's assets being in the hands of his trustee in bankruptcy affects the position at all. The bankruptcy may be highly relevant to the enforcement of a confiscation order, but not to the making of such an order in the first place. That, we think, is the explicit effect of section 102(8) of the 1988 Act, which defines what is meant by the phrase "properly held by a person", which relates back, inter alia, to the definition of "realisable property" in section 74(1) of the 1988 Act, which refers to "any property held by the defendant". Section 102(8) reads:
"References to property held by a person include a reference to property vested in his trustee in bankruptcy, permanent or interim trustee within the meaning of the Bankruptcy (Scotland) Act 1985 or liquidator."
So if the property held by the defendant for the purposes of making a confiscation order includes property vested in his trustee in bankruptcy, it is impossible to say that a confiscation order cannot be made against a bankrupt.[11]Mr Eissa contends that the reference in section 102(8) to a "trustee in bankruptcy" cannot refer to a trustee in bankruptcy appointed in England and Wales, as there is no reference in section 102(8) to the legislative provenance of that office. That is to be contrasted with the office of a permanent or interim trustee within the meaning of the Bankruptcy (Scotland) Act 1985. Again, we disagree. It would not make any sense for the 1988 Act to treat defendants in English confiscation proceedings differently depending on whether the order for bankruptcy was made in England or Scotland. Indeed, there was no need to refer in an English statute to the English legislation which created the office of trustee in bankruptcy -- or the office of liquidator for that matter -- but there was a need to refer in an English statute to the provenance of the equivalent office in another jurisdiction. In short, section 102(8) is plain. Property held by a person in any of the three offices referred to in section 102(8) is to be regarded as held by the person who the property would have been held by if a bankruptcy order had not been made against him.[12]Mr Eissa also relied on the effect of sections 84(1) and 84(2) of the 1988 Act, which deal with the impact of a defendant's bankruptcy on property which is or could be the subject of a restraint order. The principle which the 1988 Act embodies is one of "first come, first served". If a restraint order is in force and the defendant is later made bankrupt, any assets subject to the restraint order, or any proceeds of realisation by a management or enforcement receiver, do not form part of the defendant's estate for the purposes of the bankruptcy proceedings. On the other hand, if a bankruptcy order predates the restraint order, the court may not include in the restraint order any property which forms part of the bankrupt's estate for the purposes of the Insolvency Act 1986, and a management or enforcement receiver may not exercise his powers in relation to such property.[13]It is said by Mr Eissa that Parliament could never have intended to forbid the making of a restraint order simply because the defendant had already been made bankrupt, but nevertheless to allow a confiscation order to be made. We do not see why not. It goes back to the point of principle we mentioned earlier. The fact that a bankrupt's assets are vested in his trustee in bankruptcy may well affect the enforcement of a confiscation order, which is calculated by reference to those assets, but it does not necessarily affect the making of the order in the first place, and certainly does not in the light of section 102(8). Indeed, in Crown Prosecution Service v Compton [2002] EWCA 1720 Civ, the Court of Appeal did not doubt that the confiscation order which had been made in that case could have been made despite the refusal of the court previously to make a restraint order simply because the defendant had already been made bankrupt.[14]The second ground of appeal is related to the first. Even if there is no statutory bar on the making of a confiscation order against the bankrupt, there is said to be a strong public interest in avoiding a situation where the defendant fails to comply with the confiscation order because he is not free to dispose of his assets, or where he acts in breach of the restraints placed by the Insolvency Act on the disposal of assets by a bankrupt. All of the potentially complex issues which arise from the interplay between bankruptcy and confiscation are said to be avoided if the first come, first served principle is applied, ie, if a confiscation order cannot be made if the offender has already been made bankrupt.[15]In our view, the difficulties which are said to arise as a result of the tension between these two legal processes are significantly reduced when one focuses, once again, on the making of the confiscation order as opposed to its enforcement. The prosecution accepts that its powers may well be severely restricted when it comes to the enforcement of a confiscation order, which is where the tension really lies. We have not been persuaded that the making of a confiscation order, which will focus on what the offender's realisable assets are rather than how their realisation can be enforced, brings the tension between confiscation and bankruptcy into play. Indeed, as Hallett LJ pointed out in the course of argument, if the public interest is a relevant factor at all, the public interest would not be served if a defendant was able to avoid a confiscation order by the simple expedient of applying for his own bankruptcy before the hearing of the application for a confiscation order takes place. It is no argument to say that the prosecution could protect itself by making an application for a restraint order, because the circumstances entitling the prosecution to apply for a restraint order may either not be known to the prosecution or may not even exist.[16]Included in the second ground of appeal is a related point, which relies on section 74(3) of the 1988 Act. That provides that, for the purpose of calculating the amount due under a confiscation order, there has to be deducted from the defendant's realisable assets "the total amounts payable in pursuance of obligations having priority at the time". By section 74(9)(b), "an obligation has priority at any time if it is an obligation of the defendant to . . . pay any sum which would be included among the preferential debts (within the meaning given by section 386 of the Insolvency Act 1986) in the defendant's bankruptcy". It is said that the judge failed to investigate whether the appellant had any such debts. But as far as we can tell, the judge was not asked to do that. Nor did the appellant or his counsel suggest that there were any such preferential debts. No doubt the judge would have investigated such a suggestion if it had been made, but it had not been. It is, of course, well settled that when it comes to identifying what are a defendant's assets for the purposes of a confiscation order, the burden of proof is on the defendant to show that he does not have the necessary property to be realised, and to discharge that burden the defendant should adduce "clear and cogent evidence" (see Mitchell, Taylor and Talbot on Confiscation and the Proceeds of Crime, 2nd ed., vol. 1 at para.5-040).[17]The third ground of appeal relates to what was believed to be the absence of a notice from the prosecution of its intention to proceed on the basis of the provisions of section 72AA of the 1988 Act. Since it is now acknowledged that there was such a notice, that ground of appeal is no longer relied on. Nor are the sixth and seventh grounds of appeal, because they have been overtaken by events. There remain the fourth and fifth grounds of appeal, which it is convenient to take together because they relate to the assumptions set out in section 72AA(4) of the 1988 Act which the court is permitted to make for the purposes of determining whether a defendant has benefited from crime, and if so, in what amount.[18]Section 72AA(5)(c) of the 1988 Act provides that no such assumption should be made in relation to any particular property or expenditure if the court is satisfied that there would be "a serious risk of injustice in the defendant's case if the assumption were to be made in relation to that property or expenditure". It is said that the judge did not address whether the constraints placed on the appellant in dealing with his assets which arose as a result of his bankruptcy gave rise to a serious risk of injustice. Reliance is placed on the case of Ilyas [2009] 1 Cr.App.R(S) 59, in which Judge Roberts QC in the Court of Appeal said at [68] that in case the trial judge had not considered the "safety valve" in section 72AA(5)(c), the Court of Appeal should do so for itself.[19]There is, admittedly, no reference in the judgment of Judge Fisher to section 72AA(5)(c) or any consideration in the judgment of whether a serious risk of injustice would arise in this case. That, no doubt, was because no submission was made to her on the point. In any event, though, it is important not to overstate the reach of section 72AA(5)(c).

(S) 84 at [30]:

"Section 72AA(5) specifically provides that an assumption should not be made if there would be a serious risk of injustice in an offender's case if it were made. It is only in that context that Lord Steyn said [in Rezvi [2003] 1 AC 1009] that there was an obligation to consider whether there was a risk of injustice. In other words, a consideration of the assumptions under section 72AA does not impose a general obligation on the court to review the sum which emerges and to apply the calculations required with respect to section 71(4)."
The constraints placed on the appellant in dealing with his assets, which arose as a result of the bankruptcy, had nothing to do with the assumptions which the court made for the purpose of determining whether he had benefited from crime and by what amount. Accordingly, the safety valve in section 72AA(5)(c) had no application to those constraints.[20]Section 72AA(5)(c) is not the only safety valve on which Mr Eissa places reliance. There is also the safety valve of section 74(10)(b), which provides that a gift is not caught by the 1988 Act unless the court thinks it appropriate in all the circumstances to take the gift into account as part of the defendant's realisable property. The gift to which this subsection relates was the appellant's share in the matrimonial home which the appellant had transferred to his wife in return for what he claims had been the transfer to him of the proceeds of sale of the land in Bangladesh. It is suggested that the judge did not address the question whether it was appropriate to take that gift into account.[21]It is true that the judge did not expressly address that question, but she found that this was a gift caught by the 1988 Act because she did not believe that the appellant had discharged the burden of proof that the property was no longer his. She noted that if the proceeds of the sale of the land in Bangladesh had indeed been transferred to the appellant, they would have been transferred to him following the death of his mother in 1997, and yet the transfer to his wife of his half-share in the matrimonial home, which was said to be in return for this, had not occurred until the summer of 2004 which happened to be after the criminal proceedings had been instituted. There were no documents before the judge evidencing the transfer of the proceeds of the sale of the land in Bangladesh, and no evidence from the appellant's wife relating to the circumstances in which the appellant's half-share in the matrimonial home had been transferred to her. In the circumstances, we can readily understand the judge's scepticism of the account which the appellant had given. Once she had not been persuaded on a balance of probabilities that his account was true, there would have been no basis for saying that it would have been inappropriate for the gift to his wife to be taken into account as part of his realisable assets.[22]It has also been suggested -- though this was not in the grounds of appeal -- that the judge did not appreciate that she did not have to make the assumptions which she did for the purposes of determining whether the appellant had benefited from crime, and that even if she had appreciated that, this was not the sort of case in which it was appropriate for the judge to have made the assumptions which she did. We do not think that the judge could have failed to realise that the making of the assumptions which she did was a matter within her discretion. And the difficulty with the latter point is that such explanations as the appellant gave for having made the deposits which were made into his account at Barclays, or his reasons for saying that the money to purchase the property which was eventually sold on 31st October 2003 came from someone else could not have been believed by the judge. We cannot go behind her findings, and Mr Eissa has not pointed to any particular reason why we should, apart from relying on the recent information we have seen from the appellant's trustee in bankruptcy, which does not undermine what the judge decided in the light of the evidence before her.[23]The final point is that the judge is said to have been confused about the reach of the assumptions because she wrongly thought that they related, not just to whether assets held by or transferred to the appellant represented the proceeds of crime, but also to the value of those assets. That error is said to be borne out by something which the judge said when she referred to the property which had been sold on 31st October 2003. She said this:
"I am satisfied that the sum of £20,750 is the correct figure having heard the evidence of Mr Rudge [who was the financial investigator who had prepared the prosecution statement] and that that is the 50% share that this defendant has in respect of that property [and now the critical words for the purposes of this submission] and, therefore, I am satisfied that that specific sum on the evidence of Mr Rudge is an assumption that the court is entitled to make in respect of benefit accrued to the defendant."
This part of the judge's ruling is not all that happily phrased, which is something which one sometimes sees in a judgment delivered ex tempore, but we do not think for one moment that the judge intended to mean that she was only making an assumption about the value of the appellant's interest in the property. We are sure that what she intended to say was that she was making the assumption that the property had been purchased with the proceeds of sale, but that the value of the appellant's interest in it had been proved to be £20,750.[24]For all these reasons this appeal must be dismissed.

LADY JUSTICE HALLETT: Mr Eissa, Miss Campbell, one matter for both of you. The time estimate was an hour and 30 minutes. We have just completed in time, but only because we did not need to call on Miss Campbell because of her excellent argument. Please in future with time estimates include the factor that judgments in cases of this kind sometimes have to go into a certain amount of detail. Despite my Lord's excellent summary, he had to go through a number of matters.

[26]MR EISSA: Noted. Thank you.

Cited in 2 later judgments