Re McKinsley; McKinsley v Crown Prosecution Service; Re M (Application for Certificate of Inadequacy)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Scott Baker |
| Judgment Date | 25 July 2006 |
| Neutral Citation | [2006] EWCA Civ 1092 |
| Docket Number | Case No: C1/2005/2770 |
| Court | Court of Appeal (Civil Division) |
| Date | 25 July 2006 |
[2006] EWCA Civ 1092
The President of The Queen's Bench Division
Lord Justice Scott Baker and
Lady Justice Hallett
Case No: C1/2005/2770
DTA/122/2004
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(QUEENS BENCH DIVISION) ADMINISTRATIVE COURT
Mr Justice Toulson
Royal Courts of Justice
Strand, London, WC2A 2LL
Tim Owen QC and Andrew Bodnar (instructed by Messrs Daniel Berman & Co) for the Appellant
David Perry and Ian Smith (instructed by The Confiscation Unit Organised Crime Division) for the Respondent
This is the judgment of the court in an appeal against a decision of Toulson J given on 22 November 2005. It is brought with the permission of the judge. He decided that in proceedings for a certificate of inadequacy under section 17 of the Drug Trafficking Act 1994 ("the 1994 Act") it was not open to the appellant to challenge the Crown Court judge's findings as to the appellant's realisable assets.
Facts
On 15 February 2002 the appellant was convicted of conspiring to supply a class A drug namely cocaine and sentenced to 7 years imprisonment by Judge Coleman in the Crown Court at Peterborough. On 5 February 2003 the same judge made a confiscation order against him in the sum of £193,361.64 with 3 years imprisonment in default of payment, consecutive to his 7 year sentence.
He appealed against the confiscation order as to which he was given limited leave by the single judge. On 6 May 2004 the Court of Appeal (Criminal Division) allowed his appeal to a limited extent, reducing the amount of the confiscation order to £166,410.76. His renewed application for leave to appeal out of time on the wider grounds refused by the single judge was rejected except for one point on which the Crown conceded an obvious error had been made. In the result the appeal was allowed to the extent that the figure for the value of the appellant's proceeds of drug trafficking was reduced by £38,650.26 and the figure for his realisable property, and thus the confiscation order, by £26,950.88 to £166,410.76.
In June 2005 the appellant applied to the Administrative Court for a certificate of inadequacy under section 17 of the 2004 Act. By this time £61,297.63 had been realised in part satisfaction of the order, but £130,887.55 was outstanding including interest which was accruing at 8% per annum.
The appellant's application for a certificate of inadequacy came first before Lightman J. on 30 June 2005. The Crown Prosecution Service (who are the respondents to this appeal) contended it was not open to the appellant to raise the matters he was seeking to raise on the application. The point was this: of the sum held by the Crown Court to be realisable property, approximately £83,000 was in the form of "hidden assets". What the appellant was seeking to do was to go behind the Crown Court order on the basis that he did not possess these assets.
The issue on this appeal is about the circumstances, if any, in which it is possible for an applicant in certificate of inadequacy proceedings to challenge findings by the Crown Court as to the amount which might be realised. The Crown's case is simple: the court must take as an established fact that a defendant's realisable assets at the date of the confiscation hearing were as found by the judge and that on an application for a certificate of inadequacy all that can be investigated is what has happened since then.
The application proceeded before Toulson J. on the basis that the appellant could prove that he did not have, and had not had when the order was made by Judge Coleman, the hidden assets found by the judge.
Section 17
Section 17 of the 1994 Act provides:
"(1) If, on an application made in respect of a confiscation order by –
(a) the defendant, or
(b) a receiver appointed under section 26 or 29 of this Act or in pursuance of a charging order,
the High Court is satisfied that the realisable property is inadequate for the payment of any amount remaining to be recovered under the confiscation order the court shall issue a certificate to that effect, giving the court's reasons.
(2) For the purposes of subsection (1) above –
(a) in the case of realisable property held by a person who has been adjudged bankrupt or whose estate has been sequestrated the court shall take into account the extent to which any property held by him may be distributed among creditors; and
(b) the court may disregard any inadequacy in the realisable property which appears to the court to be attributable wholly or partly to anything done by the defendant for the purpose of preserving any property held by a person to whom the defendant had directly or indirectly made a gift caught by this Act from any risk of realisation under this Act.
(3) Where a certificate has been issued under subsection (1) above, the person who applied for it may apply to the Crown Court for the amount to be recovered under the confiscation order to be reduced.
(4) The Crown Court shall, on an application under subsection (3) above
(a) substitute for the amount to be recovered under the order such lesser amount the court thinks just in all the circumstances of the case; and
(b) substitute for the term of imprisonment or of detention fixed under subsection (2) of section 139 of the Powers of Criminal Courts (Sentencing) Act 2000 in respect of the amount to be recovered under the order a shorter term determined in accordance with that section (as it has effect by virtue of section 9 of this Act) in respect of the lesser amount."
Subsection (5) , which it is unnecessary to recite, contains a rule-making power.
The Crown's position is that the certificate of inadequacy procedure under this section is intended to be used only where there has been a genuine change in the applicant's financial circumstances since the confiscation order was made, where for example an asset has dropped in value as could be the case with a property or shares. The appellant has a right of appeal against a confiscation order (which was exercised in this case) under section 9(1) of the Criminal Appeal Act 1968 and that is the route he should follow if he challenges the confiscation order.
The appellant, on the other hand, says that the wording of section 17 is not restricted in this way and it makes sense for one court, namely the Administrative Court, or in future, under the Proceeds of Crime Act 2002 ("the 2002 Act") , the Crown Court to look at the whole picture together and if there has been a manifest error on the part of the court making the original order to correct it. A defendant, so he submits, is prima facie entitled to a certificate of inadequacy whenever he can satisfy the Administrative Court that his assets are inadequate to pay the amount of the confiscation order. The Court is concerned solely with the current worth of the defendant's assets. The fact that he never had the assets is a reason for the inadequacy rather than a challenge to the original confiscation order.
The legislative framework
It is necessary to say a word about the framework of the relevant legislation. The power to make a confiscation order was first introduced by the Drug Trafficking Offences Act 1986 ("the 1986 Act") which imposed a mandatory obligation on the Crown Court to confiscate the proceeds of drug trafficking. The Criminal Justice Act 1988 ("the 1988 Act") extended the confiscation regime to cover all indictable offences and certain summary offences where the benefit accruing to the defendant was likely to be high. The 1986 Act was replaced by the 1994 Act, which came into force on 3 February 1995. Both the 1988 Act and the 1994 Act have been repealed and replaced by the 2002 Act. The relevant provisions of the 2002 Act came into force on 24 March 2003. The transitional arrangements provide that in the case of offences committed before that date, the earlier legislation will continue to apply.
By section 2 of the 1994 Act the Crown Court is under a duty to hold an inquiry into whether a person convicted of a drug trafficking offence has benefited from drug trafficking. If it concludes that he has, it must then determine (1) the amount of the defendant's proceeds of drug trafficking (sections 2 and 5) and (2) the value of his realisable property available to satisfy a confiscation order in the amount of his benefit (section 5(3)) .
By section 2(3) :
"For the purposes of this Act, a person has benefited from drug trafficking if he has at any time (whether before or after the commencement of this Act) received any payment or other reward in connection with drug trafficking carried on by him or another person."
Once the prosecution has proved, on the balance of probabilities, the amount of benefit, the burden is on the defendant to satisfy the court that the amount that might be realised is less. Otherwise the amount of the confiscation order is the value of the defendant's proceeds of drug trafficking.
The material parts of section 5 provide:
"(1) Subject to subsection (3) below, the amount to be recovered in the defendant's case under the confiscation order shall be the amount the Crown Court assesses to be the value of the defendant's proceeds of drug trafficking…."
——
(3) if the court is satisfied that the amount that might be realised at the time the confiscation order is made is less than the amount the court assesses to be the value of his proceeds of drug trafficking, the amount to be recovered in the defendant's case under the confiscation order shall be –
(a) the amount appearing to...
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