R (E) v HM Revenue and Customs PROSECUTION OFFICE
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE WALKER:,MR JUSTICE WALKER |
| Judgment Date | 19 July 2006 |
| Neutral Citation | [2006] EWHC 2154 (Admin) |
| Docket Number | CJA/19/2006 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 19 July 2006 |
[2006] EWHC 2154 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT
Royal Courts of Justice
Strand
London WC2
MR JUSTICE WALKER
CJA/19/2006
MR A BODNAR (instructed by Daniel Berman & Co) appeared on behalf of the CLAIMANT
MR J HALL (instructed by RCPO) appeared on behalf of the DEFENDANT
Introduction
It has long been thought desirable to deprive criminals of the benefits of their wrongdoing. Prior to the Proceeds of Crime Act 2002, there were statutory regimes —which I shall call "the old regimes" —under which the court responsible for sentencing an offender could, among other things, make a confiscation order. Such an order would require the offender to pay a particular amount and specify a term of imprisonment to be served if that amount was not paid within a specified time. These regimes provided for the possibility that an offender might later say that his realisable property was not sufficient to pay the amount in question. They did this by permitting the offender to apply to the sentencing court for the amount to be reduced, but they also imposed a filter. Before going to the sentencing court, the offender had to apply to the High Court for what has become known as a "certificate of inadequacy". That is a certificate that the applicant's realisable property is inadequate for the payment of any amount remaining to be recovered under the confiscation order.
There is before the court an application for a certificate of inadequacy under section 83 of the Criminal Justice Act 1988 ("the 1988 Act"). The respondent accepts that the applicant does not have sufficient realisable assets to pay the full amount outstanding. It says that as a matter of statutory construction, that fact alone does not entitle the applicant to a certificate. Alternatively, it says that the court should strike out the application as an abuse of process. Counsel could not identify any earlier case where such arguments had been advanced. As the old regimes continue to apply to crimes committed before 24th March 2003, it seems to me desirable to give my decision in open court. With the consent of the parties, I now do so.
The Facts
On 30th September 2003, the applicant was convicted by the Crown Court at Hull of being knowingly concerned in the fraudulent evasion of excise duty on goods, namely tobacco, in contravention of section 170(2)(b) of the Customs and Excise Management Act 1979. The total amount of excise duty evaded was £311,627.48.
On 27th February 2004 a confiscation order was made against the applicant. This was in the sum of £30,257.52, calculated in this way. The applicant's benefit was assessed to be £311,627.48, the duty evaded. The applicant's realisable assets were £30,257.52p and the confiscation order was made in the lesser of these two amounts.
There were two elements in the realisable assets calculated by the Crown Court. The first was the applicant's share in his matrimonial home. The court valued the net worth of that share as £28,257.52. The second was an amount which the applicant had lent to a Mr P J Brown. The applicant agreed that this sum should be included within his realisable assets as a gift, brought in by the provisions of the 1988 Act. The applicant was ordered to satisfy the confiscation order by 27th August 2004 or face a default sentence of 9 months' imprisonment.
An appeal against the confiscation order was dismissed by the Court of Appeal Criminal Division on 13th November 2004. The applicant has not paid any money at all towards that confiscation order. By an application notice issued on 10th February 2006, the applicant applied for a certificate of inadequacy under section 83 of the 1988 Act. In support of that application, he says that the matrimonial home has been sold for £143,500, but his share of the net proceeds amounted only to £6,902.20. That was largely because of monies owed by way of mortgage which proved to be greater than had been expected at the time of the confiscation order. He adds that the £6,902.20 proceeds of sale has been "dissipated in payment of third party debts and living expenses". As to the loan to Mr Brown, that individual has apparently moved to Germany. The applicant states that he has been unable to locate Mr Brown.
In accordance with its duty, the respondent investigated the claim, seeking detailed information in order to decide whether it would be appropriate to agree that a certificate of inadequacy be issued. As indicated earlier in this judgment, the eventual conclusion of the respondent was that the applicant does not have sufficient realisable assets to pay the full amount outstanding. However, there were five areas where the respondent concluded that the applicant had not done things which he ought to have done.
Mr Bodnar, who appears for the applicant, told me that immediately before this morning's hearing these matters were confirmed to him by Mr Hall, who appears for the respondent. The first is the loan to Mr Brown. The second concerns a gift of £1,000 made by the applicant to his daughter when she married. The applicant says that this is irrecoverable. Mr Bodnar commented that the respondent had not sought any order against the daughter and stigmatised this complaint by the respondent as an attempt to recover a "pound of flesh". Third, the respondent refers to a car which was bought by the applicant's wife. They are still married but are estranged. The applicant says that he does not know where the car is, and in any event it is in his wife's name. Fourth, the respondent says that the applicant ought to sell his furniture and a tumble drier that he has bought. Mr Bodnar stigmatises this as a second "pound of flesh". Fifth, the respondent observes that the applicant claims that in the Crown Court it had not been appreciated that there was a second mortgage on the house at the time of the confiscation order. The respondent says it may be argued that the applicant cannot go behind the findings of the Crown Court.
For present purposes, I am prepared to assume that these five points have sufficient merit to make it appropriate for a court to consider them. The practical question which arises is, which court? Should it be the High Court at the certificate of inadequacy stage, or should it be the Crown Court which was the sentencing court and would be the court which would decide whether to reduce the amount payable?
In order to decide that question I shall first set out extracts from Mr Hall's general submissions on the confiscation regime.
The respondent's general submissions on the confiscation regime
I have been much assisted in this case by the careful exposition found in each side's skeleton arguments. Paragraphs 30–33, 35–40 and 42–43 of the respondent's skeleton argument said this:
"(30) The purpose of the confiscation legislation is to strip those who commit crime of any possible profit from doing so by depriving them of their realisable assets, whether or not those assets are the proceeds of crime, up to the amount by which they have benefited from crime: Tivnan [1999] 1 Cr.App.R.(S) 92 (in relation to drug trafficking, but it is submitted of equal application to CJA 1988).
(31) Effective but fair powers of confiscating the proceeds of crime are essential, and reflect national and international policy: per Lord Steyn in Benjafield; Rezvi [2002] 2 Cr.App.R 3, at paragraph 14.
(32) Although the purpose of a confiscation order is to deprive of benefit, a confiscation order does not require a defendant to pay more than he has by way of realisable assets at the time of the confiscation order if that figure is less than his benefit: section 71(6) CJA 1988. The totality of a defendant's realisable assets are taken into account at this stage. No deductions are made to enable a defendant to maintain a particular living standard. For example, if a defendant has a capital sum which he occasionally uses for repairs and renovation to his house, that sum is included within his realisable assets. 'Realisable property' means ' any property held by the defendant': section 74(1) CJA 1988.
(33) The fact that a defendant has debts (other than fines payable following conviction or preferential debts under the Insolvency Act 1986) is not relevant to his obligation to satisfy the confiscation order. By section 74(3) the amount that might be realised is the total of the values of all the realisable property held by the defendant and the total of the value of all gifts caught by the Act, less only obligations 'having priority' (that is, court fines and preferential debts: section 74(9) ….
(35) Where a defendant fails to satisfy a confiscation order, the Magistrates' Court may activate the default sentence imposed at the time of the confiscation order. The statutory machinery is comprehensively set out in the judgment of Schiemann LJ in R v Hastings and Rotherham Justices, ex parte Anscombe (1998) 162 JP 340.
(36) It is not an either/or situation; it is not the case that either the defendant satisfies the entirety of his confiscation order, or he serves the entirety of his default sentence. If a defendant satisfies some of his order, there is a proportionate reduction in his sentence in default: section 79(2) Magistrates' Courts Act 1980.
The Inadequacy Regime
(37) The inadequacy regime was first introduced by the Drug Trafficking Offences Act 1986. It has been adopted in subsequent confiscation legislation with one particular difference in respect of the Proceeds of Crime Act 2002. Prior...
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