RICARDO CESAREO GARROTE v (CLAIMANT) [2002] EWHC 2909 (QB)

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
DIVISIONAL COURT
[2002] EWHC 2909 (QB)Case No Case No. C0/2237/2002Venue Royal Courts of Justice, Strand, London WC2
Between
RICARDO CESAREO GARROTE(CLAIMANT)CITY OF LONDON MAGISTRATES' COURT(DEFENDANT)THE CROWN PROSECUTION SERVICE(INTERESTED PARTY)
Before
Mr Justice GibbsMR M EDMONDS (instructed by Saunders & Co, 71 Kingsway, London, WC2B 6ST) appeared on behalf of the CLAIMANTThe DEFENDANT was not representedMS L SAUNT appeared on behalf of the INTERESTED PARTYDate 17 December 2002
[1]MR JUSTICE GIBBS: This is an application by Ricardo Garrote to quash the decision by the City of London Magistrates made on 14th February 2001. By that decision the magistrates issued a warrant committing the claimant to prison for non-payment of sums due from him under a confiscation order of the Crown Court. Permission to pursue the application was given by Munby J. The magistrates, who are the defendants to the application, have not filed any evidence and are not represented. They have not produced any reasons for their decision, and have not filed an acknowledgment of service. I am satisfied that service has been effective because a certificate of service has been produced to me. The Crown Prosecution Service was made an interested party, and was served with the application. When giving permission Munby J said:
"It would, I think, assist the court if the prosecution, even if it chooses not to appear, were to file a skeleton argument setting out its position in relation to the claimant's various complaints."
[2]At first the Crown Prosecution Service did not respond to this on the understandable ground that it was appropriate to take a neutral stance. However, it has now helpfully supplied a skeleton argument drafted by Ms Saunt, and she has attended to assist the court.[3]The facts leading to this application are as follows. On 22nd February 1999, before a jury at the Crown Court at Middlesex Guildhall, the claimant was convicted of five counts of false accounting, together with a count of conspiracy to defraud. He was sentenced to a term of seven years' imprisonment. However, before sentence was passed, the prosecution indicated that proceedings under section 71 of the Criminal Justice Act would be instituted.[4]On 2nd May 2000, at the same court, Mr Recorder Purnell QC made a confiscation order against the claimant in the sum of £1,373,405.47. It will immediately be clear from the sentence of imprisonment passed, and the amount of the confiscation order, that the offences of dishonesty in which the claimant had been engaged were very serious indeed.[5]The order drawn to reflect the compensation order, and other orders to which I shall come, has a curious feature. That feature is an error or contradiction on the face of the court documents. On the form of order signed by the officer of the Crown Court and dated 27th June 2000, the defendant is ordered to pay £1,373,405.47, the amount to be confiscated. Then there appears:
"The term of custody which may be liable to be served in default of payment is set at 18 months."
[6]However, in a document purporting to set out the order in detail and, as I understand it, appended to the document signed by the officer of court, the following words appear:
"5. The defendant shall have until 18 months to comply with the terms of the Order. "6. In the event of non-compliance with the Order, the Defendant shall serve 3 years in default, consecutive to the present term."
[7]It appears to me, provisionally at any rate, that there was an error in the order as drawn and signed by the officer of the court, in that that order did not reflect the Recorder's intention as to its detailed terms. As I have already said, those detailed terms appear to have been appended to the signed document and were intended to form a part of the order itself.[8]Having noted this error or contradiction, I do not propose to rule upon the legal effect of it. The issue, whilst apparent from the documents, has not been argued before me and does not form the subject matter of this application.[9]Significantly however, the detailed terms of the order continue as follows:
"7. The Court makes a Compensation Order in the following terms:- (i) £849,974.54 in favour of Credit Suisse First Boston. (ii) £523,430.93 in favour of the Union Bank of Switzerland. "8. The Court finds that the Defendant's realisable property is insufficient to enable payment of the Confiscation Order and the Compensation Order and accordingly, pursuant to section 72(7) of the Criminal Justice Act 1988, directs that so much of the Compensation Order that cannot be met from funds not used for the purposes of the Confiscation Order shall be recovered from the amount so realised."
[10]Before leaving paragraph 8, it is undoubtedly correct that section 72(7) of the 1988 Act empowered the Recorder to make the direction that he did. On the occasion when the confiscation order was made, the prosecution produced a list of the assets of the claimant, which was agreed in a varied form with the prosecution. It showed not only a series of bank accounts and assets in this country, but also a number of assets, most, if not all of them, consisting of real property situated abroad.[11]On 7th February 2001 the prosecution applied to this court for the appointment of a receiver, pursuant to section 80 of the Criminal Justice Act 1988. In the application the prosecution stated that they did:
"not seek any Order from this Court, at this stage, in relation to [assets outside the jurisdiction]. The Crown intend to ask that authorities in the countries in which these assets are located take steps to realise these assets in accordance with their laws."
[12]The receivership application was granted. Mr Mark Dixon of Kenneth Elliot & Rowe Solicitors of Romford was appointed receiver in respect of the claimant's assets within the jurisdiction on 8th March 2001. In March 2001 the claimant changed solicitors on the grounds that he was dissatisfied with the progress made in complying with the confiscation order.[13]On 22nd August 2001 the claimant's new solicitors wrote to the prosecution asking for details of the claimant's assets realised to date. An reply was sent on 23rd October 2001. On 24th October 2001 the claimant's solicitors wrote to the prosecution asking whether the prosecution had initiated legal proceedings to recover the claimant's assets out of the jurisdiction. No response was received, and a follow-up letter was sent on 9th November 2001.[14]The respondents, that is the City of London Magistrates who were charged with enforcement of the confiscation order, were clearly, by the beginning of 2002, contemplating proceedings in relation to it. This much is clear from the fact that they were in correspondence with the Crown Prosecution Service. On 18th January 2002 the Crown Prosecution Service wrote to the City of London Magistrates' Court in respect of the claimant's assets, stating:
"I regret that you have not received a reply to your previous letter. We are experiencing a severe staff shortage. "
We are still pursuing the assets in this country and Letters of Request in respect of the foreign assets are being prepared. "We anticipate that this matter will be pending for some time. We have been made aware that since September 11 2001, the American authorities are otherwise engaged. "We shall revert to you once we have a Receiver appointed."[15]On 11th February 2002 the respondents, having been notified that the claimant would be released from prison on licence on 18th February, notified the claimant and his solicitors by fax, and also notified the prosecution, that the case would be listed for consideration of making a committal order on 14th February 2002.[16]On 13th February 2002 the receiver, Mr Dixon, applied to be discharged. He had at that stage recovered a total of £114,725.72 in relation to the English assets. These had been forwarded by cheque to the City of London Magistrates.[17]The Crown Prosecution Service and the receiver appeared to have been satisfied that the listed assets had, as far as possible, been realised, and further, that where they had not been realised, there was a sensible reason for that: for example, a third party claim. It was not, and is not, the view of the Crown Prosecution Service, as I understand it, that the claimant had in any way failed to co-operate, or that he had misled the authorities.[18]On 14th February 2002 the claimant was produced from prison to the City of London Magistrates' Court. He was there represented by counsel. The prosecution did not attend, nor were they represented. At the hearing the claimant's counsel asked for an adjournment to allow enquiries to be made, specifically as to whether:(1) the prosecution was aware of the enforcement procedure hearing;(2) the prosecution wished to be represented at the hearing;(3) the prosecution wished to make any representations;(4) the prosecution had forwarded letters of request or appointed a receiver in respect of assets outside the jurisdiction; and(5) any of the assets outside the jurisdiction have been restrained or recovered.[19]The magistrates refused the adjournment and immediately issued a warrant of commitment, committing the claimant to prison in default of payment. That is the decision which is challenged by way of judicial review before this court. It is principally submitted that the magistrates should have granted an adjournment, and that the order which eventuated following their refusal of the adjournment was made on inadequate information and was wrong in law.[20]After the grant of permission for judicial review the case came before Silber J for a full hearing. At that time the Crown Prosecution Service as interested party had not responded to Munby J's request. Silber J said as follows:
"Mr Edmonds, on behalf on the claimant, contends that the Magistrates failed to exercise their discretion in a judicial manner before issuing a warrant of committal. His main criticisms are that the Magistrates ought to have adjourned the application so as to allow representations and evidence to be adduced by the prosecution, or to enable clarification of what steps had been taken by the Crown Prosecution Service to realise the claimant's assets outside the jurisdiction, as well as the results of such searches. He also submits the Magistrates erred in failing to consider other methods of enforcement short of issuing a writ of committal. "
Mr Edmonds relies on some observations made by Stuart-Smith LJ, with whom Turner J agreed in R v Harrow Justices, ex parte Director of Public prosecutions [1991] 1 WLR, 395 that: 'What we can do is to remind justices that they have a discretion whether or not to issue a warrant of commitment and that the discretion is one which must be exercised judicially. For such discretion to be properly exercised, it is well that the following points should be kept in mind ... (5) Given the inter partes nature of the procedure leading to the making of a confiscation order, it will be in the nature of things that the prosecution will in all probability have information available which would be relevant for the justices' consideration. More compellingly, the prosecution has a legitimate interest in being heard before the justices come to any decision. (6) Given the purposes of the Drug Trafficking Offences Act 1986, it is incumbent on justices to consider all methods of enforcement short of issuing a warrant of commitment in a Drug Trafficking Offences Act case before doing so.' "The Magistrates have to conduct a balancing operation on applications to commit a defendant. It is clearly of great importance that the Magistrates do have full information on attempts to realise assets and the results of such efforts. Before I can decide whether the order made by the Magistrates should be quashed, it is necessary to know whether anything would have been gained by hearing from the prosecution. It might well be that if they had given evidence, they might have said that they carried out all the enquiries to locate the foreign assets of the claimant and had issued letters of request, but that they had been unable to find any further assets. If that would have been the position, then the claimant might well be in difficulties in quashing the order. "If, on the other hand, it had transpired from the evidence from the prosecution that there were still further enquiries to be completed and assets of the claimant had been identified by the Crown Prosecution Service and that there was some prospect of realising substantial assets abroad, that would have been a matter which the Magistrates should have taken into consideration. "Against that background, Mr Edmonds submits that this matter should be adjourned so that the Crown Prosecution Service ought to be given another opportunity of coming and stating their position. I accept that submission because it is clearly desirable that before the Court decides whether this order of the Magistrates should be quashed and the claimant is released, the true position is ascertained and determined in relation to the other assets of the claimant. Only then will it be possible to determine if the order for committal should be quashed."[21]I respectfully endorse and agree with the reasoning of Silber J in that extract from his judgment which led to the adjournment of the proceedings until today. With the benefit of Ms Saunt's skeleton argument and a statement from Mr Graham Grist, a case worker in the Central Confiscation Branch of the Crown Prosecution Service, the position of the prosecution is now clear and, as reflected in paragraphs 1 to 4 of Ms Saunt's written argument, it is as follows:
"1. The CPS is proceeding with the enforcement of the confiscation order by taking steps to realise the remaining assets. None of these assets will be straightforward for the CPS to realise because the majority are outside the jurisdiction, some involve third parties. Third parties claim an interest in the remaining assets in this jurisdiction. This takes time and resources but the CPS is taking steps to enforce the order as far as it is able. "2. The CPS is currently taking steps for the appointment of a receiver to realise the real property situated in this country. "3. The CPS is currently involved in litigation to determine a third party's claim to have an interest in a building society account and two insurance policies. Once that is resolved the receiver could be appointed to realise those assets. "4. The CPS is currently processing letters of request to the United States of America and Mexico for the realisation of the defendant's assets held in those countries."
[22]I need not go into the detail of Mr Grist's statement. The property realised to date has consisted of bank accounts, building society accounts, cash and personal property of various kinds. The amount recovered to date is only a small proportion of the total order, i.e. some £115,000 as already mentioned. On the other hand, due to lack of resources, there was a period of about a year's delay between mid-2001 and mid-2002 when the case was effectively unallocated within the CPS, and for that reason no significant steps have been taken to pursue the substantial real property assets abroad.[23]The matter now appears to be in hand. Draft letters of request have been received by the Crown Prosecution Service and steps taken to ascertain the position in relation to, among other things, a specific property in Spain. In short, it is not yet known what the extent of recoverable assets will be. The process of recovery continues and, indeed, in so far as it relates to assets abroad, is only just beginning. There is no suggestion by the Crown Prosecution Service today that the claimant has failed to co-operate, rather the contrary.[24]I now need to consider briefly the statutory position relating to the confiscation order. The facts disclose that the defendant was convicted of offences arising out of conduct during the period between 13th December 1994 and 26th December 1995. It is common ground between the claimant and the interested party that the amendments to the Criminal Justice Act 1988 made by the Proceeds of Crime Act 1995 do not apply in this case. The significance of that is that the enforcement of the compensation order by means of committal to prison would have the effect of relieving the claimant of the requirement to satisfy the confiscation order pro rata that the period of imprisonment actually served bears to the period specified in the warrant in proportion to the amount of the confiscation order. The situation in this case is, therefore, entirely similar to that considered in R v Harrow Justices (already cited). Had the amendment effected by the Proceeds of Crime Act 1995 come into force, the relief referred to would not any longer have applied, and the confiscation order would have continued to have effect in full, notwithstanding any term of imprisonment in default.[25]My conclusions about the regrettable chain of events already summarised, and about this application, are as follows. The justices apparently failed to consider all methods of enforcement, short of issuing the committal warrant. Despite receiving the letter dated 18th January 2002 from the Crown Prosecution Service saying that assets were still being pursued, the magistrates failed to offer the prosecution the opportunity to be heard in relation to the legitimate public interest that their position should be known. There is no sign that the magistrates conducted, or even considered conducting, the balancing exercise which Silber J rightly referred to as being necessary in a situation such as this. Alternatively, if the justices did attempt to conduct such a balancing exercise, they did so without the benefit of any, or any adequate, information.[26]In the result, it follows that the magistrates' decision was neither a rational one, nor was it conducted with regard to the appropriate legal considerations. The only way in which the magistrates could have dealt with the matter properly was to adjourn for the purposes of obtaining information about the progress of the prosecution regarding assets pursued both in this country and abroad, but in particular abroad.[27]A further reason for adjourning the case was to allow the Crown Prosecution Service to make representations, and in that way to come to an informed decision on whether or not it was appropriate to enforce by means of committal, or whether alternative means of enforcement should be given a chance. An adjournment was requested on the claimant's behalf. The actual and potential consequences of the justices' erroneous approach were serious.[28]First of all, by reason of the law applicable to the case, the amount recoverable under the confiscation order would be reduced in proportion to the default sentence served. That would be, arguably at any rate, contrary to the public interest, so long as assets remained to be recovered.[29]Secondly, there would be an adverse effect on the beneficiaries of the compensation order, for the same reason. To the extent that the claimant was relieved from liability under the confiscation order, the beneficiaries of the compensation order would potentially suffer due to inadequacy of funds in view of the section 72(7) direction.[30]Thirdly, I am told that the practical effect on the claimant has been drastic. Prior to the magistrates' order he had been on the point of release on licence from his term of imprisonment, following a decision of the parole board. The effect of the magistrates' order was his recall to serve the whole of the balance of his sentence. In addition to that, he would be liable to serve the majority of the three year default period of imprisonment consecutively. Under certain circumstances the draconian nature of such an outcome might be entirely justifiable. That would particularly be the case where the defendant had failed to co-operate, or when it was clear that large sums would inevitably remain irrecoverable under the confiscation order. Neither consideration applied to the claimant's case, and the seriousness of the consequences to the claimant constitutes, in my judgment, an additional and important reason why the justices ought to have conducted the balancing exercise with care in relation to the enforcement of the default term, and done so in an informed and rational manner. This, I regret to say, they failed to do, and the order must therefore be quashed.[31]The justices retain their powers to enforce the confiscation order by committal. I regard it as doubtful whether it would be appropriate for them to do so unless and until current efforts to enforce against assets abroad are concluded one way or another, or until it becomes clear that no progress can be made. But these are matters for the justices. Whenever and however they choose to proceed, they should be guided by the principles referred to in this judgment, and more particularly the Harrow Justices case which, although it relates to drugs offences, contains guidance which is undoubtedly applicable here.[32]In future cases relating to the enforcement of confiscation orders, matters will be affected by section 75(5)(a). A committal order will not of itself prevent the confiscation order continuing to have effect in full, but nevertheless, in my judgment, discretion will still need to be exercised on an informed basis regarding the enforcement of confiscation orders by committal to prison.[33]For the reasons I have already given, the order in this case will be quashed.[34]I have been assisted by counsel as to my powers to award costs. The claimant does not seek a costs order against the justices personally. It is not alleged in this case that there was any bad faith. However, Mr Edmonds, following the success of his challenge to the decision, invites me to make an order that the claimant's costs be met from central funds. I am satisfied that I have the power to do by virtue of practice direction (Costs in Criminal Proceedings, 93 Cr.App.R. 89, paragraph 275). I think it is appropriate that such an order be made in this case, and I make it.[35]Are there any further matters that require to be dealt with?[36]MR EDMONDS: My Lord, no.[37]MS SAUNT: No.[38]MR JUSTICE GIBBS: There was a costs schedule prepared, I think. I do not know whether you wish me to make a summary assessment. I would probably prefer to leave the costs to be assessed.[39]MS SAUNT: My Lord, that would be my suggestion. I do not think my fees have been incorporated on to the schedule.

MR JUSTICE GIBBS: We cannot have that, can we? Thank you both very much.

Cited in 2 later judgments