Davenport v R. [2015] EWCA Crim 1731

[2015] EWCA Crim 1731Case No 201403898B4 & 201405531 B4
IN THE COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM THE CROWN COURT SITTING AT SOUTHWARK
HH JUDGE TESTAR
T20097856
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 03/11/2015
Before
LORD JUSTICE DAVISMRS JUSTICE LANG DBEMRS JUSTICE PATTERSON DBE
Between
Edward DavenportAppellantReginaRespondent
MR ANDREW MITCHELL QC (instructed by Kaim Todner) for AppellantMR SIMON MAYO QC and MR ALEX CHALK (instructed by The Serious Fraud Office) for RespondentHearing Hearing date: 6 th October 2015
Approved Judgment of the CourtLord Justice Davis:

Introduction

[1]The appellant, Edward Davenport, was convicted on 19 May 2011 after a very lengthy trial in Southwark Crown Court before His Honour Judge Testar and a jury of conspiracy to defraud. He received a substantial custodial sentence (subsequently reduced somewhat on appeal on grounds of the appellant’s then state of health). He was also disqualified from acting as a company director for a period of ten years.[2]Protracted confiscation proceedings followed. It was common ground that the criminal life–style provisions of the Proceeds of Crime Act 2002 (“the 2002 Act”) applied. Eventually, the appellant’s benefit from general criminal conduct was agreed at £12 million. The available amount was agreed at £13,943,620. The Judge, after a hearing on 22 May 2014, on the 17 July 2014 made a confiscation order in the amount of £12 million (payable within six months and with a default term of 10 years imprisonment) and, in addition, made a compensation order in the sum of £1,943,620. It was and is common ground that the figure representing the compensation order had also been included in the amount of the benefit contained in the confiscation order. Realisations made have resulted in both orders being satisfied in full. The appellant says that such an outcome involves unfair double counting and that the combination of the two orders was such as to give, and has given, rise to a disproportionate result. That is the principal issue before this court. It involves a consideration of the decision of a constitution of this court in the case of Jawad [2013] 1 WLR 3861, [2013] EWCA Crim 644.[3]The appellant was represented before us by Mr Andrew Mitchell QC (who did not appear in the confiscation proceedings below). The respondent was represented before us by Mr Simon Mayo QC (who did not appear in the confiscation proceedings below) and Mr Alex Chalk.[4]At the hearing before us the appellant also sought to renew his grounds challenging certain of the terms of a Serious Crime Prevention Order (“SCPO”) made by the Judge on 22 May 2014 and subsequently amended and finalised on 19 September 2014; and the amount of a Prosecution Costs Order made on 22 May 2014 against the appellant in the sum of £753,949. Leave had been refused by the Single Judge on those points.

Background facts

[5]The fraud itself was long lasting and had its complexities. However, because of the nature of the present grounds of challenge the background facts can be summarised quite shortly.[6]The appellant had, on the Crown’s case, been involved in two companies, Capricorn Group Holdings Limited and Southern Cross Group Plc, which had in 2005 collapsed with a deficiency of some £20 million. In that year he caused an associate to place advertisements seeking to locate dormant companies which had been incorporated before 1965. By these means he attracted the attention of the owner of a company called Industrial Design and Finance Limited, incorporated in 1958: which he then acquired for £10,000.[7]The company was then renamed Gresham Limited (“Gresham”). Its holding company was a company called Fortune Pond Limited, registered in Nevis, West Indies, which the appellant had caused to be incorporated using the alias “James Stuart”. The company secretary was another Nevis company also incorporated by the appellant under a false name.[8]The appellant then retained the services of other individuals to operate Gresham, albeit answerable to the appellant. Elaborate brochures, promoting it as a company specialising in providing finance, were prepared and sent out and internet domain addresses for Gresham secured. Thereafter annual reports gave entirely misleading claims about Gresham’s true financial worth and standing – it claimed to have been in business since 1958 (although the reality was that the company in its previous form had never been involved in financial lending), to have expertise in project financing and to have a strong balance sheet. This was not true. For example, Gresham claimed to be the holding company of four highly profitable Nevis subsidiaries which in truth were worthless and which had filed bogus accounts.[9]The involvement of the appellant in Gresham was very significant although, in the striking phrase of the Judge, designed to leave “no footprints in the snow.” The Crown’s case was that he took one-half of the net profits. The fraud was, in essence, a form of advance fee fraud. Businesses and companies were attracted by the publicity to seek financing. They were, typically, required to pay substantial fees up front for purported due diligence fees, property surveying fees and the like. In reality, as was the Crown’s case, those proffered services were sham. No project or other financing was forthcoming: although as late as 2008 Gresham continued to place advertisements in trade and other magazines still claiming that it could provide capital by way of project finance, refinancing and bridging loans.[10]By the end of 2008 creditors were circling. However the appellant then caused the winding up of Gresham to be staved off by various dishonest misrepresentations as to Gresham’s true worth and by other means, which also included the use of the services of a dishonest solicitor.[11]Ultimately Gresham was compulsorily wound up on 14 October 2009. Losses to identified creditors were estimated at nearly £2 million (in the form of advance fees paid): although this did not include consequential losses to victims of the fraud and total losses were estimated to exceed £4 million.[12]By this time the appellant also had acquired a further company called Cutting & Co (Humber) Limited, which was established in 1930. It had shareholders’ funds of £1,621. On 1 June 2009 it was renamed Cutting & Co (Investments) Limited and by the end of July 2009 its authorised share capital was increased and the paid up share capital was asserted in a notice filed at Companies House to be £30 million. Advertisements for this new company were placed. The clear inference was that it was designed to be a successor to Gresham.[13]The trial lasted some 3 months. The sentence in due course imposed by the Judge was one of 7 years and 8 months imprisonment (reduced on appeal to 6 years and 8 months). Two co-accused, closely involved with the appellant in the running of Gresham, and essentially the “front” operators, were also convicted. Following those convictions three other co-accused (whose cases had been severed for case management reasons) pleaded guilty. In the light of the appellant’s conviction the Crown pragmatically did not seek to pursue to trial various other charges of fraud which had been brought against the appellant.[14]In subsequent sentencing remarks the trial Judge found the appellant to be the orchestrator of and mastermind behind the fraud. When he came to impose the SCPO, the Judge described the appellant as a very sophisticated operator and as “a very, very dishonest man and a very competent, skilful and determined fraudster”. The Judge noted the terrible consequential losses for some of the victims of the fraud, a number of whom had been completely ruined. The Judge – who, having presided over the 3 month trial, was in a good position to assess the matter – went on to say:
“I am sorry to say that, just as water flows downhill, it is the natural inclination of this defendant, if he is to engage in commerce, to do so dishonestly.”

Renewed application: Prosecution Costs Order and SCPO

[15]We can deal shortly with the challenges to these orders. (1). The Prosecution Costs Order[16]The making of a Prosecution Costs Order (the Judge also made a Recovery of Defence Costs Order which is not the subject of the current challenge) was, in principle, eminently justified. Mr Mitchell realistically accepted as much. But he challenged the amount of the order. He submitted that in a trial in which there were three accused but overall proceedings in which there were six accused it was wrong of the Judge, as he submitted, to attribute one third of the overall prosecution costs (including pre-trial costs) to the appellant as he in terms did.[17]He further made complaint about the attribution of all the prosecution confiscation costs to the appellant (not least when the eventual figure was much less than that previously sought and when the prosecution case had been frequently refined). He complained also at the uniform charging rates adopted and what he said was the lack of detail and particularisation in the schedule of prosecution costs provided to the Judge.[18]There is, in our judgment, no substance in these points. The Judge in terms found that the prosecution had complied with the relevant Practice Direction. He regarded the claimed hourly rates and fees as reasonable. He noted successful points made by the prosecution in the confiscation proceedings. He considered that an overall attribution of one third of all the prosecution costs to the appellant to be readily understandable “because of the way that he has conducted himself”.[19]The reality is that the trial Judge knew this whole case backwards. He was fully entitled to exercise his discretion in making this costs order as he did for the reasons that he gave. (2). The SCPO[20]Mr Mitchell also did not challenge the Judge’s entitlement to make a SCPO against the appellant. His challenge was as to its terms. He said that they had the effect of operating to exclude the appellant entirely from engaging in any business or other activity relating to investment or finance: and that was excessive and unnecessary.[21]The terms of the SCPO (which we do not need to set out here, although we have considered them carefully) are indeed stringent. The period of the order was five years from 22 May 2014. It contained ten restrictions. Some of them, taken together, do have the effect of precluding the appellant (with very limited exceptions) from engaging in investment or financial activities. Other restrictions prevent the appellant from engaging in property transactions, or in business activities other than in his own name, unless he gave prior written notice to that effect to the Serious Fraud Office.[22]Mr Mitchell said that such notice provisions could at least also have been applied to any activity relating to investment or finance: and that the Judge went too far in precluding even that. He also protested at a term preventing the appellant from holding any cash, draft or bill of exchange of a value exceeding £5,000 without giving prior notice to the Serious Fraud Office.[23]In our view, these onerous terms are to be explained by the Judge’s crystal clear remarks made when he imposed this order. This was a defendant whose natural proclivity was to engage in fraud, and of a sophisticated kind. Gresham itself had been operated in the aftermath of the demise of the Southern Cross and Capricorn companies and the appellant was in the process of seeking to operate the Cutting company for a similar purpose as the demise of Gresham loomed. The fraud itself was sustained and heartless. The appellant’s style was to “leave no footprints in the snow”. All this made the policing of his activities difficult. In such circumstances, there were ample grounds for believing that the protection of the public required effective relief from further such activities. The Judge was thus, in our view, entitled in some respects to impose the absolute prohibitions as he did and in other respects to impose the provisions qualified by notice requirements as he did. We can see no proper basis for interfering.[24]At the hearing before us we announced, having considered the arguments, that the renewed applications were in these respects refused. The above constitute our reasons for – in agreement with the Single Judge – so ruling.[25]We therefore turn to the principal issue on this appeal. We granted leave on this ground at the hearing and, with the concurrence of both sides, proceeded to hear the substantive appeal.

The confiscation and compensation orders

(a) The statutory framework

[26]The scheme of the 2002 Act is all too familiar.[27]The jurisdiction of the court to make a confiscation order is set out in s. 6. (We note in this particular case that because, at the time, certain persons had commenced civil proceedings against the appellant the court had a power, rather than a duty, to make an order in the recoverable amount; and the Judge here decided in his discretion to exercise that power to order payment in full of the recoverable amount.) Section 7 then deals with the determination of the recoverable amount; section 8 with the determination of benefit; and section 9 with the determination of the available amount.[28]Section 75 deals with criminal lifestyle. Sections 76 to 84 deal with conduct, benefit, valuation and related matters. (In the present case, as we have said, it was agreed that this was a general criminal conduct case). By s. 76(4) a person benefits from conduct if he obtains property “as a result of or in connection with” the conduct.[29]Also of some relevance to the argument before us are the provisions of s. 13. That relates to the effect of a confiscation order on the court’s other powers. With regard to compensation orders the section provides as follows:
“(5) Subsection (6) applies if – (a) the Crown Court makes both a confiscation order and an order for the payment of compensation under section 130 of the Sentencing Act against the same person in the same proceedings, and (b) the court believes he will not have sufficient means to satisfy both the orders in full. (6) In such a case the court must direct that so much of the compensation as it specifies is to be paid out of any sums recovered under the confiscation order; and the amount it specifies must be the amount it believes will not be recoverable because of the insufficiency of the person’s means.”
[30]It follows from these provisions that the court, in such circumstances, must direct that any compensation ordered is to be paid out of the sums recovered under the confiscation order. But that is only so where the court believes that the defendant will not have sufficient means to satisfy both orders in full. The corollary is that, in terms of jurisdiction, the court does have power to order both compensation and confiscation, without any such direction, where the defendant does have the means to satisfy both orders in full. That was the position here. For the Judge found that the appellant did have sufficient means to satisfy both orders in full. Indeed it is that which has given rise to the present issue.

(b) The course of the confiscation proceedings

[31]One of the matters that arose in the course of the confiscation proceedings was this. The appellant beneficially owned a property in central London at 33 Portland Place, London W1. On any view it was of very significant value. An issue arose in the course of the confiscation proceedings as to whether that property constituted “benefit” for the purposes of the 2002 Act. In the course of those proceedings the Judge ruled, in 2013, that the property constituted benefit to the extent of 1/6 of its value. The remainder of such value did not. But of course the entire net value of the property stood to be part of the realisable assets of the appellant.[32]There was a further development relating to 33 Portland Place relevant to the confiscation proceedings. That property was the subject of a charge in favour of HSBC Bank to secure a loan of £2.5 million made to the appellant. The Bank commenced proceedings in the Chancery Division on 9 March 2012 to recover the debt. The appellant contested the claim. Ultimately the proceedings were the subject of a consent order made on 1 May 2014. By it the appellant agreed to pay what was due to HSBC, including interest, in a sum totalling nearly £3 million. In addition he agreed to pay the Bank’s costs of £460,000 and receiver’s fees. There were also his own costs (for which a variation of a previous Restraint Order had been obtained). Overall, it was the Judge’s view at the subsequent confiscation hearing on 22 May 2014 that it appeared “that about £1 million had been wasted in spurious defence of HSBC’s claim.”[33]In the course of the confiscation proceedings the prosecution had initially asserted benefit from general conduct to be in the order of around £41 million (subsequently revised to £35 million). That was very much in dispute, as was the value of the appellant’s realisable assets.[34]Before the hearing scheduled for the final determination of these matters at the Southwark Crown Court in May 2014 there were lengthy negotiations between the respective legal teams, with a view to resolving all issues and thereby avoiding a protracted and expensive confiscation hearing. Unhappily, whilst the parties thought that they had eventually reached agreement in the negotiations it turned out that they were at cross-purposes. The appellant’s legal team thought that it had been agreed that the amount of the confiscation order was to be £12 million, out of which the identified losses of the scheduled victims of the fraud, accepted to be £1,943,620, would be paid to the victims as compensation. The understanding of the legal team of the prosecution, however, was that the agreed confiscation amount was £12 million but in addition there was to be a compensation order in the sum of £1,943,620 in favour of the scheduled victims.[35]This difference in understanding had been identified before the hearing. There were recriminations: it may be that the prosecution viewed this as another legal manoeuvre on the part of the appellant. It matters not. The point is that it was made known to the Judge that the parties were not, in the event, ad idem.[36]Written position statements, in the light of this disagreement, had been put in shortly before the hearing scheduled for 22 May 2014. That of the appellant, settled by leading and junior counsel then appearing for him, stated that it was agreed between the parties that the value of the benefit from general criminal conduct was £12 million: it being explicitly stated that that figure included the totality of payments made by the victims to Gresham (and so lost to them). The position statement explained further that, as at 9 May 2014, the appellant’s realisable assets were valued by the prosecution at £14,436,208 and by the defence at £13,356,515.[37]The realisable assets included quite sizeable sums in cash. The principal asset however was 33 Portland Place. This was valued by both prosecution and defence at £14 million (pursuant to a valuation from independent valuers of the highest standing) less the sums due to HSBC and other expenses: giving a net figure of between £10.583 million and £10.382 million. There was also another property, 32 Portland Place, valued by the prosecution at £2 million and the appellant at £1.365 million; yet another property valued at between £425,000 and £316,000; and various other assets and chattels.[38]In the appellant’s position statement it was made clear that it was disputed that compensation in addition should be paid. Reliance was placed on the case of Jawad (cited above). It was proposed that a confiscation order be made by the court in the sum, ignoring pence, of £10,056,379 and a compensation order in the sum of £1,943,620 (thereby giving a total of £12 million): if need be by the court exercising its discretion under s.6(6) of the 2002 Act for that purpose. The prosecution, on the other hand, in its written position statement made clear that it was seeking compensation, in addition to confiscation in the full amount of the benefit.[39]In the result, as recorded by the Judge in his written ruling handed down on 17 July 2014, during the course of the hearing at court on 22 May 2014 benefit was agreed between the parties at £12 million and the available amount was agreed at £13,943,620. As the Judge observed in his ruling:
“It is unlikely to be a coincidence that that figure is the sum of the agreed benefit and the agreed compensation. What had happened was that there had been a practical compromise. In the light of the history of the matter I did not feel inclined to stand out against that compromise, but I must confess to misgivings about it bearing in mind the misunderstanding that had arisen between counsel.”
The Judge briefly recorded the disputes about the negotiations, of which he had been told, and concluded on this aspect:
“Ultimately I have decided that justice can be achieved on the basis of the figures that counsel have negotiated.”
Although a court is not invariably bound to agree to make a confiscation order in the amounts which the parties have themselves agreed, it commonly will; and we have no doubt that the Judge was entitled to accept, as he did, the figures presented to him. It was by reference to those figures that he proceeded to make his decision on the amount of confiscation and compensation.

(c) The Judge’s Ruling

[40]The Judge, after setting out the background, indicated that he could not order compensation to be paid out of the confiscation amount, as the case was not one to which the provisions of s. 13(5) and (6) of the 2002 Act applied. “There is enough money to pay both”, as he found in paragraph 1(j).[41]The Judge then addressed the decision of the Supreme Court in Waya [2013] I AC 294, [2013] UKSC 51 and the subsequent decision of this court in Jawad. He indicated that, to his mind, the question posed was whether “the payment of compensation is cut and dried and certain.” He considered that the appellant had done nothing to ensure that it would be. He was particularly critical of the fruitless defence to the HSBC claim, at a cost of £1 million incurred in that defence and where the funds which had been the subject of the previous Restraint Order had been depleted for that purpose.[42]The core of the Judge’s reasoning (in what was a most careful, thorough and well-articulated ruling) perhaps can be found in paragraphs 1(n) and 1(o). They read as follows:
“(n) Payment of confiscation and compensation in this case depends upon the sale of real property. All the way along Edward Davenport has been arguing that the sale of 33 Portland Place is problematic because of the unusual nature of the property. I understand that it is on the market now. There is other real property that needs to be sold as well. (o) If their debt is not paid HSBC will be entitled to appoint a receiver for the sale of 33 Portland Place. I think I was told what the precise arrangements were to be. The important thing is that in this case nothing has been cut and dried. Edward Davenport has only agreed matters in these criminal proceedings at a late stage. For some 4 years I have had a deep sense that moving matters along in the case has been a truly Sisyphean task, both before during and after the trial. So it is that we are where we are in July 2014. I do not know when 33 Portland Place will be sold or how long the losers will be kept out of their money. I do not know what it will fetch. I do not know how many circuits of a Grand National course still need to be run. The case is a mile away from that which was contemplated in Jawad, where compensation has been paid before the court makes any order or where it can be paid by the stroke of a pen so as to release funds held in an account.”
[43]The Judge thus went on to order compensation in the sum of £1,943,620. He explicitly directed, it may be noted, that this was to be paid first, before any confiscation amount. In the exercise of his discretion under s. 6(6) he further ruled that the confiscation order should be in the full amount of £12 million. “In the end, I have decided that the risk of Edward Davenport retaining some of the fruits of his crime is one that my public duty dictates I should not take”.[44]He also proceeded to make the costs orders and SCPO which we have mentioned.

Events after the hearing

[45]There was at the hearing before the Judge debate as to how the sale of 33 Portland Place (the main asset) should be handled. We gather that it was by then, at least informally, on the market and attracting expressions of interest; and it was appreciated on all sides that it would be best, if only for marketing reasons, for this not to be a sale conducted by a receiver.[46]In the event, and as foreshadowed and discussed in outline at the hearing, a consent Order was in due course agreed and formally made by the Judge on 31 July 2014. This constituted a variation of the previous Restraint Order (made on 1 December 2009) relating to the appellant’s assets. This consent Order permitted the appellant to sell 33 Portland Place, marketed through agents of the highest standing. Solicitors were to have the conduct of the sale and were to receive the proceeds. No sale was permitted for less than £14 million without the prior consent of the Serious Fraud Office. The proceeds of the sale were directed by the Order to be applied as follows:
“10. The proceeds of sale are to be held by Malletts Solicitors and distributed, forthwith, as follows: a. Payment of monies due to HSBC Private Bank (Monaco) SA and the Receiver per Order of Sales J dated 1 May 2014. b. Payment of any fees and/or charges for which the prior consent of the SFO has been obtained in accordance with paragraph 9 above. c. Payment to Her Majesty’s Courts and Tribunals Service (“HMCTS”) pursuant to the compensation order made by HHJ Testar on 17 July 2014. d. Payment to HMCTS pursuant to the confiscation order made by HHJ Testar on 17 July 2014. e. The balance of the sale proceeds (if any) after payment of those amounts due in paragraphs a-d above are to be held by Malletts Solicitors in their client account, subject to the terms of the Restraint Order, until further order of the Court.”
[47]We were told that thereafter the property was formally put on the market. Offers were speedily forthcoming. We were told that contracts for sale and purchase were exchanged in October 2014. What eventuated is set out in a helpful letter from the Serious Fraud Office dated 22 September 2015. The sale of the property was completed on 11 May 2015. The sale price was £27 million. The compensation order and confiscation order were paid in full shortly thereafter. The Restraint Order in consequence had been discharged by consent (it may be added that the Judge had, in the interim, also extended the period for payment by the appellant).[48]It follows that, as was contemplated by the Orders of 17 July 2014 and as in fact happened,(a) compensation has been paid in the sum of £1,943,620 to the scheduled victims; and(b) there has been confiscation in the full agreed amount of £12 million which amount included, as benefit from particular conduct, the same sum of £1,943,620.

The legal authorities

[49]That, under the provisions of the 2002 Act, the court ostensibly has jurisdiction to make such orders bringing about such a result is plain from the statutory provisions which we have recited. There are in fact a number of reported cases where such a result had been upheld: although it is right to say that in other cases unease was expressed at the injustice that was capable of resulting and there were occasions where the court, to avoid injustice in circumstances where there had been prior restitution in full, resorted to use of the doctrine of abuse of process: see, for example Morgan & Bygrave [2009] 1 CAR(S) 60, [2008] EWCA Crim 1323.[50]But in many respects that has now been overtaken by the decision of the Supreme Court in Waya (cited above). That case - which we should note was not itself a criminal lifestyle case – is by now too well known to require any extensive recitation. The principles and approach laid down in paragraphs 10 to 35 of that decision are familiar to all specialising in this field. But one consequence is that, in order to respect the provisions of Article 1 Protocol 1 of the Convention, s. 6(5)(b) of the 2002 Act is to be read as subject to a proviso that a confiscation order is not to be made if it is disproportionate (as since confirmed by the amendment introduced by the Serious Crime Act 2015). In terms of potential double recovery that approach to proportionality is also, for example, reflected in the subsequent decision of the Supreme Court in Ahmad & Fields [2015] AC 299, [2014] UKSC 36 (not, we add, itself a case involving a combination of confiscation and compensation orders). As said in paragraph 72 of the judgment in that case:
“To take the same proceeds twice over would not serve the legitimate aim of the legislation and, even if that were not so, would be disproportionate.”
[51]The decision in Jawad is to be read in the context of Waya. In Jawad the defendant had been convicted of money laundering arising from frauds on a bank. The criminal lifestyle provisions applied. The trial judge made a compensation order in the full amount of the bank’s losses, having previously made a confiscation order in the amount of the agreed benefit (which included the bank’s losses). It was argued that such a result involved double counting and, applying the principles of Waya, was disproportionate. This court agreed. It accorded the defendant 28 days in which to pay the full amount of the compensation and, if he did so, reduced the amount of the confiscation order by that amount. (It is not known, incidentally, whether or not Mr Jawad in fact did pay the compensation within that permitted time).[52]In the course of delivering the judgment of the court Hughes LJ fully reviewed the relevant statutory provisions, the principles of confiscation and compensation and the import of the decision in Waya. In the course of that review he said this in paragraph 13:
“But once it is clear, as it now is, that disproportion must be avoided, it follows that the question of compensation might be relevant to that issue, if compensation means that money which is restored to the loser will be counted again in the POCA confiscation order. Therefore in principle it must be possible either to consider the two issues together or to have in mind, when considering the disproportion question, any compensation order which has been or is going to be made. Nevertheless, as we show below, ordinarily the concern of the judge will be less with an order for compensation than with whether actual restoration to the loser is assured.” 58. He went on to say this at paragraph 19: “What these enforcement provisions mean for compensation orders is that the making of the order is not the equivalent of payment or restoration to the loser. It remains uncertain whether such restoration will be made. In particular, especially where large sums are involved, many criminals may prefer serving time in prison in default to surrendering by way of payment of compensation the sums which they have obtained from the loser by their crime.”
[53]He then went on to say at paragraph 21:
“R v Waya requires the court to consider whether a POCA confiscation order is disproportionate. We are satisfied that it generally will be disproportionate if it will require the defendant to pay for a second time money which he has fully restored to the loser. If there is no additional benefit beyond that sum, any POCA confiscation order is likely to be disproportionate. If there is additional benefit, an order which double counts the sum which has been repaid is likely, to that extent, to be disproportionate and an order for the lesser sum which excludes the double counting ought generally to be the right order. But, for the reasons explained above, we do not agree that the mere fact that a compensation order is made for an outstanding sum due to the loser, and thus that that money may be restored, is enough to render disproportionate a POCA confiscation order which includes that sum. What will bring disproportion is the certainty of double payment. If it remains uncertain whether the loser will be paid, a POCA confiscation order which includes the sum in question will not ordinarily be disproportionate.”
[54]In stating how the principles should be applied, the court said this at paragraph 23:
“How should these principles be applied? It would be convenient if the statute were to provide for the court to have the power in an appropriate case to make a POCA confiscation order in the full sum and to couple with it an order that compensation in the relevant sum be paid to the loser out of it. That power is, however, not available except in the limited case of insufficient assets provided for by section 13(5) and (6) of POCA. However, much the same outcome can, we think, be achieved without great difficulty. The exact circumstances of different cases may vary. But generally if the defendant has control of his assets he ought to be able to make repayment in the knowledge that, once he proves he has done so, credit will be given for it against a POCA confiscation order. Repayment made through solicitors on notice to the Crown ought readily to be provable. If repayment has not been made before the day of the confiscation hearing, proof that his solicitors are in funds and willing to give an undertaking to repay on his behalf is likely to suffice, as would the existence of a bankers’ draft in favour of the loser. There may be other methods of establishing clearly that payment is guaranteed. In those cases where the defendant does not have control of the assets in question, similar principles ought to apply. If the assets are in the hands of the Crown after seizure he can request realisation and repayment either direct to the loser or via an intermediary such as a solicitor who can provide a guarantee of payment. If the assets are subject to a restraint order he can apply for a variation of it on terms that sufficient of them are released to a named and safe intermediary for the purpose of realisation and repayment to the loser. In most cases steps such as these ought to be initiated by or on behalf of the defendant before the day of the confiscation hearing, but there may be some where there is justification for making them on that day, perhaps where there is a genuine dispute about the figures which needs evidence and resolution by judicial ruling. There may in a very few cases be occasion for brief adjournment of a confiscation hearing for immediate arrangements for payment to be made. What a court should not entertain, because there is no need to do so, are expressions of well-meaning intentions on behalf of a defendant which are not backed by assurance of repayment. Still less is a court likely to be receptive to pleas to adjourn the confiscation hearing for the defendant to seek ways of making repayment.”

The arguments

[55]The bedrock of the arguments both of Mr Mitchell for the appellant and of Mr Mayo for the Crown was the case of Jawad itself. But they sought to put it to different use.[56]Mr Mitchell’s starting point was that the amount of the agreed benefit included the amount of the particular benefit (that is, reflecting the losses of the victims which had accrued to the benefit of the conspiracy). That is plainly right. It is inherent in the scheme and the wording of s.6 and s.76 of the 2002 Act that, in a criminal lifestyle case, general criminal conduct includes the particular conduct charged in the count of which a defendant is convicted (as Hughes LJ confirmed in paragraph 25 of Jawad). For good measure, that had been made explicit, and was agreed, at the confiscation hearing before the Judge.[57]Mr Mitchell went on to say that what mattered here was the proportionality of the outcome. The orders made by the Judge contemplated, in effect, double counting: and that is precisely what had occurred. The appellant had paid twice over. That was a penalty. To say that there had been no actual restitution by the time of the confiscation hearing was not, and should not be permitted to be, determinative. Nor should the fact that it undoubtedly would have taken some time to sell Portland Place. The point was that at the time of the hearing it would, realistically, be sold and the proceeds could properly be taken as sufficient to meet both orders. Indeed, the Judge had previously found that there was enough money to pay both orders. Therefore, unfair double counting would arise; as indeed had happened. He said that the Judge had been quite wrong to say that the present case was “a mile away” from the position contemplated in Jawad.[58]Mr Mitchell, as a further argument, submitted that in any event as matters stood at the hearing before us in the Court of Appeal it was now known that there had been payment of the sums due under both orders. He said that it would be wrong for this court to focus simply on the position as it was before the Judge and it should have regard to the actual position as it was now.[59]Mr Mayo, on the other hand, emphasised that Jawad had decided that there was no bar in principle to the making of both a compensation order and a confiscation order which included the particular benefit corresponding to the losses of the victims. On the contrary, such a bar only arose where restitution to the victims was “certain” or “assured”. Here, restitution to the victims was contingent on the sale of 33 Portland Place: which, on the findings of the Judge, potentially gave rise to uncertainties. He said that the Judge had properly directed himself in law and his evaluation of the position and his exercise of discretion should not be interfered with by this court. He disputed that a result different from that reached by the Judge should be reached by this court simply on the basis of subsequent developments and by reason of the fact that 33 Portland Place had sold for well in excess of the valuation given in May 2014.

Disposition

[60]One initial matter can be disposed of.[61]In his written argument, Mr Mitchell had sought to place reliance on what, on instructions, he said had been agreed between counsel in discussions prior to the confiscation hearing. Mr Mayo, for his part, sought to make the like point, albeit on his instructions the agreement had been to quite different effect.[62]This is nothing to the point. As the Judge observed, even where the parties have come to an agreement it is still for the court to approve and make a confiscation order. But, quite apart from that, what happened here was, as the Judge found, a “misunderstanding.” At all events, both parties knew by the time of the hearing of the disagreement and had elected to proceed accordingly. They thereafter agreed the amount of benefit, agreed the available amount and argued solely the issue of compensation before the Judge. In such circumstances the prior negotiations became irrelevant.[63]We add that we have reservations as to the width of Mr Mitchell’s second argument. In confiscation cases, the Court of Appeal is concerned with the order made by the Crown Court Judge. The Court of Appeal will either confirm, reverse or vary the decision or remit it to the Crown Court for further decision. The Court of Appeal is not, as it were, a free-standing further confiscation court making orders simply by reference to evidence or material which have become available since the hearing below. Were it otherwise, principles of finality and certainty would be gravely undermined. In some confiscation cases, changes in circumstances may result in, for example, applications for certificates of increase or inadequacy in the lower courts. In other confiscation cases, it cannot be altogether ruled out that an appeal to the Court of Appeal may be made on a fresh evidence basis: albeit that is likely to be an exception and any such application to adduce fresh evidence will be very carefully scrutinised if it is to be granted and permission to appeal to be given (and questions of time limits may also arise). But at all events we consider that Mr Mitchell’s second ground was altogether too broadly formulated to be acceptable as a general proposition.[64]As it seems to us, the real issue here is the issue of certainty and the way in which the Judge dealt with it, in paragraph 1(o) of his ruling in particular.[65]We have concluded, with all respect, that the Judge reached a conclusion which was not required by a proper application of the principles of Waya and Jawad or by the circumstances of this case; and in consequence made a confiscation order which was disproportionate.[66]The essential point of Jawad, or one of them, is that restitution to the victims must be “assured” or “certain”. The making of a compensation order does not in itself ensure restitution. Moreover, the availability of (ostensibly) sufficient assets may not necessarily give such assurance: for example, those (not infrequent) cases where the defendant is adjudged to have hidden assets but where their whereabouts are unknown and their nature nebulous. Further, Micawberish promises of “money tomorrow” will, as Jawad makes clear, be likely to be disregarded.[67]But that is not this case. The appellant had tangible, valuable and identified assets in the United Kingdom: notably (though not only) 33 Portland Place. They were subject to a Restraint Order; they existed; they were not going to disappear. Further, they had to be realised and, as the Judge knew, were in the process of being realised. The appellant could not have prevented their realisation: on the contrary, any failure to cooperate would simply have meant a forced sale by a receiver, appointed by the court if not by HSBC. Moreover, as Mr. Mitchell pointed out, the appellant had every reason to facilitate a prompt sale at the best price (and in accordance with the Order of 31 July 2014). Not only would the best price potentially give him a surplus but any failure to achieve a sale would have exposed him to the 10 year default sentence. We appreciate that the Judge had clearly formed a very unfavourable view of the appellant: but by this stage there was no obvious reason to think that the appellant either would or could obstruct matters so as to prevent sale. It is also true that, as pointed out in paragraph 18 of Jawad, some defendants may prefer to spend time in prison rather than pay up. But given the circumstances of this case, and where the appellant had no ultimate control over the realisation of 33 Portland Place or of his other assets, that was not, realistically, likely to be material here.[68]The Judge also considered there was uncertainty as to what price might be achieved. That is true: property valuation is not a science. But there was no reason in this case to depart from the agreed valuation of £14 million for 33 Portland Place, backed as it was by a valuation from valuers of impeccable standing and expertise.[69]The Judge had also noted arguments that the sale might be “problematic”. He did not spell out what the identified problems were, although we were told there were apparently some lodgers in the house against whom possession orders might be needed (and as happened). But, be that as it may, by May 2014 the game was, in effect, up for the appellant. He had every incentive to co-operate in the sale at best price: none not to.[70]We do not think that the fact that the victims would not, either at 22 May 2014 or at 17 July 2014, be paid immediately or (as in Jawad) within 28 days should carry the day in favour of the Crown. The point is that, albeit it would take some time, the position was that restitution in full to the victims of the fraud could properly be assessed as assured. We agree with Mr Mitchell that the Judge had given too much weight to what Mr Mitchell called “a temporal requirement” and insufficient weight to the reality of forthcoming restitution in full. Moreover, that a degree of flexibility as to the issue of whether future restitution can properly be assessed as assured is, we think, at least consistent with the lament of Hughes LJ in paragraph 23 of Jawad (and indeed of the Judge in the present case) that the 2002 Act had not in terms empowered the court to direct in an appropriate case that compensation be paid out of any sums recovered under the confiscation order, where the available assets were sufficient.[71]We accordingly reject Mr Mayo’s argument that in this case payment of compensation was not assured. Mr Mayo had in fact submitted that it was precisely because the compensation was to be derived from a property sale, and not from the transfer of cleared and available cash funds, that it was inherently uncertain. In our judgment, however, that is altogether too inflexible an approach and involves too restricted an application of the principles set out in Jawad.[72]It is also true that, in the years preceding the final confiscation hearing in 2014 the appellant had not procured the sale of 33 Portland Place or the repayment of the victims. That is indeed the case and is certainly a relevant consideration. But by the time of the hearing the HSBC litigation had very recently been resolved. The property was about to be marketed, with it (and all other assets) being under the control of the court and of the Serious Fraud Office with an agreed valuation of £14 million. Past difficulties of a “Sisyphean kind”, as alluded to by the Judge, did not, in our judgment, require a conclusion of future uncertainty or the running of “many circuits of a Grand National course” in this context, given all the circumstances.[73]We perhaps should also add that, in the light of the orders as made and in the light of the realisations as made, we asked Mr Mayo if the result to the appellant could be described as fair. His answer, as we noted it – he accepting that there was double counting – was: “Well, not unfair.” When pressed on this, he rather gave the impression, reverting to the debate about the prior negotiations, that the appellant – an egregious and manipulative fraudster on the Judge’s findings – had done very well to achieve, by compromise, a benefit figure of £12 million and so it was not unfair that he should gain no further advantage. But this court can only proceed on the basis of the confiscation order, agreed between the parties, as it stands. And by that order the amount of the benefit was £12 million (including particular benefit) and the amount of the realisable assets £13,943,620. We cannot proceed on any assumption that the appellant had “done well” out of the agreed confiscation order.[74]Accordingly we allow the appeal on this point.[75]As for future cases in the Crown Court, where the Crown seeks both a compensation order and a confiscation order in circumstances where s. 13(5) and (6) are not applicable, we think that judges may wish, irrespective of whether or not they are proceeding under s. 6(6), to bear in mind the following points: 1) The Court is empowered to make both a confiscation order and a compensation order. 2) However, the court should be alert to any risk of double counting inherent in such a combination of orders and should be alert to the risk of making a confiscation order which is disproportionate. 3) The court ordinarily should not make both a compensation order and a confiscation order representing the full amount of the benefit where there has been actual restitution to the victims prior to the date of the confiscation hearing: Waya; Jawad. 4) Where it is asserted by a defendant that there will be restitutionmade after the date of the hearing then the court should scrutinise very carefully and critically the evidence and arguments raised in support of such assertion. 5) If the court remains uncertain whether the victims will be repaid under the compensation order then a confiscation order which includes that amount will not ordinarily be disproportionate: Jawad. 6) However, mathematical certainty of restitution is not required. The court should approach matters in a practical and realistic way in deciding whether restitution is assured. 7) Restitution to the victims in the future is capable of being properly assessed as assured, depending on the particular circumstances, notwithstanding that such restitution will not be immediate, or almost immediate, at the time of the confiscation hearing. Obviously the longer the time frame the greater force there will be to an argument that restitution is not assured: but a prospective period of delay in realisation is not of itself necessarily a conclusive reason for proceeding to make a combination of such orders without adjusting the amount of the confiscation order. 8) Whilst a defendant who is truly intent on making restitution in full to his victims ordinarily should be expected to have arranged such restitution prior to the date of the confiscation hearing there may sometimes be cases where that is not possible. If, in such a case, the court has firm and evidence-based grounds for believing that restitution may nevertheless be forthcoming, albeit that cannot be taken as “assured” at the time of the hearing, the court has power in its discretion to order an adjournment to enable matters to be ascertained. 9) Finally, to state the obvious, each case must be decided on its own facts and circumstances. We do not offer these pointers as either prescriptive or exhaustive. But Crown Courts may hereafter wish to have regard to them, as well of course to what is said in Jawad, when this kind of situation arises in the course of confiscation proceedings. Conclusion[76]We allow the appeal. The compensation order in the sum of £1,943,620.56 will stand. The amount of the confiscation order is in consequence reduced from £12 million to £10,056,379.44. Counsel should agree and draw up a Minute of Order; and should lodge written submissions if there are any outstanding points.

Cited in 1 later judgment