Hogan v The Director of Public Prosecutions [2007] EWHC 978 (Admin)

Case No CO/9849/2006

[2007] EWHC 978 (Admin)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

DIVISIONAL COURT

Venue Royal Courts of Justice

Date Wednesday, 21 February 2007

Strand

London WC2

B E F O R E:

MR JUSTICE DAVID CLARKE

MR JUSTICE IRWIN

Between

MARK JOHN HOGANClaimant

-v-

Between

THE DIRECTOR OF PUBLIC PROSECUTIONSDefendant

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MR H HUGHES (instructed by McKinnells) appeared for CLAIMANT

MISS C HOWELL (instructed by CPS Lincolnshire) appeared for DEFENDANT

J U D G M E N T

[1]MR JUSTICE IRWIN: On 22 June 2006 at Lincoln Magistrates' Court, the applicant, Mark Hogan, was convicted of two offences under the Proceeds of Crime Act 2002 ("the Act") by District Judge Richard Blake. The offences were firstly, "that between 21 March 2005 and 14 April 2005, at various locations in Lincolnshire, acquired criminal property, namely scaffolding components, contrary to sections 329(1)(c) and 334 of the Act, and secondly, that between 21 March 2005 and 6 October 2005 in Lincolnshire possessed criminal property, namely scaffolding, contrary to section 329(1)(c) and section 334 of the Act".

[2]The appellant appeals by way of case stated from the decision of the district judge, the application being lodged on 22 November 2006 and the case stated by the district judge being dated 6 November 2006.

[3]The facts can summarised as follows. The appellant worked for a scaffolding company known as Deborah Services Limited between July 2002 and April 2003. He now runs his own scaffolding company known as Brit Scaffolding. Deborah Services is a company with 28 depots concerned in the supply and erection of scaffolding for hire. Deborah Services scaffolding was marked with security colours unique to the company and registered to them. The scaffolding was also marked with the company's name and telephone number.

[4]The section manager of Deborah Services, a Mr Wilfred Lawson, saw scaffolding at a site in Church Street, Lincoln, and at further sites in Bracebridge Heath and South Hykeham which appeared to be Deborah Services scaffolding with the original markings over-painted with light blue paint. It appeared that this had been done on site.

[5]Mr Lawson alerted the police, and on 20 April 2005, Police Constable Wilkinson arrested the appellant on suspicion of the theft of scaffolding. When he was interviewed, the appellant indicated that he had made legitimate purchases of the scaffolding as surplus. He named the company and another individual from whom he had brought the scaffolding in question. No receipt was provided, and the appellant indicated that he did not know contact details for those who had sold him this material. The appellant also admitted that he knew Deborah Services did not sell scaffolding. He denied knowing of the markings on the scaffolding which had been obtained and was the subject of the proceedings.

[6]Mr Lawson gave evidence before the district judge, as did the appellant. Mr Lawson's evidence as to the value of the property was summarised by the district

judge as follows:

"The scaffolding recovered belonging to Deborah Services weighed over 15 tonnes and had a value in excess of £6,000. A prepared schedule gave a replacement value of £6,192.63 for the tubes and scaffolding boards recovered. The scaffolding tubes have a life of ten years and retain their value during this time. The scaffolding boards would have a life of between two to five years. A payment of £1,100 was in the opinion of Mr Lawson not adequate as consideration for the property subject to the two charges."

Mr Lawson also indicated that the equipment could not have been legitimately offered for sale marked with the security code of Deborah Services.

[7]The appellant gave evidence before the district judge. His evidence was summarised as follows:

"The appellant confirmed that he had worked at Deborah Scaffolding Services. He maintained he did not get the surname of Darren [the man who had sold him the scaffolding]. He paid him in cash and did not get a receipt. Further, he did not enter the purchase in any business record for his company."

[8]The district judge records that he was satisfied that the applicant had shown, on balance, that he had paid a person some £1,100 for the scaffolding. He also found:

"There was no legitimate way such scaffolding could be sold and I believed that the applicant would have known this. Further, the evidence that the applicant gave of the purchase of this scaffolding led me to conclude that, even accepting that £1,100 on the balance of probabilities may have been paid, it was in circumstances where he knew he was purchasing property which was the proceeds of crime. The applicant maintained that he knew the person as 'Darren'. He paid for the equipment in cash and kept no business records of the transactions. I was satisfied that attempts had been made to conceal the true identity of the scaffolding."

[9]The district

judge went on to summarise his final finding and the question which formed the basis of this appeal:

"I rejected a submission both at the close of the prosecution case and after hearing the defence case. I concluded that section 329(2)(c) of the Act did not provide an absolute defence upon evidence of payment being made in consideration for the property. The word 'adequate' within the meaning of the Act required the court to consider the whole circumstances and manner in which the consideration may have been paid to decide whether it was 'adequate'. Merely the fact that the sum paid of £1,100 might be considered adequate value was not the sole consideration."

[10]The district

judge defined the question as follows:

"Whether I erred in law in looking at the whole circumstances of the alleged payment of consideration in concluding that the applicant had not paid adequate consideration or the applicant was afforded a defence under section 329(2)(c) of the said Act once he established that he had made payment of consideration which might be adequate in value."

[11]The relevant provisions under the Proceeds of Crime Act 2002 are as follows:

"329(1) A person commits an offence if he- (a) acquires criminal property; (b) uses criminal property; (c) has possession of criminal property. (2) But a person does not commit such an offence if- ... (c) he acquired or used or had possession of the property for adequate consideration ... (3) For the purposes of this section- (a) a person acquires property for inadequate consideration if the value of the consideration is significantly less than the value of the property; (b) a person uses or has possession of property for inadequate consideration if the value of the consideration is significantly less than the value of the use or possession ... "

[12]The relevant part of section 340 reads:

"(3) Property is criminal property if- (a) it constitutes a person's benefit from criminal conduct or it represents such a benefit (in whole or part and whether directly or indirectly), and (b) the alleged offender knows or suspects that it constitutes or represents such a benefit."

[13]Both sides contend that the district judge fell into error in this case in the way he approached the application of the Act. The appellant makes two key points. First, he says that the burden lies on the Crown to show to the usual criminal standard that the defendant in such a case did not acquire the relevant property for adequate consideration. The appellant says that obligation arises out of the way in which section 329(2) is drafted. Secondly, the appellant says this issue is a discrete question, not to be confused with the defendant's state of mind.

[14]The respondent makes three key points. Firstly, it is submitted that the legal burden of establishing that adequate consideration was provided is on the defence, not the prosecution. Second, it is accepted that the district judge erred in considering the factors he did in relation to the issue of whether the consideration provided was adequate. Third, however, it is submitted that the district judge should have considered whether the defendant had established that the value of the consideration provided was not significantly less than the value of the property acquired. The respondent argues that the matter should be remitted to the district judge for reconsideration.

[15]I turn to the question of the interpretation of the Act. The scheme of this part of the Act turns on the definition of "criminal property" set out in section 340. Rather interestingly, the definition turns in part on the state of mind of the alleged offender. Essentially, if the person acquires or keeps property whilst knowing or suspecting it is stolen, it is "criminal property", provided the other ingredients of the definition are made out. However, once the property is acquired by someone who does not have that knowledge or suspicion, the property ceases to be criminal property, whatever its origin. So far so good.

[16]However, what is also interesting about the scheme of this part of the Act is the effect of section 329(2)(c). Wherever the burden lies and whatever may be the consequential standard of proof, if criminal property is acquired for "adequate consideration", then no offence is committed under the Act. I emphasise that this requirement applies to criminal property. In other words, if the court concludes that adequate consideration has been given for the acquisition of property, then no offence is made out under the Act, even if the defendant who has acquired the property knows that it was stolen. I pause to observe that, in circumstances like that, other offences may very well be made out, but they will not be offences under this part of the Act. I reach this conclusion as a matter of straightforward statutory interpretation.

[17]What is the meaning of "adequate consideration"? This must be a question of fact in each case. In deciding it, my view is that a court is entitled -- indeed has an obligation -- to look at all relevant circumstances drawn from the evidence. But the question is an objective one. It is a discrete question from the question of knowledge, belief or suspicion by the defendant as to whether the property constitutes a benefit from criminal conduct. Thus, the question is not whether all relevant circumstances may be brought to bear on the adequacy of consideration. They may. The point is that this is a separate question from the state of mind of the defendant. It is an inevitable consequence of the way this Act is drawn that a person who acquires property which he knows to be stolen, but acquires it for full consideration, will not be guilty under this part of the Act.

[18]In practice, it will often be the case that the same evidence will bear on both questions. An unrecorded payment for goods, made in cash, in a sum representing 20 per cent of their market value, would be strong evidence against adequate consideration under section 329 and also might well be strong evidence that a defendant knew or suspected that the goods represented the benefit of criminal conduct, under section 340. However, they are separate questions.

[19]The final question here is: who bears the burden of proving the adequacy or inadequacy of the consideration given for the goods and to what standard? The appellant argues that section 329(2)(c) is not a defence but a limitation on the scope of the offence. This argument proceeds from the fact that the word "defence" never appears in the statute. Rather, it is said that the language under section 329(2) is clear:

"a person does not commit such an offence if ... "

[20]The appellant relies on the analysis set out at Archbold at paragraph 33.10 which supports this interpretation. The respondent disagrees, and firstly the respondent relies on the commentary in Confiscation and the Proceeds of Crime, edited by Mitchell, Taylor and Talbot at paragraph VIII.012. These authors disagree directly with the editors of Archbold, taking a diametrically contrary view.

[21]The respondent also relies on the cases of Lambert [2001] 2 Crim App R 28 and Sheldrake v DPP [2005] 1 Crim App R 28 which confirm that obligations upon defendants to prove defences to a balance of probabilities do not, or may not, offend against the presumption of innocence enshrined in

Article 6(2) of the European Convention on Human Rights

[22]The respondents also rely on earlier legislation, specifically upon section 93B of the Criminal

Justice Act 1988, which provided that:

"It is a defence to a charge of committing an offence under this section that the person charged, acquired or used the property or had possession of it for adequate consideration."

[23]Under that Act, the definition of "adequate consideration" was identical to that contained in the 2002 Act. The respondents rely upon the explanatory notes to the 2002 Act, which describe the 2002 Act as a provision intended to "unify and replace existing legislation including the Criminal Justice Act 1988". Thus, the respondent argues the 2002 Act is merely a consolidating measure and should be read consistently with the earlier Act dealing with money laundering offences.

[24]The respondent further relies upon section 101 of the Magistrates' Courts act 1980, which reads as follows:

"Where the defendant to an information or complaint relies for his defence on any exception, exemption, proviso, excuse or qualification, whether or not it accompanies the description of the offence, or matter of complaint in the enactment creating the offence or on which the complaint is founded, the burden of proving the exception, exemption, proviso, excuse or qualification shall be on him; and this notwithstanding that the information or complaint contains an allegation negativing the exception, exemption, proviso, excuse or qualification."

[25]The respondent confirms that this section does no more than import into statute the common law doctrine set out initially by the Court of Appeal in the case of Edwards

[1975] QB 27

, and indeed that interpretation of the Magistrates' Courts Act 1980 was confirmed by this court in the case of Hunt [1987] 84 Crim App R 163. It is clear, in my judgment, that the Act does no more, and could do no more, than enshrine the common law in statute. There cannot be a difference as to where the burden of proof lies, as between criminal proceedings in the Magistrates' Court and criminal proceedings in the Crown Court. I pause to note that the editors of Blackstone's Criminal Practice in the 2007 edition set out a useful discussion of this general question at paragraphs F3.2 and following.

[26]The question of where the burden lies in relation to this statute largely comes down to a matter of construction of this particular provision. This is a rather more difficult question than any of the others which have been thrown up by this case.

[27]There will often be an evidential burden on the defendant in statutes such as this. If no evidence is introduced to the effect that the goods or services were paid for, then the question will hardly arise. Subject to the prosecution discovering evidence of consideration having been given, leading to a requirement to disclose relevant material, it will usually be the defendant who will introduce evidence of consideration, no doubt often to be challenged on the facts by the Crown. However, once the issue is raised, in my view the appellant is correct and it is for the Crown to show that there was not adequate consideration, and to do so in relation to both halves of that question, namely the fact of the consideration advanced and the adequacy of the consideration, if proved. This is for a number of reasons.

[28]Firstly, the language of the 2002 Act, in my judgment, is clearly distinct from that of the 1988 Act, or from the other statutory provisions which provide defences. I think it preferable to conclude that the change of formulation was deliberate rather than accidental on the part of the draftsman.

[29]The 2002 Act is clearly not merely a consolidating measure. In particular, a defendant may be in the dock faced with a charge under this Act with a mens rea of mere suspicion. The mental requirement here is not even "reasonable" suspicion. That is very different from the position that obtained under the 1988 Act, section 93B of which read:

"(1) A person is guilty of an offence if, knowing that any property is, or in whole or in part directly or indirectly represents, another person's proceeds of criminal conduct, he acquires or uses that property or has possession of it."

The question of the defence of acquisition for adequate value therefore only arose at all under the earlier statutory provisions once the defendant was proved to have knowledge of the fact that the property in question represented the proceeds of criminal conduct. This is significant in two ways: firstly, as confirming that the change in the formulation of section 329 is deliberate since the schemes of the two Acts are different, and secondly, as confirming the much lower mental threshold required for an offence under the 2002 Act.

[30]The next reason is that the relevant provision in section 329 is simply not an exception or a proviso, but is expressed as a necessary ingredient of the offence -- again, a matter of straightforward construction. Here I prefer the interpretation put upon the statute by the editors of Archbold to that advanced by the editors of Mitchell, Taylor and Talbot.

[31]The next reason is that, if there is ambiguity in statutory wording in the context of a penal statute such as the 2002 Act, it has long been an established principle that any such ambiguity should be resolved so as to narrow rather than broaden criminal liability. In my judgment, that applies here.

[32]I would add that, if my interpretation of this statute were wrong, and if the question of the proportionality of an interference with the presumption of innocence in the context of

Article 6 of the European Convention on Human Rights

and the Human Rights Act 1998 were to arise, then it would seem to me that this represented too great an intrusion into the presumption of innocence, given the very low threshold by which someone may be exposed to criminal proceedings, based as I have said on the mere suspicion that the property concerned was criminal property.

[33]In practical terms, there will in most cases be an evidential burden on the defendant. Once that evidence has been advanced, it is every bit as easy for the prosecution to seek to undermine the facts on that point as on others, and just as easy for the Crown to dispute adequacy of consideration, as it is for the defendant to establish it.

[34]For all those reasons, in my judgment, section 329(c) of the Act means that, once the issue of adequate consideration has been raised, this matter should be regarded as an element of the offence to be proved by the Crown. It follows that it falls to be proved to the normal criminal standard.

[35]In conclusion, for the above reasons, this appeal succeeds and these convictions are quashed. The matter should be remitted to the district judge. He may then consider whether, on the evidence before him, taking all the relevant circumstances into account, the Crown has discharged the burden of showing that the appellant did not give adequate consideration for the relevant criminal property within the meaning of the Act.

[36]MR JUSTICE DAVID CLARKE: I agree. On the last point made by my Lord concerning the application of the Convention, I would merely add that this was not a point on which we needed to hear full argument for the purpose of disposing of this appeal.

[37]Miss Howell, you have handed up a schedule of costs, but the point will not arise.

[38]MISS HOWELL: It is clearly not applicable, my Lord. Your Lordships, I am however instructed to apply for certification on a point of public importance because this matter does have implications in relation to not only section 329, but also of course the other sections under the Act, section 327 and 328.

MR JUSTICE DAVID CLARKE: How would you formulate the question?

[40]MISS HOWELL: The question would be: where the burden and standard of proof lies under section 329 of the Act.

MR JUSTICE IRWIN: Where the burden lies and what the standard is might be --

[42]MISS HOWELL: Might be better, yes.

[43]MR JUSTICE DAVID CLARKE: Will that be necessary? Where the burden of proof lies will surely answer both questions because it is well established that if it is a burden on the Crown, it is a certain standard, and if it is a burden on the defence, it is another certain standard.

[44]MISS HOWELL: Yes, that is right. I agree.

MR JUSTICE DAVID CLARKE: It is where the burden of proof lies under?

[46]MISS HOWELL: Section 329.

MR JUSTICE DAVID CLARKE: We are dealing solely here with section 329(2)(c).

[48]MISS HOWELL: Yes, I leave it to your Lordships whether your Lordships wish to define it in that way, because of course your Lordships looked at the construction of the section, and the words "but if" under sub-section (2) of course apply equally to some of the other defences raised under that section.

MR JUSTICE DAVID CLARKE: Anything else you want to say about that?

[50]MISS HOWELL: No. Simply, on reflection, of course your Lordships have decided that the burden of proof is on the defence initially, and that being an evidential burden --

[51]MR JUSTICE DAVID CLARKE: No, that is not a burden of proof. An evidential burden is simply -- it is often said that it should not be called a burden at all. It is the raising of an issue.

[52]MISS HOWELL: Yes.

MR JUSTICE DAVID CLARKE: Mr Hughes, do you want to say anything about this?

[54]MR HUGHES: Nothing further, my Lord. Thank you.

MR JUSTICE DAVID CLARKE: We will just retire and consider that.

[56]Miss Howell, in the light of the difference of opinion between the editors of the two textbooks to which we have been referred, we are persuaded that this is a case that should be certified. We will not of course be granting leave. That will be a matter that, if so advised, if you wish to proceed, you will have to make the application elsewhere.

[57]MISS HOWELL: I suspect it will not be me that makes it.

[58]MR JUSTICE DAVID CLARKE: The question to be certified being: where the burden of proof lies under section 329(2)(c) of the Proceeds of Crime Act 2002. It is perhaps best kept as simple and confined as that.

[59]MISS HOWELL: Yes.

[60]MR JUSTICE DAVID CLARKE: Yes, very well. Thank you very much for your written and oral arguments, Miss Howell, and, Mr Hughes, perhaps you will pass on our thanks to Miss Eadie for her skeleton argument.

[61]MR HUGHES: I will, my Lord. Thank you.