Category Archives: Prosecutions

Prosecutions

UK Supreme Court split on confiscation

Supreme Court logoIt is perhaps surprising and a little troubling to find in 2018 the UK Supreme Court split 3 – 2 on the application of confiscation legislation which is 15 years old.

The issue was a simple one – but its resolution involved consideration of some fundamental principles of statutory interpretation.

The issue & the relevant legislation

There were two defendants, who were husband and wife, R v McCool (Northern Ireland) [2018] UKSC 23.  Each of them had pleaded guilty to four offences in connection with false applications made for state benefits.  In each case one offence occurred prior to 24 March 2003, and the other three after that date.

When it came to confiscation the prosecution wished to proceed under Proceeds of Crime Act 2002 rather than Criminal Justice Act 1988 confiscation provisions – but should they be permitted to do so?

That was the issue the Supreme Court was tasked to determine.

The Proceeds of Crime Act 2002 confiscation provisions apply to offences committed after 23 March 2003, by virtue of the Proceeds of Crime Act 2002 (Commencement No 5, Transitional Provisions, Savings and Amendment) Order 2003.

The prosecution had sought to disregard for each defendant the offence committed before 24 March 2003, relying in each case on the benefit from only the three later offences.

The prosecution did not seek to invoke the ‘criminal lifestyle’ assumptions against the defendants.

One might ask why the prosecution did not wish to proceed under Criminal Justice Act 1988 provisions, which could have allowed the s72AA statutory assumptions to be invoked.  The answer is not spelled out in the judgment but it is clear that, in any event, each defendant’s ‘available amount’ was less than his or her ‘benefit’.  So the statutory assumptions under CJA 1988 would not have produced any useful result in practice.

On the other hand, the CJA 1988 legislation has no provision similar to s22 PoCA 2002, which provides for the upward variation of a confiscation order in later years when a defendant has an increased ‘available amount’.

It may have been the potential for a future s22 application which attracted the prosecution to the PoCA 2002 confiscation provisions (even though this involved a reduction in ‘benefit’ because in each case any ‘benefit’ arising under the earliest offence could not be recognised at all under PoCA 2002).

Although this was a Northern Ireland case very similar legislation applies in England and Wales, so the decision of the Supreme Court is equally relevant in that jurisdiction.

The legislation

The transitional provisions provide that “Section 6 of the Act (making of confiscation order) shall not have effect where the offence, or any of the offences, mentioned in section 6(2) was committed before 24th March 2003″ (but with the substitution of s156, the equivalent section, in Northern Ireland).

Subsection (2) (in England and Wales) provides:-

“The first condition is that a defendant falls within any of the following paragraphs —

    (a) he is convicted of an offence or offences in proceedings before the Crown Court;
    (b) he is committed to the Crown Court for sentence in respect of an offence or offences under section 3, 3A, 3B, 3C, 4, 4A or 6 of the Sentencing Act;
    (c) he is committed to the Crown Court in respect of an offence or offences under section 70 below (committal with a view to a confiscation order being considered)”.

The Northern Ireland legislation is similar, but with (b) omitted.

Here the two defendants had been committed to Crown Court with a view to a confiscation order being considered.

Lord Kerr’s view

Lord Kerr’s view was that it would be “a wholly anomalous result” if this legislation were interpreted to mean that where a defendant had been convicted, in the same proceedings, of offences committed both before and after 24 March 2003 all of those offences had to be dealt with under the earlier confiscation statutes.

In Lord Kerr’s opinion, it was Parliament’s intention that all offences committed after 23 March 2003 which could generate confiscation orders under the Act should be dealt with under PoCA 2002.

“It cannot have been intended that a swathe of post-2003 offences should be removed from the Act’s purview simply because the defendant was convicted of an associated offence before the relevant date”, he said.

Since the courts will generally seek to find an interpretation of legislation which does not produce an anomalous or absurd result, and which gives effect to Parliament’s intention, subsection (2) must be interpreted as referring to the “offence or offences” to which PoCA 2002 applied.  That is the “offence or offences” committed after 23 March 2003.

It follows that the “offence or offences mentioned” in subsection (2) were all committed after 23 March 2003.

On that basis the defendants’ offences committed before 24 March 2003 could be ignored and confiscation could proceed under PoCA 2002 as sought by the prosecution – relying only upon those offences committed after 23 March 2003.

The views of Lord Hughes and Lady Black

Lord Hughes and Lady Black arrived at the same conclusion as Lord Kerr.

“If the appellants’ contention were correct, and the earlier confiscation regime has to be applied wherever there is a single pre-commencement offence on the indictment (or before the magistrates) even if it is not relied on for confiscation, it would follow that that rule would have to apply even if the pre-commencement offence could never, even arguably, have generated a benefit, and thus could never, even arguably, have had the slightest relevance to the issue of confiscation,” said Lord Hughes.

Because this outcome “might well be termed absurd” this could not be the appropriate interpretation of the legislation.

Since three of the five judges had reached this conclusion the prosecution’s approach had prevailed.

The dissenting minority

The dissenting minority, Lord Reed and Lord Mance, disagreed with the majority about the intention of Parliament and did not agree that it would be “absurd” for the earlier confiscation legislation to have been required to apply where one or more offences dealt with in the same proceedings had been committed before 24 March 2003.

They considered that the words in the legislation should be given their natural meaning and that the interpretation placed on the words by the majority was “strained beyond breaking point”.

“It seems to me to be much more likely that the drafter of the transitional provisions intended to bring all the offences in any set of proceedings into one statutory confiscation scheme or the other. Then, at least, no offences would fall outside all confiscation regimes”, said Lord Reed.

Conclusions

The prosecution won the day and it is now undeniable that the prosecution may opt, in confiscation proceedings, to entirely disregard offences committed before 24 March 2003 in order to proceed under PoCA 2002.

It is also true that none of the Supreme Court justices considered it appropriate in this case to “read into” the legislation additional words in order to give a clear and unambiguous meaning to that legislation.

However the sharp differences in opinion in these judgments underline the dangers of seeking to divine the intentions of Parliament – and the complexities of the law around confiscation.

Contacting us

Our contact details are here.

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.)

A dishonest employee – but is it theft?

Police lamp copyright David Winch 2014

Pamela Darroux was from 2 November 2002 until 1 April 2014 employed as a manager by a charity known as the Sunridge Court Housing Association.  She was a trusted and senior employee, managing the residential care home for elderly people operated by the Housing Association in Golders Green.  She had responsibility for the general running of the home.  Her responsibilities extended to the pay-roll of all employed staff, including herself.

She was contracted to work from Monday to Friday, between 9 am and 5 pm.  It was an agreed term that when she did overtime, or covered for other members of staff, she was entitled to claim additional payment.  She was also entitled to claim payment in lieu of holiday not taken.

It seems that her the practice throughout the period of her employment was to fill in the relevant claim forms by hand.

The mechanics of payment

Once the relevant claims were approved the forms would be sent on a monthly basis to a company called PCS Limited, who, in effect, provided pay-roll services.  It appears that on receipt of the relevant forms PCS would make the necessary computations for each employee; arrange for the appropriate deductions, with a view to accounting to the Revenue, in respect of PAYE and National Insurance contributions; prepare and send to each employee, the relevant monthly Pay Advice (which would include recording payment for hours worked in excess of the basic contracted amount); and arrange for the payment by bank transfer to each such employee accordingly.

The sums in question would then be paid out of the Housing Association’s account via BACS and the corresponding amount would then appear as a credit in each individual employee’s designated bank account.

Discovery of the overpayments

In 2013 the Housing Association was subject to an inspection by the Care Quality Commission, which reported shortcomings in its administration.

The Executive Director of the Housing Association ordered an audit of the financial position, including payroll payments.  The upshot of this was a claim by the Housing Association that Ms Darroux had defrauded the charity by submitting falsely inflated overtime / on call claims and claims in lieu of holiday entitlement for herself.  The total amount said to be involved was quantified at £49,465 for the period between January 2011 and February 2014.

Criminal prosecution

Ms Darroux was arrested, interviewed and ultimately charged with nine counts of theft contrary to s1 Theft Act 1968 in that she “stole monies belonging to Sunridge Court Housing Association”.

At the conclusion of her trial in the Crown Court on 15 June 2016 the jury found Ms Darroux guilty on six of the counts on the indictment.  On those counts on which the jury convicted they had, on the invitation of the judge, returned special verdicts setting out the amounts they had found to be dishonestly taken (these were rather less than had been alleged by the prosecution).

Ms Darroux was sentenced to 16 months imprisonment.  She appealed.

Grounds of appeal

In the Court of Appeal her counsel argued that, on the facts and circumstances of this case, counts of theft were unsustainable.

Counsel necessarily accepted that, by their verdicts, the jury had found Ms Darroux to be dishonest in respect of the counts on which she was convicted, but submitted that there were no acts constituting the appropriation of property belonging to another.

Counsel accepted that the facts alleged would bring this case within the ambit of s2 of the Fraud Act 2006; but not within the ambit of s1 Theft Act 1968.

Court of Appeal decision

The Court of Appeal concluded “with no enthusiasm” that these convictions must be quashed, Darroux v The Crown [2018] EWCA Crim 1009.

The dishonest actions of Ms Darroux were not “theft” as defined in law.  What had happened was that the Housing Association’s bank balance (a debt due from the bank to the Housing Association) had fallen and Ms Darroux’s bank balance (a debt due to her from her bank) had increased.

But these were two different assets.  Ms Darroux had not therefore appropriated property from the Housing Association.  This was a point dealt with by the courts long ago in R v Preddy [1996] UKHL 13.

What is more, the bank transfer had been made by PCS, not by Ms Darroux.  Ms Darroux had not assumed the rights of the Housing Association to its bank balance – those rights had been exercised by PCS.

The Court of Appeal held that it would be wrong to distort the meaning of the statutory language in order to overcome the difficulties thrown up by a wrong charging decision.  The remedy in such a case is to formulate the appropriate charges in the first place.

The Appeal Court was not prepared to substitute a conviction under s2 Fraud Act 2016.

Conclusion

Perhaps surprisingly no one appears to have drawn the attention of the Court of Appeal to the offence of false accounting contrary to s17 Theft Act 1968 – which seems to perfectly cover the facts of this case.  That section applies “Where a person dishonestly, with a view to gain for himself or another or with intent to cause loss to another . . .  falsifies any account or any record or document made or required for any accounting purpose”.

The lesson to be learned is that it is important – for both prosecution and defence – to have careful regard to the legal ingredients of the offence on the indictment.  A ‘technical’ error in selecting the correct offence to charge may result in a dishonest defendant going free.

Contacting us

Our contact details are here.

David

(Note: This article applies to matters arising under the provisions of the criminal law in England and Wales.  Appropriate professional advice should be sought in each individual case.)

The meaning of “dishonesty” in English criminal law

Legal wig copyright David Winch 2014
What is meant by “dishonesty” in English criminal law? When considering the meaning of dishonesty the criminal courts of England and Wales until now often referred to a case decided last century. Recently in the case of Ivey v Genting Casinos (UK) Ltd (t/a Crockfords) [2017] UKSC 67 (25 October 2017) the UK Supreme Court reconsidered the meaning of dishonesty – and came to some new conclusions.

 

The two-stage ‘Ghosh’ test

Until October 2017 the leading case on the meaning of dishonesty in English criminal law was R v Ghosh [1982] EWCA Crim 2. In that case, decided in 1982, the Court of Appeal determined that there was a two-stage test for dishonesty. The first stage was based on an objective criterion and the second stage was based on a subjective criterion. The two stage test was put in the following terms:-

“In determining whether the prosecution has proved that the defendant was acting dishonestly, a jury must first of all decide whether according to the ordinary standards of reasonable and honest people what was done was dishonest. If it was not dishonest by those standards, that is the end of the matter and the prosecution fails.

If it was dishonest by those standards, then the jury must consider whether the defendant himself must have realised that what he was doing was by those standards dishonest. In most cases, where the actions are obviously dishonest by ordinary standards, there will be no doubt about it. It will be obvious that the defendant himself knew that he was acting dishonestly. It is dishonest for a defendant to act in a way which he knows ordinary people consider to be dishonest, even if he asserts or genuinely believes that he is morally justified in acting as he did.”

So until October 2017 criminal courts operated on the basis that not only must the conduct of the defendant be dishonest by the ordinary standards of reasonable and honest people (the objective test) but the defendant himself must have realised that he was acting dishonestly by that standard (the subjective test).

 

The subjective test

What was implied in Ghosh, was that a defendant was entitled to say, “I did not know that anybody would regard what I was doing as dishonest” and if he was believed he should be acquitted of dishonesty (as the subjective test was not satisfied).

But the Supreme Court has now criticised that approach, saying that “It has the unintended effect that the more warped the defendant’s standards of honesty are, the less likely it is that he will be convicted of dishonest behaviour”.

The new judgment means that it is still necessary for the jury in the Crown Court or the magistrates in the Magistrates’ Court to reach conclusions about the actual state of mind of the defendant – but only insofar as this relates to the defendant’s state of knowledge or belief as to the facts.  The Supreme Court has now said that criminal courts should no longer ask themselves whether the defendant himself realised that he was acting in a way which ordinary people would consider to be dishonest.

 

The new legal position

So instead of the Ghosh test, when dishonesty is in question the court must first ascertain (subjectively) the actual state of the individual’s knowledge or belief as to the facts. The question is not whether that belief is reasonable – the question is whether it is genuinely held.  Once his actual state of mind as to knowledge or belief as to the facts is established, the question whether his conduct was honest or dishonest is to be determined by the jury or magistrates by applying the (objective) standards of ordinary decent people.

There is no longer any requirement that the defendant must appreciate that what he has done is, by those standards, dishonest.

One consequence of this is that the definition of “dishonesty” is now consistent between criminal and civil law in England and Wales.

 

An example

Suppose a person is newly arrived in England and he has come from a country in which all public transport is free.  He gets on a bus in London and on arriving at his destination gets off without paying.  He is charged under s3 Theft Act 1978 with dishonestly making off without payment.  But was he dishonest?

The issue is ‘Did he genuinely believe that no payment was required?’.  If he did then he has not been dishonest and should be acquitted.  If, on the other hand, he did know that payment was required then he was dishonest by not paying.

But this issue concerns the defendant’s belief about the relevant facts – the issue is not about his understanding of what constitutes “dishonesty”.  That is the change in the law as a result of the Supreme Court’s ruling in October 2017.

 

Is the defendant’s state of mind irrelevant?

So is it now totally irrelevant that the defendant wrongly believed that what he was doing was acceptable behaviour?  Well, not entirely.  A defendant’s deluded belief that he was not acting dishonestly (for example because he hoped one day to repay money which he was stealing and spending) will not now result in his acquittal.  But it could be put forward in mitigation on sentencing that he had no intention to cause harm to his unfortunate victim.

Contacting us

Our contact details are here.

David

(Note: This article applies to matters arising under the provisions of the criminal law in England and Wales.  Appropriate professional advice should be sought in each individual case.)

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.)

Defence opening statements to be introduced

Two way trafficDefence opening statements are to be introduced in the Magistrates’ Court and Crown Court in England and Wales from 4 April 2016.  Changes are to be made to Rules 24.3 and 25.9 of the Criminal Procedure Rules 2015 to introduce defence opening statements, which are to be heard immediately after the prosecution opening speech, where a defendant pleads ‘not guilty’.

One of the aims of this change is to better identify for Magistrates and jurors, at an early stage, those matters which are in dispute between prosecution and defence.  They may then have this in mind when hearing the prosecution and defence evidence.

Prior to this rule change it has normally been the case that only the prosecuting counsel has made an opening speech, immediately before calling witnesses for the prosecution.  The prosecution evidence has typically been followed by the presentation of any witnesses called by the defence (usually starting with the defendant himself if he is to give evidence), then closing speeches – first by the prosecution and then by the defence.  In the Crown Court this has been followed by the judge’s summing up of the evidence and his directions on the law, before the jury retire to consider their verdict.

It could therefore be the case that it would not be until almost the conclusion of the trial that the Magistrates or jurors would hear a structured presentation of the key elements of the defence challenge to the prosecution case.

Under the new Rules it is intended that Magistrates and jurors should be enabled to have the essence of the defence in mind, focussing on what is in issue, when hearing all of the evidence.

The Rule change follows a recommendation in the Review of Efficiency in Criminal Proceedings by Sir Brian Leveson, the President of the Queen’s Bench Division of the High Court, published on 23 January 2015.

 

Contacting us

Our contact details are here.

David

(Note: This article discusses the criminal law of England and Wales.  There are a number of additional issues which could be relevant to a defendant’s trial 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.)

UK Supreme Court rules on money laundering arrangements

Supreme Court logoThe UK Supreme Court recently ruled on the law relating to prosecutions for entering into, or becoming concerned in, an arrangement which facilitates the acquisition, retention, use or control of criminal property for, or on behalf of, another person – contrary to s328 Proceeds of Crime Act 2002.

The case arose as a result of the actions of a fraudster, referred to as ‘B’.

Shortly before commencing his fraud the defendant, referred to as ‘H’, opened two bank accounts and handed control of them to ‘B’ who then used them in connection with his frauds.  ‘B’ conned unsuspecting members of the public into making payments into these bank accounts (for services which in truth were non-existent).

The prosecution case was that ‘H’ must have known or at least suspected that ‘B’ had some criminal purpose even if he was not aware of the details of the con.  ‘B’ was convicted of fraud.  ‘H’ was charged with becoming concerned in an arrangement contrary to s328 PoCA 2002.

The Supreme Court was required to consider whether, in the circumstances alleged, ‘H’ could be guilty of a s328 offence – R v GH [2015] UKSC 24 (22 April 2015).

The Supreme Court broke the issue down into four key questions.  In addressing those questions it overturned some decisions of the courts below.

 

1  Must the property be ‘criminal property’ before the arrangement operates on it?

Counsel for the prosecution submitted to the Supreme Court that the same conduct could both cause property to become criminal and simultaneously constitute the offence charged under s328.  He made the same submission in relation to sections 327 and 329, correctly recognising that the three sections have to be construed coherently.

So, he submitted, a thief who steals “legitimate” property is necessarily at the same time guilty of “acquiring criminal property” contrary to s329.

The Supreme Court rejected that view, holding that it failed to recognise the necessary distinction between a person who acquires criminal property and one who acquires legitimate property by a criminal act or for a criminal purpose.

Sections 327, 328 and 329 are aptly described as “parasitic” offences because they are predicated on the commission of another offence which has yielded proceeds which then become the subject of a money laundering offence.

The Supreme Court therefore approved the decision of the Court of Appeal in an earlier case R v Geary [2010] EWCA Crim 1925 that to say that s328 extends to property which was originally legitimate but became criminal only as a result of carrying out the arrangement is to stretch the language of the section beyond its proper limits.  I have discussed the Geary case more fully in an earlier article on this blog.

However, for example, a thief who steals legitimate property might then commit a s329 money laundering offence by his possession or use of that property after his acquisition of it.

In practice such a thief should normally face a charge of theft rather than one of money laundering.  But the legal point that he may also be guilty of a money laundering offence is an important one because of the obligation on banks & others in the ‘regulated sector’ to report suspicions of money laundering under s330.

 

2  Must the ‘criminal property’ exist before the defendant joins the arrangement?

The Supreme Court agreed with the decision of the Court of Appeal in holding that it does not matter whether criminal property existed when the arrangement was first hatched.  What matters is that the property should be criminal property at a time when the arrangement operates on it.

It should be noted that the Supreme Court did not hold it to be necessary that the property should be criminal property at the time when the arrangement commences to operate on it.

The offence is complete when the arrangement becomes one which facilitates the acquisition, retention, use or control of criminal property for, or on behalf of, another person and the defendant knows or suspects this to be the case.

 

3  Were the monies ‘criminal property’ before being paid into the defendant’s bank account?

Counsel for the prosecution made a somewhat technical submission to the Supreme Court that the monies banked were criminal property at the time of payment because they represented a chose in action, namely the obligation of the purchasers of the supposed services to pay for them.

The Supreme Court were unimpressed by this submission, holding that there was a stark absence of material before the court to substantiate a case of this nature.

However the court did not close the door on such an argument being successfully presented in a future case.

 

4  Was the actus reus of the offence committed on the facts of the case?

Looking at the substance of the matter, the money paid by the victims into the accounts was lawful money at the moment at which it was paid into those accounts.  It was therefore not a case of the account holder acquiring criminal property from the victims.

But by the arrangement the respondent also facilitated the retention, use and control of the money by or on behalf of ‘B’.  Did the arrangement regarding the facilitation of the retention, use and control of the money fall foul of s328 on the basis that it was criminal property at that stage, since it was the proceeds of a fraud perpetrated on the victims?

In this case the character of the money did change on being paid into the defendant’s accounts.  It was lawful property in the hands of the victims at the moment when they paid it into the defendant’s accounts.  But it then became criminal property in the hands of ‘B’, not by reason of the arrangement made between ‘B’ and the defendant, but by reason of the fact that it was obtained through fraud perpetrated by ‘B’ on the victims.

There was a crucial difference therefore between this case and the situation in Geary (in which the arrangement itself had been the reason that the property in question became criminal property).

The Supreme Court (overturning the decision of the Court of Appeal) held that there was no artificiality in recognising that change in character of the money, and that it would be appropriate to regard the defendant as entering into or becoming concerned in an arrangement to retain criminal property for the benefit of another.

It was the retention, use & control of the monies after they had been paid into the bank accounts as the result of a fraud, under the bank account arrangement made earlier between ‘B’ & ‘H’, which could properly form the basis of a conviction of ‘H’ under s328.

 

Contacting us

Our contact details are here.

David

(Note: This article applies to prosecutions under the provisions of Part 7 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 trial 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.)

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

LAA introduces ‘soft rejection’ of claims

Two way trafficThe Legal Aid Agency has introduced a new ‘soft reject’ process for solicitors’ legal aid claims in a bid to improve its claims handling procedures.

In an announcement dated 6 February 2015 the government said that the LAA were adopting a more pragmatic approach following feedback from users.

Rather than immediately rejecting a legal aid application which is incomplete the LAA will contact the solicitor or other legal aid provider who submitted the claim form to find a way of obtaining any missing information.

If appropriate LAA criminal applications team caseworkers will contact legal aid providers by telephone in order to obtain the information they need where the legal aid application cannot be granted without it.

In 2014 the LAA introduced a similar process for Advocates’ Graduated Fees Scheme (AGFS) applications.

 

Importance of responding on the day

Where the provider is unavailable or does not have the information to hand the LAA will provide a telephone number or e-mail address and a deadline for an answer on the day to their enquiry.

If the provider can provide the necessary information before the deadline, then the application will be processed.

If that is not possible, a formal LAA rejection will be sent along with a letter detailing the missing information needed to process the application.

The new procedure is intended to help avoid unnecessary rejections, reduce processing delays, and ensure all claims are processed in a timely manner.

 

Contacting us

Our contact details are here.

David

(Note: This article applies to criminal proceedings in England and Wales.  Appropriate professional advice should be sought in each individual case.)

7 key differences between trial & confiscation

Legal booksIn many respects confiscation proceedings exist in a different world from criminal trials.  It is almost as if, like Lewis Carroll’s Alice, we have stepped through a looking glass into a parallel universe.

It is important that lawyers recognise this and adjust their approach to the work accordingly.  This article points up, briefly and in the most general terms, seven key differences between Crown Court trials and confiscation proceedings.

 

1 The question

In a Crown Court trial the key issue is whether the defendant is ‘Guilty‘ or ‘Not Guilty‘ of the offence or offences of which he is charged.

In confiscation proceedings the question is ‘How much?.  The proceedings are concerned primarily with the quantification, in money terms, of the convicted defendant’s ‘benefit‘ and ‘available amount‘ (as defined in Part 2 of the Proceeds of Crime Act 2002).

 

2 The standard & burden of proof

In the trial the burden of proof rests upon the prosecution to the ‘criminal standard’.  They have to make the jury ‘sure’ of the guilt of the defendant.

In confiscation proceedings the standard of proof is the ‘civil standard’ – the balance of probabilities – and, in many respects, the burden of proof is on the convicted defendant; particularly in rebutting the statutory s10 assumptions in a ‘criminal lifestyle‘ case and in satisfying the court that the convicted defendant’s ‘available amount‘ is less than his ‘benefit‘.

 

3 The focus & scope of the proceedings

In the trial the focus is on the offence or offences of which the defendant is charged.  In confiscation proceedings the focus is on the convicted defendant under consideration.

Where, as is often the case, in confiscation proceedings the convicted defendant is alleged to have a ‘criminal lifestylethe scope of the proceedings can range far beyond matters relevant to the offence or offences of which he has been convicted.  The entire financial affairs of the convicted defendant over a period of many years may be subject to scrutiny.

Consideration of the convicted defendant’s ‘available amount‘ involves matters unconnected with any offence.

The indictment in a criminal trial may cover a number of co-defendants, but the s16 statement in confiscation proceedings deals only with a single convicted defendant.  A confiscation order reflects the ‘benefit‘ obtained, solely or jointly, and the ‘available amount‘ of only that particular convicted defendant.

 

4 The evidence

In a criminal trial the prosecution may call a number of witnesses who may have, quite literally, witnessed the alleged crime being committed.  The defence may call evidence from the defendant himself.

In confiscation proceedings the prosecution are unlikely to call evidence from anyone other than the financial investigator who is the author of the s16 statement (which sets out the prosecution assertions regarding the convicted defendant’s ‘benefit‘ and ‘available amount‘).  The likelihood is that little or no weight will be given by the court to unsupported oral evidence from the convicted defendant since, by that stage, he has been found guilty and his credibility thereby undermined.

The defence will therefore seek to present other witnesses, perhaps including a forensic accountant expert witness, and documentary evidence in support of the defence assertions.

Evidence which would be inadmissible in the criminal trial may be admissible in confiscation proceedings.

 

5 The decision makers

In a Crown Court trial the key decision of ‘Guilty’ or ‘Not Guilty’ is made by the jury, then in the case of a ‘Guilty’ verdict the sentencing is carried out by the judge.

But in confiscation proceedings there is no jury.  All the decisions are made by the Crown Court judge.  Having said that, in many cases the figures of ‘benefit‘ and ‘available amount‘ are in practice settled by negotiation resulting in an agreement between counsel for prosecution and defence which has been reached outside the courtroom.  The judge will then be invited to make an order in the agreed figures and fix a default sentence.

 

6 The factors in sentencing

In relation to sentencing following trial key factors will often include the nature and gravity of the conduct of the defendant in committing the offence, whether he pleaded guilty, his previous convictions, and his conduct since the offence in terms of showing remorse or making reparation.

In contrast a confiscation order is not strictly speaking regarded as punishment for the offence at all.  So those factors (other than reparation) will have no impact on the confiscation.  A relatively minor offence (in terms of sentencing) might be followed by a very substantial confiscation order, whilst conviction for a relatively serious offence might be followed by a minimal confiscation order.

By way of example, in the case of Waya [2012] UKSC 51 the mortgage fraud offence attracted 80 hours community punishment but the eventual confiscation order was in the very substantial sum of £392,400.

It has been said that confiscation is intended, not to punish the convicted defendant for the crime, but to deprive him of the benefit he has obtained from relevant criminal conduct, up to the limit of his available means.

 

7 Appeals

The prosecution have, with very limited exceptions, no opportunity to appeal the verdict or sentence in a criminal trial.

However prosecution and defence are each permitted to appeal a confiscation order (or a decision to make no confiscation order).

 

Conclusions

Confiscation proceedings are very different from the criminal trial which precedes them. They demand a different approach from instructed lawyers and an extensive examination of financial evidence.  That examination may be assisted by the work of a forensic accountant, particularly where it is alleged that the convicted defendant has a ‘criminal lifestyle‘.

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 – the basics

photo 123 - copyright David Winch 2014This post aims to be an introduction to the basics of confiscation under the Proceeds of Crime Act 2002 in England & Wales.  It includes links to more detailed articles dealing with particular elements of confiscation law (shown like this).

A word of warning.  An introduction like this can be broadly correct but cannot cover the full detail of the legislation nor can it cover those unusual circumstances which may be exceptions to the general guidance contained here.

Be warned too that words and phrases used in confiscation often have a specific technical meaning which is not the same as their meaning in everyday English conversation.  That applies particularly to terms such as ‘benefit’, ‘criminal lifestyle’ and ‘available amount’.

 

When does confiscation apply?

Confiscation proceedings can only be commenced when a defendant has been convicted (either in the Crown Court or Magistrates’ Court) of one or more offences from which he has obtained a benefit.  All confiscation proceedings in England & Wales are conducted in the Crown Court in front of a judge but without a jury.

A wide range of offences can form the basis for confiscation proceedings, including offences such as theft, fraud, drugs offences, money laundering and tax evasion. However confiscation orders are not imposed in every case in which a defendant obtains a benefit. In the year to 31 March 2013 approximately 673,000 persons were convicted of an offence (not all of which involved any benefit being obtained) but only 6,392 confiscation orders were imposed.

Confiscation proceedings are initiated by the prosecution.  There are no published criteria specifying when confiscation proceedings will be initiated.  Where the defendant has obtained a benefit from an offence of which he has been convicted and the prosecution ask for confiscation proceedings to be initiated the court has no discretion to refuse.

The legislation is intended to deprive defendants of the benefit they have gained from relevant criminal conduct, whether or not they have retained such benefit, within the limits of their available means.  The benefit gained is the total value of the property or advantage obtained, not the defendant’s net profit after deduction of expenses.

 

The court procedure

Whilst the judge can make a confiscation order at the time of sentencing a convicted defendant, in many cases the judge will at that time simply set a timetable for further steps towards confiscation.

This normally involves firstly a requirement for the defendant to supply detailed information about his financial affairs; secondly the prosecution to provide a report identifying the amount of benefit said to have been obtained by the defendant and (usually) identifying his ‘available amount‘ (this is referred to as the s16 statement); thirdly the defendant is required to respond to the prosecution’s report indicating the extent to which he agrees and disagrees with it; and finally there will be a hearing scheduled which will culminate in the making of the confiscation order.

In practice the initial timetable may be revised if difficulties or delays arise so these steps may take months, or even years, to complete.

Evidence which would be inadmissible at trial may be admitted in confiscation proceedings.

 

The three decisions

Assuming that the defendant has obtained a benefit from an offence of which he has been convicted, the court then has three key decisions to make.

  • Firstly what benefit has the defendant obtained from the offence or offences of which he has been convicted (including any other offences ‘taken into consideration’ when sentencing)?
  • Secondly, if the defendant has a ‘criminal lifestyle‘, what benefit is he to be assumed to have obtained in addition to the benefit obtained from the offence or offences of which he has been convicted?
  • Thirdly what is his ‘available amount‘?

In confiscation proceedings the burden of proof generally rests upon the defendant rather than the prosecutor – particularly in rebutting the statutory assumptions where the defendant has a ‘criminal lifestyle‘ and in satisfying the court that the defendant has an ‘available amount‘ which is less than his ‘benefit’.  In each case the court will make its decision on the basis of the ‘balance of probabilities’, see s6(7) PoCA 2002.

 

Benefit obtained from the offence

The legal position is that a person obtains a benefit from criminal conduct if he obtains ‘property’ (which means an asset of any description) or a pecuniary advantage as a result of or in connection with that criminal conduct, see s76 PoCA 2002.

Sometimes the benefit obtained from the offence is quite obvious.  If I steal £10,000 from your bank account I have obviously obtained a benefit of £10,000.

But in many cases the benefit obtained will be less obvious.  For example if John is a member of a group of people and is convicted of conspiracy to supply controlled drugs there may be a number of issues arising concerning the extent of John’s involvement in the conspiracy and the valuation of the drugs.  If Peter has obtained a mortgage advance dishonestly his benefit will be a proportion of the increase in value of the property since he purchased it.

However the courts will always be looking to the benefit “obtained” – not the benefit “retained”.  Where the court is satisfied that a particular benefit has been obtained jointly by more than one person it will treat each person as having obtained the whole of that benefit – but will place a cap on the overall recovery of jointly obtained benefit from the different defendants.

 

Assumed benefit of criminal lifestyle

In many cases the defendant will be held to have a ‘criminal lifestyle‘ and this will trigger the statutory assumptions set out in s10 PoCA 2002.  The effect may be to increase very substantially the defendant’s total alleged benefit.

These assumptions relate to the defendant’s receipts and payments since the ‘relevant day’ (normally the day six years before the day on which he was charged with the offence) up to the day on which the court makes the confiscation order (but in practice the assumptions are usually applied only up to an earlier date for convenience) and the defendant’s assets held at any time after the date of his conviction (whenever they were first obtained).

A defendant has a ‘criminal lifestyle‘ if the criteria set out in s75 are satisfied, but not otherwise.  The criteria relate to the offence or offences of which the defendant has been convicted – they do not relate to his ‘lifestyle’ in the everyday sense of that word.

It is in ‘criminal lifestyle‘ cases in which the services of a forensic accountant may prove particularly valuable in challenging the prosecutor’s s16 statement.

There is an obvious danger of excessive benefit figures and double counting where the ‘criminal lifestyle‘ assumptions are made.

 

The defendant’s available amount

The defendant’s ‘available amount‘ includes all his assets currently held (with a deduction for liabilities secured on those assets) and the current value of any ‘tainted gifts’ he has made, see s9 and s81 PoCA 2002.

The court will not consider, for the purpose of determining the defendant’s ‘available amount‘, whether those assets which he currently holds were obtained legitimately or not – that does not matter at this stage.

 

The confiscation order

In order to reach its decisions the court may hold a hearing at which oral and written evidence from both sides will be presented.

However in many confiscation cases the prosecution and defence will negotiate agreed figures for ‘benefit’ and ‘available amount‘ prior to the scheduled hearing of oral evidence.  In that event there will be only a brief hearing before the judge at which he will be invited to approve the agreed figures which then become the basis for the confiscation order.

Before finalising the order the court may need to consider whether the application of the statutory assumptions has created a serious risk of injustice and whether the proposed order would be disproportionate and infringe the defendant’s human rights.

Only very rarely will the amount of the confiscation order be limited to the profit arising from the criminal conduct.

The court will normally order the defendant to pay, within a specified period of time, a sum of money equal to the lower of (a) his total benefit and (b) his available amount.

If the court has no information from which it is able to conclude on the balance of probabilities that the defendant has an ‘available amount‘ which is less than his total ‘benefit’ it will make a confiscation order in the amount of the ‘benefit’.

Where the court accepts that the defendant’s ‘available amount‘ is less than his total ‘benefit’ a brief list of the assets which form the defendant’s ‘available amount‘ should be appended to the confiscation order issued by the court.

The court will typically allow up to six months for payment (from 1 June 2015 this is limited to three months as a result of amendments to confiscation law).  The court will also set a default sentence, which is a period of imprisonment the defendant may be required to serve if he does not pay the required sum.

The defendant may subsequently return to court to ask for a six month extension to the time to pay, making a maximum of 12 months in all from the date of the confiscation order (from 1 June 2015 this is limited to a further three months making six months in all from the date of the confiscation order).

Interest is charged on any amount which remains outstanding after the due date for payment, s12.

 

Appeals

Either prosecution or defence may appeal against the confiscation order.  Appeal is to the Court of Appeal (Criminal Division) and ultimately to the Supreme Court.  An appeal ought to be initiated within 28 days of the confiscation order but late appeals may be heard in some circumstances.

 

Subsequent events

Where a confiscation order has been made in the amount of the defendant’s ‘available amount‘ and subsequent realisation of his assets identified in the confiscation order produces a lesser amount than anticipated, the defendant (or the prosecution) can apply to the court under s23 to have the amount of the defendant’s confiscation order reduced to reflect his revised ‘available amount‘ based on the actual amounts realised.

Where evidence comes to light which was not available to the prosecution at the time of the confiscation hearing which indicates that the defendant’s benefit was greater than that found by the court at that hearing the prosecution can, within 6 years of the date of conviction, apply to the court for the benefit figure to be increased under s20 or s21.

Where a confiscation order has been made in the amount of the defendant’s ‘available amount‘ (which was less than his benefit) the prosecution can apply to the court, at any time, for an order under s22 requiring the defendant to pay a further amount where he has a current ‘available amount‘ which would enable him to satisfy a new order – but he may not be required to pay an amount more than the court believes to be just.  In that sense a confiscation order may be regarded as a ‘life sentence’.

Where only a small balance remains outstanding on a confiscation order the court may discharge the order under s24 or  s25.

Where, following a fresh conviction on a subsequent occasion, a defendant finds himself subject to confiscation proceedings a second time the usual rules may be modified on the second time around.

 

Other confiscation topics

Other confiscation topics, such as restraint orders, the impact of bankruptcy on confiscation and adjustments for changes in the value of money are covered in further articles in this blog.  A full list of confiscation articles is here.

 

Contacting us

Our contact details are here.

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.)