Confiscation Orders: Hidden Assets and the Burden of Proof

7th September 2011 Business Crime

Is there a difference between deciding that,

  • The defendant has hidden assets; or
  • The defendant has failed to satisfy the court that his available assets are less than the benefit figure?

In other words, is the court compelled to make an order in the full amount of the benefit figure if it is satisfied that the defendant has lied about the extent of his assets?

These questions have been addressed in a number of cases this year but were most recently reviewed by the Court of Appeal in the case of Regina v Phillip Barry Smith No: 201101943 B1Court of Appeal Criminal Division 28 July 2011 [2011] EWCA Crim 2029 /2011 WL 2748328. The case was heard by Lord Justice Moore-Bick Mr Justice Mackay Recorder of Nottingham His Honour Judge Michael Stokes QC (Sitting as a judge of the Court of Appeal Criminal Division) Mr G Bermingham appeared on behalf of the Appellant and Mr J Fletcher appeared on behalf of the Crown.

This was an appeal with leave of the single judge against a confiscation order made on 11th March this year by His Honour Judge Christopher Plunkett, sitting at Worcester Crown Court. The appellant had previously pleaded guilty, on re-arraignment, to three counts of possession of cannabis with intent to supply and two other offences of Class C possession. He put forward a basis of plea which was not accepted by the Crown, and on 22nd January of last year, following a Newton hearing at which Judge Plunkett presided, the appellant's basis of plea was rejected and he was sentenced to 30 months' imprisonment on each count to run concurrently.

The appellant's offending came to light following a covert police operation in the summer of 2008. On 20th August of that year he was stopped whilst driving his motorcar on the M42. On arrest, he acknowledged that there was cannabis in his vehicle. Upon searching it the police recovered a number of individually packed quantities of cannabis, together with a Stanley knife and two mobile telephones. When his home was searched, further quantities of cannabis were found, along with an electronic set of scales and a safe containing cash. 2,175 euros were also found. He was bailed but search warrants were again executed in December 2008 at his home, his business address and his mother's house. What was believed to be cannabis and papers indicating that the appellant had a lifestyle going somewhat beyond his legitimate means were discovered. 1 kilogram of cannabis was also found in an outhouse at his business premises and £79,060 in cash was found well hidden in the loft of his mother's home. The bulk of it was concealed under floorboards but £5,000 was in a safe. Upon his arrest the appellant acknowledged he was in possession of cannabis, but asserted it was either for his own use or for social supply amongst his friends. At a subsequent interview he claimed that the money found at his mother's home was the proceeds of sale of a property, savings from his businesses and winnings from gambling. The trial judge did not accept his account in relation to such matters. The total weight of the cannabis seized exceeded 2 kilograms. The appellant was made the subject of a restraining order which in some respects he breached: firstly, by disposing of his vehicle to a friend and, secondly, by failing to comply with a requirement to reveal the source of the sum of money he was allowed each week as living expenses.

During the course of those proceedings, the judge heard evidence from the financial investigator and from the appellant. The appellant also called an accountant and a number of other witnesses. The judge rightly concluded that the offences committed by the appellant necessarily meant that he had a criminal lifestyle, as defined by section 75 of the Proceeds of Crime Act 2002 . The Crown investigated, so far as it could, the appellant's dealings over the previous six years. Having heard the witnesses, and arguments from counsel, the judge assessed the appellant's benefit as £153,000.

There was no appeal from that finding, nor could there be given the very careful and fair way the judge conducted his assessment of the evidence. In particular, the judge was very careful to ensure there was no double counting of the cash seized from the appellant which the Crown took from him under a separate procedure which is explained in the judge's ruling. He did not include that amount in the benefit figure.

Having satisfied himself both as to the source and the extent of the appellant's benefit from his criminal conduct, both general and particular, the judge went on to consider, as he was bound to do, the amount that might be realised by way of confiscation, that is the recoverable amount. This is dealt with by section 7 of the Act, which provides:

  1. The recoverable amount for the purposes of section 6 is an amount equal to the defendant's benefit from the conduct concerned.
  2. But if the defendant shows that the available amount is less than that benefit the recoverable amount is-
    • the available amount, or
    • a nominal amount, if the available amount is nil. [emphasis added]

It is now well established that the burden of proving that the available amount is less than the full amount of the benefit is on the offender: see Barwick [2001] 1 Cr App R (S) 129 . Neither was there any obligation on the Crown to show a prime facie case that hidden assets exist: see Summers [2008] EWCA Crim 872 . Where the criminal lifestyle provisions apply, as here, the assumptions set out in section 10 of the Act come into play. Section 10(6) makes it plain that the court must not make a required assumption in relation to any particular property or expenditure if (a) the assumption is shown to be incorrect, or (b) there would be a serious risk of injustice if the assumption were made.

The Court of Appeal agreed that, in assessing the available amount in this case, the trial judge had proceeded with meticulous care. There was a great deal of material before the court to suggest that he was dealing with a thoroughly dishonest individual who was determined, at any cost, to preserve his assets for himself. The court pointed to examples: the appellant had concealed £79,000 in cash in sacks nailed down under the floorboards of his mother's loft; he perjured himself in matrimonial proceedings in order to hide assets from the court to prevent his wife acquiring an interest in them; following his arrest he immediately transferred £34,000 to his mother in a blatant attempt to conceal that part of his assets; he executed a trust deed giving 10% of his property to his mother, another attempt to conceal from the court or his wife the true extent of his assets. In addition, as the judge found, he used his mother's account to launder cash and concealed his earnings from both Her Majesty's Revenue and Customs and the Benefits Agency. He also resisted the keeping of any records in relation to his motor trading and his trading in gold and other items.

The Court of Appeal has recently underlined that where an offender is found by the judge to be dishonest and lying about his assets, the judge is not compelled to make a confiscation order equal to the amount of the benefit figure: see McIntosh and Marsden [2011] EWCA Crim 1501 . As Lord Bingham made clear in May [2008] AC 1028 , the objective of the statutory scheme is to deprive defendants of the benefit of their criminal conduct "within the limits of their available means. In other words, it would be unjust to imprison a defendant for failure to pay a sum he cannot pay. To that end, in McIntosh , Moses LJ said at paragraph 15:

"The court may conclude that a defendant's realisable assets are less than the full value of the benefit on the basis of the facts as a whole. A defendant who is found not to have told the truth or who has declined to give truthful disclosure will inevitably find it difficult to discharge the burden imposed upon him. But it may not be impossible for him to do so. Other sources of evidence, apart from the defendant himself, and a view of the case as a whole, may persuade a court that the assets available to the defendant are less than the full value of the benefit.

Mr Bermingham argued there was a certain difficulty in proving a negative and submitted that there was no evidence in this case of extravagant living. He also argued in his written grounds that the appellant's explanations in respect of the assets he had tried unsuccessfully to hide do not admit of the findings made by the judge.

The Court of Appeal disagreed. These are matters of fact for the judge hearing the evidence to decide. It was not necessary for the judge to make any finding, as such, that the appellant had hidden assets. It was clear from his written ruling that he was not satisfied that the appellant had discharged the burden placed upon him of establishing that his available assets were less than £131,000. The judge made that assessment on the evidence before him; he did not simply assume that because he found the appellant to be dishonest he was compelled to make an order to the full value of the benefit. In the circumstances of this case the judge's findings about the appellant's truthfulness would be largely determinative of the issue because the nature and value of his assets would essentially be within the appellant's personal knowledge. The court did not think that the submissions pursued by counsel sufficiently explained the shortfall between the benefit figure and the admitted assets. In McIntosh Moses LJ also pointed out that there was no room "outwith the statute, for any residual discretion in the court to relieve a defendant who has failed to prove that his assets are less than the full amount of the benefit. He was there referring to the Criminal Justice Act 1988 , but the principle applies equally to the 2002 Act.

Here the judge did not jump to any conclusions at all. He carefully considered all the material before him. He reminded himself that just because the appellant had lied on numerous occasions did not mean that he was lying in respect of all his evidence. He plainly accepted some of what the appellant said about his trading in cars and gold. He also accepted that he was a gambler. The judge's findings also demonstrate he considered all of the evidence, including the appellant's evidence, with great care because in making the confiscation order limited to £131,000 he did determine that the available amount was less than the full amount of the benefit. In doing so, he applied the correct principles and reached proper conclusions of fact.

The court determined that the appellant did not have any legitimate complaint as to either the way the judge conducted his assessment of the evidence or the conclusion he reached. Although the judge implied that the greater part of the appellant's assets were hidden, his findings, on a proper analysis, meant no more than the appellant had manifestly failed to discharge the burden upon him to establish that his available assets were limited to that which he contended. Had the judge expressed himself in that way, rather than seemingly making a finding that there were hidden assets, the appeal would have been unarguable. His finding at paragraph 11(d) of his ruling that the appellant had "not explained, on clear and cogent evidence where the money had gone was a conclusion that was open to him on the evidence.

The appeal was dismissed.

This article is taken from the judgement of The Court of Appeal (Courtesy of Westlaw/Sweet and Maxwell).

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Evan Wright is a Partner located in Manchester in our Business Crime & Regulation department

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