Yu & Anor, R v [2015] EWCA Crim 1076

Case No 201304259 B3 / 201304261 B3[2015] EWCA Crim 1076
IN THE COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM CROWN COURT AT OXFORD
HER HONOUR JUDGE MOWATT
T20110117
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 16 June 2015
Before
LORD JUSTICE GROSSMRS JUSTICE ELISABETH LAING DBEHIS HONOUR JUDGE GILBERT QC – RECORDER OF EXETER
Between
REGINAAppellantJIE YU and ELAINE LINRespondent
Mr Gordon Menzies (instructed by West Berkshire District Council Legal Services) for RespondentsMr Nigel Lithman QC (instructed by Sonn Macmillan Walker) for AppellantsHearing Hearing dates : 26 March 2015
JudgmentLord Justice Gross:INTRODUCTION
[1]On 21st May, 2012, in the Crown Court at Oxford, before HHJ Risius, the appellants (who are husband and wife) pleaded guilty on re-arraignment to four counts contrary to s.92(1)(b) and (c) of the Trade Marks Act 1994. On the 23rd May, 2012, again before HHJ Risius, they were each made subject to a community sentence, 12 months in the case of Mr Yu (the husband) and 6 months in the case of Ms Lin (the wife).[2]Confiscation proceedings followed. On the 15th November, 2012, now before HHJ Mowat, the appellants were found to have benefited in the sum of £1,537,016.18 and to have realisable assets in the same amount and thus in the sum of £768,508.41 each. In a nutshell and following a hearing at which the appellants gave evidence, HHJ Mowat held that they had failed, on the balance of probabilities, to satisfy her that the available amount was less than their benefit. Accordingly, they were each made subject to a confiscation order (“the confiscation order”) pursuant to ss.6 and 7 of the Proceeds of Crime Act 2002 (“POCA 2002”), in the sum of £768,508.41, to be paid within 6 months and, in default, to serve a sentence of 3 years’ imprisonment.[3]On the 23rd October, 2014, the full court granted the appellants an extension of time and leave to appeal the confiscation order. Then and subsequently on the 13th February, 2015, the full court gave directions, including as to the service of fresh evidence, of which more below.[4]The question raised by Mr Lithman QC on behalf of the appellants, both in seeking leave to appeal, and before us, was whether expenditure can be relied upon as evidence to rebut the assertion of “hidden assets” when determining the available amount in accordance with s.7(2) of POCA 2002. Mr. Lithman’s submission was that while expenses were irrelevant to the calculation of the appellants’ benefit, they were relevant to the calculation of the recoverable (or available) amount.[5]In the event, as will be seen, it was common ground before us that the answer to Mr. Lithman’s question and his submission was that expenses were, as a matter of law, capable of being relevant to the calculation of the available amount. However, as Mr. Menzies for the Crown made clear, that answer was not determinative of the appeal. Instead, the issue before us was whether the detailed evidence of the appellants’ United Kingdom expenses adduced before us was relevant, as a matter of fact, to the calculation of the available amount.

THE FACTS

[6]On the 8th April, 2009, West Berkshire Council Trading Standards Service received a complaint regarding a web site called www.poshwatch.co.uk which was advertising for sale watches bearing the Trade Marks of high quality brands such as Rolex.[7]A test purchase of a watch marked as Rolex was made on 20th May, 2009 and this was sent to Rolex for examination. The price paid for the watch was £95.00.[8]Rolex confirmed that the watch was not genuine and that Poshwatch did not have any consent to use the Rolex Trade Mark. Subsequent enquiries revealed that the appellants were responsible for sending the counterfeit watch and a warrant was obtained to search their premises at an address in Reading. The warrant was executed on the 22nd October, 2009. No watches were found but there were a significant number of Trade Marked boxes (including Rolex and Cartier boxes) as well as 129 iPod Nanos amongst other items.[9]The watch boxes and other items were later confirmed by Rolex and Cartier to be counterfeit. Poshwatch did not have consent to use the Cartier logo. Apple (UK) confirmed that the iPod Nanos could be mistaken for genuine Apple products.[10]Computers were also seized and later examined by computer forensic examiners. They revealed spread sheets showing stock levels of various makes of watches and e-mails sent to Mr. Yu referring to the Poshwatch business. After the warrant was executed the Poshwatch site closed down.[11]WorldPay (UK) Ltd provided information that confirmed that “P Watch”, with principal owner “J Yu” applied for a WorldPay account on 22nd May, 2007 and that payments to Poshwatch were made via that WorldPay account.

THE CONFISCATION RULING

[12]As ever, context is of the first importance. The principal, or certainly an important, submission before the Judge was that a Mr Huang was the only person running the Poshwatch business, and was the moving force behind it, with the appellants doing no more than lending their address, bank account/s and the like. Mr. Huang had since disappeared to China. The Judge rejected this argument on the balance of probabilities and held that the appellants were joint beneficiaries of the £1,537,016.81 received into their bank accounts between about 4th November 2004 and 3rd November 2010. In passing, the Judge observed that the argument about Mr Huang’s role which the appellants advanced at the hearing had not in any way been foreshadowed in their basis of plea.[13]Next, the Judge rejected the assertion by the appellant, Ms Lin, that some of the funds were generated by her legitimate businesses, as she was not able to produce any documentary evidence to support this case.[14]The Judge then turned to the somewhat tangled question of the £367,000 odd sent by the appellants to China and the £471,000 odd received by the appellants from China.[15]The Judge was faced with a variety of inconsistencies in the appellants’ accounts, both about the moneys sent, and about those received. The details no longer matter but two examples are perhaps illustrative. First, the appellants at one point suggested that the moneys sent to China had nothing to do with Poshwatch but came from another business (Skymine); the difficulty (amongst others) with this account was that, as Mr Menzies has demonstrated, the appellants, in their s.18 POCA 2002 Responses, put their cumulative earnings from Skymine at £120,000 and thus nowhere near the £367,000 or so sent to China. Unsurprisingly, the Judge rejected the Skymine argument. Secondly, Ms Lin asserted that some £84,000 was sent by her mother to assist the appellants with a deposit for a house. However, as the Judge concluded, this assertion was impossible to reconcile with the audit trail of the funds which revealed that £50,000 of the £84,000 in question was returned to Ms Lin’s mother – all well before the before the deposit was paid and the house purchased.[16]The Judge grappled with the evidence (adduced for whatever reason in less than satisfactory form) that the moneys sent to China constituted gifts to relatives or perhaps an informal banking arrangement. She had been addressed by Mr Menzies on the improbability of the Chinese relatives – said to be living in straitened circumstances – transmitting some £100,000 of their savings to the appellants (another contention advanced at the confiscation hearing).

The Judge’s conclusion was expressed as follows (at p.127 of the Transcript):

“ All I can conclude is that that money was sent to China and, as the prosecution contend, come somewhat hard times after the closure of Posh Watch, rather more money came back from China to this couple, over £400,000, which suggests that they were in a position to draw on funds as and when needed from China, whatever may have been the arrangements with people over there. In all the circumstances, I feel I am driven to the conclusion, given the dearth of evidence about it on the defendants’ side, that there were hidden assets from what was clearly, if one looks at the bank accounts, a jolly successful business. There is a lot of money being spent…….”
[18]Accordingly, the Judge was not persuaded that the appellants’ benefit should be discounted and went on, as already recounted, to make a confiscation order in the amount of that benefit.

FRESH EVIDENCE

[19]The principal component of the fresh evidence which the appellants sought to adduce pursuant to s.23 of the Criminal Appeal Act 1968 comprised credit card statements detailing expenses incurred by the appellants in this country. As very much a secondary matter, the appellants sought leave to introduce evidence as to their present financial status. Whatever the strict justification for these applications, having considered the materials de bene esse, we were content to admit the evidence and deal with the matter on the merits.[20]Credit card statements: These were voluminous but, as matters transpired, wholly unnecessary to explore in any detail. At the original confiscation hearing, various UK bank account details were before the Court. These showed that, amongst other payments, some were made to credit card companies, e.g., American Express. All that the credit card statements added was a description and identification of the credit card transaction in question. As it had not been in dispute at the original hearing that sums from UK bank accounts were expended on meeting the appellants’ living and business expenses, including credit card bills, the credit card statements added nothing other than detail as to the credit card transactions. Against this background, at the invitation of the Court, the parties sensibly and speedily agreed that the matter could proceed on the basis of a single page schedule of agreed facts: namely, that the appellants’ total expenditure from their UK bank accounts funded by various credit and, perhaps (it matters not), debit, cards amounted to some £881,000.[21]Present financial status: Having considered, if briefly, the appellants’ evidence as to their present financial status and the evidence the Crown sought to rely upon in response, we were entirely satisfied that none of this material assisted the Court in dealing with the issues before us. We therefore propose to say no more about it.

THE RIVAL CASES

[22]For the appellants, Mr. Lithman QC submitted that the Judge had fallen into error. While expenses were irrelevant to the calculation of the benefit obtained by an offender, they were relevant to the separate question of the amount recoverable from an offender. The appellants had incurred “huge” expenses both in a personal capacity and in furtherance of their business. Expenditure, such as credit card payments – Mr. Lithman highlighted the sum in excess of £200,000 paid to American Express – told against the Judge’s conclusion that there were “hidden assets” and was relevant to reducing the realisable property available to an offender. The fresh evidence of the credit card statements was indicative of the expense sustained in continuing criminal conduct – expenditure to obtain watches subsequently supplied. The Judge had allowed nothing for expenses. The Judge’s focus on the issue concerning Mr. Huang resulted in her “closing her eyes” to such expenditure and, accordingly, the confiscation order imposed was manifestly excessive and wrong in principle. The maximum sum to which the confiscation order should have been restricted was some £86,312.59, relating to various identified assets and subject to a further question as to whether those assets remained realisable.[23]For the Crown, Mr. Menzies, as foreshadowed, accepted that, as a matter of law, expenses were capable of reducing the amount recoverable from an offender. However, as a matter of fact, neither the evidence before the Judge as to their UK expenses nor the fresh evidence before us as to the credit card statements assisted the appellants. The factual picture was that moneys left the appellants’ bank accounts to make credit card payments and, thereafter, moneys were sent to China. The issue before the Court below was whether there was a pool of money available to the appellants in China. The Judge was not satisfied that there was no such pool; in the light of the burden of proof provided by POCA 2002, the Judge was entitled and bound to go on and make a confiscation order in an amount equal to the appellants’ benefit. There was, in any event, ample evidence for such a conclusion. It had never been suggested that there were hidden assets in the UK or that the credit cards had been used as a conduit for moneys to be hidden in the UK. Still further, it was clear that the appellants’ “UK money” had been dissipated. Accordingly, nothing in the UK expenses had any bearing on what the Crown submitted had gone to China and the pool of money there available to the appellants. The Judge’s order should be upheld and the appeal dismissed.

THE LEGAL FRAMEWORK

[24]As the position here is essentially undisputed, we deal very briefly with the law and do so, largely, in order to furnish a framework for the discussion and conclusions which follow.[25]POCA 2002: S.6 provides, so far as relevant, that the court must decide whether the defendant has a criminal lifestyle and, if so, it must decide whether he has benefited from his general criminal conduct. If the court decides that the defendant has benefited from such conduct, then it must decide the recoverable amount and make a confiscation order requiring him to pay that amount. All these questions must be decided on a balance of probabilities.[26]S.7 deals with the “recoverable amount” as follows:
“ (1) The recoverable amount for the purposes of section 6 is an amount equal to the defendant’s benefit from the conduct concerned. (2) But if the defendant shows that the available amount is less than that benefit the recoverable amount is – (a) the available amount ….. ”
It is plain that the statute places the burden on the defendant to show, on a balance of probabilities, that the available amount is less than his benefit. Should the defendant fail to do so, then the recoverable amount is an amount equal to his benefit. “Benefit” is defined by s.76(7) as “the value of the property obtained”.[27]Authority: In R v May [2008] UKHL 28; [2008] 1 AC 1029, Lord Bingham of Cornhill, dealing with the structure of the statutory regime, set out the three questions which a court needed to address and answer before making a confiscation order (at [8]):
“ The first question is: has the defendant (D) benefited from the relevant criminal conduct? If the answer to that question is negative, the inquiry ends. If the answer is positive, the second question is: what is the value of the benefit D has so obtained? The third question is: what sum is recoverable from D? ….. the questions are distinct and the answer given to one does not determine the answer to be given to another. The questions and answers should not be elided.”
[28]Turning to the third question (at [35]), Lord Bingham observed that it had been recognised that a defendant may lack the means to pay a sum equal to the aggregate of his benefit. It had also been recognised (loc cit) that “…it would be unjust to imprison a defendant for failure to pay a sum which he cannot pay.” Accordingly, provision had been made for assessing the means available to a defendant and where those means were less than his benefit, for the court to make a confiscation order in the lesser sum.[29]With regard to the calculation of benefit, Lord Bingham underlined (at [48]) that the “…benefit gained is the total value of the property or advantage obtained…” not “…the defendant’s net profit after deduction of expenses or any amounts payable to co-conspirators”. As appears below, the exclusion of expenses from the calculation of benefit does not apply to the calculation of the available amount.[30]Dating back certainly to the decision in Comiskey [1991] 93 Cr App R 227, there is authority for the proposition that expenses are capable of being taken into account when it comes to calculating the available amount under s.7, POCA 2002. That said, the observation of Tucker J, giving the judgment of the court (at p.233), that “… the court cannot close its eyes to the obvious and cannot ignore the fact that some expenses must have been incurred…” must be read subject to the burden of proof on the defendant contained in s.7(2), POCA 2002 (set out above). A defendant who fails to satisfy that burden will not succeed in reducing the recoverable amount beneath the value of his benefit.[31]The issue in Lee [2013] EWCA 657 here relevant was the contention that (at [18]) “….the Judge illegitimately moved directly from rejection of the cases advanced by the defendants to the conclusion not only that there were unrevealed assets, but that they must be in the sum of the whole of the benefit as calculated under the Act”.[32]The statement of principle is contained in the judgment of the Vice President, Hughes LJ (as he then was), at [20] – [22]: “20. The starting point is of course section 7 of the Act which provides that the realisable or available amount is to be taken to be the benefit figure unless the contrary is shown on the balance of probabilities. Both defendants understandably rely on the decision of this court in R v McIntosh and Marsden [2011] EWCA Crim 1501 and its subsequent endorsement, also in this court, in the case of R v Ahmad and another [2012] EWCA Crim 391……21. We do agree that those cases show that when the court is addressing the question of undisclosed or, as they are often called, hidden assets which have to be included in the available amount, the judge is not bound (our emphasis) simply because he disbelieves a defendant to decide that his hidden assets must be the full amount of the benefit. We agree with what is said in those judgments, and in any event we are bound by them, that it may be a legitimate conclusion for the judge to reach that the defendant clearly has hidden assets but not as much as the statute calculates as benefit. Indeed it may be possible. We also agree that the mere fact that a defendant gives evidence which the judge cannot believe does not necessarily mean that the only conclusion is that the amount of hidden assets is the full amount of the benefit. It is clearly possible to have a case in which everything the defendant says about his assets is rightly disbelieved, but there is the clearest possible evidence from elsewhere that he is destitute and there simply is not any money anywhere.22. However, whilst that is certainly so…..it does remain…the fact that section 7(2) of the Proceeds of Crime Act lays upon the defendant the obligation to show that his available amount is less than the benefit. In McIntosh and Marsden Moses LJ put it this way: ‘The court may conclude that a defendant’s realisable assets are less than the full value of the benefit on the basis of the facts as a whole. A defendant who is found not to have told the truth or who has declined to give truthful disclosure will inevitably find it difficult to discharge the burden imposed upon him. But it may not be impossible for him to do so. Other sources of evidence, apart from the defendant himself, and a view of the case as a whole, may persuade a court that the assets available to the defendant are less than the full value of the benefit.’ We entirely agree. It is instructive to look at the conclusion arrived at by the court in that case precisely, dealing with the defendant Marsden, set out at paragraph 27: ‘The judge concluded that he was not satisfied that Marsden no longer held such property there or elsewhere. He found that the value of what he has abroad is totally unknown. This was a crucial finding. Once the judge had reached that conclusion, there was no basis on which he could conclude that the value of Marsden’s realisable property was less than the value of his benefit, in the light of Marsden’s role in so lucrative a conspiracy. There was no justification for valuing his available assets as less than the full value of the benefit, even accepting the modest style in which he lived.’ In other words, whilst McIntosh and Ahmad clearly show that you cannot move directly from disbelieving the defendant to finding that his assets which are hidden are necessarily the same sum as his benefit, but you must look at the whole of the evidence, if there is nothing other than evidence which is disbelieved, you are likely to have to come back to the original conclusion. That is largely what happened in the present case….. ” ‘The court may conclude that a defendant’s realisable assets are less than the full value of the benefit on the basis of the facts as a whole. A defendant who is found not to have told the truth or who has declined to give truthful disclosure will inevitably find it difficult to discharge the burden imposed upon him. But it may not be impossible for him to do so. Other sources of evidence, apart from the defendant himself, and a view of the case as a whole, may persuade a court that the assets available to the defendant are less than the full value of the benefit.’ ‘The judge concluded that he was not satisfied that Marsden no longer held such property there or elsewhere. He found that the value of what he has abroad is totally unknown. This was a crucial finding. Once the judge had reached that conclusion, there was no basis on which he could conclude that the value of Marsden’s realisable property was less than the value of his benefit, in the light of Marsden’s role in so lucrative a conspiracy. There was no justification for valuing his available assets as less than the full value of the benefit, even accepting the modest style in which he lived.’[33]We turn to apply this summary of the law to the facts of the case and a consideration of the judgment under appeal.

DISCUSSION

[34]It is plain that HHJ Mowat treated Lord Bingham’s third question in May (supra), going to the sum recoverable from the appellants, as separate from the value of the benefit obtained by them and did not elide the two.[35]Did the Judge then make the error, as submitted by the appellants, of moving directly from disbelieving them to finding not only that they had hidden assets but that these were necessarily in the same amount as their benefit? We think not. Our reasons follow.[36]First, the fallacy in the argument, otherwise attractively advanced by Mr. Lithman, was to over-state the relevance of the appellants’ UK expenses. i) We accept from Mr. Menzies that these expenses were taken into account at the hearing below: no one suggested there were hidden UK assets and, even if there were such assets, it was not in dispute that these had been dissipated. Thus even without the detail now furnished by the credit card statements, these expenses had not been overlooked. ii) It follows that the key to establishing the available amount (within POCA 2002, s.7) lay with the funds available to the appellants in China rather than in the UK. The difficulty for the appellants was establishing the relevance of the UK expenses to the question of the funds available to them in China. iii) As Mr Menzies submitted and we accept, the pattern was for moneys to be sent by the appellants to China after UK expenses had been met by credit card payments made using funds from UK bank accounts. Inescapably therefore, the UK expenses could not be relied upon by the appellants to reduce the sums available to them in China – the UK expenditure had already taken place before transfers were made to China. The UK expenses were therefore irrelevant – as a matter of fact – to the calculation of the available amount. iv) We add that, given the way the matter proceeded – outlined above - there is no question of the Judge having treated the UK expenses as irrelevant as a matter of law to the calculation of the available amount; the appellants’ difficulty was and is one of fact rather than law.[37]Secondly, the Judge was amply entitled to reject the various tangled and inconsistent explanations offered by the appellants (outlined above) as to their financial dealings and as to the movements of funds from the UK to China and from China to the UK.[38]Thirdly, of itself, this conclusion did not necessarily entail that the appellants possessed “hidden assets” in China, at all or in the amount of their benefit. But, as observed in Lee (supra), if, having regard to the whole of the evidence there was nothing other than the evidence which was disbelieved, there was no or no proper basis for the Judge concluding that the value of the appellants’ realisable property was less than the value of their benefit. In essence and fairly read, that was the conclusion to which the Judge felt driven to come – on the whole of the evidence and not because of some illegitimate leap from disbelieving the appellants to arriving at her answer. Having regard to the burden of proof resting on the appellants pursuant to s.6, POCA 2002 and once having disbelieved them, there was no proper evidential foundation for the Judge to conclude that the £471,000 received by the appellants from China included the £367,000 sent by the appellants to China. In short, as it seems to us, the Judge was both entitled and bound to reach the conclusion to which she came.[39]Fourthly, for completeness, we have not overlooked the decision of this Court in The Attorney-General v McMillan-Smith [2009] EWCA Crim 732. The facts there were very different and the court was in a position to form a view as to the total amount of income received by the defendant – not least because it was there accepted that he had no hidden assets prior to the activity in question (running a cannabis factory over a number of years). That is not the case here, both because of the difficulty in placing a figure on the pool of money available to the appellants in China (see above) and because other sources of income available to the appellants could not be discounted.[40]It follows that the appeal must be dismissed.