Category Archives: Expert witness

Expert witness

Alleged possession of criminal property

Police lamp copyright David Winch 2014Pete and Tony both worked for Snodsby Council as care workers at the Flower Dew Home.  This was supported accommodation for four adults with learning difficulties, who would not be capable of living independently or managing their personal finances.  Pete and Tony had worked there for years and had become friends.

Part of their role was to take residents on trips out to local shops and attractions where the residents could spend their own funds, withdrawn for the purpose from safe custody at the home. It was permissible for the residents to purchase items for themselves and even spend small amounts on gifts for the staff – an ice cream for example.  After each trip the care workers were obliged to account for the expenditures of the residents’ monies.

But one day an allegation was made that Pete had been stealing cash from the residents. After a local authority investigation a report was prepared which alleged that, as well as stealing their cash, Pete had been spending excessive amounts on trips out.  In effect Pete was alleged to have been treating himself and Tony on these trips, taking improper advantage of the residents’ vulnerability by using their money inappropriately.

 

Investigations

Pete and Tony were interviewed by council staff, including a manager Mr Justin Thyme.  Pete immediately admitted that he had taken some money.  Following those interviews the matter was referred to the police and both Pete and Tony were arrested and interviewed under caution by Detective Constable Arthur Crabtree.

DC Crabtree drew up a schedule of amounts drawn by Pete from residents’ monies between August 2013 and October 2014.  DC Crabtree called these “unaccounted withdrawals”.

Then DC Crabtree obtained copies of bank account statements for both Pete and Tony from their banks.  He looked for cash deposits into Pete’s and Tony’s bank accounts over the same period.  He put these deposits onto his schedule, which he called ABC/1.

The schedule showed total “unaccounted withdrawals” of £12,621 from residents’ monies between August 2013 and October 2014.  Over the same period there were cash deposits, which DC Crabtree called “unsourced deposits”, of £12,249 in Pete’s bank accounts.  In that same period there were also bank transfers of £7,960 from Pete’s bank accounts to Tony’s.

 

Charges

In due course Pete was charged with theft of a total of £10,221 from the four residents of Flower Dew Home, contrary to s1 Theft Act 1968.  Pete was also charged with possession of criminal property of £12,249 in money (which was the total amount of cash he had banked) contrary to s329 Proceeds of Crime Act 2002 and concealing criminal property of £7,960 in money (which was the total amount of the bank transfers to Tony) contrary to s327 of the same Act.

Tony was charged with possessing criminal property of £7,960 in money (which was the amount transferred from Pete’s bank accounts to his) contrary to s329 Proceeds of Crime Act 2002.

Pete pleaded guilty to all the charges he faced and was sentenced.

Tony pleaded not guilty to the single charge he faced.  The matter was referred to the Crown Court and a trial date was fixed.

 

An ‘open and shut’ case?

One might think that Tony was certain to be convicted because Pete had already pleaded guilty to concealing criminal property of the £7,960 which he had transferred to Tony.  But matters are not that straightforward.  Pete might have been advised to plead guilty to all the charges he faced rather than risk further investigations by the council or the police and to get the maximum reduction in sentence from an early guilty plea.  Because Pete had pleaded guilty the prosecution evidence had not been challenged in court by Pete’s legal team.

The court was not entitled to assume that because Pete had pleaded guilty, Tony must also be guilty.  Added to that, even if Pete was guilty of concealing criminal property of £7,960 by transferring it to Tony, it should not automatically follow that Tony would be guilty of possessing criminal property by receiving that money – that would depend, amongst other things, on whether Tony suspected or knew the money was proceeds of crime.

 

Possible defences

Tony’s legal team were aware of four alternative possible reasons why he might be found not guilty of the offence of which he had been charged.

These were

  1. the £7,960 was not proceeds of crime, or
  2. the £7,960 was proceeds of crime, but Tony neither knew nor suspected that, or
  3. the £7,960 was repayment of monies Tony had previously lent to Pete, or
  4. the £7,960 transferred into Tony’s bank account was not money which was in Tony’s “possession”.

 

Our instructions

Tony’s solicitors instructed us to consider the prosecution evidence, including exhibit ABC/1 – DC Crabtree’s schedule of “unaccounted withdrawals”, “unsourced deposits” and bank transfers from Pete to Tony – in relation to possible reasons 1 and 3 and to prepare an expert witness report suitable to be served in evidence.  If necessary we would attend Tony’s trial and give oral evidence.

 

Our work

We prepared a fee estimate which was approved by the Legal Aid Agency.  Then we set to work.

The first thing we did was to attempt to verify all the entries on exhibit ABC/1 to supporting bank statements or other documentary evidence supplied by the prosecution.

The documents presented to us by our instructing solicitors were the prosecution bundle which included witness statements from DC Crabtree and the council manager Mr Thyme and the bank statements of Pete’s and Tony’s which DC Crabtree had obtained – but did not include any accounting records of Flower Dew Home relating to residents’ monies (which had been referred to by Mr Thyme in his witness statement) nor the transcripts of the interviews DC Crabtree had held with Pete and Tony.  Also there was no prosecution case summary in the bundle nor any documents from the plea and trial preparation hearing.

 

The prosecution case

Our understanding was that the prosecution case was that the “unaccounted withdrawals” were monies stolen from residents (although Mr Thyme’s witness statement said that there had been inappropriate spending on trips out – but not that the entirety of the monies drawn were stolen), that the “unsourced deposits” were stolen cash banked by Pete into his account, and that the bank transfers to Tony were funded from the “unsourced deposits” (and hence were monies stolen by Pete).

 

Our findings

We were not able to confirm that the “unaccounted withdrawals” were stolen monies (although they might be) because we had not seen the records of Flower Dew Home and because Mr Thyme’s witness statement suggested that only part of the monies withdrawn were stolen or used inappropriately on gifts or treats for Pete and Tony.

We were able to identify on exhibit ABC/1 the particular withdrawals making up the £10,221 which Pete had admitted to stealing, but we could find no reason why Pete had not been charged with the theft of the whole of the unaccounted withdrawals of £12,621 listed on exhibit ABC/1.  It seemed that some withdrawals on the list may simply have been omitted from the theft charges on the indictment in error.

We were able to identify the deposits totalling £12,249 on Pete’s bank account statements and the bank transfers of £7,960 from Pete’s bank accounts to Tony’s on both Pete’s and Tony’s bank statements.

Chart of withdrawals v deposits

But when we looked at the detail of the dates and amounts of the “unaccounted withdrawals” and “unsourced deposits” on exhibit ABC/1 we found that although the total of the withdrawals (the alleged cash stolen) of £12,621 and Pete’s bank deposits of £12,249 were very similar, the timing and pattern of the alleged thefts and the bank deposits did not tie up.

We prepared a graph of the “unaccounted withdrawals” and “unsourced deposits”, day by day, which illustrated the mismatch between the two.  This showed that at least some of the bank deposits occurred before the cash thefts admitted by Pete, which meant that those deposits cannot have related to the thefts in question.

It also became clear that Pete had at least one account with another bank – and those other bank statements had not been obtained by DC Crabtree.  So the picture we had of Pete’s financial affairs was incomplete and, in our opinion at least, some of the inferences drawn by DC Crabtree were therefore not reliable.

 

Pete’s legitimate income

It seemed that until January 2014 Pete’s monthly salary had been paid by bank transfer from Snodsby Council into the bank account examined by DC Crabtree.  There was a pattern of Pete transferring most of his salary out of this account into his account with the other bank soon after he was paid each month.  Then there seemed to be a series of smaller transfers back to this account, presumably when Pete needed spending money.

After January 2014 there were no salary credits from Snodsby Council, but the transfers into the account from the other bank continued.  We inferred from this that from February 2014 onwards Pete’s monthly salary had been credited to his account with the other bank (although neither ourselves nor DC Crabtree had seen any bank statements for that account).

It had not been suggested that Pete’s monthly salary was proceeds of any crime.

 

The monies transferred to Tony

We then looked at the timing of the transfers from Pete’s bank account to Tony’s and the credits to Pete’s account immediately before those transfers, to see how far, on a practical level, the transfers to Tony seemed to be funded from the “unsourced deposits” into Pete’s account.

We found that more often than not the transfers to Tony seemed to be more closely related to Pete’s monthly salary credits or to monies Pete had transferred into his account from his account at the other bank.  Of the £7,960 transferred to Tony only £250 looked to be more closely related to “unsourced deposits” than other credits to Pete’s account.

 

Tony’s loans to Pete

Finally we looked to see if, outside the indictment period of August 2013 to October 2014, there were transfers of monies between Pete and Tony.  Tony had told his solicitors that he had often lent money to his friend Pete and been paid back over time, so there was nothing unusual in Pete transferring money into his bank account.  We did find evidence of such money transfers, in both directions, both before August 2013 and after October 2014.

That finding supported Tony’s evidence in that respect.  It also strengthened the possibility that the transfers from Pete to Tony were repayments of earlier informal loans from Tony to Pete.

 

Our report and its impact

We prepared a formal expert witness report and submitted it to Tony’s solicitors.  They in turn served copies on the prosecution and the Crown Court.

A little while later the prosecution indicated to Tony’s solicitors that they would not continue with the prosecution of Tony and in due course he was formally acquitted of the charge.

So a prosecution case which at first sight might have appeared to be overwhelming had proved on detailed examination to be full of holes.

 

Contacting us

Our contact details are here.

David

(Note: This article refers to a criminal prosecution in England and Wales. There are a number of additional issues which could be relevant to criminal proceedings in particular cases which it is not possible to deal with in an article such as this. Appropriate professional advice should be sought in each individual case. Names and certain other details have been changed in this article in order to preserve client confidentiality.)

Expert evidence – updated Part 19 Criminal Procedure Rules 2015

(c) FreeFoto.comPart 19 of the Criminal Procedure Rules 2015 dealing with expert evidence in Crown Courts and Magistrates’ Courts in England & Wales has been updated with effect from 5 October 2015. For convenience the new materials are brought together in a single document here.

The Criminal Procedure Rules are in future to be referred to by the abbreviation CrimPR to distinguish them from the Civil Procedure Rules, see new rule 2.3.(2).

 

Expert evidence – guide to the amendments to the Rules

Part 19 (Expert evidence) is amended to include a new rule about an expert witness’ obligations to the court.  At the same time the Criminal Procedure Rules as a whole have been rearranged – the new Part 19 dealing with expert evidence previously appeared as Part 33 of the 2014 edition of the rules.

Rule 19.2 (Expert evidence; Expert’s duty to the court) now requires an expert witness, as part of her or his duty to the court, to help the court in some of the same ways as a party to the case, by complying with directions (for example, as to the time by when a report must be served), and by warning the court of any significant failure to act as required by a direction (for example, by warning of substantial delay in the preparation of a report).

In response to observations by the Court of Appeal in its judgment in R v Reynolds, R v Rosser [2014] EWCA Crim 2205, and in response to reports by Rule Committee members of increasing difficulties in obtaining expert reports within the same times as before, the Committee agreed that an expert’s implicit duty to the court to give a realistic estimate of the time within which expert evidence can be prepared, and to adhere to that estimate, should be made explicit.

 

Expert evidence – the Rules as amended

When this part applies
19.1.
(1) This Part applies where a party wants to introduce expert opinion evidence.

(2) A reference to an ‘expert’ in this Part is a reference to a person who is required to give or prepare expert evidence for the purpose of criminal proceedings, including evidence required to determine fitness to plead or for the purpose of sentencing.

Expert’s duty to the court

19.2.

(1) An expert must help the court to achieve the overriding objective —

    (a) by giving opinion which is —
      (i) objective and unbiased; and
      (ii) within the expert’s area or areas of expertise; and
    (b) by actively assisting the court in fulfilling its duty of case management under rule 3.2, in particular by —
      (i) complying with directions made by the court, and
      (ii) at once informing the court of any significant failure (by the expert or another) to take any step required by such a direction.

(2) This duty overrides any obligation to the person from whom the expert receives instructions or by whom the expert is paid.

(3) This duty includes obligations —

    (a) to define the expert’s area or areas of expertise —

      (i) in the expert’s report, and
      (ii) when giving evidence in person;
    (b) when giving evidence in person, to draw the court’s attention to any question to which the answer would be outside the expert’s area or areas of expertise; and
    (c) to inform all parties and the court if the expert’s opinion changes from that contained in a report served as evidence or given in a statement.

Introduction of expert evidence

19.3.
(1) A party who wants another party to admit as fact a summary of an expert’s conclusions must serve that summary —

    (a) on the court officer and on each party from whom that admission is sought;
    (b) as soon as practicable after the defendant whom it affects pleads not guilty.

(2) A party on whom such a summary is served must —

    (a) serve a response stating —
      (i) which, if any, of the expert’s conclusions are admitted as fact, and
      (ii) where a conclusion is not admitted, what are the disputed issues concerning that conclusion; and
    (b) serve the response —
      (i) on the court officer and on the party who served the summary,
      (ii) as soon as practicable, and in any event not more than 14 days after service of the summary.

(3) A party who wants to introduce expert evidence otherwise than as admitted fact must —

    (a) serve a report by the expert which complies with rule 19.4 (Content of expert’s report) on —
      (i) the court officer, and
      (ii) each other party;
    (b) serve the report as soon as practicable, and in any event with any application in support of which that party relies on that evidence;
    (c) serve with the report notice of anything of which the party serving it is aware which might reasonably be thought capable of detracting substantially from the credibility of that expert;
    (d) if another party so requires, give that party a copy of, or a reasonable opportunity to inspect —
      (i) a record of any examination, measurement, test or experiment on which the expert’s findings and opinion are based, or that were carried out in the course of reaching those findings and opinion, and
      (ii) anything on which any such examination, measurement, test or experiment was carried out.

(4) Unless the parties otherwise agree or the court directs, a party may not —

    (a) introduce expert evidence if that party has not complied with paragraph (3);
    (b) introduce in evidence an expert report if the expert does not give evidence in person.

Content of expert’s report

19.4.
Where rule 19.3(3) applies, an expert’s report must —

    (a) give details of the expert’s qualifications, relevant experience and accreditation;
    (b) give details of any literature or other information which the expert has relied on in making the report;
    (c) contain a statement setting out the substance of all facts given to the expert which are material to the opinions expressed in the report, or upon which those opinions are based;
    (d) make clear which of the facts stated in the report are within the expert’s own knowledge;
    (e) say who carried out any examination, measurement, test or experiment which the expert has used for the report and —
      (i) give the qualifications, relevant experience and accreditation of that person,
      (ii) say whether or not the examination, measurement, test or experiment was carried out under the expert’s supervision, and
      (iii) summarise the findings on which the expert relies;
    (f) where there is a range of opinion on the matters dealt with in the report —
      (i) summarise the range of opinion, and
      (ii) give reasons for the expert’s own opinion;
    (g) if the expert is not able to give an opinion without qualification, state the qualification;
    (h) include such information as the court may need to decide whether the expert’s opinion is sufficiently reliable to be admissible as evidence;
    (i) contain a summary of the conclusions reached;
    (j) contain a statement that the expert understands an expert’s duty to the court, and has complied and will continue to comply with that duty; and
    (k) contain the same declaration of truth as a witness statement.

Expert to be informed of service of report

19.5.
A party who serves on another party or on the court a report by an expert must, at once, inform that expert of that fact.

Pre-hearing discussion of expert evidence

19.6.
(1) This rule applies where more than one party wants to introduce expert evidence.

(2) The court may direct the experts to —

    (a) discuss the expert issues in the proceedings; and
    (b) prepare a statement for the court of the matters on which they agree and disagree, giving their reasons.

(3) Except for that statement, the content of that discussion must not be referred to without the court’s permission.

(4) A party may not introduce expert evidence without the court’s permission if the expert has not complied with a direction under this rule.

Court’s power to direct that evidence is to be given by a single joint expert

19.7.
(1) Where more than one defendant wants to introduce expert evidence on an issue at trial, the court may direct that the evidence on that issue is to be given by one expert only.

(2) Where the co-defendants cannot agree who should be the expert, the court may —

    (a) select the expert from a list prepared or identified by them; or
    (b) direct that the expert be selected in another way.

Instructions to a single joint expert

19.8.
(1) Where the court gives a direction under rule 19.7 for a single joint expert to be used, each of the co-defendants may give instructions to the expert.

(2) A co-defendant who gives instructions to the expert must, at the same time, send a copy of the instructions to each other co-defendant.

(3) The court may give directions about —

    (a) the payment of the expert’s fees and expenses; and
    (b) any examination, measurement, test or experiment which the expert wishes to carry out.

(4) The court may, before an expert is instructed, limit the amount that can be paid by way of fees and expenses to the expert.

(5) Unless the court otherwise directs, the instructing co-defendants are jointly and severally liable for the payment of the expert’s fees and expenses.

Court’s power to vary requirements under this Part

19.9.
(1) The court may extend (even after it has expired) a time limit under this Part.

(2) A party who wants an extension of time must —

    (a) apply when serving the report, summary or notice for which it is required; and
    (b) explain the delay.

 

Expert evidence – the Practice Direction

19A.1 Expert opinion evidence is admissible in criminal proceedings at common law if, in summary, (i) it is relevant to a matter in issue in the proceedings; (ii) it is needed to provide the court with information likely to be outside the court’s own knowledge and experience; and (iii) the witness is competent to give that opinion.

19A.2 Legislation relevant to the introduction and admissibility of such evidence includes section 30 of the Criminal Justice Act 1988, which provides that an expert report shall be admissible as evidence in criminal proceedings whether or not the person making it gives oral evidence, but that if he or she does not give oral evidence then the report is admissible only with the leave of the court; and CrimPR Part 19, which in exercise of the powers conferred by section 81 of the Police and Criminal Evidence Act 1984 and section 20 of the Criminal Procedure and Investigations Act 1996 requires the service of expert evidence in advance of trial in the terms required by those rules.

19A.3 In the Law Commission report entitled ‘Expert Evidence in Criminal Proceedings in England and Wales’, report number 325, published in March, 2011, the Commission recommended a statutory test for the admissibility of expert evidence. However, in its response the government declined to legislate. The common law, therefore, remains the source of the criteria by reference to which the court must assess the admissibility and weight of such evidence; and CrimPR 19.4 lists those matters with which an expert’s report must deal, so that the court can conduct an adequate such assessment.

19A.4 In its judgment in R v Dlugosz and Others [2013] EWCA Crim 2, the Court of Appeal observed (at paragraph 11): “It is essential to recall the principle which is applicable, namely in determining the issue of admissibility, the court must be satisfied that there is a sufficiently reliable scientific basis for the evidence to be admitted. If there is then the court leaves the opposing views to be tested before the jury.” Nothing at common law precludes assessment by the court of the reliability of an expert opinion by reference to substantially similar factors to those the Law Commission recommended as conditions of admissibility, and courts are encouraged actively to enquire into such factors.

19A.5 Therefore factors which the court may take into account in determining the reliability of expert opinion, and especially of expert scientific opinion, include:

    (a) the extent and quality of the data on which the expert’s opinion is based, and the validity of the methods by which they were obtained;
    (b) if the expert’s opinion relies on an inference from any findings, whether the opinion properly explains how safe or unsafe the inference is (whether by reference to statistical significance or in other appropriate terms);
    (c) if the expert’s opinion relies on the results of the use of any method (for instance, a test, measurement or survey), whether the opinion takes proper account of matters, such as the degree of precision or margin of uncertainty, affecting the accuracy or reliability of those results;
    (d) the extent to which any material upon which the expert’s opinion is based has been reviewed by others with relevant expertise (for instance, in peer-reviewed publications), and the views of those others on that material;
    (e) the extent to which the expert’s opinion is based on material falling outside the expert’s own field of expertise;
    (f) the completeness of the information which was available to the expert, and whether the expert took account of all relevant information in arriving at the opinion (including information as to the context of any facts to which the opinion relates);
    (g) if there is a range of expert opinion on the matter in question, where in the range the expert’s own opinion lies and whether the expert’s preference has been properly explained; and
    (h) whether the expert’s methods followed established practice in the field and, if they did not, whether the reason for the divergence has been properly explained.

19A.6 In addition, in considering reliability, and especially the reliability of expert scientific opinion, the court should be astute to identify potential flaws in such opinion which detract from its reliability, such as:

    (a) being based on a hypothesis which has not been subjected to sufficient scrutiny (including, where appropriate, experimental or other testing), or which has failed to stand up to scrutiny;
    (b) being based on an unjustifiable assumption;
    (c) being based on flawed data;
    (d) relying on an examination, technique, method or process which was not properly carried out or applied, or was not appropriate for use in the particular case; or
    (e) relying on an inference or conclusion which has not been properly reached.

NOTE: A previous article dealing with the 2014 revisions to the Criminal Procedure Rules can be found HERE.

Post Office ‘Horizon’ issue in the news again

Post OfficeThe Post Office has again been mired in controversy over the alleged failings in its ‘Horizon’ software system used in thousands of sub-postoffices around the country.

It is clear that there has been a breakdown of trust between the national Post Office organisation and Second Sight, the independent forensic accountants appointed by the Post Office to investigate the allegations.

 

This has resulted in the Post Office terminating their contract with Second Sight and closing a Working Group which had been set up to examine outstanding disputes between the Post Office & sub-postmasters.

Following an investigation by the parliamentary Business, Innovations & Skills select committee the chairman wrote to the Secretary of State on 17 March 2015 commenting on the “lamentable lack of information” provided to Second Sight by the Post Office.

It is understood that Second Sight completed a report recently but this report remains confidential to the parties involved in the dispute.  Nevertheless media reports have surfaced indicating serious disagreements between the Post Office and the forensic accountants with the forensic accountants claiming that the Post Office have failed to disclose relevant documents to the investigating accountants & the Post Office disputing the accountants’ assertions.

 

Prosecutions

The heart of the dispute has been a number of prosecutions of sub-postmasters following investigations into their figures.  Many of those prosecutions have resulted in conviction of the sub-postmaster for dishonesty.  But matters may not be as straightforward as they appear.

The Justice for Sub-postmasters Alliance (JFSA) believes that in many cases the root cause of the problems have been failures in the Post Office ‘Horizon’ software – which have created unexplained apparent shortfalls in cash in local post offices.  Since sub-postmasters are contractually obliged to make good such shortfalls out of their own pockets they have in some cases ‘cooked the books’ in an attempt to hide these apparent shortfalls from the Post Office organisation.

It is these false entries which have been identified by Post Office internal auditors & which have led to the successful prosecutions.

But JFSA says that this is an injustice where the original computer failings have remained uninvestigated.

The Post Office say that there “has been an exhaustive and informative process which has confirmed that there are no system-wide problems with our computer system and associated processes” and that they “will now look to resolve the final outstanding cases as quickly as possible”.

But we may not have heard the last of this controversy.

David

Getting technical help on proceeds of crime issues

 

My name is David Winch, Director of Accounting Evidence Ltd.

We are forensic accountants specialising in crime and proceeds of crime proceedings in Crown Court cases in England and Wales.

Most of the work we do is financed by legal aid under ‘prior authority’ arrangements.

Personally, I have been qualified as a Chartered Accountant for 35 years and have a lot of experience in the Crown Court as an expert witness.

If you visit our website you will find over 70 detailed technical articles which will help you.

If you can’t find what you want, try the Quick Query button on our website homepage.

That emails me and I will personally reply – free of charge.

If you need expert advice, get in touch.

Accounting Evidence.

It’s what we do.

 

Contacting us

Our contact details are here.

David

Video produced by On Record Media Ltd info@onrecord.media 07872 550905

Confiscation – a huge figure of benefit

 

My name is David Winch, Director of Accounting Evidence Ltd.

We are forensic accountants specialising in crime and proceeds of crime, typically under legal aid

funding arrangements, in Crown Court cases in England and Wales.

You are a solicitor with a section 16 Proceeds of Crime Act 2002 statement landed on your desk.

There’s a huge figure of benefit for your client, an available amount that doesn’t make any sense

and hundreds of pages of appendices.

What do you do?

Well, give us a call on 01229  716651 and speak to me

or email me via the Quick Query button at the foot of the homepage.

Accounting Evidence.

It’s what we do.

 

Contacting us

Our contact details are here.

David

Video produced by On Record Media Ltd info@onrecord.media 07872 550905

Expert evidence – updated Part 33 Criminal Procedure Rules 2014

Photo 33 copyright David Winch 2014Part 33 of the Criminal Procedure Rules dealing with expert evidence in Crown Courts and Magistrates’ Courts in England & Wales has been updated with effect from 6 October 2014.  For convenience the new materials are brought together in a single document here.

 

Expert evidence – official guide to the amendments to the Rules

Part 33 (Expert evidence) is amended to include new rules about an expert witness’ duty to the court and about establishing the reliability of expert evidence.

Rule 33.1 is amended to redefine the scope of the Part.  Rule 33.2 is amended to redefine an expert’s duty to the court.  Rule 33.3 is amended to supply the procedure for introducing a summary of an expert’s conclusions, and to require service of information detrimental to an expert’s credibility.  Rule 33.4 is amended to require that an expert’s report must include information relevant to assessing the reliability of the expert’s opinion.

In Law Commission Report No. 325, entitled ‘Expert Evidence in Criminal Proceedings’, published in March, 2011, the Commission concluded that “special rules are required for assessing the reliability of expert evidence as a factor bearing on admissibility, and … opinion evidence with insufficient indicia of reliability (that is, pointers to reliability) ought not to be admitted in criminal proceedings … there should be further disclosure obligations in relation to all expert evidence, whether the evidence is relied on by the prosecution or by the defence” (from paragraphs 1.8 to 1.12 of the Report).

The Commission recommended that Parliament should enact legislation which, among other things, would contain a list of ‘indicia of reliability’.  The Government’s response was published last year.  Instead of introducing a Bill, it asked the Rule Committee to make changes to the Criminal Procedure Rules, so as to encourage the prompt introduction of expert evidence due to be relied upon at trial, in order that parties and courts would have enough time to consider it carefully, and so as to require that experts’ reports should deal explicitly with reliability, especially the reliability of scientific evidence.

In response, the Rule Committee has made a number of amendments to the rules accordingly, the purpose of all of which is to clarify what information the court must have so as to be able to make an informed decision about the admissibility of expert evidence, having regard to the reliability of the expert’s opinion and, where relevant, having regard to the expert’s credibility.

Where expert evidence is unlikely to be in dispute, the rules now provide for it to be introduced in a summary, with a full report required only if the conclusions are contested.  Although the rules do not list ‘indicia of reliability’ of the sort recommended by the Law Commission, the Rule Committee has asked the Lord Chief Justice to amend the Criminal Practice Directions that supplement Part 33 of the Rules to include such indicia and to give courts guidance on how to apply them.

[NOTE: A more recent article dealing with the further amendments effective from 5 October 2015 can be found HERE.]

 

Expert evidence – the Rules as amended

When this part applies
33.1.
(1) This Part applies where a party wants to introduce expert opinion evidence.

(2) A reference to an ‘expert’ in this Part is a reference to a person who is required to give or prepare expert evidence for the purpose of criminal proceedings, including evidence required to determine fitness to plead or for the purpose of sentencing.

Expert’s duty to the court

33.2.
(1) An expert must help the court to achieve the overriding objective by giving opinion which is —

    • (a) objective and unbiased; and
    • (b) within the expert’s area or areas of expertise.

(2) This duty overrides any obligation to the person from whom the expert receives instructions or by whom the expert is paid.

(3) This duty includes obligations —

      • (a) to define the expert’s area or areas of expertise —

        • (i) in the expert’s report, and
        • (ii) when giving evidence in person;

(b) when giving evidence in person, to draw the court’s attention to any question to which the answer would be outside the expert’s area or areas of expertise; and

(c) to inform all parties and the court if the expert’s opinion changes from that contained in a report served as evidence or given in a statement.

Introduction of expert evidence

33.3.
(1) A party who wants another party to admit as fact a summary of an expert’s conclusions must serve that summary —

    • (a) on the court officer and on each party from whom that admission is sought;
    • (b) as soon as practicable after the defendant whom it affects pleads not guilty.

(2) A party on whom such a summary is served must —

      • (a) serve a response stating —

        • (i) which, if any, of the expert’s conclusions are admitted as fact, and
        • (ii) where a conclusion is not admitted, what are the disputed issues concerning that conclusion; and

(b) serve the response —

      • (i) on the court officer and on the party who served the summary,
      • (ii) as soon as practicable, and in any event not more than 14 days after service of the summary.

(3) A party who wants to introduce expert evidence otherwise than as admitted fact must —

      • (a) serve a report by the expert which complies with rule 33.4 on —

        • (i) the court officer, and
        • (ii) each other party;

(b) serve the report as soon as practicable, and in any event with any application in support of which that party relies on that evidence;

(c) serve with the report notice of anything of which the party serving it is aware which might reasonably be thought capable of detracting substantially from the credibility of that expert;

(d) if another party so requires, give that party a copy of, or a reasonable opportunity to inspect —

      • (i) a record of any examination, measurement, test or experiment on which the expert’s findings and opinion are based, or that were carried out in the course of reaching those findings and opinion, and
      • (ii) anything on which any such examination, measurement, test or experiment was carried out.

(4) Unless the parties otherwise agree or the court directs, a party may not —

    • (a) introduce expert evidence if that party has not complied with paragraph (3);
    • (b) introduce in evidence an expert report if the expert does not give evidence in person.

Content of expert’s report

33.4.
Where rule 33.3(3) applies, an expert’s report must —

    • (a) give details of the expert’s qualifications, relevant experience and accreditation;
    • (b) give details of any literature or other information which the expert has relied on in making the report;
    • (c) contain a statement setting out the substance of all facts given to the expert which are material to the opinions expressed in the report, or upon which those opinions are based;
    • (d) make clear which of the facts stated in the report are within the expert’s own knowledge;
    • (e) say who carried out any examination, measurement, test or experiment which the expert has used for the report and —
      • (i) give the qualifications, relevant experience and accreditation of that person,
      • (ii) say whether or not the examination, measurement, test or experiment was carried out under the expert’s supervision, and
      • (iii) summarise the findings on which the expert relies;
    • (f) where there is a range of opinion on the matters dealt with in the report —
      • (i) summarise the range of opinion, and
      • (ii) give reasons for the expert’s own opinion;
    • (g) if the expert is not able to give an opinion without qualification, state the qualification;
    • (h) include such information as the court may need to decide whether the expert’s opinion is sufficiently reliable to be admissible as evidence;
    • (i) contain a summary of the conclusions reached;
    • (j) contain a statement that the expert understands an expert’s duty to the court, and has complied and will continue to comply with that duty; and
    • (k) contain the same declaration of truth as a witness statement.

Expert to be informed of service of report

33.5.
A party who serves on another party or on the court a report by an expert must, at once, inform that expert of that fact.

Pre-hearing discussion of expert evidence

33.6.
(1) This rule applies where more than one party wants to introduce expert evidence.

(2) The court may direct the experts to —

    • (a) discuss the expert issues in the proceedings; and
    • (b) prepare a statement for the court of the matters on which they agree and disagree, giving their reasons.

(3) Except for that statement, the content of that discussion must not be referred to without the court’s permission.

(4) A party may not introduce expert evidence without the court’s permission if the expert has not complied with a direction under this rule.

Court’s power to direct that evidence is to be given by a single joint expert

33.7.
(1) Where more than one defendant wants to introduce expert evidence on an issue at trial, the court may direct that the evidence on that issue is to be given by one expert only.

(2) Where the co-defendants cannot agree who should be the expert, the court may —

    • (a) select the expert from a list prepared or identified by them; or
    • (b) direct that the expert be selected in another way.

Instructions to a single joint expert

33.8.
(1) Where the court gives a direction under rule 33.7 for a single joint expert to be used, each of the co-defendants may give instructions to the expert.

(2) A co-defendant who gives instructions to the expert must, at the same time, send a copy of the instructions to each other co-defendant.

(3) The court may give directions about —

    • (a) the payment of the expert’s fees and expenses; and
    • (b) any examination, measurement, test or experiment which the expert wishes to carry out.

(4) The court may, before an expert is instructed, limit the amount that can be paid by way of fees and expenses to the expert.

(5) Unless the court otherwise directs, the instructing co-defendants are jointly and severally liable for the payment of the expert’s fees and expenses.

Court’s power to vary requirements under this Part

33.9.
(1) The court may extend (even after it has expired) a time limit under this Part.

(2) A party who wants an extension of time must —

    • (a) apply when serving the report, summary or notice for which it is required; and
    • (b) explain the delay.

 

Expert evidence – the new Practice Direction

33A.1 Expert opinion evidence is admissible in criminal proceedings at common law if, in summary, (i) it is relevant to a matter in issue in the proceedings; (ii) it is needed to provide the court with information likely to be outside the court’s own knowledge and experience; and (iii) the witness is competent to give that opinion.

33A.2 Legislation relevant to the introduction and admissibility of such evidence includes section 30 of the Criminal Justice Act 1988, which provides that an expert report shall be admissible as evidence in criminal proceedings whether or not the person making it gives oral evidence, but that if he or she does not give oral evidence then the report is admissible only with the leave of the court; and Part 33 of the Criminal Procedure Rules, which in exercise of the powers conferred by section 81 of the Police and Criminal Evidence Act 1984 and section 20 of the Criminal Procedure and Investigations Act 1996 requires the service of expert evidence in advance of trial in the terms required by those rules.

33A.3 In the Law Commission report entitled ‘Expert Evidence in Criminal Proceedings in England and Wales’, report number 325, published in March, 2011, the Commission recommended a statutory test for the admissibility of expert evidence. However, in its response the government declined to legislate. The common law, therefore, remains the source of the criteria by reference to which the court must assess the admissibility and weight of such evidence; and rule 33.4 of the Criminal Procedure Rules lists those matters with which an expert’s report must deal, so that the court can conduct an adequate such assessment.

33A.4 In its judgment in R v Dlugosz and Others [2013] EWCA Crim 2, the Court of Appeal observed (at paragraph 11): “It is essential to recall the principle which is applicable, namely in determining the issue of admissibility, the court must be satisfied that there is a sufficiently reliable scientific basis for the evidence to be admitted. If there is then the court leaves the opposing views to be tested before the jury.” Nothing at common law precludes assessment by the court of the reliability of an expert opinion by reference to substantially similar factors to those the Law Commission recommended as conditions of admissibility, and courts are encouraged actively to enquire into such factors.

33A.5 Therefore factors which the court may take into account in determining the reliability of expert opinion, and especially of expert scientific opinion, include:

    (a) the extent and quality of the data on which the expert’s opinion is based, and the validity of the methods by which they were obtained;
    (b) if the expert’s opinion relies on an inference from any findings, whether the opinion properly explains how safe or unsafe the inference is (whether by reference to statistical significance or in other appropriate terms);
    (c) if the expert’s opinion relies on the results of the use of any method (for instance, a test, measurement or survey), whether the opinion takes proper account of matters, such as the degree of precision or margin of uncertainty, affecting the accuracy or reliability of those results;
    (d) the extent to which any material upon which the expert’s opinion is based has been reviewed by others with relevant expertise (for instance, in peer-reviewed publications), and the views of those others on that material;
    (e) the extent to which the expert’s opinion is based on material falling outside the expert’s own field of expertise;
    (f) the completeness of the information which was available to the expert, and whether the expert took account of all relevant information in arriving at the opinion (including information as to the context of any facts to which the opinion relates);
    (g) if there is a range of expert opinion on the matter in question, where in the range the expert’s own opinion lies and whether the expert’s preference has been properly explained; and
    (h) whether the expert’s methods followed established practice in the field and, if they did not, whether the reason for the divergence has been properly explained.

33A.6 In addition, in considering reliability, and especially the reliability of expert scientific opinion, the court should be astute to identify potential flaws in such opinion which detract from its reliability, such as:

    (a) being based on a hypothesis which has not been subjected to sufficient scrutiny (including, where appropriate, experimental or other testing), or which has failed to stand up to scrutiny;
    (b) being based on an unjustifiable assumption;
    (c) being based on flawed data;
    (d) relying on an examination, technique, method or process which was not properly carried out or applied, or was not appropriate for use in the particular case; or
    (e) relying on an inference or conclusion which has not been properly reached.

A confiscation case study – the career fraudster

Books - copyright David Winch 2014On 16 June 2014 the Court of Appeal in London heard the appeal of Mr Sam Ernest against a confiscation order in the sum of £308,380 made against him at Kingston-upon-Thames Crown Court.  The Appeal Court judgment R v Ernest [2014] EWCA Crim 1312 makes interesting reading.

Mr Ernest purported to run a business as an events organiser.  He would claim to have contacts from whom he could obtain sought-after tickets to popular high profile events, such as Wimbledon, the London Olympics, rock concerts or film festivals, in return for money.

Mr Ernest sometimes provided the tickets for which he had been paid, but often he would not.  When tickets were not provided he would usually promise refunds – on some occasions refunds were given, but on others they were not.

 

The victims

His victims were in the main either wealthy people or organisations who could afford to pay substantial sums of money for prestige events, or men whom he had befriended or women with whom he entered into relationships.

One woman with whom he was having a relationship got a party of 18 people together, some from the USA, to attend events at the London Olympics.  She paid almost £4,000 to Mr Ernest.  He continued to promise that the tickets would arrive right up until after her friends had arrived in the UK.

In total Mr Ernest defrauded his victims of over £48,000.

 

The police investigation

Mr Ernest’s activities had first been reported to the police in 2009, but they took no action at that stage.  It was not until 2012, when a special team of police officers were investigating fraud associated with tickets for the London Olympics, that attention was focused on his activities.

On discovering that the police wished to speak to him, Mr Ernest prevaricated and would not agree to attend for interview.  No doubt this was in part because he was a United States citizen who had entered the UK on a six month tourist visa in 2005 and was an illegal over-stayer. His passport had expired in 2010.

However in December 2012 Mr Ernest pleaded guilty to 17 counts of fraud and was sentenced to 4 years imprisonment.  Confiscation proceedings followed.

 

The confiscation proceedings

Mr Ernest was subject to confiscation proceedings on the basis that he had a ‘criminal lifestyle‘ having been convicted in the same proceedings of more than 3 offences from which he had obtained a benefit and had, in aggregate, obtained a benefit of at least £5,000, s75 Proceeds of Crime Act 2002.

The Appeal Court judgment does not, of course, give a full history of the confiscation proceedings.  We do not know what was in the prosecution’s s16 statement or in Mr Ernest’s response.  We do know, however, that the confiscation went to a full hearing in the Crown Court which heard evidence from a Detective Constable Knowles and from Mr Ernest.

 

The prosecution assertions

DC Knowles referred to bank accounts held by a Ms Barbara Howell which had apparently been used by Mr Ernest (and by Ms Howell for legitimate purposes).  There was also a bank account in the name of J Bailey Morgan which apparently Mr Ernest controlled.  DC Knowles considered the movements on these bank accounts since the ‘relevant day’, which it was agreed was 29 August 2006 (six years prior to the date on which Mr Ernest had been charged).

DC Knowles calculated the amount of money in these accounts paid in by known victims together with all of the unexplained credits to the accounts, that is all the monies deposited during the relevant period other than those which represented Ms Howell’s legitimate earnings and funds. This figure came to £209,980. This figure included sums specifically identified as being monies paid into that account by persons identified as victims of Mr Ernest’s activities.

The prosecution invited the court to assume all these sums credited to the various bank accounts to be benefit of Mr Ernest’s general criminal conduct pursuant to s10(2).  Presumably to avoid risk of double counting the prosecution did not seek to assert, as benefit of particular criminal conduct, any additional benefit of the 17 offences of which Mr Ernest had been convicted.

However the prosecution did assert that a further assumed benefit arose, under s10(4), in respect of Mr Ernest’s day to day living expenses over the period since the ‘relevant day’.  These were estimated at £16,400 per year for 6 years, so £98,400 in total.  The prosecution accepted that to some extent Mr Ernest had been financially supported over this period by a succession of girlfriends but contended that, even so, he would have incurred this £98,400 expenditure himself.

In consequence, the prosecution’s total benefit figure was £308,380.  The prosecution apparently did not accept that Mr Ernest’s ‘available amount’ would be less than his benefit.

 

The defence evidence

Mr Ernest asserted that on at least some occasions he had supplied tickets for which he had been paid and on other occasions he had made refunds to customers.  So it would not be correct, in his view, to treat the entirety of the sums banked as benefit.  He also asserted that he had no assets available and no hidden assets.

However the defence produced no books and records of the business and no report of a forensic accountant, nor did the defence produce documentary evidence of Mr Ernest’s current ‘available amount’.  The defence relied upon the oral evidence of Mr Ernest.

 

The judgment in the Crown Court

The Crown Court judge entirely rejected the oral evidence of Mr Ernest.  He was, the judge concluded, a “career fraudster” who had used the bank accounts of others and had produced no documents in support of his oral evidence.  The judge concluded that he was a dishonest man who had lied repeatedly under oath.

The judge accepted the benefit figure of £308,380 asserted by the prosecution and found that the defendant had not discharged the burden upon him to show that his ‘available amount’ was less than his benefit.

Accordingly he ordered Mr Ernest to pay £308,380 within 6 months, with a default sentence of 3 years consecutive to the prison term he was already serving.

 

The Court of Appeal judgment

On appeal it was argued that the judge should have reduced the benefit figure to reflect legitimate business activities conducted by Mr Ernest where he had provided tickets or had made refunds.  Furthermore Mr Ernest had incurred expenditures in obtaining the tickets which he had supplied.

The Court of Appeal would have none of this.  It noted the absence of evidence in support of the asserted legitimate activities and commented that “the fact that some unidentified proportion of that money might conceivably be referable to some specific (but unidentified) business transaction does not render the making of the assumption incorrect”.

The Court was not prepared to make any reduction in the benefit figure in respect of expenses which Mr Ernest might have incurred.  It regarded the occasional provision of tickets by Mr Ernest as a means of furthering his fraudulent purpose by luring customers to do more business with him.

The £209,980 assumed benefit arising from credits to the bank accounts was therefore upheld.

But the Court of Appeal did accept that the bank statements showed expenditures by Mr Ernest on his living costs.  These expenditures had therefore been met from monies already included in assumed benefit.  This undermined the prosecution’s assertion that Mr Ernest would have incurred £98,400 of living expenditure funded entirely by additional assumed criminal conduct.  There was no other suitable figure before the court, so this head of benefit was omitted on appeal.

In consequence the benefit figure was reduced to £209,980.  The court ordered Mr Ernest to pay this lower figure and reduced the default sentence to 2 years 6 months.

 

Commentary

One doesn’t know whether in this case the defence had instructed a forensic accountant or not.  It is possible that a forensic accountant’s report had been obtained but had not been disclosed as part of the defence evidence (perhaps for good reason!).

However it should come as no surprise to find a Crown Court judge entirely rejecting the unsupported oral evidence of a convicted defendant.  Possibly if a forensic accountant had given evidence in the Crown Court confiscation hearing the judge might have accepted that the defendant, having incurred the expenses shown on the bank accounts, would not have had an ‘available amount’ equal to the total of his assumed benefit.  Such a conclusion would have been consistent with the Court of Appeal decision in McIntosh & Marsden v R [2011] EWCA Crim 1501.

In the event this defendant seems destined to serve his default sentence in due course.

David

(Note: This article applies to confiscation proceedings under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales. There are a number of additional issues which could be relevant to a defendant’s confiscation proceedings in particular cases which it is not possible to deal with in a relatively short article such as this. Appropriate professional advice should be sought in each individual case.)

Confiscation – challenging the prosecutor’s s16 statement

Legal wig copyright David Winch 2014How should the defence challenge the prosecutor’s assertions concerning the defendant’s benefit and available amount?

The prosecutor’s s16 Proceeds of Crime Act 2002 statement is a key document in confiscation proceedings.  In preparing the s16 statement the prosecution will have considered the offence(s) of which the defendant has been convicted; the evidence at trial (or readied for trial where there has been a guilty plea) and other information collected during investigation of the offence; information provided by the defendant in any statement under s18 or in response to any requirement in a restraint order under s41(7); information obtained from banks and others (perhaps by way of a production order under s345); and the results of the prosecution’s own investigations – probably undertaken by an accredited financial investigator.

 

Variety

Prosecution s16 statements are prepared in a wide variety of circumstances.  No two s16 statements will be the same – though they all have some similarities.  In any event the s16 statement will need careful study.  Typically the body of the s16 statement will run to between 10 and 30 pages with supporting appendices which could run to several hundred pages, and may include spreadsheets.

The s16 statement is likely to include some background narrative which sets the confiscation proceedings into context, including a description of the court proceedings resulting in the conviction and any restraint order which has been obtained.   There may also be information about the defendant (date of birth, previous convictions, etc) and information about his known legitimate income.

The defence legal team will wish to challenge any incorrect factual assertions in that narrative – but this narrative background is not at the heart of the s16 statement.

 

Financial investigations and ‘benefit’

The s16 statement will then move on, probably providing some details about the financial investigations undertaken by the prosecution and their findings about the defendant’s financial affairs.  That leads to the prosecution assertions about the defendant’s ‘benefit’ for confiscation purposes.

In this context ‘benefit’ has a special meaning based on the statutory provisions – it does not refer to what might be the defendant’s benefit in the everyday sense of the word.

 

‘Benefit’ of the offences

The first element of the defendant’s ‘benefit’ which the s16 statement will deal with is the ‘benefit’ of the offences of which the defendant has been convicted, sometimes referred to as the ‘direct benefit’ or the ‘benefit of particular criminal conduct’.  Here the prosecution are considering what the defendant ‘obtained’ as a result of the offences of which he has been convicted in the proceedings which triggered the confiscation.

This may be very easy to establish.  If the defendant has been convicted of, say, stealing a cheque for £10,000 payable to someone else and paying it into his own bank account then the ‘benefit’ of that offence is £10,000 (possibly uplifted for changes in the Retail Prices Index since the date of the theft).

But in many cases the ‘benefit’ of the offence will be less clear cut.  For example there may be theft of cash where there are inadequate records to quantity the amount of cash stolen, or supply of controlled drugs where there are no records of the monies received for the drugs, or the defendant may have been a member of a conspiracy (meaning it will be necessary to ascertain the amount ‘obtained’ by this particular defendant in his role in that conspiracy).

In rare cases the ‘benefit’ may be based on the profit deriving from fundamentally legitimate business operations which have been tainted by criminality, as in the case of R v Sale.

The ‘benefit’ asserted by the prosecution may also include assets which need to be valued, such as controlled drugs seized at the time of the defendant’s arrest.

In other cases the ‘benefit’ may be based on a ‘pecuniary advantage’ arising from the evasion of a liability – for example evasion of income tax, VAT or duties on goods.

In a minority of cases the prosecution may not be asserting that the defendant has obtained any benefit at all from the offences of which he has been convicted.

 

Assumed ‘benefit’

If the prosecution assert that the defendant has a ‘criminal lifestyle’ then the s16 statement will also deal with additional assumed ‘benefit’ which arises under the statutory assumptions of s10 PoCA 2002.  The statutory assumptions apply to the defendant’s receipts and expenditures since the ‘relevant day’ (which is usually 6 years prior to the date on which the defendant was charged with the offences of which he has been convicted) and to any assets held by the defendant since the date of his conviction.

Typically the prosecution will have obtained bank and credit card statements for all known bank and credit card accounts held by the defendant and will have reviewed all deposits to those accounts since the ‘relevant day’.  They may also have information about the defendant’s expenditures since the ‘relevant day’ – for example as a result of examining documents seized from searches of the defendant’s premises or considering information provided by the defendant in recorded interviews or in his s18 statement.  In addition the prosecution may have obtained Land Registry records or solicitors’ conveyancing files regarding property purchases, and mortgage account statements.

These same sources of information may be the basis for assertions of assumed ‘benefit’ in respect of any assets held by the defendant after the date of his conviction.

 

‘Available amount’

Finally the prosecutor’s s16 statement will deal with the defendant’s ‘available amount’.  Again this is a term defined by statute which does not mean simply the amount which the defendant has available to meet the confiscation order.  It refers to the current market value of the defendant’s assets, less any mortgage or other liability which is secured on those assets, plus the current value of any ‘tainted gift’ which the defendant has made.

However many of the defendant’s liabilities, such as unsecured borrowings and unpaid bills, will be ignored when computing the defendant’s ‘available amount’.

 

Default sentence

The s16 statement may conclude with an indication of the range of default sentences applicable where a confiscation order remains unpaid.

 

Challenging the s16 statement

The defence will wish to scrutinise in detail the prosecution assertions in relation to both the defendant’s ‘benefit’ and his ‘available amount’.  The focus of the defence challenge to the prosecutor’s figures will depend very much on the details within the s16 statement.

In relation to the ‘benefit’ of the offences of which the defendant has been convicted the defence will wish to consider the existence of the asserted ‘benefit’; whether it has been ‘obtained’ by the defendant himself, solely or jointly; and whether it is correctly valued.

Regarding the assumed ‘benefit’ the defence will wish to consider whether the criteria for a ‘criminal lifestyle’ have been met; whether the ‘relevant day’ has been correctly identified; the existence of the asserted receipts, expenditures and assets of the defendant himself (which may involve careful consideration of bank accounts and assets held in joint names and consideration of ‘lifting the corporate veil’); any evidence of the legitimate nature of those receipts and legitimate funds used to finance those expenditures and the purchase of those assets; any overlap or double counting between the various heads of asserted ‘benefit’ including, for example, where monies have been withdrawn from one of the defendant’s bank accounts and paid in to another; and the valuation of the various items reflected in the assumed ‘benefit’.

In relation to the asserted ‘available amount’ the defence will again consider the existence of those assets; the ownership of them by the defendant himself so as to exclude any interest of third parties; the current market value of those assets; and the amount of any liabilities secured on those assets.

Particular difficulties may arise where the ‘available amount’ is said to include any ‘tainted gifts’ or ‘hidden assets’.

Ultimately the defence will also wish to consider whether the use of the statutory assumptions involves a ‘serious risk of injustice’ or the confiscation order sought by the prosecution would be disproportionate and so infringe the defendant’s human rights.

All of these matters will feed in to the drafting of a s17 statement to be signed by the defendant and filed in response to the prosecution’s s16 statement, and the defence preparation for the confiscation hearing in the Crown Court.

 

Use of a forensic accountant

A forensic accountant may be able to assist the defence in challenging a number of aspects of the s16 statement.  This is likely to be particularly important in cases involving ‘assumed benefit’ under the ‘criminal lifestyle’ assumptions.  A forensic accountant may be better placed than the solicitor to undertake detailed examination of the figures and financial documents underlying the prosecution’s s16 assertions.

The cost of a forensic accountant’s report will normally be met by criminal legal aid under prior authority arrangements.

As a first step it is advisable to ask the forensic accountant to provide a fee quotation (to be forwarded to the Legal Aid Agency with an application for prior authority).  In order to prepare his quotation the forensic accountant should ideally be provided with a copy of the body of the prosecutor’s s16 statement, an approximate page count of the appendices to that statement, a copy of the defendant’s s18 statement, any advice which may have been obtained from counsel in relation to the s16 statement, and a note of the court timetable for the submission of the defendant’s response in the form of a s17 statement.

Where the appendices to the s16 statement include spreadsheets it is usual to ask the prosecution to supply electronic copies of the Excel spreadsheets (not the PDFs) either on disc or as email attachments.

Once the prior authority has been obtained the forensic accountant’s work can get underway!

David

(Note: This article applies to confiscation proceedings under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales. There are a number of additional issues which could be relevant to a defendant’s confiscation proceedings in particular cases which it is not possible to deal with in a relatively short article such as this. Appropriate professional advice should be sought in each individual case.)

Accountant sentenced to 7 years for cheat & fraud

Legal wig copyright David Winch 2014An accountant has been sentenced to 7 years’ imprisonment for cheating HMRC and defrauding his clients.

Simon Terry Pearce, 48, who held no recognised accountancy qualifications, ran S T Pearce Accountants from offices in St Austell, Cornwall.  He was convicted on 26 charges after a ten week trial at Truro Crown Court.  The prosecution evidence assembled by HM Revenue & Customs ran to approaching 40,000 pages and, in total, 51 prosecution witnesses were called to give evidence.

 

The allegations

It was alleged that over a period of several years Mr Pearce had operated his practice dishonestly by preparing tax returns for his clients which overstated their business expenses and the tax which they had suffered under the Construction Industry Scheme (CIS tax), overclaimed capital allowances particularly in relation to cars and – in relation to Capital Gains Tax – understated the sales proceeds of properties.  In many cases Mr Pearce had revised previous years’ tax returns for new clients.  The result of all this was that his clients’ tax liabilities were dishonestly understated and tax refunds were generated falsely.

It was further alleged that Mr Pearce had forged clients’ signatures and dishonestly abused HMRC’s Structured Action Request online system for taxpayers and their authorised agents with the result that clients’ tax refunds were paid by HMRC into his bank account rather than to the clients.  Whilst in some cases these refunds were forwarded to clients fully and reasonably promptly, in many cases refund payments were delayed (sometimes by a period of years), or paid on only in part, or not paid on at all.

Finally it was alleged that in relation to Mr Pearce’s own tax returns he had dishonestly understated his fee income and that he had failed to register his business for VAT at the appropriate time.

 

Mr Pearce’s defence

Mr Pearce said that he had not been dishonest. The tax returns which he had prepared for clients reflected the information which clients had provided to himself and his staff at interviews with them.  He had included fair estimates of expenditures for which the clients had no documentary evidence, particularly in relation to travelling and subsistence.  He had misunderstood tax law in relation to motor cars, believing that 100% first year allowances or annual investment allowances were available, and the abolition of CGT taper relief in 2008 had not come to his attention.

He had arranged for clients’ tax refunds to be paid to his bank account when fees were due to him.  His failure to pass the balance of refunds on to clients was as a result of inadequate and misleading information received from HMRC, poor record keeping in his office and pressure of work resulting from having taken on too many clients.  He had fobbed off clients who had enquired about their refunds and had given them excuses and explanations for delays which were untrue.  He accepted that he had used HMRC’s online Structured Action Request facility to arrange refunds to be paid to him but believed he was entitled to do so.

He asserted that clients’ income tax returns were only submitted to HMRC after clients knew what was on them, albeit that the clients may have received and signed paper copies of the returns only after they had been filed online with HMRC.

 

My role

I was instructed by Mr Pearce’s solicitors and counsel to advise them on generally accepted conduct by accountants in relation to the preparation of accounts and tax returns for clients, relevant tax law and practice, the proper treatment of clients’ tax refunds, and to examine Mr Pearce’s own business records and those of certain of his clients, together with the associated accounts and tax computations, to advise whether tax liabilities had been understated.

I attended court and advised the defence team throughout the presentation of the prosecution case but I was not myself called to give evidence.  The only witness called by the defence was Mr Pearce himself.

 

The clients’ evidence

The clients typically gave evidence to the effect that they relied upon and trusted Mr Pearce as their accountant to deal properly with their accounts and tax affairs.  In many cases they denied providing Mr Pearce with information which he claimed to have received from them.

They did not themselves understand accounts or tax and believed that their tax returns were being correctly prepared and that they were entitled to any refunds which they had received.  They were devastated when they learned that they were required to repay substantial sums to HMRC.

 

The outcome

The jury found Mr Pearce guilty on 26 of the 30 counts which he faced.  Clearly the jury considered him to have been thoroughly dishonest over a period of years.

 

The lessons to be learned

Mr Pearce frequently received tax refunds on behalf of clients but did not operate a client bank account.  In practice refunds received were swallowed up by business and private expenses leaving Mr Pearce unable to pass on to clients the monies which were due to them.

The firm’s working papers and interview notes in support of figures in the accounts and tax returns were inadequate to demonstrate persuasively which figures were based on information that had been provided by clients and which were based on estimates made by Mr Pearce apparently based on his general knowledge of his clients’ activities – or to refute the allegations that some increases in claimed expenses arose purely from fabrications by Mr Pearce.

In many cases business expenses in accounts and returns had apparently been compiled based only on an examination of paid bills and discussions with clients – and without examination of clients’ bank statements.  In the majority of cases which I examined Balance Sheets had not been prepared.  Had the accountancy work been more thorough then many mis-statements which were made on tax returns, for example from duplication of genuine expenditures, could have been avoided.

Either Mr Pearce’s knowledge of tax law and practice was faulty and out of date in important respects or he was claiming allowances and reliefs for his clients which he knew were not available to them.

 

Overview

This was a very significant prosecution by HMRC, the biggest case ever prosecuted by them in Cornwall, and a major case by any standards.  Few Crown Court trials run to ten weeks or involve over 50 witnesses and few criminal investigations generate approaching 40,000 pages of exhibits.  The prosecution asserted that Mr Pearce had ultimately retained £170,000 in refunds due to his clients and that overall HMRC had lost between £1 million and £2 million as a result of his activities.

I have no doubt that my advice was valuable to the defence in professionally examining the prosecution evidence and ensuring that it was appropriately challenged.  Ultimately the weight of evidence against Mr Pearce was overwhelming and the jury were sure that he had been dishonest.

David

(Note: This article refers to a criminal prosecution in England and Wales. There are a number of additional issues which could be relevant to criminal proceedings in particular cases which it is not possible to deal with in an article such as this. Appropriate professional advice should be sought in each individual case.)

Benefit in confiscation: gross receipts or profit?

Antique coin copyright David Winch 2014For many years lawyers acting in confiscation cases on behalf of convicted defendants have sought to limit ‘benefit’ for confiscation purposes to the ‘true benefit’ or ‘profit’ arising from the criminal activity – and for just as many years lawyers acting for the prosecution have sought to argue that the ‘benefit’ is the gross amount received. This article traces the development of this argument through the history of the various different Acts of Parliament which have provided for confiscation and right up to the present.

 

Drug Trafficking Offences Act 1986

One of the earliest cases to focus on the issue of gross receipts or profits in confiscation was R v Smith (Ian) [1989] 1 WLR 765. This was a drug related confiscation under the provisions of the Drug Trafficking Offences Act 1986. The defendant’s counsel argued that the benefit should reflect only the profit derived from drug trafficking. The Court of Appeal countered, “it seems to us that the section is deliberately worded so as to avoid the necessity, which the appellant’s construction of the section would involve, of having to carry out an accountancy exercise, which would be quite impossible in the circumstances of this case”.

It is true that the wording of the relevant Act referred to “any payments or other rewards received by a person . . . in connection with drug trafficking carried on by him or another”. It is difficult to see how these words could be considered to refer to the profit from drug trafficking rather than the gross amounts received.

 

Drug Trafficking Act 1994

But the Smith case set the tone for many subsequent confiscation cases. So, for example, in the case of R v Banks [1996] EWCA Crim 1799, a drugs case based on the confiscation provisions of the Drug Trafficking Act 1994, the Court of Appeal reaffirmed the decision in Smith. Again it may be relevant that the 1994 Act had repeated the wording of the 1986 Act with regard to “payments or other rewards received”.

 

Criminal Justice Act 1988

Away from drug offences, confiscation had been introduced more generally by the Criminal Justice Act 1988. The provisions of that Act were consider by the House of Lords in R v (David Cadman) Smith [2001] UKHL 68. This case concerned evasion of duty on the import of cigarettes. In that respect issues of what had actually been received were sidelined, since the benefit for confiscation purposes was held to be the duty which had not been paid – rather than any monies which had actually been received.

But the House of Lords took the opportunity to refer with approval to the 1989 judgment in Smith – indicating that legislators had “adopted a similar approach” in relation to drug related and non-drug related confiscations, notwithstanding the different form of words used in the 1988 Act.

 

Proceeds of Crime Act 2002

Some years later, in the case of CPS Nottinghamshire v Rose [2008] EWCA Crim 239, the Court of Appeal gave detailed consideration to the separate strands of confiscation legislation in respect of drug offences and non-drug offences, and the newer legislation in the Proceeds of Crime Act 2002 dealing with confiscation in relation to all types of offences.

Whilst the Court of Appeal did not consider that when drafting PoCA 2002 the legislators had chosen to adopt the confiscation provisions from one branch of earlier statute law rather than another, it did consider that “it can safely be assumed that Parliament did not intend to weaken the application of the confiscation regime (or regimes) when bringing the existing provisions within a single framework”.

 

Confiscation and business activities

The Court of Appeal decision in the case of R v Scragg [2006] EWCA Crim 2916 had dealt with confiscation in relation to a (relatively) legitimate business. Mr Scragg bought and sold motor cars. But Mr Scragg was dishonest and he was convicted of ‘fraudulent trading’ contrary to s458 Companies Act 1985. In the confiscation proceedings which followed under the Proceeds of Crime Act 2002 the question arose, “where a defendant obtains by deception a vehicle valued at £10,000 and sells it for £8,000, how is his benefit to be quantified?”.

It was not suggested that only Mr Scragg’s profit was his benefit – rather the issue was whether his benefit in relation to that purchase and sale would be £10,000 or £18,000. The Court of Appeal found his benefit to be limited to the greater of the purchase price and the sale price in respect of each vehicle (so the benefit would be £10,000 in respect of the car in this example).

 

Gross receipts

But one needs no imagination to see that the implications of confiscation for a business could be harsh indeed. This is graphically illustrated by the decision in Del Basso & Goodwin v R [2010] EWCA Crim 1119 which concerned a business offering long term car parking on land not far from Stansted Airport. The business was a legitimate one except that it was carried on in contravention of an enforcement notice stemming from an absence of any planning permission for the land in question to be put to that use.

The confiscation order in that case was based on the gross receipts of the business – not on the profits arising. In arriving at that conclusion the Court of Appeal referred to the House of Lords decision in R v May [2008] UKHL 28 in which, when summarising the key features of confiscation their Lordships had said, “the benefit gained is the total value of the property or advantage obtained, not the defendant’s net profit after deduction of expenses”.

In the case of R v Waya [2012] UKSC 51 the Supreme Court, consistent with May, had noted that, “a legitimate, and proportionate, confiscation order may . . . require a defendant to pay the whole of a sum which he has obtained by crime without enabling him to set off expenses of the crime”.

 

Accounting exercises unwelcome

More recently in the case of R v Harvey [2013] EWCA Crim 1104 the Court of Appeal upheld a confiscation order based on a percentage of all gross receipts of a business notwithstanding the fact that those gross receipts included some demonstrably legitimate sums and Value Added Tax on invoiced sales, which had been properly accounted for to HM Revenue & Customs. The court commented that, “it is repugnant and contrary to the principles stated in May paragraph 48 and Waya paragraph 26 to carry out an accounting exercise in respect of those monies” obtained as a result of criminal conduct.

From this history it might appear that courts in England & Wales have taken a consistent, and harsh, line that confiscation orders are to be made on the basis of the gross amounts obtained as a result of, or in connection with, crime.

 

A softer line?

But there is an alternative and more nuanced interpretation.

In the case of Waya the Supreme Court acknowledged that there may in some circumstances be a danger of a disproportionate outcome which, “will have to be resolved case by case as the need arises. Such a case might include, for example, the defendant who, by deception, induces someone else to trade with him in a manner otherwise lawful, and who gives full value for goods or services obtained. He ought no doubt to be punished and, depending on the harm done and the culpability demonstrated, maybe severely, but whether a confiscation order is proportionate for any sum beyond profit made may need careful consideration”.

 

Confiscation and profits

Perhaps illustrating that approach, the Court of Appeal in R v Sale [2013] EWCA Crim 1306 allowed an appeal against a confiscation order based on the total receipts generated from contracts obtained illegally and substituted an order based on the gross profits arising from those contracts, noting that, “it would have seemed to us proportionate to limit the confiscation order to the profit made”.

In that case the court would also have wished to reflect in the confiscation order, “the pecuniary advantage gained by obtaining market share, excluding competitors, and saving on the costs of preparing proper tenders” but it had no information enabling it to uplift the confiscation order to reflect this aspect of the “true benefit” obtained by the defendant.

 

True benefit

But, arguably at least, the cases of Waya and Sale have opened the door for defendants in future confiscation proceedings in some cases to ask Crown Courts to restrict the confiscation order to be made against them to the ‘true benefit’ obtained from their criminal conduct rather than the gross amounts obtained, in order to arrive at a confiscation order which is proportionate and compliant with Article 1 of the First Protocol to the European Convention on Human Rights.

 

A fuzzy line

It might be said however that the effect of recent decisions has been to create some uncertainty. On first sight it seems difficult to reconcile the full-bloodied and harsh outcome in Harvey with the more generous approach adopted in Sale in circumstances where both cases related to essentially legitimate business activities tainted by an illegitimate ingredient. It will be interesting to see how these types of cases are dealt with in future.

David

 

UPDATE:  Since this article was written the Court of Appeal has dealt with the case of R v King [2014] EWCA Crim 621.  It was argued on behalf of the defendant, on appeal, that following the logic in Sale the defendant’s benefit should have been based on his profit from trading in used cars rather than his gross receipts.  The selling of used cars was not of itself criminal activity, it was argued.  Mr King’s offence was in purporting to act as a private individual rather than as a motor trader when selling 58 cars (and thereby attempting to sidestep consumer protection legislation).  However, with one exception, the purchasers had apparently been satisfied with the cars they had purchased from him.  His appeal was dismissed.  The Court of Appeal found that Mr King’s benefit was the gross amount received and that “this business was founded on illegality”.

It may be considered however that in Sale, since the contracts in question were obtained by illegal bribes, it might equally have been said that the gross receipts were “founded on illegality”.  To the writer it remains far from clear in which circumstances the court will consider it appropriate to restrict the amount of the confiscation order to the profit arising.  There appears to be no hard and fast line nor a single determinative factor and, as the Court of Appeal noted at paragraph [32] of King, “cases differ to a great extent”.

 

FURTHER UPDATE:  See my later article Confiscation & legitimate businesses for further discussion of this topic.

(Note: This article applies to confiscation orders under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales. There are a number of additional issues which could be relevant to a defendant’s confiscation order in particular cases which it is not possible to deal with in a relatively short article such as this. Appropriate professional advice should be sought in each individual case.)