Smith, R. v [2013] EWCA Crim 502

[2013] EWCA Crim 502Case No 201203064 D2
IN THE COURT OF APPEAL
CRIMINAL DIVISION
Venue Royal Courts of JusticeDate Friday, 8th March 2013
Strand
London, WC2A 2LL
B e f o r e:
LORD JUSTICE LAWS
MR JUSTICE KEITH
HIS HONOUR JUDGE WIDE QC
(Sitting as a judge of the Court of Appeal Criminal Division)
Between
R E G I N ACrownv
Between
KIM SMITH
Computer Aided Transcript of the Stenograph Notes ofWordWave International LimitedA Merrill Communications Company165 Fleet Street London EC4A 2DYTel No: 020 7404 1400 Fax No: 020 7422 6138(Official Shorthand Writers to the Court)
Miss O Davies appeared for AppellantMr A D Harris appeared for Crown
J U D G M E N T
[1]MR JUSTICE KEITH: On 3rd June 2011 at Leicester Crown Court, the appellant pleaded guilty to three counts of dishonestly making false statements with a view to obtaining benefit. She was sentenced to four months' imprisonment suspended for 12 months with unpaid work and programme requirements. An application for a confiscation order was made, and on 16th December 2011 Judge Rogers made a confiscation order against the appellant in the sum of £8,394.99, to be paid within six months, with four months' imprisonment in default of payment. She now appeals against the confiscation order with the leave of the single judge. All references in this judgment to sections of an Act are references to sections of the Proceeds of Crime Act 2002.[2]The facts were these. On 20th February 2003 the appellant applied to Leicester City Council for housing benefit and council tax benefit. She said in the form that she had no savings or investments (count 1). She said the same thing in a later form dated 15th March 2004 (count 2), as well as on 20th May 2006 when she was visited by a Council official to verify her claims and she told the official that she had only two accounts (count 3). All those statements were untrue. She had several accounts over the years, together with significant savings. At the time of the first false statement, she had savings of £1,500. At the time of the second, she had savings of over £24,000. She had roughly the same amount of savings at the time of the third false statement.[3]In the light of her savings, the appellant had not been entitled to any benefit at all. The total amount she had received came to a sum in excess of £23,000. In September 2010, she repaid £10,000, and she then repaid the equivalent of £40 a month from December 2010 to June 2011. She also repaid a sum in excess of £6,000, but that was, at least in part, attributable to payments which had been made to her which did not form part of the indictment. That resulted in an outstanding balance of £12,364.06. Since the benefits to which count 3 related came to just under that – £12,039.32 – the prosecution limited its application for a confiscation order to count 3 and to that amount.[4]There was no dispute that the recoverable amount, and therefore the amount which the confiscation order should require the appellant to pay, was £12,039.32. To use the language of section 7(1), that was her “benefit from the conduct concerned”. It was then for the appellant to show that the amount available to her was less than that. If it was, then that amount became the recoverable amount: see section 7(2).[5]The appellant's case was that by the time of the hearing of the application for the confiscation order, she had no available assets. She had spent all the money she had. Sums in excess of £16,000 had been used to repay the Council, and the balance had gone on her day-to-day living expenses, on paying off the sums due on her credit cards and on money which she had given to members of her family. The sums of money she had given to members of her family were to be treated as gifts because section 78(1) provides:
"If the defendant transfers property to another person for a consideration whose value is significantly less than the value of the property at the time of the transfer, he is to be treated as making a gift."
Those gifts came to £8,394.99, though it is not clear to us how that sum was calculated because the appellant was not able to particularise many of the gifts she claimed to have made.[6]As it was, the judge found that she had no hidden assets, and he accepted her evidence that all her savings had gone, because he said in terms that he accepted her evidence “as to her own current situation”. He made no specific finding about the gifts she claimed to have made, but since he did not say that he was rejecting her evidence on the topic, he must be presumed to have proceeded on the assumption that what she had said about giving members of her family money had been correct.[7]Section 9(1) is the governing provision when it comes to determining the amount which is available to a defendant for the purposes of deciding what the recoverable amount should be. It provides:
"For the purposes of deciding the recoverable amount, the available amount is the aggregate of - (a) the total of the values (at the time the confiscation order is made) of all the free property then held by the defendant minus the total amount payable in pursuance of obligations which then have priority, and (b) the total of the values (at that time) of all tainted gifts."
In the context of the present case, any gifts made by the appellant after 20th May 2006 were tainted gifts: see section 77(5)(a). It was not disputed by the appellant's solicitor that the gifts which the appellant had admitted making were tainted gifts. However, it was argued that there was no prospect of the appellant being able to recover the sums she had given, and since she therefore had no prospect of being able to meet any confiscation order in the sum of £8,394.99, she would inevitably be in default of such a confiscation order. It was argued that in those circumstances the gifts should be treated as having been of no value, and that therefore a confiscation order only in a nominal amount should be made. The judge disagreed.[8]This appeal therefore addresses the circumstances when a tainted gift within the meaning of section 9(1)(b) should be regarded as having no value. The question of how you value “free property” within the meaning of section 9(1)(a) was considered in Najafpour [2010] 2 Cr App R (S) 38. In that case, the offender had been convicted of money-laundering. It was common ground that he had benefited from his general criminal conduct in the sum of £10m, but that sum dwarfed his available assets, and the court therefore had to determine what his available assets were. One of his assets was a sum in excess of £40,000 which he was owed by an Iranian living in Iran, and which the judge found to be “money which on any likelihood he is not going to get”. One of the arguments advanced on his behalf was that the court should not have treated this sum as an available asset as it could not in practice be recovered. The Court of Appeal rejected that argument, but it held at the same time that although it was an available asset, it should be treated as being an asset of no value.[9]The court reached that conclusion after considering what Lord Bingham had said in May [2008] 1 AC 1028 at [35]:
"From the 1986 Act onwards, the courts have been required to reinforce confiscation orders by the imposition of a term of imprisonment to be served in default of payment. But it has been recognised that a defendant may lack the means to pay a sum equal to the aggregate of the payments or rewards he has received, or the value of the property or pecuniary advantages he has obtained. It has also been recognised that it would be unjust to imprison a defendant for failure to pay a sum which he cannot pay. Thus provision has been made for assessing the means available to a defendant and, if that yields a figure smaller than that of his aggregate benefit, making a confiscation order in the former, not the latter, sum."
[10]In the light of that, Elias LJ in giving the judgment of the court in Najafpour said at [33]-[34]:
"33. If it is impossible to recover the debt then it would be quite inconsistent with the structure of the Act as explained by the judgment of Lord Bingham in May to trigger the default sentence. A defendant is not to be imprisoned if he satisfies the court that he simply does not have the assets available: see the decision of this court in Chen (4th December 2009) [[2009] EWCA Crim 2669]. So if an asset is in fact of no financial value, it must be assessed as such. 34. We anticipate that this situation will arise but rarely. In many and perhaps most cases a court may well at the point of determining the Confiscation Order be sceptical about assertions by a defendant that monies due are irrecoverable. The court may quite properly wish to have evidence from the defendant of the steps he has taken to recover the sums before he is able to satisfy the court that the debt is in practice worthless. In those circumstances the court will make a confiscation order and the amount will include the value of the debt, and the defendant will have to seek a certificate of inadequacy at a later date. But where, as here, the judge is fully satisfied when making the order that the debt will not be recovered, he should assess the value of the asset at nil."
[11]Najafpour therefore deals with how you value the defendant's “free property” within the meaning of section 9(1)(a). It does not deal with how you value “tainted gifts” within the meaning of section 9(1)(b). We shall come shortly to whether a tainted gift which cannot be recovered by the defendant has no value, but it is important to note that in this case the judge did not find that the money which the appellant had given to members of her family could not be recovered. The judge noted that the appellant had not made “any real attempt to recover” the money. That was in part due to what the judge described as “a personal choice in the difficult family circumstances”, but he said that it “may also [have been] a realisation that it would be a fruitless exercise on her part”. He was not finding that attempts to recover the money would be futile. He was just saying that that may have been what the appellant thought. It is true that he went on to find that “her family members are very limited in terms of their own personal resources and would not be able easily to pay money to her or to return goods”, and that “such goods as there were in any event are likely now to be old and used and of very little tangible value”. That amounts to a finding that what members of her family bought with the money she gave them may not be worth that much, and that it would not be easy for them to raise the money to repay her. But there was no finding that the money could not be recovered if the appellant put her mind to it, or if, to use the words of the judge, she had made “rather greater efforts than the present”.[12]Having said all that, though, we recognise that the judge said in terms that there was no need for him to decide whether the money could be recovered. What he said was:
"So an application of the statutory provisions seems to me to lead to this inevitable result: that once items are included within the definition of 'tainted gifts' there is no need for an investigation to be made as to whether in fact there is any prospect of the items being returned or their value being recovered."
His reading of the statutory provisions was unaffected by what was said in Najafpour, if only because Najafpour was not dealing with tainted gifts under section 9(1)(b), but with one of the defendant's assets to which section 9(1)(a) related, and whether the value of an asset of that kind was affected by its lack of recoverability.[13]We agree with the judge for two reasons. First, there is a specific statutory regime governing the valuation of tainted gifts. It is in section 81, which is headed "Value of tainted gifts". There is nothing in section 81 which links the value of the gift to its recoverability, even though it contemplates the situation where the recipient of the gift has parted with it. There is no equivalent provision relating to the valuation of “free property”, and the basic rule in section 79 about valuing property focuses only on the market value of the property. It does not address the value of the debt owed to the defendant which it may be difficult or impossible for the defendant to recover. It was therefore open to the court in Najafpour to decide for itself whether the recoverability of such a debt was relevant to the valuation of “free property” of that kind.[14]Secondly, the whole point of including assets which a defendant has given away as one of the components in assessing the amount which a defendant has available was to prevent a defendant dissipating his assets by giving them away. If he is to be able to say that they are of no value because he cannot get them back, that would defeat what the inclusion of tainted gifts in section 9(1) was seeking to achieve. Since you cannot sue the recipient of a gift for its return, there may be many occasions when gifts cannot be recovered. It cannot have been intended for those gifts which the recipient is prevailed upon to return to be included as part of the offender's available assets, but not those which the recipient cannot be persuaded to give up.[15]For these reasons, this appeal must be dismissed.

Cited in 2 later judgments