Revenue & Customs Prosecutions Office v Duffy [2008] EWHC 848 (Admin)

Case No CO/5683/2007[2008] EWHC 848 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
DIVISIONAL COURT
Venue Royal Courts of JusticeDate Friday, 7th March 2008
Strand
London WC2A 2LL
B e f o r e:
LORD JUSTICE RICHARDS
MRS JUSTICE SWIFT DBE
Between
REVENUE & CUSTOMS PROSECUTIONS OFFICEAppellantv
Between
DUFFYRespondent
Computer-Aided Transcript of the Stenograph Notes ofWordWave International LimitedA Merrill Communications Company190 Fleet Street London EC4A 2AGTel No: 020 7404 1400 Fax No: 020 7831 8838(Official Shorthand Writers to the Court)
David Barnard (instructed by Revenue and Customs Prosecutions Office) appeared for Appellant for The defendant did not appear and was not represented
J U D G M E N T

LORD JUSTICE RICHARDS:

[1]I will ask Swift J to give the first judgment.[2]MRS JUSTICE SWIFT: This is an appeal by way of case stated by the appellant, Her Majesty's Revenue & Excise, against an order for compensation made by the Weston-super-Mare Magistrates' Court against the respondent, Mrs Laura Duffy, on 23rd March 2007. The appellant has been represented today by Mr David Barnard; the respondent had previously indicated that she intended to take no part in the appeal.[3]On 16th February 2007 the respondent pleaded guilty to four charges before the Weston-super-Mare Magistrates' Court. All those charges alleged that she had been knowingly concerned in fraudulent activity, undertaken with a view to obtaining payment of a tax credit contrary to section 35 of the Tax Credits Act 2002 (the 2002 Act).[4]The 2002 Act provides a system whereby persons of limited income can apply for payments (tax credits) towards the cost of childcare to be made to their nominated bank accounts. The appellant is responsible for the payment and management of the tax credits. Regulations for the administration of the scheme are made under section 4 of the 2002 Act, which expressly provides that those Regulations may require a claim to be made in a prescribed form. The Regulations in force at the material time were the Tax Credits (Claims and Notifications) Regulations 2002.[5]Once a claim is made, authorised payments are made and continue until the applicant indicates a change in circumstance. As I understand the position, the amount of the tax credit to which a successful applicant is entitled is not necessarily equal to the amount actually expended on childcare. Thus, in the respondent's case, the weekly amount she received would not necessary equate to the amount of childcare costs that she (falsely) declared at various times that she was incurring.[6]The first charge against the respondent alleged that on or about 24th September 2002, her fraudulent activity consisted of dishonestly completing a tax credit application form in which she claimed falsely that she was paying weekly childcare costs of £172. That was the initial application form, which was completed in order to establish her entitlement to tax credit payments. Those payments began to be paid in April 2003. We have been told by Mr Barnard today that, between April 2003 and August 2003, as a result of the information given on the application form, the respondent received in excess of £2,500 by way of tax credits.[7]The second charge, which was dated on or about 28th August 2003, alleged that the respondent dishonestly claimed in a letter that she was paying registered childcare costs at that time of £241 a week. We are told by Mr Barnard that that information did not lead to any loss because it merely confirmed (although slightly altering) information that had been given previously. It did not affect the amount of tax credit payment to which the respondent was entitled.[8]The third charge alleged that, on 10th November 2003, the respondent dishonestly claimed during a telephone call that she was paying childcare costs of £149 a week. That information led to the making of tax credit payments, backdated to 1st September 2003. Those payments continued until 5th April 2006 and amounted, we are told, to a total in excess of £14,000, although at some point (I think in April 2005) some internal mechanism known as "inhibition" caused the appellant's loss to cease at that time.[9]The fourth charge alleged that, on or about 27th December 2005, the respondent dishonestly claimed that she had been paying childcare costs to a named individual, and provided false receipts to that effect. However, we are told that that particular charge led to no loss. So the losses resulted from the first and third charges.[10]It was said by the appellant before the Magistrates' Court that, in all, the respondent dishonestly obtained tax credits in the sum of, in round figures, £19,600. Although no written schedule appears to have been available showing how that sum had been calculated, it seems that it was accepted by all parties at the Magistrates' Court that this amount did indeed represent the total loss to the appellant. It appears from the information that we have been given today that the total loss was in fact rather less than that sum and that it related, as I have indicated, to the first and third charges only. I will refer to that further in a moment, but the fact that the figures relied upon now are rather different does not affect the principles which were in issue in this case.[11]Following the respondent's indication of pleas of guilty on 9th February 2007, the appellant indicated its intention to apply for a compensation order in the sum of £19,600. On behalf of the respondent, it was argued that it was not open to the appellant to apply for compensation in respect of all the tax credit payments made to her without amendment of the charges or the provision of a schedule of the offences to be taken into consideration. Relying on the case of R v Crutchley and Tonks [1994] 15 Cr App R (S) 627, to which I shall return, the magistrates accepted the respondent's submission on the point. No formal finding was made at that stage, but the case was adjourned so that counsel for the appellant could take instructions and, if appropriate, prepare appropriate schedules of offences to be taken into consideration.[12]On 16th February 2007, the matter came before the magistrates again. On this occasion, the respondent entered a plea of guilty. The magistrates decided not to commit the case to the Crown Court for sentence and adjourned for the preparation of a pre-sentence report. The legal adviser and the magistrates reminded counsel for the appellant of the view which had been taken at the previous hearing about the need for a schedule of offences. It appears that counsel agreed to provide such a schedule on the next occasion.[13]On 23rd March 2007, the matter again came before the court and the respondent was sentenced. In respect of each of the four charges, she was sentenced to short consecutive periods of imprisonment totalling 6 months in all, which were suspended for 1 year. She was ordered to pay the prosecution costs of £200. The appellant applied for compensation in the sum of £19,600. There had been no amendment to the charges, nor had any schedule of offences to be taken into consideration been prepared. The respondent resisted the making of an order in that sum. The magistrates declined the appellant's application and instead made an order in the sum of £562, that being the weekly amount of childcare costs that the respondent claimed she was incurring on the dates identified in the first three charges.[14]The power to make a compensation order is set out in sections 130 and 131 of the Powers of Criminal Courts (Sentencing) Act 2000 (the 2000 Act). Section 130(1) of the Act provides:
"A court by or before which a person is convicted of an offence, instead of or in addition to dealing with him in any other way, may, on application or otherwise, make an order (in this Act referred to as a "compensation order") requiring him -- (a) to pay compensation for any... loss... resulting from that offence or any other offence which is taken into consideration by the court in determining sentence..."
Section 130(4) of the 2000 Act provides:
"Compensation under subsection (1) above shall be of such amount as the court considers appropriate, having regard to any evidence and to any representations that are made by or on behalf of the accused or the prosecutor."
It is also necessary to refer to section 131(1) of the 2000 Act, which provides:
"The compensation to be paid under a compensation order made by a Magistrates' Court in respect of any offence of which the court has convicted the offender shall not exceed £5,000."
[15]In resisting the appellant's application, the respondent contended that the four charges were specimen charges, namely examples of the respondent's dishonesty which had occurred over a period of several years. She relied on the case of R v Crutchley and Tonks. In that case, the defendants pleaded guilty to varying numbers of counts alleging offences of obtaining by deception arising out of benefit, insurance and mortgage frauds. Each of the counts related to an individual example of obtaining an identified sum of money by deception. These counts were specimen counts, representative of many other similar offences of obtaining sums of money by deception. No offences were taken into consideration. The prosecution applied successfully for compensation orders against both defendants in the sum -- not of the amounts identified in the counts on the indictment to which they pleaded guilty -- but in the total of all the monies they were alleged to have obtained in the course of their offending.[16]The defendants appealed against those orders to the Court of Appeal. At the appeal hearing, counsel for the defendants referred to section 35(1) of the Powers of Criminal Courts Act 1973, which was in similar terms to section 130 of the 2000 Act. He submitted that the values claimed as compensation were the total values of the amounts lost by the various authorities and bodies in respect of the whole of the defendant's frauds. The amounts lost as a result of the offences charged on the indictment were very much less. Since no offences were taken into consideration, the compensation orders must, he said, be limited to these lesser sums.[17]Counsel for the prosecution argued that, even if, formally, various other offences had not been taken into consideration, nevertheless if the defendants have clearly accepted that the counts were sample offences, and that they were guilty of a substantial number of other offences, then it is proper to make a compensation order to compensate the losers for the losses they have suffered from the totality of the defendant's offending.[18]The Court of Appeal rejected the prosecution's argument. Giving the judgment of the court, Glidewell LJ said:
"The wording of section 35(1) is too clear to permit us to adopt the construction for which he [counsel for the prosecution] argues. It may well be that it would be desirable if a procedure were devised by which, when a defendant was accepting his guilt of a whole series of frauds, a compensation order could properly be made in favour [of] a sum reflecting the total losses suffered by those who had been defrauded. But where, as here, there is neither an overall count which covers the total loss of any individual company which has suffered loss as a result of the fraud, nor any offences taken into consideration in addition to those in the indictment, then in our view the compensation order can only be made to compensate for the loss resulting from the counts in the indictment. Since, at the time when the appellants were sentenced, their counsel expressly accepted that compensation should properly be ordered in the sums claimed, an argument that the sums in the order should now be much reduced is unattractive, but it is correct."
[19]At the hearing before the magistrates in this case, it was argued on behalf of the respondent that the charges were specimen charges, so the compensation payable should be restricted to the sums named in the charges. Alternatively, it was submitted that, if the charges were not specimen charges, then each charge related to one action by the respondent only, so that compensation would still be payable only in the total sum identified in the charges.[20]For the appellant, it was contended before the magistrates, as before this court, that the charges were not specimen charges. Mr Barnard submitted before us that an offence under section 35 of the 2002 Act was not of the same type as an individual offence of obtaining property by deception on a single date. The offence here was being knowingly concerned with fraudulent activity (for example, completing an application form or otherwise providing information to the appellant), undertaken with a view to obtaining payments (and Mr Barnard stressed the use of the plural here) of a tax credit.[21]Mr Barnard argued that the question that the magistrates should have asked themselves, pursuant to section 130(1)(a) of the 2000 Act, was: What loss could fairly be said to result from the offence? He referred to the case of Rowlston v Kenny 4 Cr App R (S) 159, a decision of this court, in which it was held that the test in deciding whether a particular loss resulted from an offence is not whether the loss resulted solely from that offence, but whether it can be said fairly to have resulted from that offence. The fact that a defendant could have been charged with an offence did not, it was held, provide any reason for refusing compensation if the loss could be said fairly to have resulted from the offence in respect of which he is convicted.[22]Rowlston was a case where the defendant had made a declaration of means which was false in support of a claim for supplementary benefits. She was charged with one offence of making that false declaration, as a result of which she received payments of supplementary benefit week by week. The court found that, notwithstanding the fact that the defendant had to make regular additional declarations, the payments would not have been made without the original false declaration. Accordingly, it held that the whole loss of supplementary benefits incurred by the prosecution fairly resulted from the offences and confirmed the compensation order made by the magistrates.[23]The magistrates in the present case accepted the respondent's submissions. Their decision is recorded in their case stated:
"6.1 The charges were indeed specimen charges. The mischief in this case was committed on every occasion that the respondent received a tax credit payment and it was a continuing offence. It was not committed solely on the occasion when the initial claim was made. 6.2 As a result of the finding at point 6.1, we were obliged to follow the authority of R v Crutchley and Tonks. 6.3 The charges were loosely drafted in that they used the term "
On or about". This was insufficiently precise and did not give the respondent notification of what she was actually accused of. In such a scenario we must sentence based upon the facts as identified by the charge and from the charge we can only state with any certainty that one action involving dishonesty occurred in each charge. 6.4 As a result of the findings in points 6.1-6.3, and following R v Crutchley and Tonks, we were restricted to ordering compensation in the amount as alleged by one dishonest activity in each charge. This sum was adjudged by us to be £562.00. 6.5 We noted that this sum would be larger if the charge had used the term 'Between DATE and DATE', or if a schedule of offences to be taken into consideration was drafted. We came to this conclusion because the charge would then have alleged with sufficient certainty the total mischief committed by the respondent. 6.6 Further, we noted that even if these charges were not specimen charges then the principle outlined in R v Crutchley and Tonks... would still be followed. Our reasoning for this is that the charge, whether specific or specimen, simply does not allege the total mischief the appellant claims it does and we would be obliged to sentence on the basis of the charge... 6.9 We could sentence on the basis of an overpayment of £19,624.62 in all respects except for the issue of compensation. The reason for this was that the only matter in contention between the appellant and respondent from the outset was compensation... we took the view that the respondent had plainly approached the case as this being the total figure of overpayment and therefore it would be wrong to limit the sentence, except for on the issue of compensation where the respondent had raised concerns from the outset."[24]The magistrates identified the questions for this court as:
"1. Whether the bench was right to conclude that the charges were specimen charges and therefore that R v Crutchley and Tonks applied; and "2. Whether the bench were wrong to limit the award of compensation to the amount in the charges, which amounts reflected the childcare fee the defendant falsely claimed to have paid as opposed to the loss incurred as a result of the claim."
[25]I accept the appellant's arguments in this case. The respondent's actions in completing the application form and in subsequently providing false information to the appellant together triggered the payment, over a lengthy period, of tax credit to which she was not entitled. This was not a case where, as in Crutchley and Tonks, the offences charged were individual acts of obtaining single payments of tax credit. Thus, they were not specimen charges, and the principles set out in that case did not apply. I would therefore answer the first question in the negative. Having done so, it is unnecessary for me to deal with the alternative argument set out by Mr Barnard in his skeleton argument: namely, that the offences should be viewed as a course of continuous conduct by the respondent and that a compensation order in the sum of the appellant's total losses was justified on that basis. I merely comment that the position in relation to offences which amount to a course of conduct may well be affected by recent amendments to the Criminal Procedure Rules.[26]As to the second question, the position in this case was similar to that in the case of Rowlston. In my view, it can be said with complete fairness that all the tax credit payments made by the appellant to the respondent (and therefore all the appellant's losses) were attributable to two of the offences to which the respondent pleaded guilty: namely, the first and third. Had it not been for those offences, none of the payments would have been made.[27]It should be noted that the respondent was sentenced in all other respects on the basis that she had received payments of £19,624 to which she was not entitled. It seems clear from paragraph 6.9 of the case stated, which I have already quoted, that no objection was raised to that course; that supports, to some extent, my view about the fairness of the approach I have advocated. I would therefore answer the second question in the negative.[28]That is not, however, the end of the matter. The fact that, in principle, it was open to the magistrates to impose a compensation order in the total sum of the losses suffered by the appellant does not mean that they would in fact have done so. They would have had to have regard to the limit on the amount of compensation payable in respect of any one offence. They were also bound to take account of the respondent's means and should not have made an order which would require payment of compensation over too long a period, or with which there was no reasonable prospect of compliance. They referred to these matters in their case stated. It may be that, given the respondent's means, and the other circumstances of the case, they would still have imposed a compensation order of far less than that sought by the appellant, and indeed that has been conceded by Mr Barnard. Section 134 of the 2000 Act afforded them a wide discretion. In my view they should have the opportunity to reconsider the matter in light of the decision of this court as to principle. I would therefore allow the appeal, quash the compensation order made by the Magistrates' Court and remit the matter to them for reconsideration of the appropriate level of compensation to be paid.

LORD JUSTICE RICHARDS: I agree.

[30]MR BARNARD: My Lord, there is no application for costs.

LORD JUSTICE RICHARDS: Thank you very much indeed.